| Wed 29 Oct 2003, 15:48 | | Afgri Reports Interim Results Well Ahead Of Target |
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Afgri Reports Interim Results Well Ahead Of Target
AFGRI LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1995/004030/06)
ISIN: ZAE000040549 JSE Code: AFR
("the company")
Agricultural services group AFGRI reported a 86.2% growth in headline earnings
per share (HEPS) for the six months ended 31 August 2003, after restating its
results for the comparable interim period in 2002.
This is well ahead of the target the group set for itself at the start of the
financial year, according to managing director Jeff Wright. The near doubling in
HEPS was achieved despite revenue being virtually unchanged from the previous
comparable period.
The lack of growth in revenue was the result of lower ground moisture and dam
levels as well as weaker commodity prices during the reporting period. Normal
weather patterns are predicted for the rest of the year. "The increase in HEPS
was mainly due to the increased carry-over grain stock in our storage
facilities, excellent results from the Animal Feed and Earlybird Farm
operations, and the return to profitability in our Grain Trading Division," says
Wright.
Wright says AFGRI Capital also achieved good results due to growth in the
debtors" book. It grew operating profit by 27% to R33 million over the period. A
R101 million turnaround in the group"s Grain operations - from a restated loss
of R21 million for the previous comparable period to an operating profit of R80
million for the period under review - contributed to the sharp growth in group
operating profit of R128 million (R74 million).
The low maize price, unseasonal weather patterns and the strong rand negatively
impacted the results of AFGRI Requisites and AFGRI Products" Cotton Division.
Requisites recorded an R18 million loss at the interim stage, reversing the R19
million profit for the previous period. The Cotton Division recorded a R12
million loss, reversing the R26 million profit for the previous comparable
period. However, these losses were more than offset by the substantial recovery
in the Grain operations and a doubling in operating profit to R44 million (R22
million) in the Animal Feed and poultry Division.
Wright says the previous two years were good for both agricultural producers and
processors, but the current strong rand combined with significantly lower
commodity prices and unusual weather conditions have made the going tough in
agriculture.
AFGRI has been able to weather these difficulties, showing consistent earnings
growth for the past two-and-a-half years as a result of group restructuring and
revenue and earnings diversification. The introduction of new products and
services and the acquisition of Laeveld Korporatiewe Beleggings in the Lowveld
and Waltons Stores in Australia have made the group more resilient in the face
of these market difficulties.
AFGRI is currently fine-tuning its structure to further improve service and
reduce fixed overheads. Considerable time and effort has been expended on
tightening controls in the Grain Trading Division because of the previous losses
in this area of the business. This involved defining a risk management
environment, refining the AC133 valuation model (which deals with the valuation
of financial instruments) and embarking on the sourcing and implementation of a
new IT solution to more effectively manage the business.
AFGRI was one of the early adopters of AC133, a particularly complex and
complicated accounting standard. Subsequent to the release of the results for
the year ended 28 February 2003, AFGRI has been able to refine and review the
AC133 valuation model and the information used to calculate the impact on the
results of 28 February 2003, in order to more accurately reflect the results of
the Grain Trading Division. This process led to the refinement of certain of the
assumptions made during the valuation process and information relating to
certain financial instruments as at 28 February 2003. These revised assumptions
and information relate mainly to silo location differences, forward sales and
option costs. This fundamentally changed the prior financial year"s results,
requiring the restatement in terms of South African GAAP. The effect of this
adjustment was to reduce profit after tax for the year ended 28 February 2003 by
R63 million, HEPS by 19,0 cents to 66,2 cents and net tangible asset value per
share by 19,4 cents to 371,9 cents.
Wright indicated that AFGRI is currently negotiating a joint venture with an
international merchant bank for the administration and management of the Grain
Trading Division with a view to containing the group"s exposure to this business
in the future.
Though business activity in the agricultural sector slowed down during the
period under review, the group expects a return to normal weather patterns in
the second half. It expects a "material increase in HEPS" compared to the
previous year and a "substantial increase in HEPS" based on the restated prior
year results. AFGRI has declared an interim cash dividend of 15,2 cents per
share, unchanged from the previous interim dividend.
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 41380
E-MAIL : jwright@afgri.co.za
idgoosen@afgri.co.za
WEBSITE www.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 : 29 October 2003
Date: 29/10/2003 03:42:06 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
