| Wed 14 May 2003, 15:34 | | AFGRI DELIVERS EARNINGS GROWTH OF 25% |
|
AFGRI LIMITED
ISIN: ZAE000040549
JSE Share code: AFR
For the year to 28 February 2003 agricultural services group Afgri has honoured
promises made to shareholders in the previous year to continue delivering
earnings growth well in excess of inflation.
Each of the group"s four business pillars - Products, Requisites, Capital and
Services - achieved top line growth for the year as a result of market share
gains, expansion in new and existing territories, and acquisitions.
The results show earnings per share up 25% to 84,9c (2002: 67,9c) and headline
earnings per share up 22% to 85,2c (2002: 69,8c).
Revenue from continuing operations grew 38% to R6,1 billion and pre-tax profit
by 14% to R368 million for the year under review.
Afgri Products" Trading division suffered an after-tax loss of R67 million
(2002: a profit of R11 million) after accounting for trading losses. These
losses were the result of mismatched grain hedges carried out in contravention
of the group"s trading policy. All mismatches have since been corrected, and a
team of experienced trading and risk management executives appointed to oversee
all trading activities.
Group managing director Jeff Wright says these losses have been fully absorbed
in the 2003 financial year, and the group has accelerated implementation of the
new AC133 accounting standard, which deals with the recognition, measurement and
disclosure of financial instruments. Afgri now complies fully with AC133, a
year ahead of the required compliance date, resulting in opening equity being
decreased by R110 million as of 1 March 2002.
"As we announced earlier this year, we took quick action to restructure the
Trading division and appointed high calibre executives to oversee this activity
and so prevent a recurrence," says Wright. "Despite the trading losses, we were
still able to deliver earnings growth of 25% for the year under review, and that
is extremely gratifying."
Divisional results were positively influenced by increased utilisation of the
group"s grain storage facilities as a result of improved crop yields and higher
business volumes in all divisions.
Afgri Products remains the largest contributor to group revenue and profits, and
includes its grain, cotton and animal feed and protein business units. The
division contributed more than half the group"s revenue of R6,1 billion and 53%
of its operating profit of R368 million. Afgri Requisites, operating through a
network of 73 stores, generated revenue of R2,7 billion or 44% of the group
total, and operating profit of R82 million, 22% of the total.
Afgri Capital generated revenue of R227 million, up 97% from the previous year,
and nearly doubled operating profit over the past year to R73 million. The
newest addition to the group, Afgri Services, reported an operating profit of
R10 million (2002: R1 million loss).
Capital expenditure totalled R112 million, nearly half of which was absorbed by
Afgri Products, and a further R12 million by Afgri Services, which is a centre
of agricultural excellence servicing farmers and processors and the new business
incubator of the group.
Two major acquisitions were concluded during the year:
- the purchase for R59 million of T&H Walton, the largest distributor of John
Deere farming equipment in Western Australia, which provides an important
beachhead into this market, with a large and ready-made customer base for
Afgri"s other products and services;
- the acquisition for R82,3 million of Laeveld Korporatiewe Beleggings Beperk
(LK), which expands Afgri"s regional footprint to the Lowveld, adding tobacco,
citrus and other tropical and sub-tropical foods, nuts and sugar clients to the
existing client base of Afgri.
Both acquisitions were transacted at close to net asset value and are consistent
with the group"s diversification strategy to expand into new product lines and
geographies.
The group"s positive cash flow from operating activities and realization of
discontinued operations was utilized for net fixed asset acquisition of R84
million; repurchase of shares of R64 million and acquisition of shares in
subsidiaries to an amount of R203 million. At year end the group had R246
million cash available.
Looking ahead, Wright says the strength of the rand will negatively impact the
prices of some agricultural commodities, with an adverse knock-on effect on
certain areas of business. These negative impacts should be ameliorated by the
recent acquisitions, expansion into new product lines and territories, and
ongoing operational, procurement and efficiency improvements. The group"s
adoption of the Economic Value Added model (EVA), which measures all activities
in terms of their contribution to shareholder returns, has already yielded
substantial benefits, and the group is endeavouring to ensure shareholder wealth
is created on a sustainable basis.
Ends
ISSUED FOR: AFGRI LIMITED
CONTACT : Jeff Wright, Managing Director: 011 706 7897 Cell 082 806 1284
De Wet Goosen, Financial Director: 011 706 7897 Cell 082 770 7859
FAX NO : 011 463 4139
E-MAIL : jwright@afgri.co.za
idgoosen@afgri.co.za
ISSUED BY : TISH STEWART PR ASSOCIATES
CONTACT : Tish Stewart 011 325 4195 Cell 082 443 6399
FAX NO : 011 325 4199
E-MAIL : tish@tspr.co.za
DATE : 14 May 2003
Date: 14/05/2003 01:59:48 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
