| Mon 23 May 2011, 17:10 | | RBW - Rainbow Chicken Limited - Reviewed abridged interim results for the twelve |
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RBW
RBW
RBW - Rainbow Chicken Limited - Reviewed abridged interim results for the twelve
months ended 31 March 2011
RAINBOW CHICKEN LIMITED
(Registration number 1966/004972/06)
JSE share code: RBW ISIN: ZAE000019063
("Rainbow" or "the Group" or "the company")
SALIENT FEATURES
- Revenue UP 0,1%
- Operating profit UP 2,8%
- Headline earnings UP 5,9%
- Final dividend declaration deferred to new financial year-end of 30 June
REVIEWED ABRIDGED INTERIM RESULTS FOR THE TWELVE MONTHS ENDED 31 MARCH 2011
BALANCE SHEET
Reviewed Audited
31 March 31 March
R`000 2011 2010
ASSETS
Non-current assets
Property, plant and equipment 1 594 994 1 464 929
Goodwill 287 444 287 444
1 882 438 1 752 373
Current assets
Inventories 601 180 538 413
Biological assets 416 370 422 798
Trade and other receivables 1 263 069 1 154 647
Derivative financial instruments 6 866
Tax receivable 29 524 8 558
Cash and cash equivalents 502 714 539 067
2 819 723 2 663 483
Total assets 4 702 161 4 415 856
EQUITY
Capital and reserves 2 835 822 2 660 182
LIABILITIES
Non-current liabilities
Deferred income tax liabilities 356 636 320 322
Post-retirement medical obligation 100 635 94 670
457 271 414 992
Current liabilities
Trade and other payables 1 303 237 1 337 810
Derivative financial instruments 192 1 004
Current income tax liabilities 105 639 1 868
1 409 068 1 340 682
Total liabilities 1 866 339 1 755 674
Total equity and liabilities 4 702 161 4 415 856
STATEMENT OF COMPREHENSIVE INCOME
Revenue 6 956 412 6 952 789
Operating profit before depreciation 701 418 677 111
Depreciation (167 034) (157 425)
Operating profit 534 384 519 686
Finance costs (2 638) (900)
Finance income 17 489 14 877
Profit before tax 549 235 533 663
Income tax expense (181 214) (178 155)
Profit for the year 368 021 355 508
Total comprehensive income for the year 368 021 355 508
Basic earnings per share (cents) 125,7 121,8
Basic earnings per share - diluted (cents) 124,8 121,0
HEADLINE EARNINGS
Reviewed Audited
31 March 31 March
R`000 2011 2010
Total comprehensive income for the year 368 021 355 508
Loss/(profit) on disposal of property, plant and
equipment 4 176 (4 053)
Headline earnings 372 197 351 455
Headline earnings per share (cents) 127,1 120,4
Headline earnings per share - diluted (cents) 126,3 119,7
CASH FLOW INFORMATION
Operating profit 534 384 519 686
Non-cash items 189 454 144 634
Operating profit before working capital requirements 723 838 664 320
Working capital requirements (199 737) (138 437)
Cash generated by operations 524 101 525 883
Net finance income 14 851 13 977
Tax paid (62 094) (95 471)
Cash available from operating activities 476 858 444 389
Dividends paid (222 541) (210 173)
Net cash flows from investing activities (302 899) (233 528)
Net cash flows from financing activities 12 229 10 295
Net movement in cash and cash equivalents (36 353) 10 983
Cash and cash equivalents at the beginning of the year 539 067 528 084
Cash and cash equivalents at the end of the year 502 714 539 067
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 year 355 508 355 508
Ordinary dividends paid (210 173) (210 173)
BEE share-based payments
charge 3 383 3 383
Employee share option
scheme:
Proceeds from shares
issued 10 295 10 295
Value of employee
services 15 259 15 259
Balance at 1 April 2010 1 177 057 116 574 1 366 551 2 660 182
Total comprehensive
income for the year 368 021 368 021
Ordinary dividends paid (222 541) (222 541)
BEE share-based payments
charge 3 383 3 383
Employee share option
scheme:
Proceeds from shares
issued 12 229 12 229
Value of employee
services 14 548 14 548
Balance at 31 March 2011 1 189 286 134 505 1 512 031 2 835 822
SUPPLEMENTARY INFORMATION
Reviewed Audited
31 March 31 March
R`000 2011 2010
Capital expenditure contracted and committed 72 574 99 216
Capital expenditure approved but not contracted 92 098 81 187
Contingencies 26 068 30 771
STATISTICS
Ordinary shares in issue (000`s) 293 887 292 563
Weighted average ordinary shares in issue (000`s) 292 869 291 918
Diluted weighted average ordinary shares in
issue (000`s) 294 784 293 694
Net asset value per share (cents) 964,9 909,3
Ordinary dividends per share:
Interim dividend paid (cents) 28,0 28,0
Final dividend paid (cents) 48,0
Total dividends (cents) 28,0 76,0
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 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) and IAS 27 (Consolidated and Separate Financial
Statements (revised)). The adoption of these standards has no effect on the
results, nor has it required any restatement of the results.
FINANCIAL YEAR-END CHANGE AND CASH DIVIDEND DECLARATION
Rainbow`s financial year-end has changed to 30 June so as to align with that of
its holding company, Remgro Limited. The JSE approval of the change was noted on
SENS on 17 March 2011.
The abridged financial statements for the twelve months ended 31 March 2011 have
been reviewed by the Group`s auditors, PricewaterhouseCoopers Inc. This review
has been conducted in accordance with International Standard on Review
Engagements 2410, "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity", and their unmodified review conclusion is
available for inspection at the Company`s registered office.
Audited results will be published for the 15 months ended 30 June 2011 in August
2011, at which time the final dividend for the 2011 financial year will be
declared.
OVERVIEW AND MARKET CONDITIONS
The results for the twelve months ended 31 March 2011 reflect a statutory
headline earnings increase of 5,9%, with the underlying pre IAS 39 results
increasing by 4,5%.
South Africa`s GDP grew modestly by 2,8% in calendar 2010. The strong rand and
further global uncertainty remain the key contributors to the low interest rate
levels. However consumer confidence and in turn consumer demand remains subdued
with consumers` disposable income impacted by the high levels of indebtedness
and unemployment as well as the significant cost increases in electricity and
fuel.
Chicken prices have remained low by virtue of both the pressure on consumers and
the lower feed cost environment. As a consequence, the local chicken market is
estimated to have declined by 5% in the past twelve months to R19,2 billion,
with a 10% realisation decline partially being offset by a 6% volume growth. The
additional volume is largely attributable to the 26% increase in chicken imports
(excluding mechanically deboned meat (MDM)) over the comparable year.
International maize and soya prices have increased significantly over the past
few months, testing the record levels reached during September 2008. The full
extent of these increases on local raw material prices was partially offset by
the strong rand, but will adversely impact food inflation going forward.
RAINBOW GROUP RESTRUCTURE
With effect from 1 January 2011 the Group was restructured into two operating
units, namely Rainbow and Vector, each with its own board and MD. The purpose of
the restructure was to bring additional operational focus to the businesses and
to free up the CEO and CFO to focus on strategic growth opportunities for the
Group. In future the Rainbow and Vector results will be reported as separate
segments.
REVIEW OF OPERATIONS
Brands
The second half of the period under review has seen an improved balance in
supply and demand in the South African chicken market. Despite the tough trading
environment, Rainbow`s mainstream chicken has seen volume growth accompanied by
marginal price improvements.
In the Added Value sector, Rainbow`s products have performed well, growing at
double digit levels. Retail added value lines like Viennas, Polonies and Crumbed
Frozen products have all seen strong growth. The growth in Chilled Processed
Meats has been facilitated by the acquisition of a second processing facility
which is located at Wolwehoek near Sasolburg. The new facility is well
positioned to enable Rainbow to better service the inland market.
The new Rainbow Family Polony has established a meaningful market share and the
new frozen Rainbow Saucy Steaklets and Fingers have also been well accepted by
the trade and consumers.
The Foodservice sector has returned modest, but positive growth over the period.
It is anticipated that this sector will continue to grow as quick service
restaurants open new stores.
Supply chain
The overall agricultural performance has continued to improve over the period
under review, particularly in the Cape where challenges were experienced last
winter.
Performance measurement continues to focus on delivering the right sized bird at
the lowest cost in order to service the demand of customers` weight sensitive
products.
The processing plants and feed mills managed to contain the high energy cost
increases through additional focus on efficiencies. The plants also did well to
increase flexibility and added value capacity to meet the changing customer
product mix requirements.
The feed mills were successful in achieving better utilisation of available
capacity.
The safety, health, environmental and quality programme is a priority for
Rainbow and all business units including the Westville national office are ISO
22000:2005 (Food Safety) certified. Rainbow aims to have all business units ISO
14001 (Environmental) and OHSAS 18001 (Health and Safety) certified within the
next year.
In the 2010 Carbon Disclosure Leadership Index, Rainbow achieved 84% and joint
7th position in the SA top 100 companies. The reduction in the consumption of
energy and water is integral to our sustainability and carbon footprint
reduction strategy.
Distribution
Recent initiatives to further optimise Rainbow`s outbound supply chain are
delivering benefits and efficiencies. These initiatives include the upgrade of
the Roodepoort operation which was completed at the end of October 2010, and the
closure and relocation of the Clayville operation to a new facility located in
Midrand, Gauteng. This new facility has added much needed secondary and bulk
storage capacity to facilitate future growth. The strategy to leverage assets
and business competencies continues to gain momentum, with the take-on of Fry`s
Foods and the Compass Group business during the period under review, as well as
the extension of service offerings to existing strategic partners.
FINANCIAL REVIEW
Revenue - Rm 2011 2010 % var
Chicken 5 640,7 5 703,1 (1,1)
Feed 753,1 746,7 0,9
Services 562,6 503,0 11,8
Total revenue 6 956,4 6 952,8 0,1
Despite volumes being 0,3% higher, chicken revenue was 1,1% lower than the
previous year by virtue of average price realisations decreasing by 0,9%. The
external feed volume increase of 13% was offset by lower pricing because of
lower feed input costs. Services revenue was higher as Vector took on new
business.
Total revenue increased 0,1% to R6,9 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 R61,0
million (2010: R51,6 million).
2011 2010 % var
Headline EBIT (Rm)
- Statutory 540,2 514,1 5,1
- Pre IAS 39 479,2 462,5 3,6
Headline EBIT margin (%)
- Statutory 7,8 7,4 0,4
- Pre IAS 39 6,9 6,7 0,2
The adverse impact of chicken realisations on underlying (pre IAS 39) headline
EBIT was offset by the 17,5% reduction in feed costs.
The lower effective tax rate of 33,0% (2010: 33,4%) is largely attributable to
an overprovision in prior years.
Headline earnings increased by 5,9% to R372,2 million (2010: R351,5 million)
with diluted headline earnings per share increasing by 5,5% to 126,3 cents per
share (2010: 119,7 cents per share).
Cash generated by operations of R524,1 million is similar to that generated in
the prior year. Inventories and receivables have been impacted by Vector`s take-
on of new business. Strategic holdings of maize stocks were temporarily
increased during March following issues with the reliability of rail supply to
specific mills. Trade receivable days are marginally improved on the previous
year.
Capital expenditure was R308,8 million (2010: R251,4 million). The R308,8
million includes the R52,0 million Wolwehoek acquisition. A further amount of
R72,6 million (2010: R99,2 million) has been contracted and committed, but not
spent, whilst a further R92,1 million (2010: R81,2 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 marginally to 13,4% (2010: 13,8%).
PROSPECTS
The global economic recovery remains fragile with growth in the SA economy below
the levels experienced prior to the recession.
Oil prices specifically are trading at relatively high levels, which impacts on
related ethanol and maize markets. Maize and soya prices are likely to remain
high and volatile, with any improvement in the low global stock levels dependant
on the yield of the new northern hemisphere crops. Local raw material price
movements are anticipated to follow international price movements in the next
six months.
Whilst chicken realisations have shown some improvement in recent months, they
are expected to remain under pressure as a result of consumers` lower disposable
income and the current higher level of imports.
DIRECTORATE
Mr DW Vale retired as a director on 30 July 2010.
For and on behalf of the Board
MH Visser M Dally
Non-executive Chairman Chief Executive Officer
Durban
23 May 2011
Directors: MH Visser (Non-executive Chairman), M Dally (CEO)*, JJ Durand,
RH Field*, 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: 23/05/2011 17:10:01 Produced by the JSE SENS Department.
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