| Wed 18 May 2005, 12:48 | | Afgri Limited - Challenging agricultural year for |
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Afgri Limited - Challenging agricultural year for Afgri
Afgri Limited
Share codes: AFR
Isin: ZAE000040549
Challenging agricultural year for Afgri
Highlights (year to 28 February 2005)
- Groundbreaking BEE transaction concluded; a first for the agricultural
sector
- Special dividend of 112 cents paid to shareholders, making a total dividend
of 140 cents for the year
- Revenue up 5,6%
- Exceptional performances by Handling & Storage, Logistics, Animal Feeds and
international operations
- Strong cash generation
- Ungeared balance sheet
- Action taken to restore loss-making businesses to profitability
In a difficult agricultural year agricultural services group Afgri Ltd reported
headline earnings of 44,5 cents per share, which is a decline on the prior year
of 39,3%. The decline in headline earnings is mainly due to the effect of the
strong rand on hard currency commodity prices, imported goods for resale and
foreign earnings. Earnings were also affected by the sale of the 50% stake in
the broiler business, Early Bird Farm, for R250m, which was effective 31 August
2004.
Despite the difficult agricultural year Afgri achieved a 5,6% growth in revenue
to R6,2 billion (2004 : R5,9 billion) for the year to 28 February 2005. Revenue
was boosted by the inclusion of Natalagri, which was acquired with effect from 1
July 2004 and reduced by the sale of the broiler business and sharply reduced
sales in traditional areas.
`The reduced headline earnings reflects the severity of the situation facing
South African agriculture`, says Afgri Managing Director Jeff Wright. The strong
South African Rand and the resultant reduction in the grain price caused a sharp
decline in turnover in the last quarter of the financial year. The high volume
of the carry-over maize crop and the anticipated bumper crop which is presently
being harvested will result in the grain agricultural sector remaining depressed
until surpluses are removed from the system.`
White maize prices are currently trading at about R560 a ton on the South
African Futures Exchange (Safex), down from a peak of around R1 800 two years
ago.
Pretax profit at R214m declined by one-third compared to the previous year. `As
a result of the outlook for agriculture, we have been aggressive in making
provisions and have also embarked on a serious rationalisation exercise to
reduce fixed overheads, closing marginal stores and reducing staff count,` says
Wright.
Afgri Handling & Storage, Logistics and Trading had an excellent year due to the
higher carry-over stock and increased throughput from `mill door` contracts
where Afgri assumes full responsibility for the commodity supply chain, from
farm gate to mill door.
Afgri`s Financial Services business performed well but year-end provisioning
tempered results. The Animal Feeds operation and the John Deere franchise in
Australia performed well.
Requisites and Cotton had poor years. The strong rand had a particularly
negative impact on Cotton, imported equipment, spares and chemicals. `Every
effort is being made to improve the business model to make it more robust,` says
Wright.
On a positive note, Afgri completed a groundbreaking BEE transaction resulting
in the sale of 26,77% of Afgri Operations to a broad-based consortium, the Agri
Sizwe Empowerment Trust, for R502 million. Two new BEE directors, Moses Moloele
and Khomotso Thoka, have joined the main board and Domonic Sewela has been
appointed Deputy Managing Director.
`Our BEE partners are delighted with their acquisition,` says Wright. `This is
a tremendous vote of confidence in the group and the agricultural sector as a
whole. Agri Sizwe is already adding value to the group,` he adds.
Afgri announced a special dividend of 112 cents following the conclusion of the
BEE deal, bringing to 140 cents the total dividend for the year.
The balance sheet remains strong with net cash of R189 million.
Apart from the acquisition of Natalagri, the group expanded its existing
businesses with investments totaling approximately R70 million in facility
upgrades, a lemon oil business in the Lowveld, new technology, a shrimp feed
facility and an animal feed joint venture with the Eastern Cape Agricultural Co-
operative.
Wright says that Cotton and Requisites will return to profitability during the
current financial year, while Handling & Storage is looking forward to another
good year due to the high carry-over maize crop and the anticipated bumper maize
crop which is presently being harvested.
`We have implemented steps that will place us back on a growth path,` says
Wright. `Agricultural markets go through cycles and, while it will be tough, we
are confident that the group will return to achieving real earnings growth in
the year ahead.`
Ends
ISSUED FOR: AFGRI LIMITED
CONTACT: Jeff Wright, Managing Director: 082 806 1284 / 011 549 0606
De Wet Goosen, Financial Director: 082 770 7859 / 011 549 0602
FAX NO: 011 463 4139
E-MAIL: jwright@afgri.co.za or idgoosen@afgri.co.za
WEBSITE: www.afgri.co.za
ISSUED BY: TISH STEWART PR ASSOCIATES
CONTACT: Tish Stewart 011 325 4195 / 082 443 6399
FAX NO: 011 325 4199
E-MAIL: tish@tspr.co.za
DATE: 18 May 2005
Date: 18/05/2005 12:20:06 PM
Produced by the JSE SENS Department
