| Wed 1 Sep 2010, 7:05 | | AFR - Afgri Limited - Audited condensed consolidated financial results for the |
|
AFR
AFR
AFR - Afgri Limited - Audited condensed consolidated financial results for the
year ended 30 June 2010 and cash dividend declaration
AFGRI LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1995/004030/06)
ISIN number: ZAE000040549
Share code: AFR
Audited condensed consolidated financial results for the year ended 30 June 2010
and cash dividend declaration
*Large maize crop contributes to improved results from AFGRI`s grain storage
business
*17% improvement in AFGRI Foods` results following 2009 expansion
*AFGRI Financial Services returns to profitability
*6% increase in headline earnings per share
*32% improvement in Group profit
*Non-core assets disposed of and further investment in foods sector
*R690 million net cash at 30 June 2010
Group balance sheet (R`millions)
Note 30 June 30 June
2010 2009
ASSETS
Non-current assets 2 080 2 121
Property, plant and equipment 2 1 394 1 346
Goodwill 2 37 38
Other intangible assets 2 241 237
Investments in associates 36 36
Other financial assets 52 41
Financial receivables 204 266
Deferred income tax assets 116 157
Current assets 6 375 7 547
Inventories 900 1 023
Biological assets 57 53
Trade and other receivables 545 483
Trade receivables financed by banks 6 3 898 5 015
Derivative financial instruments 50 108
Income tax assets 28 21
Cash and cash equivalents and cash collateral 897 844
deposits
?Cash collateral deposits 422 597
?Cash and cash equivalents 475 247
Assets of disposal groups classified as held 23 157
for sale
Total assets 8 478 9 825
EQUITY and liabilities
Capital and reserves attributable to equity 1 602 1 487
holders
Share capital - -
Treasury shares (90) (90)
Incentive trust shares (171) (192)
Fair value and other reserves 43 47
Retained earnings 1 820 1 722
Minority interests 683 646
Total equity 2 285 2 133
Non-current liabilities 347 329
Borrowings 173 128
Deferred income tax liabilities 174 201
Current liabilities 5 846 7 318
Trade and other payables 1 564 1 797
Derivative financial instruments 73 89
Income tax liabilities 2 6
Short-term borrowings 105 59
Call loans and bank overdrafts 207 363
Bank borrowings to finance trade receivables 6 3 895 5 004
Liabilities of disposal groups classified as - 45
held for sale
Total liabilities 6 193 7 692
Total equity and liabilities 8 478 9 825
Net asset value per share attributable to 451 430
equity holders (cents)
Group income statement (R`millions)
Note Year Year
ended ended
30 June 30 June
2010 2009
Continuing operations
Sales of goods and services 6 876 7 438
Interest on trade receivables 383 579
Total revenue 7 259 8 017
Cost of sales (5 060) (5 757)
Gross profit 2 199 2 260
Other operating income 79 116
Selling and administration expenses (1 369) (1 247)
Operating profit 909 1 129
Finance costs 3 (456) (666)
Share of profit of associates - 33
Profit before income tax 453 496
Income tax expense (61) (92)
Profit for the year from continuing 392 404
operations
Discontinued operations
Profit/(loss) for the year from discontinued 75 (50)
operations
Profit for the year 467 354
Profit for the year attributable to:
Equity holders of the Company 305 233
Minority interest - Agri Sizwe partners 129 110
- Other minorities 33 11
Profit for the year 467 354
Weighted average number of shares in issue 321,7 320,7
(million)
Diluted weighted average number of shares in 354,8 346,1
issue (million)
Earnings per share from continuing operations 77,7 84,0
(cents)
Earnings/(losses) per share from discontinued 17,0 (11,3)
operations (cents)
Earnings per share from all operations 94,7 72,7
(cents)
Diluted earnings per share from continuing 70,5 77,9
operations (cents)
Diluted earnings/(losses) per share from 15,4 (10,6)
discontinued operations (cents)
Diluted earnings per share from all 85,9 67,3
operations (cents)
Group statement of comprehensive income (R`millions)
Year Year
ended ended
30 June 30 June
2010 2009
Profit for the year 467 354
Other comprehensive income
?Exchange differences on translating foreign 3 (53)
operations
?Cash flow hedges (16) 12
?Income tax relating to components of other - -
comprehensive income
Other comprehensive (loss)/income for the period, (13) (41)
net of tax
Total comprehensive income for the year 454 313
Total comprehensive income attributable to:
Equity holders of the Company 292 192
Minority interest - Agri Sizwe partners 129 110
- Other minorities 33 11
454 313
Group statement of changes in equity (R`millions)
Share Fair Retained Treasury Incentive
capital value earnings shares trust
and share
other
reserves
Balance 30 June 2008 - 80 1 578 (155) (124)
(audited)
Total comprehensive - (41) 233 - -
income
Purchase of incentive - - - - (3)
shares
Dividends paid - - (89) - -
Payment to minorities - - - - -
Transfer of Group - - - 65 (65)
shares
Share based payments - 8 - - -
Balance 30 June 2009 - 47 1 722 (90) (192)
(audited)
Total comprehensive - (13) 305 - -
income
Disposal of incentive - - - - 21
shares
Dividends paid - - (133) - -
Payment to minorities - - - - -
Share based payments - 9 - - -
Transaction with - - (74) - -
minorities
Balance 30 June 2010 - 43 1 820 (90) (171)
Group statement of changes in equity (R`millions)
Total Agri Other Total
share- Sizwe Minorit-
holders partners ies
equity
Balance 30 June 2008 (audited) 1 379 594 18 1 991
Total comprehensive income 192 110 11 313
Purchase of incentive shares (3) - - (3)
Dividends paid (89) - - (89)
Payment to minorities - (85) (2) (87)
Transfer of Group shares - - - -
Share based payments 8 - - 8
Balance 30 June 2009 (audited) 1 487 619 27 2 133
Total comprehensive income 292 129 33 454
Disposal of incentive shares 21 - - 21
Dividends paid (133) - - (133)
Payment to minorities - (78) (11) (89)
Share based payments 9 - - 9
Transaction with minorities (74) - (36) (110)
Balance 30 June 2010 1 602 670 13 2 285
Group cash flow statement (R`millions)
Year Year
ended ended
30 June 30 June
2010 2009
Operating activities
Cash generated by operations before changes in 522 393
working capital and tax paid
Changes in working capital 33 491
Tax paid (71) (53)
Net cash generated by operating activities 484 831
Net cash generated by/(utilised in) investing 55 (410)
activities
Net cash utilised in financing activities (155) (194)
Net increase in cash and cash equivalents 384 227
Cash and cash equivalents at the beginning of year (116) (343)
Cash and cash equivalents at the end of the year 268 (116)
Cash collateral deposits 422 597
Cash and cash equivalents and cash collateral 690 481
deposits
Business segment results (R`millions)
AFGRI Financial Services
Capital Broking
2010 2009 2010 2009
Revenue 693 839 19 9
- sale of goods and services 310 260 19 9
- interest 383 579 - -
Operating profit/(loss) (before 324 456 8 6
the items below)
- other operating income 60 81 - -
- pension fund surplus - - - -
- depreciation and amortisation (29) (12) - -
- allocation of Corporate costs (24) (33) (3) (5)
Operating profit/(loss) 331 492 5 1
Other items of profit and loss - - - -
- fair value adjustment to - - - -
disposal group assets
- share of profit/(loss) of - - - -
associates
Profit/(loss) before finance 331 492 5 1
costs
Finance costs (314) (512) 2 -
Profit/(loss) before income tax 17 (20) 7 1
Income tax
Profit after tax
Assets 4 018 5 333 1 1
Non-current assets 215 328 - -
Other current assets 44 91 - -
Trade and other receivables 3 322 4 338 - -
Cash and cash equivalents 437 576 1 1
Liabilities 3 274 4 628 1 -
Non-current liabilities 13 114 - -
Other current liabilities 319 400 1 -
Borrowings to finance trade 2 937 4 114 - -
receivables
Call loans and overdrafts 5 - - -
Capital expenditure 30 168 - -
AFGRI Financial Services contains the
Group`s lending operation (Capital)
and commodity broking activities.
Included in the Capital operating unit
is the Group`s Treasury function and
its Insurance Broking service unit.
Business segment results (R`millions)
AFGRI Agri-Services
Retail and Equipment Logistic Services
Primary Retail Logistics Trading
inputs
2010 2009 2010 2009 2010 2009 2010 2009
Revenue 420 659 2 652 2 983 469 431 102 157
- sale of 420 659 2 652 2 983 469 431 102 157
goods and
services
- interest - - - - - - - -
Operating 15 14 149 173 238 207 (6) 28
profit/(loss)
(before the
items below)
- other - - - - - - - -
operating
income
- pension fund - - - - - - - -
surplus
- depreciation - - (11) (14) (16) (15) (4) -
and
amortisation
- allocation (7) (9) (17) (24) (25) (32) (7) (9)
of Corporate
costs
Operating 8 5 121 135 197 160 (17) 19
profit/(loss)
Other items of - - - 32 - 1 - -
profit and
loss
- fair value - - - - - - - -
adjustment to
disposal group
assets
- share of - - - 32 - 1 - -
profit/(loss)
of associates
Profit/(loss) 8 5 121 167 197 161 (17) 19
before finance
costs
Finance costs (1) (1) (42) (42) (13) (23) (17) (4)
Profit/(loss) 7 4 79 125 184 138 (34) 15
before income
tax
Income tax
Profit after
tax
Assets 148 255 1 395 1 557 461 390 550 796
Non-current 1 57 216 285 365 322 80 39
assets
Other current 79 123 731 945 44 9 103 172
assets
Trade and 53 59 436 304 52 59 294 527
other
receivables
Cash and cash 15 16 12 23 - - 73 58
equivalents
Liabilities 85 146 729 890 73 54 481 487
Non-current 1 4 2 5 20 - - -
liabilities
Other current 84 142 727 885 53 54 481 487
liabilities
Borrowings to - - - - - - - -
finance trade
receivables
Call loans and - - - - - - - -
overdrafts
Capital 6 14 27 38 57 26 3 3
expenditure
AFGRI Retail and Equipment AFGRI Logistic Services
consists of two operating includes both the
units: Primary Inputs and Handling and Storage and
Retail. Logistic Services
The Retail unit includes divisions. The Trading
FarmCity and Australia. operation matches
Together AFGRI Logistic physical supply and
Services and AFGRI Retail demand of grain
and Equipment represent commodities in a fully
AFGRI Agri-Services. hedged environment.
Business segment results (R`millions)
AFGRI Foods and Other
Foods Other
Animal Oil and Corporate Group
Protein Protein eliminations
2010 2009 2010 2009 2010 2009 2010 2009
Revenue 2 627 2 582 544 501 1 3 (268) (147)
- sale of goods 2 627 2 582 544 501 1 3 (268) (147)
and services
- interest - - - - - - - -
Operating 301 278 42 30 (105) (130) - -
profit/(loss)
(before the
items below)
- other - - - - 19 35 - -
operating
income
- pension fund - - - - - 59 - -
surplus
- depreciation (58) (51) (7) (6) (11) (10) - -
and
amortisation
- allocation of (16) (22) (6) (9) 105 143 - -
Corporate costs
Operating 227 205 29 15 8 97 - -
profit/(loss)
Other items of - - - - - - - -
profit and loss
- fair value - - - - - - - -
adjustment to
disposal group
assets
- share of - - - - - - - -
profit/(loss)
of associates
Profit/(loss) 227 205 29 15 8 97 - -
before finance
costs
Finance costs (56) (51) (4) (1) (11) (32) - -
Profit/(loss) 171 154 25 14 (3) 65 - -
before income
tax
Income tax
Profit after
tax
Assets 1 523 1 430 150 253 736 549 (504) (739)
Non-current 882 812 77 104 259 174 (15) -
assets
Other current 240 264 26 67 49 104 (258) (413)
assets
Trade and other 395 347 46 78 76 112 (231) (326)
receivables
Cash and cash 6 7 1 4 352 159 - -
equivalents
Liabilities 675 662 77 122 1 276 1 402 (478) (699)
Non-current 253 141 7 9 66 56 (15) -
liabilities
Other current 422 521 70 113 50 93 (463) (699)
liabilities
Borrowings to - - - - 958 890 - -
finance trade
receivables
Call loans and - - - - 202 363 - -
overdrafts
Capital 146 212 21 4 67 10 - -
expenditure
AFGRI Foods includes Animal The Corporate office houses
Protein, consisting of the certain of the Group`s
Animal Feed and Poultry financing structures, CSI,
operating units. The Oil compliance and internal
and Protein division audit functions, treasury
produces vegetable oil for and incentive shares, and
human consumption and incubates new projects.
associated by-products. Corporate costs are
allocated to the divisions
where appropriate.
Business segment results (R`millions)
Totals
Continuing operations Discontinued All operations
operations
2010 2009 2010 2009 2010 2009
Revenue 7 259 8 017 1 067 1 247 8 326 9 264
- sale of goods 6 876 7 438 1 041 1 219 7 917 8 657
and services
- interest 383 579 26 28 409 607
Operating 966 1 062 125 95 1 091 1 157
profit/(loss)
(before the
items below)
- other 79 116 2 3 81 119
operating income
- pension fund - 59 - - - 59
surplus
- depreciation (136) (108) (6) (10) (142) (118)
and amortisation
- allocation of - - - - - -
Corporate costs
Operating 909 1 129 121 88 1 030 1 217
profit/(loss)
Other items of - 33 - (47) - (14)
profit and loss
- fair value - - - (46) - (46)
adjustment to
disposal group
assets
- share of - 33 - (1) - 32
profit/(loss) of
associates
Profit/(loss) 909 1 162 121 41 1 030 1 203
before finance
costs
Finance costs (456) (666) (33) (84) (489) (750)
Profit/(loss) 453 496 88 (43) 541 453
before income
tax
Income tax (61) (92) (13) (7) (74) (99)
Profit after tax 392 404 75 (50) 467 354
Assets 8 478 9 825 8 478 9 825
Non-current 2 080 2 121 2 080 2 121
assets
Other current 1 058 1 362 1 058 1 362
assets
Trade and other 4 443 5 498 4 443 5 498
receivables
Cash and cash 897 844 897 844
equivalents
Liabilities 6 193 7 692 6 193 7 692
Non-current 347 329 347 329
liabilities
Other current 1 744 1 996 1 744 1 996
liabilities
Borrowings to 3 895 5 004 3 895 5 004
finance trade
receivables
Call loans and 207 363 207 363
overdrafts
Capital 357 475 357 475
expenditure
Notes to the condensed consolidated annual financial statements
1. Basis of preparation and accounting policies
The directors of AFGRI Limited ("AFGRI" or "the Company") present these
audited condensed consolidated financial results of the AFGRI group of
companies ("the Group") for the year ended 30 June 2010. These
condensed consolidated annual financial statements have been prepared
in accordance with International Financial Reporting Standards ("IFRS")
IAS 34 under the historical cost convention, as modified by the
revaluation of available-for-sale financial assets and financial
liabilities (including derivative financial instruments) and biological
assets at fair value through profit or loss, the Listings Requirements
of the JSE Limited ("JSE") and the South African Companies Act (Act 61
of 1973) as amended, on a basis consistent with that of the prior
period.
Property, plant and Other intangible assets and
equipment goodwill
(R`millions) Year ended Year ended Year ended Year ended
30 June 30 June 30 June 30 June
2010 2009 2010 2009
2. Property,
plant and
equipment,
other
intangible
assets and
goodwill
Carrying value 1 346 1 175 275 265
beginning of
year
Additions 282 384 74 91
Disposals at (102) (72) (28) -
book value
Foreign 1 (9) - (3)
currency
differences
Depreciation/a (99) (86) (43) (32)
mortisation
Net sale of (31) (39) - (23)
subsidiary
(including
assets held
for sale)
Impairment (3) (7) - (23)
Carrying value 1 394 1 346 278 275
end of period
(R`millions) Year ended Year ended
30 June 30 June
2010 2009
3. Finance costs
Interest paid on bank borrowings used (366) (534)
to finance trade receivables
Other interest paid to financial (90) (132)
institutions
Finance cost - Continuing operations (456) (666)
(per income statement)
Finance cost - Discontinued operations (33) (84)
Finance cost - Total (489) (750)
(Cents) Year ended Year ended
30 June 30 June
2010 2009
4. Reconciliation of headline
earnings per share (cents)
Earnings 94,7 72,7
Loss from discontinued operations - 9,0
Impairment of assets 2,4 2,7
Negative goodwill on acquisition of - (7,2)
share of associate
(Profit)/loss of the sale of business (12,1) 3,9
Profit on (6,4) (6,7)
disposal of
assets
Headline 78,6 74,4
earnings
Diluted headline earnings 71,2 68,9
5. Business segment results
The pre-tax segment results are presented without taking into account
any headline earnings adjustments and before the allocation of any
minority (including Agri Sizwe) share of profits. Operating profits
after finance costs are shown after a charge for internal interest
based on each operating unit`s net assets throughout the period.
6. Trade receivables financed by banks and related liability
The only security for the liability is the trade receivables
themselves, and in certain cases, additional cash collateral deposits
or cash trade receivables of between 10% and 15% of the facility. The
Group carries the risk of loss on these trade receivables.
7. Agency agreements
The Group manages Agri debtors on behalf of third party financial
institutions to the amount of R1,2 billion (2009: R1,2 billion).
Management fees are paid by these third parties. The Group is liable
for bad debts to a maximum of between 5% and 10% of the value of
debtors administered. The Group receives a fee for the handling,
grading, storing and administration of commodities on behalf of third
parties. The value of these commodities is R2,9 billion (2009:R3,5
billion).
8. Business combinations
On 1 June 2010 the Group acquired the minority interest in Midway Chix
(Pty) Limited as part of its expansion into the foods sector. This
transaction is outside the scope of IFRS 3, and has been accounted as
an equity transaction in terms of IAS 27 (revised).
9. Discontinued operations
On 26 January 2010 the Group concluded the sale agreement of the
Tsunami business unit with Oninamix (Pty) Limited trading as Arysta
Lifescience South Africa. Certain of the business unit`s assets will
only be transferred over the next 12 months and are therefore disclosed
under assets of disposal groups classified as held for sale. The
trading results are included with the results from discontinued
operations. These assets contributed R645 million (2009: R438 million)
to the Group`s revenue and R70 million (2009: R31 million) to the
Group`s profit before tax. More details regarding this transaction were
published on SENS on 1 February 2010.
On 4 February 2010, the Group entered into a sale agreement with
Capital Harvest to sell the Western Cape debtors book owned by Gro
Capital and the assets and liabilities of the AFGRI Western Cape
business unit. These assets contributed R29 million (2009: R39 million)
to the Group`s revenue and R4 million (2009: R10 million) to the
Group`s profit before tax. More details regarding this transaction were
published on SENS on 5 February 2010.
During the year the Group concluded the sale agreement with MGK
Operating Company (Pty) Limited regarding the sale of 10 of the retail
stores in the Lowveld region. The Group further concluded a sale
agreement to dispose of 13 of its retail branches in the Natal region
to TWK Landbou Limited. These combined assets contributed R393 million
(2009: R694 million) to the Group`s revenue and R13 million (2009: R20
million) to the Group`s profit before tax.
The trading results of the Tsunami business unit, the Lowveld and Natal
retail stores and Capital Harvest are disclosed as discontinued
operations. The comparative reclassification between continuing and
discontinued operations in the income statement and business segment
results has been made.
10. Subsequent event
Subsequent to 30 June 2010 the Group concluded discussions regarding
the restructuring of its black economic empowerment interest. Izitsalo
Employee Investments (Pty) Limited, one of the current beneficiaries of
the Agri Sizwe Empowerment Trust with an undivided interest of 19,9% in
relation to distributions of capital and interest by the Agri Sizwe
Trust, will by agreement acquire the 80,1% Agri Sizwe Trust beneficiary
interests of all of the remaining beneficiaries of the Agri Sizwe
Trust. This event constitutes a non-adjusting event after the reporting
period in terms of IAS 10. More details regarding this transaction were
published on SENS on 29 July 2010.
As part of its growth strategy the Group entered into a purchase
agreement on 6 August 2010 to obtain the business of Rossgro Chickens
(Pty) Limited as a going concern. The transaction is pending approval
by the South African Competition Authorities. This event constitutes a
non?adjusting event after the reporting period in terms of IAS 10. More
details regarding this transaction were published on SENS on 11 August
2010.
11. Contingent liabilities
In March 2009 the Competition Commission initiated an investigation
into the common use of a grain storage tariff by grain storage
companies, the "Safex" rate. AFGRI is cooperating fully with the
Competition Commission. Whilst AFGRI denies any intentional
contravention of the Competition Act, there remains the possibility
that the Competition Tribunal could impose a fine not exceeding 10% of
the affected business (Logistics division) turnover.
12. Going concern
The Board of Directors is satisfied that, after taking into account the
current banking facilities, its utilisation thereof and the budgeted
profit and cash flows for the year ending 30 June 2011, the working
capital available to AFGRI will be sufficient to meet its requirements
for the next 12 months.
13. Corporate governance and JSE Limited (JSE) compliance
The principles of good corporate governance were adhered to. The Group
complies with the JSE Listings Requirements regarding the contents of
the condensed consolidated annual financial statements.
14. Audit opinion
These condensed consolidated financial results have been audited by our
auditors, PricewaterhouseCoopers Inc., who have performed their audit
in accordance with the International Standards on Auditing. A copy of
their unqualified audit report is available for inspection at the
registered office of the company.
Commentary
The directors of AFGRI Limited ("AFGRI") are pleased to present the
audited condensed consolidated financial results of the AFGRI group of
companies ("the Group") for the year ended 30 June 2010. The consolidated
profit for the year reflects a 32% improvement over the previous financial
year.
The third successive year of favourable agricultural conditions has
contributed to a significantly improved performance from the Group. Almost
as important as the results, is the progress made in implementing the One
AFGRI strategy and philosophy. The disposal of five non-core business units
(Seed, Tsunami, the Lowveld and Natal region`s retail stores, and the Western
Cape debtors` book) represents real progress towards aligning the Group with
the grain value chain in high production areas. The Group is committed to
growing its investment in the foods sector and, after expanding the Daybreak
Farms operation in 2009, has now acquired the remaining minority interest
in Midway Chix. Subsequent to year-end, AFGRI acquired the processing, and
marketing elements of Rossgro, a poultry operation situated close to the
existing operations in Sundra.
Operational Review (Revenue and profit before income tax)
Continuing Operations:
AFGRI Financial Services
AFGRI Advances provides both producer and specialised lending within the
agricultural sector. With the introduction in 2009 of the One AFGRI
philosophy, and the alignment of the AFGRI Group to the maize value chain,
various initiatives were adopted to reduce the Group`s credit exposure to
regions and commodities outside of this value chain.
The large maize crop and the resulting decline in prices, and therefore insured
values, resulted in a reduction in crop insurance commissions. Also, the
challenging economic climate resulted in a reduction in the sales of
life assurance products. Notwithstanding these factors, AFGRI Insurance
maintained its earnings level through improved sales of employee benefits
and general insurance products.
The Zambian operation experienced lower international grain trading
volumes, resulting in a 54% reduction in profit before tax.
Careful margin management, improved non-interest income and cost-cutting
measures resulted in the AFGRI Advances division returning to profitability
in 2010. A considerable improvement from the Broking division, and an increase
in profitability of the Treasury division, resulted in the segment reporting
a profit before tax of R23,9 million - an increase of R41,8 million on 2009.
AFGRI Agri-Services
Included within AFGRI Agri-Services are the Group`s two main agri-services
segments: AFGRI Retail and Equipment and AFGRI Logistic Services.
The operations and results of both divisions of AFGRI Agri-Services are
driven by agricultural conditions within AFGRI`s region, often in a
counter-cyclical manner. After the exceptional price increases in agricultural
inputs during 2008 and 2009, the agricultural economy now finds itself in a
period of deflation. Farmers respond quickly to international prices and
exchange rates and anticipate price increases. They also defer purchases
during periods of declining prices. As such, the Retail and Equipment division
finds itself exposed to volatility in sales, with key selling periods becoming
ever shorter during the planting and growing seasons.
Retail and Equipment recorded a 11% decline in turnover (after adjusting for
the disposal of the Lowveld and Natal retail stores). A significant portion of
this decline can be attributed to the 25% to 40% reductions in fertiliser and
animal feed retail prices. Sales volumes for the division`s retail lines
remained in line with the prior year, but bulk store-sales (fertilisers etc.)
and direct sales reported volumes lower than 2009.
The Equipment division sold 418 tractors (2009: 641) at a regional market share
of 31% (2009: 35%) and 40 combine harvesters (2009: 48) at a regional market
share of 47% (2009: 44%). The decline in new equipment sales had a marked impact
on the division`s results that was partly offset by higher spares sales.
The overall profitability of the Retail and Equipment division has been impacted
by significant once-off items in both 2009 and 2010. In 2009 the Group reported
a R29,6 million pre-tax gain due to negative goodwill arising on the acquisition
of the share in a tobacco associate. During 2010 the division sold non-
productive properties, realising capital profits of approximately R12,6 million.
The comparative capital profits figure for 2009 was R29,1 million.
The Retail and Equipment division reported a profit before tax of R86,3 million
including capital profits. After adjusting both the current and prior year for
capital profits and once-off items, the division reported an increase in profit
before tax of 5,4% - a satisfactory result given the market conditions.
AFGRI`s Handling and Storage business unit once again produced an excellent
year. High opening stock levels and increased storage periods of up to 15%,
supported a performance where efficiency improvements and cost containment also
make valuable contributions. Despite only a 9% increase in revenue, the combined
Handling and Storage and Logistics business units reported a profit before tax
of R184,3 million - an increase of 33% on 2009.
The Grain Trading division sold some 2,8 million tons of grain, of which 65%
was sold on a delivered basis. Poor rail delivery service resulted in only 10%
of these commitments being executed by rail, with the remaining balance
delivered by road. The impact of this is severe, with an increase in delivery
costs and time delays experienced across the supply chain. Stock holding costs
increased as stock, acquired for export, was held for longer periods until it
could be utilised locally. A shortage of stock in certain key locations
resulted in higher procurement premiums being incurred in order to meet
obligations.
Turnover declined by 35% compared to 2009, which included substantial maize
exports to east Africa. Sales commission percentages also decreased. More
importantly, execution costs (transport and carry- or holding costs) increased
due to poor rail infrastructure, lower exports and strikes. Overall, the
Group`s trading subsidiary reported a loss before tax of R33,9 million (2009:
profit before tax R12,5 million).
AFGRI Foods
The AFGRI Foods division, representing the more industrial elements of the
Group and comprising the AFGRI Animal Feeds, AFGRI Poultry (formally Daybreak
Farms) and Nedan oil business units performed above expectation. The key
external drivers impacting on AFGRI Foods is GDP growth and consumer spending.
Both of these factors impinged upon the foods sector in the current year
although AFGRI Foods reported improved results overall.
A notable symptom of the poor economic conditions was the price of poultry
products which declined by an average of 9,7% year on year. This was, in part,
offset by lower raw material ingredient prices. Selling prices were also driven
down by capacity expansion within the local industry. Imported poultry products
had less of an impact on prices than in previous years.
The Animal Protein division improved its operating margin from 10,8% to 11,5%
through greater manufacturing efficiencies, feed formulation and cost control.
Higher depreciation and internal interest charges are the result of investments
made in the prior and current years. In total, the division reported a profit
before tax of R171,2 million - an increase of 11% on 2009`s R153,7 million.
Nedan`s results were driven by a 28% increase in sales volumes and a 33%
improvement in its gross margin percentage, achieved through product-mix
variations. In total, the Oil and Protein division reported a 69% increase in
profit before tax, achieving R25,3 million (2009: R14,0 million).
Discontinued Operations:
As part of the Group`s One AFGRI strategy to focus on particular parts of the
grain value chain in high production areas and regions, the Group disposed of
the following operating units during the year:
*AFGRI Seed
*Retail branches in the Lowveld
*Retail branches in the Natal region
*The assets and business of Tsunami Crop Care (Pty) Limited and Tsunami Plant
Protection (Pty) Limited
*The debtors` book and business of Capital Harvest (Pty) Limited, the Western
Cape operation of AFGRI Advances
The disposal of profitable business units during the year led to a turn around
in of the results from discontinuing operations from a post-tax loss in 2009 of
R49,7 million to a post-tax profit of R74,6 million in the current year.
Included in the 2010 results are pre-tax capital profits realised on the
disposal of these businesses and their associated assets of R65,4 million.
Earnings and headline earnings
Profit before tax from continuing operations decreased by 8% (R43 million) based
on the 2009 reported results. Adjusting for the various once-off and capital
items included in the Retail and Equipment business unit and the R59 million
gain arising from the apportionment of the Group`s pension fund surplus in 2009,
the Group`s pre-tax operating profit from continuing operations increased by
some 14,8%.
The effective tax rate for the AFGRI group of companies during 2010 amounted to
19,6%. The reduction in the Group`s average tax rate, compared to the legislated
rate of 28%, is the result of various factors; including a once-off STC credit
of approximately R26 million arising from the unwinding of the preference share
investment by AFGRI Limited. The Group does not expect to be able to maintain
such a low tax rate and future tax charges should approximate the legislated
rate.
Group profit for the period from all operations of R467,1 million represents an
increase of 32%. Earnings per share attributable to ordinary shareholders
increased from 72,70 cents per share to 94,70 cents per share.
Cash flow
The reduction in the trade receivables financed by banks of more than R1,4
billion, together with an increase in the financing of other trade receivables
with general banking facilities, allowed the Group to release R175 million in
cash collateral deposits no longer required. Cash received from the sale of non-
core business units and non-productive property assets raised a further R480
million.
R98 million was invested in acquiring the minority share in Midway Chix and a
further R349 million was invested in the expansion of the Group`s operations,
notably at Animal Feeds, AFGRI Poultry, the Grain Handling division, and the
capitalisation of costs related to the implementation of a group-wide ERP
system.
In total, the Group improved its cash position by R209 million during the year.
Dividends
The Board has declared a final cash dividend of 17.15 cents per share. This
brings the total dividend for the year to 41.30 cents per share (2009: 36.40
cents per share).
Changes to the Board of Directors
Mr DD de Beer stood down as Chairman of the Board with effect from 1 January
2010 and was replaced by Mr JPR Mbau.
Mr CA Apsey resigned as a director with effect from 1 January 2010 and Messrs DD
Barber and LM Koyana were appointed as independent non-executive directors with
effect from 10 January 2010.
Ms L de Beer was appointed as an independent non-executive director with effect
from 19 May 2010.
Prospects
Following the third successive year of a large maize crop, the AFGRI silos
contained nearly two million tons of grain at 30 June 2010, more than in the
previous two years. Unless significant opportunities arise to export maize from
South Africa, these higher stock levels will be stored for a longer period of
time, allowing the Grain Storage division to sustain its current levels of
profitability. The lower maize prices resulting from the larger crop will
negatively impact on primary producers` financial position, limiting growth in
the Group`s retail stores and equipment sales. The return to profitability of
the Financial Services segment should be maintained, if not improved upon
following the restructuring and cost-cutting efforts during the year. The
expansion in 2009 of the Group`s poultry operations has already contributed in
improved results from the Foods segment. The acquisition of the minority
interest in Midway Chix and the acquisition of Rossgro subsequent to year end,
will allow the Group to build on the current year`s performance.
A more streamlined management, the introduction of a group-wide ERP system and
the establishment of a Shared Services Centre will allow for greater
efficiencies and customer service throughout AFGRI.
By order of the Board
JPR Mbau CP Venter
Non-Executive Chairman Chief Executive Officer
31 August 2010
Declaration of final cash dividend
Notice is hereby given that the directors of AFGRI have declared a final cash
dividend of 17,15 cents per share for the year ended 30 June 2010. In
accordance with settlement procedures of STRATE, the following dates will
apply to the final dividend:
Last day to trade cum the dividend Friday, 12 November 2010
Trading ex dividend commences Monday, 15 November 2010
Record date Friday, 19 November 2010
Dividend payment date Monday, 22 November 2010
There will be no dematerialisation or rematerialisation of AFGRI shares
between Monday, 15 November 2010 and Friday, 19 November 2010; both dates
inclusive.
By order of the Board
N van Wyk
Group Company Secretary
Centurion
Administration
Business address and registered office
1st Floor AFGRI Building,
267 West Street, Centurion?
Fax (012) 643 1768
Tel (012) 643 8000?
Company Secretary
Ms N van Wyk, PO Box 11054, Centurion, 0046
Bankers
ABSA Bank Limited, Co-operatieve Centrale Raiffeisen-Boerenleenbank B.A.
trading as Rabo Bank, FirstRand Bank Limited, Hong Kong and Shanghai Banking
Corporation, Investec Bank Limited, Land and Agricultural Development Bank of
SA Limited, Nedcor Limited, Standard Bank of SA Limited, Standard Chartered
Bank?
Auditors
PricewaterhouseCoopers Inc., 32 Ida Street, Menlo Park, 0102?
Transfer secretaries
Computershare Investor Services (Proprietary) Limited, 70 Marshall Street,
Johannesburg, 2001
PO Box 61051, Marshalltown, 2107 Tel: (011) 370 5000 Sponsor: Investec Bank
Limited, 100 Grayston Drive, Sandton, 2196, PO Box 785700, Sandton, 2146
Directorate
Non-executive
JPR Mbau (Chairman), DD Barber, DD de Beer, L de Beer, JJ Claassen, JJ
Ferreira, L Koyana, MM Moloele, KL Thoka, FJ van der Merwe
Executive
CP Venter (Chief Executive Officer), JA van der Schyff (Financial Director),
MI Mogari (Dr) Deputy Managing Director, AFGRI Animal Feeds
This announcement is available on SENS and Afgri`s website at www.afgri.co.za
Date: 01/09/2010 07:05:07 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.
