| Wed 11 Sep 2002, 0:00 | | Ceramic Industries Limited - Preliminary Financial |
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Ceramic Industries Limited - Preliminary Financial Results For The Year Ended 31
July 2002
Ceramic Industries Limited
(Reg. No. 1982/008520/06)
(CERAMIC)
(CRM)
ISIN: ZAE000008538
PRELIMINARY FINANCIAL RESULTS FOR THE YEAR ENDED 31 JULY 2002
Abridged group income statement
for the year ended 31 July
2002 2001
% Reviewed Audited
Change R000`s R000`s
Revenue 32,6 553 641 417 489
Tiles 30,8 467 439 357 477
Sanitaryware 43,6 86 202 60 012
Operating profit before depreciation 39,4 183 961 131 972
Depreciation 22,2 (38 336) (31 365)
Operating profit 44,7 145 625 100 607
Tiles 39,0 120 747 86 875
Sanitaryware 81,2 24 878 13 732
Investment income 4,7 11 886 11 353
Profit before taxation 40,7 157 511 111 960
Taxation (43 372) (24 449)
Earnings attributable to ordinary
shareholders 30,4 114 139 87 511
Weighted average number of
shares in issue (000`s) 18 263 18 263
Basic earnings per share (cents) 30,4 625,0 479,2
Headline earnings per share (cents) 29,8 621,9 479,0
Dividends per share (cents) 31,3 105,0 80,0
Reconciliation of headline earnings
Income attributable to ordinary
shareholders 114 139 87 511
Profit on disposal of fixed assets (472) ( 26)
Negative goodwill amortised (85) -
Headline earnings 113 582 87 485
Abridged group balance sheet
at 31 July
2002 2001
Reviewed Audited
R000`s R000`s
ASSETS
Non-current assets 284 898 171 908
Property, plant and equipment 282 226 171 908
Negative goodwill* (3 328) -
Payment in advance 6 000 -
Current assets 348 818 268 017
Inventories 13 243 17 427
Trade and other receivabes 132 571 76 129
Cash and cash equivalents 203 004 174 461
Total assets 633 716 439 925
EQUITIES AND LIABILITIES
Capital and reserves 426 831 319 431
Ordinary shares 64 962 64 962
Reserves 22 083 9 645
Retained earnings 339 786 244 824
Minority shareholder`s interest 189 -
Non-current liabilities
Deferred taxation 10 826 17 326
Current liabilities 195 870 103 168
Trade creditors, other payables and provisions 161 937 89 370
Receiver of Revenue 33 839 13 694
Shareholders for dividend 94 104
Total equity and liabilities 633 716 439 925
* Discount on acquisition of foreign subsidiary
Abridged statement of changes in shareholders` equity
at 31 July
2002 2001
Reviewed Audited
R000`s R000`s
Balance at beginning of period 319 431 236 886
Earnings attributable to ordinary
shareholders 114 139 87 511
Foreign currency translation reserve
arising during year 9 333 513
Transfer to dividend reserve (19 177) (14 611)
Transfer from dividend reserve 19 177 14 611
Dividends paid (16 072) (5 479)
Balance at end of period 426 831 319 431
Abridged cash flow statement
at 31 July
2002 2001
Reviewed Audited
R000`s R000`s
Operating activities
Profit before tax adjusted for non-cash items 191 962 131 946
Changes in working capital 16 592 20 258
Cash generated from operations 208 554 152 204
Investment income 11 886 11 353
Dividends paid (16 082) (12 533)
Taxation paid (29 727) (16 712)
174 631 134 312
Investing activities (146 088) (73 857)
To expand operations* (153 636) (73 857)
Net cash acquired on acquisition of foreign
subsidiary 7 548 -
Net increase in cash and cash equivalents 28 543 60 455
Cash and cash equivalents beginning of period 174 461 114 006
Cash and cash equivalents end of period 203 004 174 461
*Including R6 million payment in advance
COMMENTARY
FINANCIAL RESULTS
Ceramic Industries Limited is pleased to report its results for the financial
year ended 31 July 2002. Group revenue grew 33% to R554 million (2001: R418
million). Revenue from tiles increased by 31% to R468 million (2001: R358
million), while sanitaryware contributed revenue of R86 million (2001: R60
million), an improvement of 43%.
Operating profit increased 45% to R146 million (2001: R101 million). Earnings
attributable to ordinary shareholders improved 30%, to R114 million (2001: R88
million). Headline earnings per share increased 30% to 622 cents (2001: 479
cents). Notwithstanding capital expenditure of R154 million, cash reserves at
the end of the period increased to R203 million.
These results were mainly attributable to:
- improved margins as a result of enhanced cost-efficiencies;
- increased production volumes and improved yields due to continuous investment
in manufacturing technology;
- benefits from economies of scale; and
- improved demand for local product due to the depreciation of the Rand during
the second half of the 2001 calendar year.
OPERATING ACTIVITIES
Manufacturing
Tile production increased 16% to 14,8 million m2 (2001: 12,7 million m2). This
was mainly as a result of investment in new technology.
Capital investment in Betta Sanitaryware resulted in increased production to 0,8
million pieces of sanitaryware (2001: 0,6 million pieces).
The NCI factory was closed during October 2001. The results of this operation,
listed below, are included in the group`s financial results.
2002 2001
Reviewed Audited
for the year ended 31 July R million R million
Revenue 3,1 19,0
Operating (loss)/profit before deprecation (0,8) 0,4
The market
The Group increased market share during the period, enhancing its role as South
Africa`s leading ceramic tile manufacturer. Betta Sanitaryware achieved
excellent growth and also entrenched its position as the leader in the
manufacture of vitreous china sanitaryware.
The Group has decided not to increase selling prices at the beginning of the
2003 financial year. This is in accordance with its marketing strategy to limit
selling price increases to levels lower than inflation.
Increased production was readily absorbed by growth in local demand for the
Group`s product. With local supply meeting only approximately 65% of the total
demand, management is confident that the South African ceramic tile and
sanitaryware markets afford significant growth potential. Ceramic tiles are
rapidly gaining the status of preferred wall and floor coverings in South
Africa. This is based mainly on the user-friendly nature of the product and
associated aspirational values. Current Southern African consumption, excluding
South Africa, is estimated at 20 million m2 per annum. The sustainable growth
potential of the Southern African market will remain a key focal area for supply
from increasing production capacity.
Satisfying sales growth has been experienced in sub-Saharan Africa and
particularly in Zambia, Malawi and Tanzania. For the period under review,
exports grew by 28% and contributed 13% of turnover. Export growth was
constrained by increased local consumption.
PROSPECTS
The Group will continue with expansion strategies, both locally and abroad. The
company remains ungeared, with all capital projects financed through cash
reserves.
Local investment and capital expenditure
Vitro/NCI
The new technology NCI production line within the Vitro factory will be
commissioned during September 2002. This additional capacity replaces that of
the NCI factory closed in October 2001 and will increase production by 1 million
m2 per annum, therefore total production capacity at Vitro will be 5,5 million
m2 per annum.
Samca I
As reported in the interim announcement during March 2002 the Board approved the
installation of a fourth production line at Samca 1, subject to the procurement
of the required clay reserves. Clay supplies have now been secured and this R35
million expansion is planned for commissioning at the end of July 2003. The
total production capacity will be 9,3 million m2 per annum, an increase of 29%.
Samca II
The third production line at Samca II has been successfully commissioned. This
R20 million investment will increase capacity by 47% to 7,5 million m2 per
annum.
Betta Sanitaryware
During the period under review, Betta Sanitaryware commissioned additional high
pressure casting capacity, a third glazing robot and a second modern tunnel
kiln. This increased production capacity to 1 million pieces per annum. Further
expansion to achieve the targeted 1,2 million pieces per annum is progressing
well.
Pegasus
Phase 1 of the Group`s Pegasus factory is approximately five weeks behind
schedule, mainly due to adverse weather conditions. The first kiln is scheduled
for commissioning during November 2002. A second kiln will be commissioned early
in the 2003 calendar year. It is anticipated that production output from the
first two kilns will be 7,5 million m2 per annum.
The group expects the value for money Pegasus pressed floor tile, to result in a
substantial increase in the size of the Southern African tile market.
Tax incentive
Ceramic Industries` subsidiary, Pegasus (Pty) Ltd, has been granted a tax
allowance in terms of the Department of Trade and Industry`s Strategic
Industrial Projects programme for the Pegasus factory. This allowance will
result in an estimated R30 million tax saving.
Foreign investment
Italy
Gruppo Ceramiche Ricchetti, the Group`s Italian joint venture partner, resolved
not to proceed with the proposed Italian factory as a result of a change in its
strategic objectives. Ceramic Industries acquired 49,5% of the shares in the
Italian company, Orange Moon S.r.l., from Gruppo Ceramiche Ricchetti at a cost
of EURO 4,6 million, giving rise to a discount on acquisition of R3,4 million.
This gain will, in accordance with the Group`s accounting policies, be amortised
over 10 years or over the period in which future losses may be incurred.
The Board believes that, in order to meet the Group`s vision, a manufacturing
presence in Italy is necessary. The project will therefore be reassessed with
particular reference to its risk profile and a decision on whether the Group
should proceed without a strategic partner, will be made within the next six
months.
Australia
Negotiations regarding clay supplies have been concluded and phase 1 of this
greenfields project is scheduled for commissioning at the end of calendar year
2003. The first phase of this glazed porcelain floor tile plant will have a
total production capacity of 3 million m2 per annum.
MANAGEMENT
All local factories and projects are fully staffed at executive level. Mr. L.
Pereira, an executive director, is responsible for establishing the Australian
operation.
THE YEAR AHEAD
The Group will continue to pursue its vision of becoming an internationally
recognised low cost producer. During the next twelve months, the Group will
focus on the reduction of manufacturing costs, management of its capital
investment projects and the growth of the Southern African market for its
product. The Board is satisfied that the Ceramic Industries Group will continue
to deliver real growth in earnings during this period.
DIVIDEND
The Board has declared a final dividend of 67 cents, which together with the
interim dividend of 38 cents, brings the total dividend to 105 cents (2001: 80
cents), an increase of 31,3%.
On behalf of the Board
G.A.M. Ravazzotti
Chairman
N. Booth
Chief Executive Officer
DIVIDEND ANNOUNCEMENT
The Board has resolved to declare a final dividend (number 25) of 67 cents per
share to all shareholders of Ceramic Industries Limited. The last day to trade
"cum" the dividend in order to participate in the dividend will be Friday, 18
October 2002. The shares of Ceramic Industries Limited will commence trading
"ex" the dividend from the commencement of business on 21 October 2002 and the
record date will be Friday, 25 October 2002. The dividend will be paid on
Monday, 28 October 2002. Share certificates may not be rematerialised or
dematerialised between 21 October 2002 and 25 October 2002, both days inclusive.
By order of the Board
I.A. Mollentze
Secretary
11 September 2002
NOTES TO THE ABRIDGED FINANCIAL STATEMENTS
There have been no changes in accounting policies during the year ended 31 July
2002, apart from the adoption of AC107. The reviewed results have been prepared
in accordance with the South African Statements of Generally Accepted Accounting
Practice. The results have been reviewed by PricewaterhouseCoopers Chartered
Accountants (SA), the auditors of Ceramic Industries Limited, and their review
opinion is available for inspection at Ceramic Industries Limited`s registered
office.
Directors: G.A.M. Ravazzotti (Chairman), N. Booth (Chief Executive Officer), L.
Pereira, S.D. Jagoe, E. Mafuna, K. Schultz, P. Wickens (British), G. Zannoni
(Italian)
Registered office: 33 Sarel Baard Crescent, Gateway Industrial Park, Centurion
POBox 1369, Rivonia 2128
Transfer secretaries: Computershare Investor Services Limited, 11 Diagonal
Street, Johannesburg 2001 PO Box 1053, Johannesburg 2000
Date: 11/09/2002 09:00:00 AM Produced by the JSE SENS Department
