| Wed 7 May 2008, 12:01 | | AFR - AFGRI Limited - AFGRI Lifts Headline Earning |
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AFR
AFR
AFR - AFGRI Limited - AFGRI Lifts Headline Earnings Per Share By 10,3%
AFGRI Limited
(Incorporated in the Republic of South Africa)
Registration number: 1995/004030/06
Share Code: AFR
ISIN: ZAE000040549
("AFGRI")
AFGRI LIFTS HEADLINE EARNINGS PER SHARE BY 10,3%
HIGHLIGHTS
- Total sales up 20,0%
- Headline earnings per share up 10,3%
- Excellent performance from Producer Services, with retail profit up
71,5%
- Protein business reported higher profit despite impact of rising input
costs
- Logistics business adversely affected by two consecutive low maize
crops
- Rains in second half of 2007 should result in a record season ahead
Agricultural services group AFGRI reported a 10,3% improvement in headline
earnings per share to 68,5 cents for the 12-month interim period ended 29
February 2008, on a 20% increase in sales.
Sales for the 12 month period totaled R7,8 billion, up from R6,5 billion for
the prior year. Headline operating profit after interest totaled R322
million, up 2,9% on the previous year, excluding the effects of the R 31
million once-off prior year foreign exchange gain. Financing costs increased
to R443 million from R305 million due to a substantial increase in the
debtors` book and higher interest rates.
AFGRI managing director Jeff Wright says the positive improvement in
headline earnings per share was achieved despite the negative impact of the
drought suffered in many parts of the country. This resulted in a lower
maize crop for the second year in a row and a sharp drop in silo stock
levels in 2007. "The net effect of this is that the country actually lost an
entire year`s crop if one tallies the total crop for the last two years,"
says Wright. "We were able to mitigate the effect of this by focusing on
internal efficiencies and better procurement practices."
Segmental performance
AFGRI`s Financial Services business was positively impacted by a larger
debtors` book and improved performance in Africa. This resulted in profits
improving by 43,8% from the prior year, after excluding the effects of the
prior year once-off foreign exchange gain of R31 million.
The Logistics business, which operates one of the largest silo complexes in
the country, reported a 39,8% drop in profits for the year due to the low
level of carry-over maize stocks resulting from two years of poor crops.
Wright says the drop in stock levels was actually lower than expected, given
the scale of the drought that affected maize farming, and Logistics managed
to maintain its market share.
It was an excellent year for Producer Services, which benefited from good
rains in the second half of the year. Increased spending by farmers on
equipment and supplies helped lift profits of retail and primary inputs by
71,5% and 4,5% respectively.
The Foods business experienced a good year, increasing profits by 7,1% as a
result of improved procurement and operational yields.
The Protein business performed well in a difficult trading period. It lifted
profits by 4,1% despite rising feed costs and over-capacity in the broiler
industry, which resulted in a sharp drop in broiler prices. Wright says the
post-Christmas over-supply of broilers in the South African market will
continue to put pressure on the results of this business, however the weaker
rand has curtailed broiler imports, and there are signs of a modest recovery
in broiler prices.
In January 2008 AFGRI delayed expansion plans for its Daybreak poultry
operations due to the softening in broiler prices. This followed an earlier
announcement that the group would spend roughly R420 million to double
Daybreak`s capacity to one million broilers a week. Wright says the group`s
board has revised the capital expenditure plans for Daybreak to accommodate
the softening in market conditions. A total of about R90 million will be
spent to lift Daybreak`s capacity by 30% and improve factory yields. This
capacity expansion will be completed during the current calendar year.
The Animal Feeds business performed well during the 12 months under review,
due largely to better procurement practices and a focus on internal
efficiencies.
The Group`s Zambian operations returned to profitability after
restructuring, and the business is now performing to expectations. The
Australian operations weathered the worst drought in recorded history, and
reported a small profit. There are now signs of normalisation in the Western
Australian agricultural sector, which points to a better year ahead.
Dividend and financial year-end
A dividend of 21,7 cents has been declared for the six-month period, an
increase of 9,3% over the prior period. For the full 12 months, the dividend
is 33,35 cents per share, 11.2% up on the prior 12-month period.
AFGRI has announced that it will adjust its financial year end to June, so
the current 12-month results represent a second interim report for 2008.
Outlook
Looking forward to the remainder of the 16 month trading period to June
2008, Wright says higher grain prices and excellent recent rainfalls have
resulted in substantially higher maize plantings. This year`s maize crop is
expected to exceed 11 million tons, ranking it among the highest ever
achieved. "This is expected to have a positive impact on our Logistics
business, which is highly dependent on the crop size and the volume of stock
entering our logistics chain. This, together with continued good
performances from the Producer Services and Animal Feeds businesses, should
result in a satisfactory final four months in the current financial year."
ISSUED FOR: AFGRI LIMITED
CONTACT: Jeff Wright, Managing Director: 011 549 0606
FAX NO: 011 463 4139
E-MAIL: jwright@afgri.co.za
WEBSITE: www.afgri.co.za
ISSUED BY: AFGRI Corporate and Investor Communications
CONTACT: Tish Stewart 011 442 5536 / 082 443 6399
FAX NO: 011 447 9317
E-MAIL: tishstewart@mweb.co.za
DATE: 07 May 2008
Date: 07/05/2008 12:01:01 Produced by the JSE SENS Department.
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