| Tue 18 Feb 2003, 16:37 | | AG Industries Ltd - Trading Update |
|
AG INDUSTRIES LIMITED
(FORMERLY AFRICA GLASS INDUSTRIES LIMITED)
("the Company")
JSE Code: AGI
ISIN: ZAE000039467
Registration number: 1980/004051/06
TRADING UPDATE
The company will publish its` interim results for the six months ended 31
December 2002 on about 25 March 2003. As this is later than the date on which
the Company`s interim results were previously announced, this trading update is
published.
UPDATE - USA EXPORT CAMPAIGN
The company has pleasure in announcing that its USA Hurricane Door (over a year
in the design and testing phase) achieved its USA certification during January
2003. It will go into immediate production with the first hurricane door
shipment expected in April 2003. In addition, six different shower doors and tub
enclosures have been designed for the USA market with shipment having commenced
in December 2002. Both shower and hurricane doors are anticipated to begin
influencing the Company`s performance from the end of the current financial
year. The effect on performance can be expected to be more significant during
the 2004 financial year and beyond. Second phase products include aluminium
components and an expanded range of aluminium and glass products. These products
are scheduled for introduction to the USA market towards the end of the 2003
financial year. The development of third phase products, which include windows
for which a demand has already been identified, has begun. Completion of the
third phase product development is expected by the third quarter of 2003 with
products being introduced to the USA market by the first half of the 2004
financial year.
UPDATE - DOMESTIC OPERATIONS & EUROPE
An enhanced version of the Kal Kote wood grain aluminium finish was developed
during the first quarter of the current financial year. Significant orders are
expected during the second half of the current financial year and beyond.
Margins on export of enhanced laminate and mirror products suffered, however,
from the stronger Rand and European margins remained subdued. Operations in
South Africa grew strongly during the first half of the current financial year.
However, glass distribution margins came under pressure from glass importation.
FINANCIAL PERFORMANCE
Strong organic revenue growth continued for the first half of the 2003 financial
year.
However, the restructure of the Company`s international operations during the
first half of the 2003 financial year, in preparation for the full scale
introduction of export campaign finished products, resulted in a significant
reduction in the operating margin in international operations. This
notwithstanding, headline operating profit before foreign exchange and finance
costs continues to grow in line with the Company`s long range performance
targets. Operating cash flow, likewise, is strong.
The substantial Rand strength encountered during the period led, however, to a
foreign exchange loss in contrast with significant foreign exchange earnings in
the comparative period. In addition, as projected at the close of the 2002
financial year, an increase in gearing and finance costs arose from
infrastructural developments in prior periods.
The combined effect of the change in foreign exchange earnings and finance costs
has been to reduce headline earnings. However, improved working capital
management and strong operating cashflows, are expected to result in a
reasonable return on equity for the first half of the 2003 financial year.
PROSPECTS
During the period under review, although operations grew satisfactorily, no
significant benefit was enjoyed from the Company`s export campaign. A wide range
of first phase export campaign finished product is now on sale in international
markets with second and third phase products to follow imminently. Still
stronger growth in operations is, therefore, expected commencing in the second
half of the 2003 financial year.
In the absence of the cost of the restructure of international operations, which
has already been borne, operating margins can also be expected to improve.
Furthermore, as the benefits of the export campaign escalate, a return will be
earned on the infrastructure developed for the campaign. This return will
counter the effect of the additional finance costs borne in respect of that
development.
Finally, the Rand is not expected to appreciate further at the rate it has over
the past nine months.
In conclusion, a still stronger operating performance can be expected in the
absence of restructuring costs and as the export campaign escalates.
Furthermore, in the absence of the variances experienced during the interim
period in foreign exchange and finance costs, headline earnings growth should
more closely mirror the growth in operating profit.
Further details regarding the Company`s results will be published with the
interim results announcement for the six months ending 31 December 2002 to be
published on about 25 March 2003.
By order of the Board
AA Barrell
Executive Chairman
J B Rosenberg
Group Financial Director/Company Secretary
J Martingano
Group Commercial Director
18 February 2003
Sponsor
HSBC
Date: 18/02/2003 04:24:00 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
