| Wed 12 May 2004, 14:36 | | PRESS RELEASE: AFGRI BOOSTS HEPS BY 42% DESPITE TO |
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AFGRI LIMITED - PRESS RELEASE: AFGRI BOOSTS HEPS BY 42% DESPITE TOUGH YEAR FOR
AGRICULTURE
Afgri Limited
(Incorporated in the Republic of South Africa)
(Registration number 1995/004030/06)
ISIN: ZAE000040549
JSE Share Code: AFR
("AFGRI" or the "Company")
PRESS RELEASE: AFGRI BOOSTS HEPS BY 42% DESPITE TOUGH YEAR FOR AGRICULTURE
HIGHLIGHTS
- Headline earnings per share up 42%-on adjusted prior year
- Operating profit from continuing operations up 39%-on adjusted prior year
- Earnings rise by 27% on adjusted prior year
- Return on average adjusted shareholders" interest rises by 21%
Agricultural services group AFGRI delivered headline earnings per share (HEPS)
growth of 42% for the financial year ended 29 February 2004, in what it
describes as a difficult year for agriculture and business generally.
The 2004 HEPS of 93,9c compares with the adjusted prior year figure of 66,1c.
Revenue from continuing operations declined marginally to R5,9 billion due to
lower commodity prices arising from the strength of the Rand, low rainfalls in
the winter planting regions and late rainfall in the summer planting regions.
Managing director Jeff Wright says all business units except Requisites and
Cotton performed to expectations, and the Trading division returned to
profitability after remedial action was taken during the year to improve risk
controls.
"These results reflected AFGRI"S balanced and diversified business model and
reinforced the pattern of consistent growth we"ve established over the past
three years. We were particularly pleased with the performance of our new
acquisitions, namely Laeveld Korporatiewe Beleggings in the Lowveld and T&H
Waltons Stores in Western Australia. Both these companies performed beyond
expectations, and we see considerable scope for expansion, both organically and
through acquisitions, in Australia and sub-Saharan Africa."
Operating profit from continuing operations increased by 39% on the adjusted
prior year figure, and by 5,4% on the reported figure for 2003.
The main contributors to group profits were AFGRI Handling and Storage, and
AFGRI Animal Feeds and Protein. Better utilisation of the group"s 64 silos
produced an excellent increase in turnover, notwithstanding adverse weather
conditions and lower commodity prices. Results were further improved due to more
efficient procurement.
Turnover from Requisites in the old "OTK" region was adversely affected by
weather conditions and reduced plantings by producers. The lower turnover and
high percentage fixed overheads in the group"s 72 stores negatively affected
margins
The strong rand negatively impacted returns in the Cotton division.
The Trading division returned to profitability after reporting a loss for the
prior financial year due to mismatches in certain grain hedges. Steps taken to
avoid a repetition include s thorough overhaul of the division"s risk management
procedures and systems, and the employment of a highly skilled team of risk
managers.
AFGRI restated its prior year figures at the interim stage after refining the
AC133(which sets guidelines for the valuation of derivative instruments)
valuation model and the information used to calculate the impact on the results
of 28 February 2003. During this process an error was detected in the valuation
of the group"s derivatives as at 28 February 2003, which necessitated a prior
year adjustment of R63 million after tax.
AFGRI Capital has grown its debtors book from R700 million to about R3 billion
over the last two years . This division continues to expand its range of
financing services, offering farmers and Agri processors a single portal for all
their financing and insurance needs.
A number of joint ventures and acquisitions were concluded during the year. The
first was the formation of a 50-50 joint venture in the Eastern Cape between
AFGRI and the East Cape Agricultural Co-operative for an animal feed plant in
Patterson, which expands the Group"s animal feed footprint to the Eastern Cape.
The cost of this transaction was R32 million.
AFGRI also acquired the remaining 50% of Kramp SA, a company involved in
importing agricultural equipment and spare parts, for R9 million.
Two post year-end transactions of note were the disposal of AFGRI"S 50% share in
the Earlybird broiler business, and the acquisition of Natal Agricultural Co-
operative (Natalagri).
The disposal of the Earlybird stake frees AFGRI to re-enter the broiler business
unencumbered by the restrictions imposed on it by this investment. Wright says
the group intends to re-enter the broiler business by way of acquisition,
probably during the current financial year. The Earlybird stake was sold to
Astral for R250 million plus a R25 million dividend. The only remaining
condition precedent is the approval of the Competition Commission.
The Natalagri acquisition, recently sanctioned by the Competition Commission and
currently before the Competition Tribunal, fills a notable gap in AFGRI"S
geographical coverage. It gives AFGRI 5,000-plus customers in KwaZulu-Natal, a
further 36 retail outlets, 360,000 tons of silo capacity, a 40,000 tons a year
animal feeds factory and a financing and insurance operation with a book valued
at close to R230 million. Though not yet profitable, Wright says Natalagri will
be recapitalised and restored to profitability within 18 months.
The Group"s business structure has been simplified into two operating divisions:
AFGRI Services (comprising the former Requisites, Capital, Handling and Storage
and Logistics businesses) and AFGRI Products ( comprising Animal Feeds, Seed
and Cotton). The aim of the Services Division is to expand its customer base to
reduce its reliance on the agricultural sector. The Products Division houses the
Group"s value-added processing businesses.
Looking forward, Wright says AFGRI expects to maintain real growth in earnings
during the current financial year. AFGRI Services will focus its energies on the
financial turnaround of Natalagri, further geographical expansion, improved
procurement efficiencies, and continued expansion of the Finance business.
AFGRI Products will focus on acquisitions, the expansion of contract growing of
cotton in Zambia and Malawi as well as gaining broader market acceptance for
AFGRI"S high yielding yellow maize hybrids.
"All businesses are currently trading profitably, and we expect to build on the
gains made over the last year while exercising tight controls and risk
management procedures," concludes Wright.
Ends
ISSUED FOR: AFGRI LIMITED
CONTACT: Jeff Wright,
Managing Director
011 549 0609
Cell 082 8061284
De Wet Goosen,
Financial Director
011 549 0604
Cell 082 7707859
FAX NO: 011 463 4139
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: 12 May 2004
Date: 12/05/2004 12:57:08 PM Produced by the JSE SENS Department
