| Tue 23 Nov 2010, 17:15 | | RBW - Rainbow Chicken - Abridged unaudited results for the six months ended 30 |
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RBW
RBW
RBW - Rainbow Chicken - Abridged unaudited results for the six months ended 30
September 2010 and cash dividend declaration
RAINBOW CHICKEN LIMITED
(Registration number 1966/004972/06)
JSE share code: RBW ISIN: ZAE000019063
("Rainbow" or "the Group" or "the company")
ABRIDGED UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
AND CASH DIVIDEND DECLARATION
SALIENT FEATURES
* REVENUE INCREASED BY 0,7%
* OPERATING PROFIT DECREASED BY 4,5%
* HEADLINE EARNINGS PER SHARE DECREASED BY 5,2%
* INTERIM DIVIDEND PER SHARE 28,0 cents
BALANCE SHEET
30 Sept 30 Sept 31 March
R`000 2010 2009 2010
ASSETS
Non-current assets
Property, plant and equipment 1 514 932 1 434 066 1 464 929
Goodwill 287 444 287 444 287 444
Deferred income tax assets 5 798
1 802 376 1 727 308 1 752 373
Current assets
Inventories 633 278 655 941 538 413
Biological assets 422 938 463 530 422 798
Trade and other receivables 1 266 574 949 345 1 154 647
Derivative financial instruments 918 465
Tax receivable 107 8 558
Cash and cash equivalents 367 623 343 917 539 067
2 691 438 2 413 198 2 663 483
Total assets 4 493 814 4 140 506 4 415 856
EQUITY
Capital and reserves 2 694 687 2 545 885 2 660 182
LIABILITIES
Non-current liabilities
Deferred income tax liabilities 321 628 243 598 320 322
Post-retirement medical obligation 96 270 88 505 94 670
417 898 332 103 414 992
Current liabilities
Trade and other payables 1 337 103 1 230 187 1 337 810
Derivative financial instruments 276 12 915 1 004
Current income tax liabilities 23 332 19 416 1 868
Bank overdraft 20 518
1 381 229 1 262 518 1 340 682
Total liabilities 1 799 127 1 594 621 1 755 674
Total equity and liabilities 4 493 814 4 140 506 4 415 856
STATEMENT OF CHANGES IN EQUITY
Stated Share-based Retained
R`000 capital payments earnings Total
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
Total comprehensive
income for the period 182 075 182 075
Ordinary dividend paid (81 804) (81 804)
BEE share-based payments
charge 1 679 1 679
Employee share option scheme:
Proceeds from shares issued 4 718 4 718
Value of employee services 7 629 7 629
Balance at 1 April 2010 1 177 057 116 574 1 366 551 2 660 182
Total comprehensive
income for the period 162 460 162 460
Ordinary dividend paid (140 530) (140 530)
BEE share-based payments charge 1 716 1 716
Employee share option scheme:
Proceeds from shares issued 3 586 3 586
Value of employee services 7 273 7 273
Balance at 30 September
2010 1 180 643 125 563 1 388 481 2 694 687
STATEMENT OF COMPREHENSIVE INCOME
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
R`000 2010 2009 2010
Revenue 3 384 386 3 360 513 6 952 789
Operating profit before depreciation 317 124 323 915 677 111
Depreciation (79 687) (75 225) (157 425)
Operating profit 237 437 248 690 519 686
Finance costs (1 082) (329) (900)
Finance income 8 332 8 333 14 877
Profit before taxation 244 687 256 694 533 663
Income tax expense (82 227) (83 261) (178 155)
Profit for the period 162 460 173 433 355 508
Total comprehensive income
for the period 162 460 173 433 355 508
Basic earnings per share (cents) 55,5 59,5 121,8
Basic earnings per share - diluted (cents) 55,2 59,2 121,0
HEADLINE EARNINGS
Total comprehensive income
for the period 162 460 173 433 355 508
Profit on disposal of
property, plant and equipment (791) (3 609) (4 053)
Headline earnings 161 669 169 824 351 455
Headline earnings per share(cents) 55,2 58,2 120,4
Headline earnings per
share - diluted (cents) 55,0 58,0 119,7
CASH FLOW STATEMENT
Operating profit 237 437 248 690 519 686
Non-cash items 84 229 64 896 144 636
Operating profit before
working capital requirements 321 666 313 586 664 322
Working capital requirements (204 336) (204 891) (138 439)
Cash generated by operations 117 330 108 695 525 883
Net finance income 7 250 8 004 13 977
Tax paid (51 006) (56 992) (95 471)
Cash available from
operating activities 73 574 59 707 444 389
Dividends paid (140 530) (128 369) (210 173)
Net cash flows from
investing activities (128 592) (121 082) (233 528)
Net cash flows from
financing activities 3 586 5 577 10 295
Net movement in cash and
cash equivalents (191 962) (184 167) 10 983
Cash and cash equivalents
at the beginning of the period 539 067 528 084 528 084
Cash and cash equivalents
at the end of the period 347 105 343 917 539 067
SUPPLEMENTARY INFORMATION
Six months Six months Year
ended ended ended
30 Sept 30 Sept 31 March
R`000 2010 2009 2010
Capital expenditure
contracted and committed 77 876 75 514 99 216
Capital expenditure
approved but not contracted 114 698 67 073 81 187
Contingent liabilities 29 259 33 599 30 771
STATISTICS
Ordinary shares in issue (000`s) 292 879 292 022 292 563
Weighted average ordinary
shares in issue (000`s) 292 746 291 657 291 918
Diluted weighted average
ordinary shares
in issue (000`s) 294 142 292 990 293 694
Net asset value per share (cents) 920,1 871,8 909,3
Ordinary dividends:
Interim dividends
declared/paid (cents) 28,0 28,0 28,0
Final dividend paid (cents) 48,0
COMMENTARY
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 of South Africa 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 standards noted below that became effective on 1 July 2009:
IFRS 3 (Business Combinations (revised)) and IAS 27 (Consolidated and Separate
Financial Statements (revised)). The adoption of these standards has no effect
on the current period results, nor has it required any restatement of prior
period results.
OVERVIEW AND MARKET CONDITIONS
The results for the six months ended 30 September 2010 reflect a statutory
headline earnings decline of 4,8%, with the underlying pre IAS 39 results the
same as the comparable period.
South Africa`s GDP grew modestly over the past two quarters. CPI figures and
little evidence of local demand-side pressures allowed interest rates to be
lowered in September 2010. A stronger rand and the ongoing concerns with respect
to the sustainability of the global economic recovery were also key factors in
the interest rate cut. This rate cut will benefit consumers in future months,
however, the impact of the near one million job losses locally remains a
significant factor in driving softer consumer demand.
Chicken prices have continued to be under significant pressure due to the impact
of the recession on demand, additional local capacity and the higher level of
imports. As a result, the local chicken market is estimated to have declined by
5% in the past twelve months to R19,6 billion, with a 7% realisation decline
partially being offset by a 1,5% volume growth. Total chicken imports (excluding
turkey and mechanically deboned meat) have increased by 14% over the past twelve
months largely due to the strengthening of the rand.
Feed raw material prices have remained volatile throughout calendar 2010 but
have traded significantly below the peak pricing in June 2009. As a consequence
of the projected three million ton stock carry-out, local maize prices have
traded close to export parity but are being driven more by international price
movements. Soya prices have remained within a tight range albeit at historically
high levels.
REVIEW OF OPERATIONS
Brands
The chicken industry has been through a tough trading period, with low pricing
driven by lower consumer demand. Despite this, Rainbow`s added value strategy
has ensured that overall results are at an acceptable margin.
The Foodservice sector has shown low growth over the period. Same store growth
for the major Quick Service Restaurants has been under pressure but overall
growth was assisted by new store openings.
Rainbow`s retail added value products have performed well in a depressed market,
showing a 32% volume growth for the six-month period. This growth is despite
grocery sales in South Africa declining during this period. Rainbow Family
Polony was launched eighteen months ago to take advantage of the value-for-money
sector of the chicken polony market and to date has performed exceptionally
well. Rainbow Simply Chicken Viennas and Freezer to Fryer products continue to
show strong volume growth as well. The recent launch of Rainbow Spice Flavas has
been well accepted by the trade and consumers.
Rainbow`s mainstream chicken, similar to the balance of the local market,
experienced price deflation.
During October 2010, Rainbow acquired a further processed facility in Gauteng
for R52 million which will significantly increase production capacity for
polonies and viennas. The ongoing success enjoyed by the existing further
processed products has meant the Hammarsdale plant is already out of Chilled
Processed Meat capacity. This new facility is well positioned to enable Rainbow
to better service the inland market.
Supply chain
The overall agricultural performance improved significantly during the six
months, particularly in the Cape where challenges were experienced last winter.
Performance measurement centres on delivering the right sized bird at the lowest
cost which infers improvement in underpinning key performance indicators such as
feed conversion and mortality.
The processing plants and feed mills faced higher than inflation rate increases
on large cost components like electricity, coal and labour and have done well to
contain increases to single digits through creative cost saving initiatives.
Specific capital investment has been made in the processing plants that will
increase flexibility and enable the production of a more profitable product mix
as well as a reduction in expensive overtime shifts. The increased focus on
asset management combined with a much improved preventative maintenance
programme has resulted in a significant decrease in unplanned down time and
should extend the useful life of some of the critical assets.
The reduction in the consumption of energy and water is central to our
sustainability and carbon footprint reduction strategy. Various projects have
been launched in this regard and are starting to impact positively on cost
containment.
The safety, health, environmental and quality programme is a priority at the
processing plants and feed mills, with all production facilities passing their
ISO 22000:2005 (Food Safety) recertification audits this year. National office
and all the agricultural and Vector facilities audited to date have passed their
first ISO 22000:2005 audits. Rainbow remains committed to have all its business
units certified ISO 22000:2005, ISO 14001 (Environmental) and OHSAS 18001
(Health and Safety) within the next year.
Recent initiatives to further optimise the Rainbow Outbound Supply Chain are
starting to deliver, particularly with regard to the consolidation of stock at
the new bulk storage facility in Midrand, Gauteng. The upgrade of the Roodepoort
operation, scheduled for completion at the end of October, will add much needed
capacity to the region as well as employing the latest in warehousing technology
to improve efficiencies. The strategy to leverage assets and business
competencies through growth continues to gain momentum, with the take-on of the
Fry`s Foods distribution in May, as well as extending our service offering to
existing principals.
FINANCIAL REVIEW
Revenue (Rm) 2010 2009 % var
Chicken 2 726,4 2 734,5 (0,3)
Feed 386,2 389,6 (0,9)
Services 271,8 236,4 15,0
Total revenue 3 384,4 3 360,5 0,7
Despite volumes being 6,6% higher, chicken revenue was 0,3% lower than the same
period of the previous year by virtue of average price realisations decreasing
by 6,1%. 2,6% of the volume increase relates to three additional trading days in
the period. The increase in external feed sales volumes was offset by lower
pricing because of the lower feed input costs. Services revenue was pleasingly
higher as Vector took on new business.
Total revenue increased 0,7% to R3,4 billion (2009: R3,4 billion).
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 R2,5 million (2009: R14,9 million positive).
2010 2009 % var
Headline EBIT (Rm)
- Statutory 236,3 243,7 (3,0)
- Pre IAS 39 233,8 228,8 2,2
Headline EBIT margin (%)
- Statutory 7,0 7,3 (0,3)
- Pre IAS 39 6,9 6,8 0,1
The underlying (pre IAS 39) headline EBIT was adversely impacted by lower
chicken realisations, however this was offset by the 19,6% reduction in feed
costs.
Net finance income decreased by R0,8 million due to slightly lower average cash
balances and interest rates.
The higher effective tax rate of 33,6% (2009: 32,4%) is largely attributable to
the secondary tax on companies charge on the higher year-end dividend.
Headline earnings decreased by 4,8% to R161,7 million (2009: R169,8 million)
with diluted headline earnings per share decreasing by 5,2% to 55,0 cents per
share (2009: 58,0 cents per share).
Cash generated by operations increased by 7,9% to R117,3 million (2009: R108,7
million).
The increase in trade and other receivables is mostly a timing difference
relating to period cut-off, with underlying aging having actually improved
marginally relative to the prior period. Capital expenditure was R130,1 million
(2009: R133,3 million). A further amount of R77,9 million (2009: R75,5 million)
has been contracted and committed, but not spent, whilst a further R114,7
million (2009: R67,1 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 13,1% (2009: 14,9%).
PROSPECTS
Maize and soya prices are likely to remain volatile with uncertainty around both
the current USA crop and new season local planting intentions. With the recent
firming of market prices for maize and soya, feed prices are expected to be
marginally higher in the second six months.
Despite chicken realisations showing some improvement in recent months, trading
conditions remain uncertain and difficult to predict.
DIRECTORATE
Mr DW Vale retired as a director on 30 July 2010.
CASH DIVIDEND DECLARATION
Notice is hereby given that on 23 November 2010 the Board declared an interim
dividend (number 75) of 28,0 cents per ordinary share in respect of the period
ended 30 September 2010 (2009: 28,0 cents).
The salient dates of the declaration and payment of this dividend are as
follows:
Last date to trade ordinary shares cum dividend Friday, 7 January 2011
Ordinary shares trade ex dividend Monday, 10 January 2011
Record date Friday, 14 January 2011
Payment date Monday, 17 January 2011
Share certificates may not be dematerialised or rematerialised between Monday,
10 January 2011 and Friday, 14 January 2011 (both dates inclusive).
For and on behalf of the Board
MH Visser M Dally
Non-executive Chairman Chief Executive Officer
Durban
23 November 2010
Directors: MH Visser (Non-executive Chairman), M Dally (CEO)*, JJ Durand,
RH Field(CFO)*, M Griessel, PR Louw, NP Mageza, JB Magwaza, MM Nhlanhla,
RV Smither, 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: 23/11/2010 17:15:01 Produced by the JSE SENS Department.
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