| Thu 8 Mar 2012, 7:05 | | CRM - Ceramic Industries Limited - Unaudited interim results for the six |
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CRM
CRM
CRM - Ceramic Industries Limited - Unaudited interim results for the six
months ended 31 January 2012
CERAMIC INDUSTRIES LIMITED
Registration number 1982/008520/06
(Incorporated in the Republic of South Africa)
("Ceramic Industries" or "the Group")
Share code: CRM
ISIN: ZAE000008538
Unaudited interim results for the six months ended 31 January 2012
Condensed consolidated statement of comprehensive income
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2012 2011 2011
Change Unaudited Unaudited Audited
% R000`s R000`s R000`s
Revenue 4,9 809 417 771 892 1 547 249
Tiles 2,2 664 698 650 165 1 299 617
Sanitaryware 18,9 144 719 121 727 247 632
Operating profit before (14,2) 138 361 161 301 327 221
depreciation
Depreciation 12,1 (72 582) (64 722) (135 374)
Operating profit (31,9) 65 779 96 579 191 847
Tiles (35,6) 58 511 90 867 174 248
Sanitaryware 27,2 7 268 5 712 17 599
Finance income 83,9 23 820 12 953 22 535
Finance expenses (28,6) (5) (7) (1 516)
Income from associated (61,7) 2 356 6 154 7 500
companies
Profit before taxation (20,5) 91 950 115 679 220 366
Taxation 6,2 (29 063) (27 366) (87 139)
Profit for the period (28,8) 62 887 88 313 133 227
Other comprehensive income
Foreign currency translation 21 090 19 254 28 694
differences for foreign
operations
Total comprehensive income 83 977 107 567 161 921
for the period
Profit attributable to:
Ordinary shareholders of the (27,2) 64 288 88 288 133 204
Group
Non-controlling interest (1 401) 25 23
Total comprehensive income
attributable to:
Ordinary shareholders of the 85 039 106 869 162 936
Group
Non-controlling interest (1 062) 698 (1 015)
Earnings per share
Basic earnings per share (28,0) 376,4 522,7 788,0
(cents)
Diluted earnings per share (25,6) 369,4 496,4 761,3
(cents)
Dividend per share (cents) (21,4) 110,0 140,0 1 800,0
Reconciliation of headline
earnings
Profit attributable to 64 288 88 288 133 204
ordinary shareholders of the
Group
Loss/(profit) on disposal of 187 (127) (461)
plant and equipment
Headline earnings (26,9) 64 475 88 161 132 743
Headline earnings per share (27,7) 377,5 522,0 785,3
(cents)
Diluted headline earnings per (25,3) 370,5 495,7 758,6
share (cents)
Condensed consolidated statement of financial position
31 January 31 January 31 July
2012 2011 2011
Unaudited Unaudited Audited
R000`s R000`s R000`s
ASSETS
Non-current assets 884 323 877 934 887 577
Property, plant and equipment 857 425 863 558 861 418
Goodwill 4 520 4 520 4 520
Investment in associate 22 069 9 856 21 399
Deferred taxation assets 309 - 240
Current assets 606 418 771 822 560 487
Inventories 93 715 84 518 118 248
Trade and other receivables 207 178 191 168 224 089
Income taxation receivable - 2 635 438
Cash and cash equivalents 305 525 493 501 217 712
Total assets 1 490 741 1 649 756 1 448 064
EQUITY AND LIABILITIES
Equity 1 254 616 1 426 450 1 198 085
Share capital 64 816 64 816 64 816
Shares held by share trust (122 861) (146 720) (122 861)
Share-based payment reserve 47 212 47 212 47 212
Share awards reserve 15 581 8 812 12 451
Reserves 122 130 98 208 111 153
Retained earnings 1 121 183 1 346 772 1 077 697
Ordinary shareholders` interest 1 248 061 1 419 100 1 190 468
Non-controlling interest 6 555 7 350 7 617
Non-current liabilities 73 310 77 245 76 242
Shareholders` loans 9 858 9 326 9 231
Deferred taxation liabilities 63 452 67 919 67 011
Current liabilities 162 815 146 061 173 737
Trade and other payables and 152 637 145 844 173 402
provisions
Income taxation payable 9 835 - -
Shareholders for dividends 343 217 335
Total equity and liabilities 1 490 741 1 649 756 1 448 064
Condensed consolidated statement of cash flows
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2012 2011 2011
Unaudited Unaudited Audited
R000`s R000`s R000`s
Operating activities
Operating profit adjusted for non- 142 581 173 787 344 569
cash items
Changes in working capital 20 679 10 750 (28 342)
Cash generated from operations 163 260 184 537 316 227
Finance income 23 820 12 953 22 535
Finance expenses (5) (7) (1 516)
Dividends paid (30 568) (30 277) (340 375)
Taxation paid (25 603) (32 971) (92 922)
130 904 134 235 (96 051)
Investing activities (43 718) (71 263) (138 549)
Increase in share of investment in (670) (4 352) (10 832)
associate
Property, plant and equipment (net) (43 048) (66 911) (127 717)
Financing activities 627 (5 219) 16 564
Shareholders` loans raised/(repaid) 627 (235) (330)
Share buy back - (1 404) (1 897)
Premium on acquisition of non- - (3 580) -
controlling interest
Additional shareholding acquired in - - (5 561)
NCI Australia
Treasury shares sold to BEE partners - - 24 352
Net movement in cash and cash 87 813 57 753 (218 036)
equivalents
Cash and cash equivalents at 217 712 435 748 435 748
beginning of period
Cash and cash equivalents at end of 305 525 493 501 217 712
period
Condensed consolidated statement of changes in equity
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2012 2011 2011
Unaudited Unaudited Audited
R000`s R000`s R000`s
Balance at beginning of period 1 198 085 1 355 799 1 355 799
Share buy back - (1 404) (1 897)
Treasury shares sold to BEE partners - - 24 352
Share awards reserve 3 130 329 3 968
Premium on acquisition of non- - (3 580) (3 580)
controlling interest
Profit attributable to ordinary 64 288 88 288 133 204
shareholders of the Group
Movement in foreign currency 20 751 18 581 27 751
translation reserve
Movement in minority shareholders (1 062) (1 282) (1 015)
Transfer to dividend reserve (20 803) (26 482) (340 473)
Dividend reserve 20 803 26 482 340 473
Net dividend paid (30 576) (30 281) (340 497)
Balance at end of period 1 254 616 1 426 450 1 198 085
Commentary
Overview
In the six months ended 31 January 2012, trading conditions in the building
and construction industries in both South Africa and Australia remained
subdued, featuring low levels of public and private sector investment.
- Competition intensified as low priced imports in both markets continued to
find favour with price sensitive consumers and import volumes grew.
- Above-CPI increases in core input costs including energy, transport and
glazes were also experienced in the review period.
- In this context, whilst production and sales volumes increased in the
Group`s local operations, intense margin pressure was experienced. In a
deliberate strategy to retain market share, Ceramic reduced average selling
prices by 4%, eroding profitability of the business. Margins across the Group
declined by 4,4%.
- In contrast to the modest improvement in operational performance reported
by the South African factories, the Australian plant, Centaurus, delivered a
particularly disappointing result. This operation, which comprises 11% of
Ceramic`s turnover, reported a substantial decline in both production and
sales volumes, and caused a disproportionate impact on the Group`s
profitability. The business operated at a loss of R24 million (before tax)
for the period.
- Ceramic`s sanitaryware division, comprising the Betta and Aquarius
operations, continued to deliver improved results, based on remedial measures
implemented over the past two years.
Operational review
6 months to 31 January 2012 2011 % change
Revenue (R`million)
Tiles 664,7 650,2 2,2
South Africa 576,4 547,3 5,3
Australia 88,3 102,9 (14,2)
Sanitaryware 144,7 121,7 18,9
Group 809,4 771,9 4,9
Sales - units
Tiles (mSquared million) 18,0 17,2 4,7
South Africa 16,7 15,3 9,2
Australia 1,3 1,9 (31,6)
Sanitaryware (pieces `000) 717,3 621,5 15,4
Production - units
Tiles (mSquared million) 16,3 16,5 (1,2)
South Africa 15,0 14,7 2,0
Australia 1,3 1,8 (27,8)
Sanitaryware (pieces `000) 689,1 594,8 15,9
- Group operating profit declined 31,9% to R65,8 million (2011: R96,6
million), primarily due to difficulties experienced at Centaurus.
* Operating profit from tiles decreased 35,6% to R58,5 million (2011: R90,9
million).
* The sanitaryware division increased operating profit by 27,2% to R7,3
million (2011: R5,7 million).
- Finance income for 2012 includes a R15,2 million foreign exchange gain on
the repayment by the Australian operation of a portion of its loan account.
- Headline earnings declined 26,9% to R64,5 million (2011: R88,2 million),
while headline earnings per share decreased to 377,5 cents (2011: 522,0
cents).
- Notwithstanding payment of a special dividend of R304 million during the
prior reporting period, the Group`s cash reserves remain robust at R305,5
million (2011: R493,5 million).
The Group`s strong balance sheet at the end of the period is attributable to:
* the cash generative nature of the business
* contained capital expenditure of R44 million incurred on high definition
inkjet printer technology and equipment upgrades.
- Inventories increased to R93,7 million (2011: R84,5 million), largely due
to poor sales volumes in Australia. Measures have been implemented to reduce
stock levels.
- Ceramic`s net asset value per share decreased 13,0% to 7 345 cents (2011: 8
446 cents) primarily due to the declaration of the special dividend in the
2011 financial year.
Manufacturing operations - Tile division
South Africa
* Sales of 16,7 million mSquared outstripped production of 15,0 million
mSquared.
* Capacity utilisation across the local factories averaged 94%.
* The implementation of high definition inkjet printer technology in the
Group`s Samca Wall and Pegasus factories is successfully improving Ceramic`s
fashion offering.
* Export sales increased to R95,4 million (2011: R82,3 million). Strong
growth in sales was experienced in Kenya, Mozambique, Namibia, Zambia and
Zimbabwe.
Pegasus
This factory manufactures low cost large format glazed tiles for the DIY and
contract market, and is in the process of implementing technology to extend
the range to a 60 cm x 60 cm format. The new size format has strong appeal
for consumers seeking diversity from imported Chinese product.
Production volumes increased to 7,2 million mSquared (2011: 6,9 million
mSquared), while sales volumes grew to 8,0 million mSquared (2011: 7,3
million mSquared).
Vitro
The full bodied glazed and unglazed extruded punched tiles which Vitro
produces are targeted at the up-market domestic and contract sectors.
Production volumes declined to 2,4 million mSquared (2011: 2,6 million
mSquared) as a result of a temporary shut-down during the period for the
installation of new selection and packaging equipment. Sales volumes improved
to 2,8 million mSquared (2011: 2,6 million mSquared).
The new selection and packaging equipment which was commissioned in January
2012 will improve quality control thereby enhancing both the quality of
product delivered to the market and the standard of packaging.
Samca Floor Tiles
This factory`s range comprises predominantly large format fashionable pressed
glazed floor tiles.
Production volumes increased to 2,7 million mSquared (2011: 2,5 million
mSquared), while sales volumes improved to 3,0 million mSquared (2011: 2,7
million mSquared).
Corrective actions implemented in the review period assisted in stabilising
this factory`s performance after a relatively turbulent period. Restructuring
of the management team and improvements in operational efficiencies and
product range have started to deliver benefits for the business.
Samca Wall Tiles
This is the only factory in the Group and the country that manufactures wall
tiles. The pressed, glazed tiles are targeted at both the commodity and
fashion markets.
Production volumes declined to 2,6 million mSquared (2011: 2,7 million
mSquared) while sales volumes increased to 2,9 million mSquared (2011: 2,7
million mSquared).
Production during the review period was affected by the installation and
commissioning of three new printers and selection equipment. These changes
will serve to improve the quality of product and service to customers.
Australia
Centaurus
This operation produces premium-end glazed porcelain floor tiles in various
size formats for the sophisticated consumer market. Centaurus is the only
volume tile manufacturer in Australia.
Due to Centaurus` inability to meet the market`s fashion expectations,
reduced demand from its customers led to a 50% under-utilisation of capacity
with a resultant increase in unit costs.
Intensive remedial measures have been implemented at the operation, including
a comprehensive restructuring of the senior management team. The Group Chief
Executive Officer will provide additional support in this initial transition
phase. These corrective interventions are expected to realise improved
efficiencies in the business and further developments will be conveyed to
shareholders in due course.
Manufacturing operations - Sanitaryware division
* Sales and production volumes increased and the division succeeded in
stabilising unit production costs at 2011 levels. This, together with a
higher average selling price achieved primarily from increased sales of
higher value products at Betta, resulted in an improved margin.
* Export sales increased 15,7% to R29,4 million (2011: R25,4 million), with
noteworthy improvements in sales to Zambia and Zimbabwe. Strong demand exists
for Ceramic`s products in Africa, and greater attention will be focused on
catering for this growing market.
Betta
This factory is a high volume low cost manufacturer of glazed porcelain
sanitaryware.
Production volumes increased to 621 892 pieces (2011: 544 954 pieces). Sales
volumes increased to 648 215 pieces (2011: 567 904 pieces).
Betta succeeded in regaining market share and continued to benefit from its
range of higher value box sets. The contribution to total sales of box sets
has increased from 10% to over 30% in the past two years and the potential
exists to grow that further.
Aquarius
Aquarius produces drop-in and free-standing acrylic baths for the local and
export market.
Production volumes increased to 67 232 pieces (2011: 49 884 pieces). Sales
volumes increased to 69 108 pieces (2011: 53 627 pieces).
Whilst this market segment remains a price sensitive, low margin environment,
the Group derives strategic benefit from being able to offer a comprehensive
product solution to customers.
Prospects
Current challenging trading conditions are expected to prevail in the
industry for the foreseeable future.
Management`s key short-term priority is to regain market share and reduce
losses made in the Australian operation.
Opportunities exist for the Group to gain market share in sub-Saharan Africa.
Focus will be on capitalising on strong demand for Ceramic`s products in
territories north of the border, whilst in the local market product
development is underway to introduce a well-priced fashionable range of large
format glazed tiles to compete with imported product.
A price increase in line with CPI inflation was implemented on 1 February
2012, which should restore margins to acceptable levels. Significantly, the
Group`s back order book is robust, with almost 7 million mSquared on order.
The Group`s plans to commission another volume-based tile plant in South
Africa remain on hold pending the procurement of suitable raw materials.
The renovations market is likely to remain relatively active compared with
the new build market, which is typical to the cyclical trend experienced in
an economic downturn. Ceramic will focus on improved cost efficiencies and
range innovation to ensure customer satisfaction and retention of its
customer base.
Dividend
The Board has declared an interim dividend (number 44) of 110 cents (2011:
140 cents per share). The dividend cover remains at 3,5 times.
On behalf of the Board
G A M Ravazzotti N Booth
Chairman Chief Executive Officer
6 March 2012
Dividend announcement
The Board has declared an interim dividend (no 44) of 110 cents per ordinary
share for the six months ended 31 January 2012 to all shareholders recorded
in the books of Ceramic Industries Limited at the close of business on
Friday, 30 March 2012. The last day to trade cum dividend in order to
participate in the dividend will be Friday, 23 March 2012. The shares will
commence trading ex dividend from the commencement of business on Monday, 26
March 2012 and the record date will be Friday, 30 March 2012. The dividend
will be paid on Monday, 2 April 2012. Share certificates may not be
rematerialised or dematerialised between Monday, 26 March 2012 and Friday, 30
March 2012, both days inclusive.
By order of the Board
E J Willis
Secretary
6 March 2012
Statement of compliance
The unaudited interim financial information has been prepared in accordance
with the recognition and measurement criteria of International Financial
Reporting Standards, the presentation as well as the disclosure requirements
of IAS 34 - Interim Financial Reporting, the AC 500 Standards as issued by
the Accounting Practices Board, the Listings Requirements of the JSE Limited
and the requirements of the South African Companies Act. These unaudited
interim financial statements have not been reviewed or audited by the Group`s
auditors. The accounting policies are those presented in the annual financial
statements for the year ended 31 July 2011 and have been applied consistently
to the periods presented in these interim financial statements.
The results have been prepared under the supervision of the Chief Financial
Officer, Mr D R Alston (CA)SA.
Directors: G A M Ravazzotti (Chairman),
N Booth (Chief Executive Officer), D R Alston (Chief Financial Officer), S D
Jagoe, E M Mafuna, N S Nematswerani, N D Orleyn,
L E V Ravazzotti, K M Schultz, G Zannoni (Italian)
Company Secretary: E J Willis
Registered office: Farm 2, Old Potchefstroom Road, Vereeniging, PO Box 2247,
Vereeniging, 1930
Transfer secretaries: Computershare Investor Services (Pty) Limited, 70
Marshall Street, Johannesburg 2001, PO Box 61051, Marshalltown 2107
Sponsor: One Capital.
Date
8 March 2012
Date: 08/03/2012 07:05:01 Produced by the JSE SENS Department.
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