| Thu 19 Nov 2009, 17:15 | | RBW - Rainbow Chicken - Unaudited results for the six months ended 30 September |
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RBW
RBW
RBW - Rainbow Chicken - Unaudited results for the six months ended 30 September
2009 and cash dividend declaration
RAINBOW CHICKEN LIMITED
("Rainbow" or "the Group or the company")
(Registration number 1966/004972/06)
JSE share code: RBW ISIN: ZAE000019063
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2009 AND CASH DIVIDEND
DECLARATION
SALIENT FEATURES
Chicken revenue UP 4,7%
Operating profit UP 42,3%
Headline earnings UP 35,0%
Interim dividend 28.0 cents
BALANCE SHEET
30 Sept 30 Sept 31 March
R`000 2009 2008 2009
ASSETS
Non-current assets
Property, plant and equipment 1 434 066 1 309 425 1 383 196
Goodwill 287 444 287 444 287 444
Deferred income tax assets 5 798 5 796
1 727 308 1 596 869 1 676 436
Current assets
Inventories 655 941 680 622 543 925
Biological assets 463 530 436 219 429 553
Trade and other receivables 949 345 950 619 987 503
Derivative financial instruments 465 16 727 6 295
Tax receivable 32 621 6 965
Cash and cash equivalents 343 917 379 967 528 084
2 413 198 2 496 775 2 502 325
Total assets 4 140 506 4 093 644 4 178 761
EQUITY
Capital and reserves 2 545 885 2 351 719 2 485 910
LIABILITIES
Non-current liabilities
Deferred income tax liabilities 243 598 240 174 243 709
Post-retirement medical obligation 88 505 84 138 85 655
332 103 324 312 329 364
Current liabilities
Trade and other payables 1 230 187 1 348 953 1 329 764
Provisions 41 622 17 500
Derivative financial instruments 12 915 16 223
Current income tax liabilities 19 416 27 038
1 262 518 1 417 613 1 363 487
Total liabilities 1 594 621 1 741 925 1 692 851
Total equity and liabilities 4 140 506 4 093 644 4 178 761
STATEMENT OF COMPREHENSIVE INCOME
Six months Six months
ended ended Year ended
30 Sept 30 Sept 31 March
R`000 2009 2008 2009
Revenue 3 360 513 3 326 724 6 811 448
Operating profit before
non-recurring
items and depreciation 323 915 247 085 549 268
Legal disputes provision release 23 800
Operating profit before
depreciation 323 915 247 085 573 068
Depreciation (75 225) (72 324) (149 229)
Operating profit 248 690 174 761 423 839
Finance costs (329) (1 428) (5 059)
Finance income 8 333 13 768 22 875
Profit before taxation 256 694 187 101 441 655
Income tax expense (83 261) (61 789) (124 203)
Profit for the period 173 433 125 312 317 452
Total comprehensive income
for the period 173 433 125 312 317 452
Basic earnings per share (cents) 59,5 43,1 109,1
Basic earnings per share - diluted
(cents) 59,2 43,1 109,1
HEADLINE EARNINGS
Six months Six months
ended ended Year ended
30 Sept 30 Sept 31 March
R`000 2009 2008 2009
Total comprehensive income for
the period 173 433 125 312 317 452
(Profit)/loss on disposal of
property, plant and equipment (3 609) 439 1 376
Headline earnings 169 824 125 751 318 828
Legal disputes provision release (17 136)
Additional tax allowance (26 506)
Adjusted headline earnings 169 824 125 751 275 186
Headline earnings per share (cents) 58,2 43,3 109,6
Headline earnings per share -
diluted (cents) 58,0 43,3 109,6
Adjusted headline earnings per
share (cents) 58,2 43,3 94,6
Adjusted headline earnings per
share - diluted (cents) 58,0 43,3 94,6
CASH FLOW STATEMENT
Operating profit 248 690 174 761 423 839
Non-cash items 64 896 84 141 149 060
Operating profit before
working capital requirements 313 586 258 902 572 899
Working capital requirements (204 891) (92 312) 21 635
Cash generated by operations 108 695 166 590 594 534
Net finance income 8 004 12 341 17 816
Tax paid (56 992) (49 710) (115 767)
Cash available from
operating activities 59 707 129 221 496 583
Dividends paid (128 369) (127 859) (197 755)
Net cash flows from
investing activities (121 082) (138 517) (290 131)
Net cash flows from
financing activities 5 577 7 228 9 493
Net movement in cash
and cash equivalents (184 167) (129 927) 18 190
Cash and cash equivalents
at the beginning of the period 528 084 509 894 509 894
Cash and cash equivalents
at the end of the period 343 917 379 967 528 084
STATEMENT OF CHANGES IN EQUITY
Stated Share-based Retained
R`000 capital payments earnings Total
Balance at
1 April 2008 1 157 092 78 519 1 101 519 2 337 130
Total comprehensive
income for the period 125 312 125 312
Ordinary dividend paid (127 859) (127 859)
BEE share-based
payments charge 1 716 1 716
Employee share
option scheme:
Proceeds from
shares issued 7 405 7 405
Value of employee
services 8 015 8 015
Balance at 30
September 2008 1 164 497 88 250 1 098 972 2 351 719
Total comprehensive
income for the period 192 140 192 140
Ordinary dividend paid (69 896) (69 896)
BEE share-based
payments charge 1 667 1 667
Employee share
option scheme:
Proceeds from shares
issued 2 265 2 265
Value of employee
services 8 015 8 015
Balance at
1 April 2009 1 166 762 97 932 1 221 216 2 485 910
Total comprehensive
income for the period 173 433 173 433
Ordinary dividend paid (128 369) (128 369)
BEE share-based
payments charge 1 704 1 704
Employee share
option scheme:
Proceeds from shares
issued 5 577 5 577
Value of employee
services 7 630 7 630
Balance at 30
September 2009 1 172 339 107 266 1 266 280 2 545 885
SUPPLEMENTARY INFORMATION
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
R`000 2009 2008 2009
Capital expenditure contracted and
committed 75 514 72 231 92 694
Capital expenditure approved but not
contracted 67 073 137 235 109 217
Contingent liabilities 33 599 49 830 36 257
STATISTICS
Ordinary shares in issue (000`s) 292 022 291 191 291 320
Weighted average ordinary
shares in issue (000`s) 291 657 290 574 290 904
Diluted weighted average
ordinary shares in issue (000`s) 292 990 290 574 290 904
Net asset value per share (cents) 871,8 807,6 853,3
Ordinary dividends:
Interim dividends
declared/paid (cents) 28.0 24,0 24,0
Final dividend paid (cents) 44,0
BASIS OF PREPARATION
The unaudited results 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 comply with IFRS and are consistent with those applied in the previous
year except for the impact of the standards noted below that became effective
on 1 January 2009: IAS 1 (Presentation of Financial Statements (revised)) and
IFRS 8 (Operating Segments). The adoption of these standards has no effect on
the results, nor has it required any restatement of the results.
OVERVIEW AND MARKET CONDITIONS
The results for the six months ended 30 September 2009 reflect a headline
earnings increase of 35,0%.
The South African economy posted its third consecutive annualised quarterly
decline in the second quarter. Nearly a million jobs have been lost this
calendar year and households continue to suffer. Despite a significant response
from monetary and fiscal policy, it looks likely that South Africa`s growth
recovery will take longer than most other countries. While private sector
investment continues to falter, the sustained push on the public sector
investment has been critical in mitigating what would have otherwise been a
deeper recession.
Household consumption contracted at an accelerated pace of 5,8% in the second
quarter, its steepest decline in 23 years. This decline was underpinned by a 6%
annualised fall in disposable income owing mainly to further job losses and
reduced working hours in certain industries. The significant interest rate cuts
since December last year have certainly helped as they pass through to
households immediately, however household debt remains close to record levels.
Inflation has declined from a peak of 8,6% in February to 6,1% in September.
Feed raw material prices peaked at historically high levels during the past
financial year and remain volatile. With the exception of soya, raw material
prices and the exchange rate have all reduced substantially since March 2009.
Although Rainbow is currently shorter than its overall position previously, the
rate at which the input prices have declined has made it difficult to take full
advantage of the lower pricing. Going forward there is a greater opportunity to
reduce feed costs should raw material prices remain at the current lower
levels.
The graph (which can be viewed in the press) depicts the feed cost increases
for the six-month periods ended 30 September since 2005, with 2009
representing a marginal increase over the high base of 2008.
SEE PRESS RELEASE FOR GRAPH
The local chicken market is estimated to have grown in rand value by 17% in the
past twelve months to R20,7 billion. Total chicken imports (excluding turkey
and mechanically deboned meat) have increased by 50% over the past six months
(market share 6% to 8%), largely due to the strengthening of the rand.
REVIEW OF OPERATIONS
Brands
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 first six months of the financial year has seen softer demand in grocery
markets as a consequence of the economic slowdown. Despite this, Rainbow has
continued with its rollout of added value innovation, as well as innovation
in its core products.
The last two months have seen the launch of a number of Farmer Brown crumbed
products, as well as Rainbow Fingers to compete against fish fingers, which
remains a significant category in crumbed frozen food. Rainbow has doubled its
volumes in crumbed frozen foods over the last year, while competitor brands`
share has declined.
Rainbow Family Polony was launched during the last six months and has already
established itself as a significant player in the polony category, adding to
Rainbow`s existing Simply Chicken brand leadership.
The Foodservice market remains in a slower growth pattern as a consequence of
the economic slowdown. Rainbow has continued to invest in this important area
of the business to enable future anticipated growth.
Supply chain
Challenges in agricultural performance have been experienced during the winter
months, particularly in the Cape. Recent improvements to the Cobb breed have
resulted in improved hatchability. 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 processing plants and feed mills maintained their focus on operational
efficiency and quality with great success. Rainbow seeks to achieve an optimum
level of flexibility in these operations, balancing cost optimisation and the
ability to respond to changes in demand. Of particular note is the improved
service levels achieved over this period.
Feed Safety and Food Safety are core to Rainbow`s business and all processing
plants and feed mills have maintained their ISO 22000 certification status. The
sustainability programme in these operations continues to derive benefits,
particularly in terms of lower electricity and coal consumption. The focus on
yield improvement in the processing plants has also delivered further
efficiency benefits.
Rainbow`s Outbound Supply Chain is now fully integrated, with all primary and
secondary warehouse and transport services being managed by Vector. This will
help drive efficiencies and provide Rainbow with a competitive advantage and
superior customer service. Current initiatives to further optimise the supply
chain include the Sales and Operational Planning (S&OP) project and an upgrade
to the Roodepoort facility.
FINANCIAL REVIEW
Revenue - Rm 2009 2008 %
Chicken 2 633,3 2 515,7 4,7
Other 727,2 811,0 (10,3)
Total revenue 3 360,5 3 326,7 1,0
Chicken revenue for the six months was 4,7% higher than the same period of the
previous year. Rainbow`s average realisations increased by 5,4% and volumes
were 0,7% lower by virtue of 3 less trading days (2,4% impact).
Total revenue increased by only 1,0% to R3,4 billion (2008: R3,3 billion) as
a result of significantly lower feed prices and volumes sold external to
Rainbow.
The table below depicts headline EBIT from a statutory perspective and adjusted
for unrealised gains or losses on financial instruments used in the feed raw
material procurement strategy.
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 period under review, the pre-taxation impact on the
Group`s results of these unrealised positions is a positive impact of R14,9
million (2008: R52,9 million negative).
2009 2008 %
Headline EBIT (Rm)
- Statutory 243,7 175,2 39,1
- Pre IAS 39 228,8 228,1 0,3
Headline EBIT margin (%)
- Statutory 7,3 5,4 1,9
- Pre IAS 39 6,8 7,0 (0,2)
The underlying (pre IAS 39) headline EBIT is adversely impacted by a lower
contribution from the external feed business. The increase in statutory
headline EBIT margin is in line with the prospects stated at the previous
year-end and reflects the reversal of the year-end feed raw material positions.
Net finance income decreased by R4,3 million due to the lower cash balances and
lower interest rates during the period.
The effective tax rate of 32,4% (2008: 33,0%) is lower as a result of an
overprovision for tax at year-end, offset by the higher STC charge on the
increased number of shares in issue associated with the BEE transaction
implemented last year.
Headline earnings increased by 35,0% to R169,8 million (2008: R125,7 million)
with diluted headline earnings per share increasing by 33,9% to 58,0 cents per
share (2008: 43,3 cents per share).
Cash generated by operations decreased by 34,8% to R108,7 million (2008: R166,6
million), largely due to lower trade and other payables (R118,8 million
movement).
Capital expenditure was R133,3 million (2008: R139,6 million). A further amount
of R75,5 million (2008: R72,2 million) has been contracted and committed, but
not spent, whilst a further R67,1 million (2008: R137,2 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 14,9% (2008: 20,7%), however marginally up on the
year-end`s 13,2%.
OPERATING SEGMENTS
IFRS 8 (Operating Segments) requires segmental disclosure based on information
that management uses to run the business. The company operates as a vertically
integrated chicken producer and is managed as a single segment. Additional
entity wide disclosure will be reported in the year-end financial statements.
PROSPECTS
Maize prices are likely to remain at the lower levels but will be dependent on
weather conditions and the extent of planting locally. Soya prices are likely
to remain volatile due to the lower crop expectation and threat of further
strikes in Argentina as well as the continued exchange rate volatility. By
virtue of Rainbow`s forward procurement policy, feed prices are only expected
to decline in the second six months of the financial year, however, tough
conditions in the external feed market are expected to continue.
Considering the economic recession and job loss statistics, consumer spending
is expected to remain under pressure, translating into softer demand and
continued depressed chicken realisations.
DIRECTORATE
With effect from 1 September 2009, Mr NP Mageza was appointed as an independent
non-executive director.
CASH DIVIDEND DECLARATION
Notice is hereby given that on 19 November 2009, the Board declared an interim
dividend (number 73) of 28.0 cents per ordinary share in respect of the six
months ended 30 September 2009 (2008: 24.0 cents).
The salient dates of the declaration and payment of this dividend are as
follows:
Last date to trade ordinary shares cum dividend Friday, 8 January 2010
Ordinary shares trade ex dividend Monday, 11 January 2010
Record date Friday, 15 January 2010
Payment date Monday, 18 January 2010
Share certificates may not be dematerialised or rematerialised between Monday,
11 January 2010 and Friday, 15 January 2010 (both dates inclusive).
For and on behalf of the Board
MH Visser M Dally
Non-executive Chairman Chief Executive Officer
Durban
19 November 2009
Directors: MH Visser (Non-executive Chairman), M Dally (CEO)*, RH Field*,
M Griessel, PR Louw, NP Mageza, 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: 19/11/2009 17:15:01 Produced by the JSE SENS Department.
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