| Wed 10 Sep 2003, 9:38 | | REVIEWED PRELIMINARY FINANCIAL RESULTS FOR THE YEA |
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CERAMIC INDUSTRIES LIMITED - REVIEWED PRELIMINARY FINANCIAL RESULTS FOR THE YEAR
ENDED 31 JULY 2003
CERAMIC INDUSTRIES LIMITED
Registration number 1982/008520/06
(Ceramic)
Share code: CRM
ISIN code: ZAE000008538
REVIEWED PRELIMINARY FINANCIAL RESULTS FOR THE YEAR ENDED 31 JULY 2003
Condensed group income statement for the year ended 31 July
2003 2002
% Reviewed Audited
Change R000"s R000"s
Revenue 13,0 625 819 553 641
Tiles 13,7 531 578 467 439
Sanitaryware 9,3 94 241 86 202
Operating profit before
depreciation 22,1 224 549 183 961
Depreciation 46,7 (56 235) (38 336)
Operating profit 15,6 168 314 145 625
Tiles 14,4 138 158 120 747
Sanitaryware 21,2 30 156 24 878
Investment income (94,4) 665 11 886
Minority shareholders" interest - 28 -
Profit before taxation 7,3 169 007 157 511
Taxation (10,2) (38 940) (43 372)
Net income attributable to
ordinary shareholders 14,0 130 067 114 139
-
Weighted average number of
shares in issue (000"s) 18 263 18 263
Basic earnings per share (cents) 14,0 712,2 625,0
Headline earnings per share
cents) 13,6 706,5 621,9
Dividends per share (cents) 14,3 120,0 105,0
Reconciliation of headline earnings
Net income attributable to
ordinary shareholders 130 067 114 139
Impairment of plant and equipment 2 376 -
Negative goodwill released (3 328) (85)
Profit on disposal of plant and
equipment (89) (472)
Headline earnings 129 026 113 582
Condensed group balance sheet
at 31 July
2003 2002
Reviewed Audited
R000"s R000"s
ASSETS
Non-current assets 489 393 284 898
Property, plant and equipment 468 961 282 226
Negative goodwill - (3 328)
Deferred taxation asset 13 632 -
Payment in advance 6 800 6 000
Current assets 267 104 348 818
Inventories 35 741 13 243
Trade and other receivables 124 255 132 571
Cash and cash equivalents 107 108 203 004
Total assets 756 497 633 716
EQUITIES AND LIABILITIES
Capital and reserves 526 899 426 831
Ordinary shares 64 962 64 962
Reserves 14 000 22 083
Retained earnings and reserves 447 937 339 786
Minority shareholders" interest 161 189
Non-current liabilities 38 794 10 826
Deferred taxation liability 14 718 10 826
Borrowings 24 076 -
Current liabilities 190 643 195 870
Trade creditors, other payables and
provisions 164 218 161 937
Income taxation payable 26 326 33 839
Shareholders for dividend 99 94
Total equity and liabilities 756 497 633 716
Condensed statement of changes in equity
for the year ended 31 July
2003 2002
Reviewed Audited
R000"s R000"s
Balance at beginning of year 426 831 319 431
Net income attributable to ordinary
shareholders 130 067 114 139
Movement in foreign currency translation
reserve (9 178) 9 333
Transfer to dividend reserve (21 916) (19 177)
Transfer from dividend reserve 21 916 19 177
Dividends paid (20 821) (16 072)
Balance at end of year 526 899 426 831
Condensed group cash flow statement
for the year ended 31 July
2003 2002
Reviewed Audited
R000"s R000"s
Operating activities
Profit before taxation adjusted for
non-cash items 218 101 191 962
Changes in working capital (11 901) 16 592
Cash generated from operations 206 200 208 554
Investment income 665 11 886
Dividends paid (20 816) (16 082)
Taxation paid (59 904) (29 727)
126 145 174 631
Investing activities (246 117) (146 088)
To expand operations* (246 117) (153 636)
Net cash acquired on acquisition of
foreign subsidiary - 7 548
Financing activities
Borrowings raised 24 076 -
Net (decrease)/increase in cash and cash
equivalents (95 896) 28 543
Cash and cash equivalents at beginning
of year 203 004 174 461
Cash and cash equivalents at end of year 107 108 203 004
*Including R2,0 million (2002:R6,0 million) payment in advance
COMMENTARY
FINANCIAL RESULTS
Ceramic Industries Limited group again produced real growth for the year ended
31 July 2003, in line with management"s stated objectives. Group revenue
increased 13,0% to R625,8 million (2002: R553,6 million). Revenue from tiles
contributed R531,6 million (2002: R467,4 million), up 13,7%, while revenue from
sanitaryware increased by 9,3% to R94,2 million (2002: R86,2 million).
Operating profit rose 15,6% to R168,3 million (2002: R145,6 million) with
contributions of R138,2 million from tiles and R30,1 million from sanitaryware.
Net income attributable to ordinary shareholders of R130,1 million was 14,0% up
on the prior year (2002: R114,1 million), while headline earnings per share grew
13,6% to 706,5 cents (2002: 621,9 cents).
While earnings grew at a lower rate than the previous year, the results are
creditable in what proved to be a difficult trading environment. The substantial
strengthening of the rand during the financial year resulted in strong
competition from imported product (particularly from China and Brazil) and led
to the strategic decision to cut prices across the product range in February
2003, which impacted margins negatively. The group was not able to cut costs
sufficiently quickly or deeply to maintain margins at the levels achieved in the
first six months of this financial year.
Ceramic Industries has, however, maintained market share and entrenched its
position as the leading manufacturer of both ceramic tiles and vitreous china
sanitaryware in South Africa.
Cash balances net of debt at year-end reduced to R83,0 million (2002: R203,0
million) as a result of investing R246,1 million to expand and modernise the
existing factories and fund the expansion into Australia. The benefits of this
capital investment programme can be seen in the improved volumes and yields
being experienced at all plants, which should provide the opportunity to reduce
costs and recover some lost margin, to compensate for the reduction in
investment income.
Working capital management remains a priority, and inventory in particular,
requires a fine balance between limiting excess stock holding and providing
customers with a full product range. To facilitate manufacturing flexibility,
equipment is being or has been installed to enhance the group"s ability to
alternate products with minimal disruption in the factories. This quick-change
technology will allow the group to meet market needs with a reduced stock level.
The effective taxation rate of 23,0% (2002: 27,5%) is below the standard rate of
30,0% primarily due to the Strategic Investment Programme taxation incentives
granted by the DTI to the newly commissioned Pegasus factory.
MANUFACTURING
Pegasus
The Pegasus plant was commissioned in November 2002, and a second kiln was
successfully commissioned in April 2003, as planned. Pegasus produces value-for-
money glazed pressed tiles and supports the group"s penetration into new,
developing markets while at the same time maintaining the group"s cost
competitiveness against low priced imports. The Pegasus range is rapidly gaining
acceptance in the market.
This plant now has a theoretical production capacity of 7,5 million m2 per annum
but will require a further period of fine-tuning before its full potential is
realised.
Vitro
The Vitro plant produces a range of dense, extremely strong and hard wearing
tiles. The new wet glaze technology commissioned in 2002 continued to present a
number of unique technical difficulties during the year. These challenges have
largely been resolved and management is satisfied that the factory"s performance
will improve in the months ahead to reach design capacity of 5,5 million m2 per
annum.
The NCI line producing unglazed split tiles for the upper middle end of the
market is currently operating at capacity of 0,8 million m2 per annum. The
product range is being improved to meet the requirements of its served market.
Samca 1
This plant, producing quality floor tiles, delivered a solid performance for the
year. Capacity is presently at 7 million m2 per annum and the group is currently
installing quick-change technology to enhance performance and meet customer
demands for a wider range of tiles.
Samca 2
Changes in wall tile fashion in terms of size, texture and colour, have
necessitated a redesign of the product range, which will only be completed in
the early part of 2004. Accordingly, production will be maintained at the
current 6 million m2 per annum to meet market requirements.
Betta Sanitaryware
Betta produces a range of glazed porcelain sanitaryware in a variety of colours
to meet local market requirements. Both volumes and yields improved during the
year and additional facilities installed included the latest high-pressure
casting system to produce closed-rim pans, the first implementation of its kind
in the world. Betta now has the capacity to produce 1,2 million pieces per
annum.
In line with the group"s objective to establish itself as an internationally
recognised supplier, all new products developed on the high-pressure casting
system meet international water consumption regulations. This environmentally
sensitive enhancement has particular significance for markets on the African
continent, given the scarcity of water resources.
EXPORTS
Exports were maintained at the 12% of group turnover achieved in the first half
of the year. A solid performance was delivered in the Zambian and Malawian
markets and inroads were made into Angola, a new market for the group. Further
opportunities are being explored and the group will continue to expand into
suitable sub-Saharan countries.
FOREIGN INVESTMENT
The group"s Australian project is progressing well, with all required approvals
in place and the factory is on schedule for commissioning in January 2004. Key
employees have been recruited and have undergone training at the group"s
facilities in South Africa. This factory will produce glazed porcelain floor
tiles developed specifically for the Australian market.
PROSPECTS
Following a period of substantial capital expansion the group"s focus will be on
consolidation and maximising return on investment. Further capital expenditure
in South Africa will be limited and the focus will be on driving existing
technology to provide the product range and flexibility demanded by the market.
The Australian project is not expected to have a material effect on the results
for the 2004 financial year.
Based on current market conditions, management expects to again achieve real
growth in earnings in the forthcoming year.
DIVIDEND
The Board has declared a final dividend of 73 cents per share, which together
with the interim dividend of 47 cents per share, produces a total dividend of
120 cents per share (2002: 105 cents per share), an increase of 14,3%.
On behalf of the Board
G. A. M Ravazzotti N. Booth
Chairman Chief Executive Officer
DIVIDEND ANNOUNCEMENT
The Board has declared a final dividend (number 27) of 73 cents per share to all
shareholders recorded in the books of Ceramic Industries Limited. The last day
to trade CUM the dividend in order to participate in the dividend will be
Friday, 17 October 2003. The shares of Ceramic Industries Limited will commence
trading EX the dividend from the commencement of business on Monday, 20 October
2003 and the record date will be Friday, 24 October 2003. The dividend will be
paid on Monday, 27 October 2003. Share certificates may not be rematerialised or
dematerialised between Monday, 20 October 2003 and Friday, 24 October 2003, both
days inclusive.
By order of the Board
E.J. Willis 10 September 2003
Secretary
NOTES TO THE PRELIMINARY FINANCIAL STATEMENTS
There have been no changes in accounting policies during the year ended 31 July
2003 apart from the adoption of AC133. The reviewed results have been prepared
in accordance with the South African Statements of Generally Accepted Accounting
Practice. The results have been reviewed by KPMG Inc. 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), S.D. Jagoe,
E.M. Mafuna, K.M. Schultz, L. Pereira, P.D. Wickens (British), G. Zannoni
(Italian)
Registered office:
33 Sarel Baard Crescent, Gateway Industrial Park, Rooikraal Ext 25, Centurion
POBox 1369, Rivonia 2128
Transfer secretaries:
Computershare Limited, 70 Marshall Street, Johannesburg 2001
POBox 61051, Marshalltown 2107
Date: 10/09/2003 08:00:08 AM Produced by the JSE SENS Department
