| Tue 30 Aug 2011, 17:15 | | RBW - Rainbow Chicken Limited - Abridged group audited results for the 15 months |
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RBW
RBW
RBW - Rainbow Chicken Limited - Abridged group audited results for the 15 months
ended 30 June 2011 and cash dividend declaration
RAINBOW CHICKEN LIMITED
(Registration number 1966/004972/06)
JSE share code: RBW ISIN: ZAE000019063
("RCL" or "Group")
ABRIDGED GROUP AUDITED RESULTS FOR THE 15 MONTHS ENDED 30 JUNE 2011 AND CASH
DIVIDEND DECLARATION
SALIENT FEATURES
UP Revenue 24,0%
UP EBITDA 12,6%
UP Operating profit 6,3%
UP Headline earnings 10,6%
Total dividend 84,0 cents per share
CONSOLIDATED BALANCE SHEET
30 June 31 March
R`000 2011 2010
ASSETS
Non-current assets
Property, plant and equipment 1 600 008 1 464 929
Goodwill 287 444 287 444
1 887 452 1 752 373
Current assets
Inventories 664 804 538 413
Biological assets 445 226 422 798
Trade and other receivables 1 259 552 1 154 647
Tax receivable 41 773 8 558
Cash and cash equivalents 469 496 539 067
2 880 851 2 663 483
Total assets 4 768 303 4 415 856
EQUITY
Capital and reserves 2 856 333 2 660 182
LIABILITIES
Non-current liabilities
Deferred income tax liabilities 372 198 320 322
Post-retirement medical obligation 102 162 94 670
474 360 414 992
Current liabilities
Trade and other payables 1 433 243 1 337 810
Derivative financial instruments 3 469 1 004
Current income tax liabilities 898 1 868
1 437 610 1 340 682
Total liabilities 1 911 970 1 755 674
Total equity and liabilities 4 768 303 4 415 856
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
15 months 12 months
30 June 31 March
R`000 2011 2010
Revenue 8 621 389 6 952 789
Operating profit before depreciation 762 617 677 111
Depreciation (210 340) (157 425)
Operating profit 552 277 519 686
Finance costs (1 808) (900)
Finance income 21 520 14 877
Profit before tax 571 989 533 663
Income tax expense (188 139) (178 155)
Profit for the period 383 850 355 508
Total comprehensive income for the period 383 850 355 508
Basic earnings per share (cents) 131,0 121,8
Basic earnings per share - diluted (cents) 130,1 121,0
HEADLINE EARNINGS
15 months 12 months
30 June 31 March
R`000 2011 2010
Total comprehensive income for the period 383 850 355 508
Loss/(profit) on disposal of property,
plant and equipment 4 920 (4 053)
Headline earnings 388 770 351 455
Headline earnings per share (cents) 132,7 120,4
Headline earnings per share - diluted (cents) 131,8 119,7
CONSOLIDATED CASH FLOW INFORMATION
Operating profit 552 277 519 686
Non-cash items 238 845 144 634
Operating profit before working capital
requirements 791 122 664 320
Working capital requirements (147 791) (138 437)
Cash generated by operations 643 331 525 883
Net finance income 19 712 13 977
Tax paid (170 448) (95 471)
Cash available from operating activities 492 595 444 389
Dividends paid (222 540) (210 173)
Net cash flows from investing activities (352 253) (233 528)
Net cash flows from financing activities 12 627 10 295
Net movement in cash and cash equivalents (69 571) 10 983
Cash and cash equivalents at the beginning of the period 539 067 528 084
Cash and cash equivalents at the end of the period 469 496 539 067
CONSOLIDATED 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 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 period 383 850 383 850
Ordinary dividends paid (222 540) (222 540)
BEE share-based payments charge 4 260 4 260
Employee share option scheme:
Proceeds from shares issued 12 627 12 627
Value of employee services 17 954 17 954
Balance at 30 June 2011 1 189 684 138 788 1 527 861 2 856 333
SUPPLEMENTARY INFORMATION
30 June 31 March
R`000 2011 2010
Capital expenditure contracted and
committed 79 694 99 216
Capital expenditure approved but not
contracted 116 858 81 187
Contingencies 24 424 30 771
STATISTICS
Ordinary shares in issue (000`s) 293 926 292 563
Weighted average ordinary shares in issue (000`s) 293 075 291 918
Diluted weighted average ordinary shares
in issue (000`s) 295 018 293 694
Net asset value per share (cents) 971,8 909,3
Ordinary dividends per share:
Interim dividend paid (cents) 28,0 28,0
Final dividend declared/paid (cents) 56,0 48,0
Total dividends (cents) 84,0 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 and the
Listings Requirements of the JSE Limited, under the supervision of the Chief
Financial Officer, Robert Field CA (SA). 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
During the year RCL changed its financial year-end to 30 June so as to align
with that of its holding company, Remgro Limited. It is acknowledged that
this change makes comparative reporting difficult and it also needs to be noted
that historically the April to June trading quarter is materially lower than
the balance of the year.
GROUP RESTRUCTURE
With effect from 1 January 2011 the Group was restructured into two operating
units, namely Rainbow (chicken) and Vector (logistics), each with its own
board and managing director responsible for the day-to-day operations. The
purpose of the restructure was to bring additional operational attention to
the businesses and to enable the CEO and CFO of RCL to apply further focus on
strategic growth opportunities for the Group. The CEO, however, retains
overall executive responsibility. The restructure also acknowledges that
Vector has significant business scale in its own right, and reinforces
Vector`s independence from Rainbow, with its other key principals. In future
the Rainbow and Vector results will be reported as separate segments.
OVERVIEW AND MARKET CONDITIONS
Consumer confidence and demand has remained low and poultry industry specific
factors have limited any real growth opportunity.
The local chicken market is estimated to have grown by 4,3% to R20,9 billion
over the past year, a function of a 6,9% volume growth partly offset by a
2,4% realisation decline. The volume increase has been led by imports. Total
chicken imports (excluding turkey and mechanically deboned meat) increased by
43% for the quarter ended June 2011 versus the June 2010 comparative quarter.
On a 12-month comparative basis, imports increased by 36% to June 2011, whilst
chicken prices remained suppressed by virtue of both the pressure on consumers
and the lower feed cost environment in the early part of the year.
International maize and soya prices have increased significantly over the
past period, with maize exceeding the record levels reached during September
2008. The full extent of these increases on local raw material prices was
partially offset by the stronger rand.
Over the past few years major retailers in South Africa have been pursuing a
strategy of centralising the distribution of their ambient goods which is in
line with international best practice to reduce supply chain costs through
improved route to market efficiencies. It is likely that this strategy will
at some point extend to the frozen and chilled categories as well. A similar
trend has been evidenced in the foodservice market where customers have
consolidated their supply chains by partnering with selected third party
logistics service providers with multi-temperature distribution capabilities.
FINANCIAL PERFORMANCE SUMMARY
RCL`s revenue increased by 24,0% to R8,6 billion, mainly attributable to the
extended year-end.
Headline earnings for the 15 months ended 30 June 2011 increased by 10,6%
compared to the 12-month financial year ended 31 March 2010. This moderate
earnings growth, representing only marginal improvement on the recently
published interim results to March, indicates the continued difficult trading
conditions experienced by the Group. The operating profit margin decreased
to 6,4% from 7,7% reported for the 12-month period to March 2011 and 7,5% to
March 2010. This decline is largely attributable to market factors but was
exacerbated by certain company specific issues explained later in this
announcement.
Overall pricing has been depressed within the chicken markets, most especially
in the last quarter to June 2011 and within the commodity categories where
record levels of imports have met low consumer demand.
RCL remains committed to its strategic focus on adding value through brands.
The Group`s chicken consumer brands and differentiated customer offerings in
both Foodservice chicken and Vector`s distribution service have all shown
pleasing growth over the past period. Management have initiated a number of
projects that will contribute towards restoring operating margins to target
levels.
REVIEW OF OPERATIONS
Chicken brands
Although the last two quarters of the period under review saw an improved
balance in local supply and demand in the South African chicken market, this
balance was largely undermined by record import levels for the last quarter
ending June 2011. Despite the tough trading environment encountered, Rainbow`s
mainstream chicken has seen volume growth accompanied by some marginal price
improvements.
In the Added Value sector, Rainbow`s focus on added value has seen its
contribution to total revenue increasing to 48% in 2011. 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
Although impacted by the severe winter conditions across the country in May
and June 2011, the overall agricultural performance for the period under review
has been an improvement over the prior year. The Cobb breed continues to yield
improved hatchability.
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. Further investment has also been made in new broiler houses
in KwaZulu-Natal replacing some of the oldest houses in Rainbow.
The processing plants and feed mills managed to contain the high energy cost
increases through additional focus on efficiencies. The increased freezing
capacity at the Hammarsdale processing plant together with other capital
investment projects across the other plants has provided a greater degree of
flexibility, enabling a more profitable mix to be produced. The plants also
did well to increase added value capacity to meet the changing customer product
mix requirements. The feed mills were successful in achieving better utilisation
of available capacity.
Plant efficiencies, production mix and throughput at the Rustenburg plant were
however adversely impacted in May and June by disruptions to electricity and
water supply. The financial consequence of the accompanying downtime and less
profitable production mix was R12,2 million.
Rainbow`s results were also negatively impacted by a very unfortunate
eight-week strike over the year-end period within the agricultural and
processing operations. Final settlement was at the same level originally
offered and immediately taken up by almost 50% of the workforce. Rainbow`s
wages are the highest in the industry and the respective 7,2% and 7,8% increase
was deemed fair in the context of the current inflationary environment. The
direct cost of the strike to Rainbow was R4,2 million.
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
seventh 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.
Vector
Recent initiatives to further optimise Rainbow`s outbound supply chain are
delivering benefits and efficiencies. These include the lease of a new frozen
storage facility at Midrand, Gauteng which has enabled Rainbow`s Inland storage
requirements to be consolidated and its storage and transport costs to be
reduced. In addition to this, the upgrade and expansion of the Roodepoort
operation has delivered improved operational efficiencies and customer
service. Stock shrinkage remains a challenge in the Inland Region and every
effort is being made to contain these to more acceptable levels. The strategy
to leverage assets and business competencies continues to gain momentum with
the take-on of Fry`s Foods, the Compass Group and Eskort`s frozen distribution.
Service offerings to existing strategic partners have also been extended such
as the recent take-on of Chicken Licken`s frozen bread roll distribution
and opening of a new bulk storage facility for McCain at Midrand.
IT
The Group has made further progress with the implementation of its IT and
Enterprise Resource Planning strategy. Focus continues to be placed on supply
chain excellence and customer service initiatives. The leveraging of IT systems
remains a key enabler within the business, with specific emphasis on the
analysis of customer and product profitability. An advanced management
information system has also enabled detailed analysis of farms` performance.
Similarly, performance analysis within feed milling has benefited from the
implementation of a management and accounting control system allowing
detailed tracking of actual costs against quarterly standard costs.
FINANCIAL REVIEW
2011 2010 % variance
Revenue (Rm)
Chicken 6 985,5 5 703,1 22,5
Feed 918,3 746,7 23,0
Services 717,6 503,0 42,7
Total revenue 8 621,4 6 952,8 24,0
Total revenue increased 24,0% to R8,6 billion, largely as a consequence of the
additional three months` trading included in the extended 15-month financial
year.
Chicken revenue for the year was 22,5% higher than last year. Rainbow`s average
price realisations decreased by 0,7% whilst the 24,1% volume increase is a
consequence of the extended financial year. Services revenue was higher as
Vector took on new business.
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 R59,5
million (2010: R51,6 million).
2011 2010 % variance
Headline EBIT (Rm)
- Statutory 559,1 514,1 8,8
- Pre IAS 39 499,6 462,5 8,0
Headline EBIT margin (%)
- Statutory 6,5 7,4 (0,9)
- Pre IAS 39 5,8 6,7 (0,9)
Headline EBIT for the 2011 financial year has been adversely impacted by the
continued gap between chicken realisations and cost growth. This was especially
the case in the last quarter of the extended financial year as feed costs began
rising more rapidly and agricultural performance was challenged by the cold
winter.
The increase in net finance income of R5,7 million is largely a function of
the extended 15-month financial year.
The lower effective tax rate of 32,9% (2010: 33,4%) is largely attributable to
an overprovision in prior years.
Headline earnings increased by 10,6% to R388,8 million (2010: R351,5 million)
with diluted headline earnings per share increasing by 10,1% to 131,8 cents
per share (2010: 119,7 cents per share).
Cash generated by operations increased by 22,3% to R643,3 million (2010:
R525,9 million) and working capital has been impacted by the changed year-end.
Maize inventory levels are normally higher over the June period compared to
March to take advantage of harvests in proximity to Rainbow`s coastal mills.
Finished goods inventory levels are also higher, primarily related to
Individually Quick Frozen (IQF) stocks as a consequence of the lower consumer
demand typically associated with this period. The higher ending raw material
and feed prices have also impacted the valuation of inventories. Trade
receivable days are in line with the previous year.
Capital expenditure
Capital expenditure for the 15-month period was R360,0 million (2010: R251,4
million). Although it predominantly relates to spend on plant and equipment,
it also includes the R52,0 million Wolwehoek acquisition. A further amount of
R79,7 million (2010: R99,2 million) has been contracted and committed, but not
spent, whilst a further R116,9 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 for the 15-month period is 13,9% (2010:
13,8%).
CASH DIVIDEND DECLARATION
Notice is hereby given that on 30 August 2011 the board declared a final
dividend (number 76) of 56,0 cents per share in respect of the 15 months ended
30 June 2011 (2010: 48,0 cents).The total dividend for the year is 1,6 times
covered by fully diluted headline earnings per share (2010: 1,6 times). It is
the Board`s intention to restore the dividend cover range to between 2,0 and 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, 16 September 2011
Ordinary shares trade ex dividend Monday, 19 September 2011
Record date Friday, 23 September 2011
Payment date Monday, 26 September 2011
Share certificates may not be dematerialised or rematerialised between Monday,
19 September 2011 and Friday, 23 September 2011 (both dates inclusive).
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.Since year-end local maize
prices have increased significantly and over the next six months all raw
material prices are anticipated to follow international price movements.
Energy rate cost increases, driven largely by oil and electricity, continue to
challenge Rainbow and Vector`s cost of doing business.
Although chicken realisations have improved marginally, they are expected to
remain under pressure as a result of consumers` lower disposable income and the
current higher level of imports.
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.
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
30 August 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 (Pty) 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: 30/08/2011 17:15:01 Produced by the JSE SENS Department.
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