| Tue 9 Jun 2009, 17:15 | | RBW - Rainbow Chicken Limited - Abridged Audited Results For The Year Ended 31 |
|
RBW
RBW
RBW - Rainbow Chicken Limited - Abridged Audited Results For The Year Ended 31
March 2009 And Cash Dividend Declaration
RAINBOW CHICKEN LIMITED
("Rainbow" or "the Group")
(Registration number 1966/004972/06)
JSE share code: RBW
ISIN: ZAE000019063
ABRIDGED AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2009 AND CASH DIVIDEND
DECLARATION
SALIENT FEATURES
Revenue up 14,4%
Chicken realisations up 15,2%
Feed cost up 33,6%
Operating profit down 45,7%
Headline earnings down 39,6%
R153 million unrealised loss in respect of feed raw material procurement
Total dividend maintained 68 cents
CONSOLIDATED BALANCE SHEET
31 March 31 March
R`000 2009 2008
ASSETS
Non-current assets
Property, plant and equipment 1 383 196 1 243 670
Goodwill 287 444 287 444
Deferred taxation 5 796
1 676 436 1 531 114
Current assets
Inventories 543 925 521 945
Biological assets 429 553 369 224
Trade and other receivables 987 503 862 591
Derivative financial instruments 6 295 16 768
Taxation receivable 6 965 21 688
Cash and cash equivalents 528 084 509 894
2 502 325 2 302 110
Total assets 4 178 761 3 833 224
EQUITY
Capital and reserves 2 485 910 2 337 130
LIABILITIES
Non-current liabilities
Deferred taxation 243 709 240 041
Post-retirement medical obligation 85 655 80 862
329 364 320 903
Current liabilities
Trade and other payables 1 329 764 1 126 210
Provisions 17 500 43 251
Finance lease liability 177
Derivative financial instruments 16 223 1 394
Taxation payable 4 159
1 363 487 1 175 191
Total liabilities 1 692 851 1 496 094
Total equity and liabilities 4 178 761 3 833 224
CONSOLIDATED INCOME STATEMENT
Year ended Year ended
31 March 31 March
R`000 2009 2008
Revenue 6 811 448 5 955 327
Operating profit before non-recurring items and
depreciation 549 268 925 808
Legal disputes provision release 23 800
Feed claim recovery 40 000
BEE expense (49 368)
Operating profit before depreciation 573 068 916 440
Depreciation (149 229) (136 426)
Operating profit 423 839 780 014
Finance costs (5 059) (2 566)
Finance income 22 875 34 248
Profit before taxation 441 655 811 696
Taxation (124 203) (272 730)
Profit for the year attributable to the equity
holders of the company 317 452 538 966
Basic earnings per share (cents) 109,1 186,5
Basic earnings per share - diluted (cents) 109,1 184,6
HEADLINE EARNINGS
Profit for the year attributable to the equity
holders of the company 317 452 538 966
Loss on disposal of property, plant and equipment 1 376 269
Net asset impairment provision release (11 170)
Headline earnings 318 828 528 065
Legal disputes provision release (17 136)
Additional taxation allowance (26 506)
Feed claim recovery (28 400)
BEE expense 49 368
Adjusted headline earnings 275 186 549 033
Headline earnings per share (cents) 109,6 182,8
Headline earnings per share - diluted (cents) 109,6 180,8
Adjusted headline earnings per share (cents) 94,6 190,0
Adjusted headline earnings per share - diluted (cents) 94,6 188,0
CONSOLIDATED CASH FLOW INFORMATION
Operating profit 423 839 780 014
Non-cash items 149 060 185 125
Operating profit before working capital requirements 572 899 965 139
Working capital requirements 21 635 (347 905)
Cash generated by operations 594 534 617 234
Net finance income 17 816 31 682
Taxation paid (115 767) (239 641)
Cash available from operating activities 496 583 409 275
Dividends paid (197 755) (208 803)
Net cash flows from investing activities (290 131) (310 509)
Net cash flows from financing activities 9 493 29 595
Net increase/(decrease) in cash and cash equivalents 18 190 (80 442)
Cash and cash equivalents at
the beginning of the year 509 894 590 336
Cash and cash equivalents at
the end of the year 528 084 509 894
STATEMENT OF CHANGES IN EQUITY
Stated Share-based Retained
R`000 capital payments earnings Total
Balance at
1 April 2007 1 127 285 22 248 771 356 1 920 889
Profit for the year
attributable to the
equity holders of
the company 538 966 538 966
Ordinary dividends paid (208 803) (208 803)
BEE share-based
payments charge 45 468 45 468
Employee share
option scheme:
Proceeds from
shares issued 29 807 29 807
Value of employee
services 10 803 10 803
Balance at
1 April 2008 1 157 092 78 519 1 101 519 2 337 130
Profit for the year
attributable to the
equity holders of
the company 317 452 317 452
Ordinary dividends paid (197 755) (197 755)
BEE share-based
payments charge 3 383 3 383
Employee share
option scheme:
Proceeds from
shares issued 9 670 9 670
Value of employee
services 16 030 16 030
Balance at
31 March 2009 1 166 762 97 932 1 221 216 2 485 910
SUPPLEMENTARY INFORMATION
Year ended Year ended
31 March 31 March
R`000 2009 2008
Capital expenditure contracted and committed 92 694 94 165
Capital expenditure approved but not contracted 109 217 119 258
Contingencies 36 257 50 078
STATISTICS
Ordinary shares in issue (`000) 291 320 290 004
Weighted average ordinary shares in issue (`000) 290 904 288 951
Diluted weighted average ordinary shares in issue
(`000) 290 904 292 028
Net asset value per share (cents) 853,3 805,9
Ordinary dividends:
Interim dividend paid (cents) 24,0 24,0
Final dividend declared/paid (cents) 44,0 44,0
Total dividends (cents) 68,0 68,0
BASIS OF PREPARATION
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS), including IAS 34 (Interim financial
reporting) and in compliance with the Companies Act (Act 61 of 1973) as
amended, and the Listings Requirements of the JSE Limited. The accounting
policies are consistent with those of the previous financial year.
OVERVIEW AND MARKET CONDITIONS
The Group`s results for the twelve months ended 31 March 2009 reflect a
headline earnings decline of 39,6%, however excluding the unrealised losses on
financial instruments used in the feed raw material procurement strategy, the
decline moderates to 14,8%.
The third quarter of calendar 2008 will be remembered as one of the most
tumultuous periods in the history of modern capital markets. Global equity
markets collapsed by over 40%, credit markets froze, housing prices continued
to decline and central bankers extended their lending facilities beyond what
would have been imaginable only months before.
Although South Africa has to a large extent escaped the direct impact of this
financial market turmoil, the indirect effects of the global recession are
already becoming evident.
News on inflation (CPI) is more favourable. Having peaked at 13,6% in August
2008 a downward trend is now in place with inflation falling back to 8,5% in
March 2009. This fall has been underpinned by a moderation in food price
inflation from a high base and the decline in domestic fuel prices. Prime
lending rates have been lowered over the past few months providing some much
needed respite for indebted consumers.
Feed raw material prices peaked at historically high levels during the past
twelve months and remain exceptionally volatile. Record high prices across all
commodities were reached, followed by the credit crunch and then an even more
rapid fall in commodity prices. The global recession and fundamentals behind
key raw materials indicate that further price reductions are possible along
with continued volatility. This together with the exchange rate volatility has
translated into significant challenges for raw material procurement. Despite
these difficult market conditions Rainbow has applied its feed raw material
procurement strategy consistently.
The graph below depicts the rand feed cost movements for the twelve month
periods ended 31 March since 2003, with significant increases having been
experienced in the past two years.
SEE PRESS RELEASE FOR GRAPH
The local chicken market is estimated to have grown in rand value by 10% in the
past twelve months to R17,7 billion. Total chicken imports (excluding turkey
and mechanically deboned meat) have decreased by approximately 33% to March
2009, largely due to the earlier weakening of the rand, overseas suppliers
diverting product into other more profitable markets and the effect of the
significant capacity expansion locally.
The poultry industry`s petition to oppose the International Trade
Administration Commission`s proposed scrapping of the US anti-dumping tariff is
ongoing.
REVIEW OF OPERATIONS
Brands
Rainbow`s strategic focus on innovation, differentiation and communication
continues to prove successful. Rainbow`s brand strategy, which differentiates
the company from its competitors, has been effective in delivering an
acceptable margin during a period of extreme input cost pressure.
The Rainbow range of products can be classified as `core` and `added value`. A
significant amount of work has gone into invigorating the core Rainbow
products. The rollout of the new Rainbow logo has ensured better stand-out and
differentiation in-store and is consistent with the drive to provide consumers
with a better quality branded chicken offering.
Added value products which now include Rainbow Viennas and Polonies, Rainbow
Crumbed, Rainbow Grill and Braai as well as Farmer Brown Fully Cooked and
Tenderbreasts have shown tremendous growth, and now contribute a meaningful
percentage to total retail sales. The focus on driving growth in the added
value portfolio has resulted in Rainbow Simply Chicken Polony becoming the
market leader in the polony sector.
After five years of double digit growth, the foodservice channel has slowed in
reaction to the prevailing economic conditions. Declining same store growth at
certain major Quick Service Restaurants (QSRs) has put pressure on suppliers to
reduce costs and investigate cheaper alternatives.
Supply chain
Agricultural performance during the winter months improved on last year despite
the higher than normal incidence of disease in the industry and the
particularly cold winter experienced in some areas. Performance challenges were
however experienced during the early summer months, particularly in the Cape.
The agriculture teams remain focused on producing the right bird at the lowest
cost to ensure Rainbow`s weight sensitive product mix can be produced most
profitably.
The feed operation is a critical element of Rainbow`s overall cost chain and
its strategic priorities remain cost-effective procurement, milling efficiency,
targeting external business to utilise excess capacity and working with
agriculture to achieve the lowest c/kg chicken. Feed experienced difficult
trading conditions and was less successful than prior years in selling its
excess capacity profitably.
The processing plants continue to maintain the high degree of flexibility
required to deliver the exciting list of new products and to meet the
significant growth experienced on certain product lines. Costs have been well
contained and yield and efficiency improvements have been successful with more
improvements expected.
Rainbow`s outbound supply chain has been streamlined by the completion of the
new plant-based cold storage facility at Hammarsdale which Vector manages.
Vector Primary Transport which commenced in August 2007 to mitigate risk for
Rainbow and McCain, extended this service offering during the current year to
I&J and Willowton. Vector also entered into new distribution contracts with
Famous Brands (Wimpy and FishAways) and Pieman`s Pantry during the current
year.
FINANCIAL REVIEW
Revenue - Rmillion 2009 2008 %
Chicken 5 367,9 4 578,5 17,2
Other sales 1 443,5 1 376,8 4,8
Reported revenue 6 811,4 5 955,3 14,4
Chicken revenue for the year was 17,2% higher than the previous year. Rainbow`s
average price realisations increased by 15,2% and despite two less trading days
(0,8% impact) volumes were 2,0% higher.
Group revenue increased by 14,4% to R6,8 billion (2008: R6,0 billion) largely a
function of the higher chicken realisations.
The table below depicts headline EBIT from a statutory perspective and adjusted
for both non-recurring items and unrealised gains or losses on financial
instruments used in the feed raw material procurement strategy. The
non-recurring items include the provision release in respect of the settlement
of certain legal disputes (R23,8 million) in 2009 and the feed claim recovery
(R40,0 million) and BEE expense (R49,4 million) in 2008.
Reporting the financial effects of certain financial instruments used in the
feed raw material procurement strategy introduces volatility to the Group`s
financial results. For the year under review, the pre-taxation impact on the
Group`s results of these unrealised positions is a negative impact of R153,2
million (2008: R34,4 million positive).
2009 2008 %
Headline EBIT (Rmillion)
- Statutory 425,2 764,6 (44,4)
- Adjusted for non-recurring items 401,4 774,0 (48,1)
- Adjusted pre IAS 39 554,6 739,6 (25,0)
Headline EBIT margin (%)
- Statutory 6,2 12,8 (6,6)
- Adjusted for non-recurring items 5,9 13,0 (7,1)
- Adjusted pre IAS 39 8,1 12,4 (4,3)
The decline in headline EBIT margin is in line with the forecast made at the
previous year end and reflects the 33,6% feed cost increase not being entirely
recovered in chicken pricing.
Rainbow Chicken Foods, the company owning the Further Processing Plant, was
approved by the Minister of Trade and Industry as a qualifying strategic
industrial project with preferred status. The company`s preferred status grants
an additional taxation allowance of 100% of the cost of qualifying industrial
assets. The preferred status was subject to the company maintaining certain
performance criteria set out in the approval, failing which the allowance would
reduce to 50% of the cost. Deferred taxation was previously recognised based on
50% of the additional taxation allowance. Management is satisfied that all
performance criteria have now been met and as a consequence, the remaining
portion of the additional allowance has been recognised in the current year
(R26,5 million).
The effective taxation rate of 28,1% (2008: 33,6%) is lower as a result of the
additional taxation allowance referred to above, offset by the higher STC
charge on the increased interim dividend resulting from the BEE shares issued
during the year.
Net finance income decreased by R13,9 million due to the lower cash balances
during the period.
Headline earnings decreased by 39,6% to R318,8 million (2008: R528,1 million)
with diluted headline earnings per share reducing by 39,4% to 109,6 cents per
share (2008: 180,8 cents per share).
Cash generated by operations decreased by 3,7% to R594,5 million (2008: R617,2
million) by virtue of the lower trading results and lower non-cash items as a
result of the impact of the BEE transaction in the prior year (R49,4 million).
Inventories and receivables have been impacted by the higher feed costs however
underlying days cover is marginally improved on the previous year.
Capital expenditure was R293,1 million (2008: R315,5 million). A further amount
of R92,7 million (2008: R94,2 million) has been contracted and committed, but
not spent, whilst a further R109,2 million (2008: R119,3 million) has been
approved, but not contracted. The Group continues to follow a policy of
upgrading its facilities and funding normal levels of replacement capital
expenditure from its own resources. Return on equity decreased to 13,2% (2008:
25,3%).
BEE TRANSACTION
Rainbow`s BEE transaction was concluded on 30 July 2008 with the issue of the
15% ordinary shares to the broad-based consortium. As noted in the 2008 annual
report, for accounting purposes the transaction is treated as an option and
therefore does not impact the per share calculations. The only impact on
Rainbow`s results will be the recurring employee portion of the option charge
and STC payable on dividends declared in respect of the 15% BEE shares.
PROSPECTS
Considering the global economic recession and its spill-over impact locally,
consumer spending is expected to remain under pressure.
Maize prices are likely to remain volatile but at lower levels and continue to
trade around export parity. Soya prices are likely to remain under pressure due
to lower anticipated crops, the threat of further strikes in Argentina and the
continued exchange rate volatility. By virtue of Rainbow`s forward procurement
policy, feed prices are only expected to be meaningfully lower in the second
six months of the 2010 financial year.
The lower anticipated feed prices and benefit of the unrealised procurement
losses booked in 2009 are likely to have a favourable impact on earnings for
the 2010 year.
DIRECTORATE
Following the implementation of the BEE transaction, with effect from 31 July
2008, Mr GC Zondi was appointed as a non-executive director. Mr DG Zwiegelaar
retired from the Board on 19 November 2008 and Mr RV Smither and Mr PR Louw
were appointed on 1 December 2008.
AUDIT OPINION
The annual financial statements, from which the abridged Group results
contained herein are derived, have been audited by PricewaterhouseCoopers Inc.
Their unmodified Audit Reports on the annual financial statements and the
abridged Group results are available for inspection at the company`s registered
office.
CASH DIVIDEND DECLARATION
Notice is hereby given that on 9 June 2009 the Board declared a final dividend
(number 72) of 44,0 cents per ordinary share in respect of the twelve months
ended 31 March 2009 (2008: 44,0 cents). By virtue of the lower earnings the
total dividend for the year is 1,6 times covered by fully diluted headline
earnings per share (2008: 2,7 times).It is the Board`s intention to restore the
dividend cover to between 2,0 - 2,5 times over a period of time.
The salient dates of the declaration and payment of this dividend are as
follows:
Last date to trade ordinary shares cum dividend Friday, 3 July 2009
Ordinary shares trade ex dividend Monday, 6 July 2009
Record date Friday, 10 July 2009
Payment date Monday, 13 July 2009
Share certificates may not be dematerialised or rematerialised between Monday,
6 July 2009 and Friday, 10 July 2009 (both dates inclusive).
For and on behalf of the Board
MH Visser M Dally
Non-executive Chairman Chief Executive Officer
Durban
9 June 2009
Directors: MH Visser (Non-executive Chairman), M Dally (CEO)*, RH Field*,
M Griessel, PR Louw, JB Magwaza, MM Nhlanhla, RV Smither, DW Vale, GC Zondi
* Executive Directors
Company secretary: JMJ Maher
Registered office: Rainbow Chicken Limited, One The Boulevard, Westway Office
Park, Westville, 3629
Transfer secretaries: Computershare Investor Services (Proprietary) Limited,
70 Marshall Street, Johannesburg 2001
Auditors: PricewaterhouseCoopers Inc
Sponsor: RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Bankers: ABSA Bank Limited
Website: www.rainbowchicken.co.za
Date: 09/06/2009 17:15:02 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
