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CSL
CSL
Consol Limited - Unaudited Interim Results
Consol Limited (Consol or the Group)
Registration number: 1946/021828/06
Share code: CSL
ISIN: ZAE000063251
UNAUDITED INTERIM RESULTS
for the six months ended 31 December 2005
Volume growth of 10,0%
Revenue up 9,2% to R1,3 billion
Operating profit up 8,4% to R303,3 million
Basic headline earnings per share up 13,0% to 65,8 cents
Cash flows from operations increased by R130,2 million to R473,1 million
Consol Speciality Glass minority interests acquired
Capital programme to increase production capacity by 25% on track
"These are a very good set of half-year results underpinned by a positive
performance in respect of volumes. The profit margin has been maintained, cash
flows remain very strong, and the capital programme to expand production
capacity by 25% within the next 12 months is well on track. As a consequence the
business can look forward to another good performance in the second half of the
year driven by continued buoyant market conditions."
M Arnold - Group Managing Director
Salient features
Unaudited for the
half-year
ended 31 December %
2005 2004 increase
Group summary (Rm)
Volume tons 358 997 326 406 10,0
Revenue 1 338,5 1 225,5 9,2
EBITDA 412,9 382,1 8,1
Operating profit 303,3 279,9 8,4
Headline earnings 205,6 183,6 12,0
Capital expenditure 123,6 106,6 15,9
Group overview
Consol performed well during the period underpinned by group volume growth of
10,0% and revenue growth of 9,2%. Selling price adjustments were limited to an
average increase of 2,2%. Revenue growth was constrained by a decline in
plastics revenue and a negative glass product mix.
Operating profit increased by 8,4% to R303,3 million. Performance was
constrained by higher distribution costs as geographic capacity limits were
exceeded, wage strike costs incurred during July 2005 and higher energy costs.
This abnormal expenditure amounted to approximately R25 million and the business
did well to achieve an operating profit margin of 22,7% (2004: 22,8%).
Net finance income of R3,0 million was higher than the prior period (2004: R2,0
million) as a result of interest received from the South African Revenue
Service.
The effective tax rate decreased to 32,9% (2004: 33,7%) due to the decrease in
the statutory tax rate and a favourable prior year adjustment off-set by a
higher STC charge.
The minority shareholders" interest of 26,7% in Consol Speciality Glass (Pty)
Limited was acquired for a consideration of R72,8 million, effective 1 July
2005.
Headline earnings for the six-month period increased by 12,0% to R205,6 million
and basic headline earnings per share increased by 13,0% to 65,8 cents.
Cash flow continues to be strong with cash flows from operations amounting to
R473,1 million for the period (2004: R342,9 million). Capital expenditure of
R123,6 million includes R71 million for capacity expansion at the Clayville
facility (total project cost R315 million) to be commissioned in August 2006 and
R18 million relating to glass-forming machines at the Wadeville plant. Net
working capital decreased by R54,1 million during the period.
Group balance sheet
Unaudited at Audited
31 December at 30 June
2005 2004 2005
Rm Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 1 145,5 1 130,6 1 131,5
Intangible asset 48,3 - -
Investments 16,1 - 11,2
1 209,9 1 130,6 1 142,7
Current assets
Inventories 491,6 433,5 538,4
Trade and other receivables 397,4 395,6 345,3
Cash and cash equivalents - 9,2 15,5
889,0 838,3 899,2
TOTAL ASSETS 2 098,9 1 968,9 2 041,9
EQUITY AND LIABILITIES
Equity
Share capital and reserves 1 441,1 1 423,6 1 355,6
Minority interests - 19,4 24,5
1 441,1 1 443,0 1 380,1
Non-current liabilities
Deferred tax liabilities 153,0 130,5 151,5
Provisions 75,4 63,6 73,5
228,4 194,1 225,0
Current liabilities
Trade and other payables 294,5 295,4 235,1
Payable to minorities 72,8 - -
Taxation 58,2 12,1 15,1
Short-term borrowings 3,9 24,3 186,6
429,4 331,8 436,8
TOTAL EQUITY AND LIABILITIES 2 098,9 1 968,9 2 041,9
Group income statement
Unaudited for
the half-year
ended 31 December
2005 2004
Rm Rm
Revenue 1 338,5 1 225,5
Cost of sales 845,3 777,4
Gross profit 493,2 448,1
Operating expenses 189,9 168,2
Operating profit 303,3 279,9
Net finance income/(expense) 3,0 2,0
Profit before tax 306,3 281,9
Income tax expense 100,7 94,9
Profit for the period/year 205,6 187,0
Attributable to:
- Equity holders of Consol 205,6 183,6
Limited
- Minority interest - 3,4
205,6 187,0
Determination of headline
earnings:
Attributed to equity holders of 205,6 183,6
Consol Limited
Adjustment for capital items (net - -
of tax)
Headline earnings 205,6 183,6
Share information (cents):
Basic earnings per share 65,8 58,2
Basic headline earnings per share 65,8 58,2
Diluted earnings per share 65,1 58,2
Diluted headline earnings per 65,1 58,2
share
Weighted average number of shares 312 659 200 315 386 460
Weighted average number of shares 315 636 561 315 691 565
- diluted
Audited for
the year
ended
30 June
% 2005
increase Rm
Revenue 9,2 2 245,7
Cost of sales 1 415,0
Gross profit 10,1 830,7
Operating expenses 321,5
Operating profit 8,4 509,2
Net finance income/(expense) (1,7)
Profit before tax 8,6 507,5
Income tax expense 154,3
Profit for the period/year 9,9 353,2
Attributable to:
- Equity holders of Consol 344,7
Limited
- Minority interest 8,5
353,2
Determination of headline
earnings:
Attributed to equity holders of 344,7
Consol Limited
Adjustment for capital items (net 0,8
of tax)
Headline earnings 12,0 345,5
Share information (cents):
Basic earnings per share 13,0 109,4
Basic headline earnings per share 13,0 109,7
Diluted earnings per share 11,9 109,2
Diluted headline earnings per 11,9 109,4
share
Weighted average number of shares 314 996 243
Weighted average number of shares 315 714 188
- diluted
Group statement of changes in equity
Share capital Non-
and distributable
premium reserves
Rm Rm
HALF-YEAR ENDED 31 DECEMBER 2005
At 1 July 2005 - audited 11,8 2,8
Profit for the period
Ordinary dividend
Minority interests acquired
Scheme shares disposed
Share-based payments 1,1
At 31 December 2005 - unaudited 11,8 3,9
HALF-YEAR ENDED 31 DECEMBER 2004
At 1 July 2004 - audited 10,5 1,8
Profit for the period
Ordinary dividends
Share-based payments 0,2
At 31 December 2004 - unaudited 10,5 2,0
Group statement of changes in equity
Distributable
Treasury reserves
shares
Rm Rm
HALF-YEAR ENDED 31 DECEMBER 2005
At 1 July 2005 - audited (31,2) 1 372,2
Profit for the period 205,6
Ordinary dividend (121,9)
Minority interests acquired
Scheme shares disposed 0,7
Share-based payments
At 31 December 2005 - unaudited (30,5) 1 455,9
HALF-YEAR ENDED 31 DECEMBER 2004
At 1 July 2004 - audited (190,5) 1 715,6
Profit for the period 183,6
Ordinary dividends (297,6)
Share-based payments
At 31 December 2004 - unaudited (190,5) 1 601,6
Group statement of changes in equity
Minorities Total equity
Rm Rm
HALF-YEAR ENDED 31 DECEMBER 2005
At 1 July 2005 - audited 24,5 1 380,1
Profit for the period - 205,6
Ordinary dividend - (121,9)
Minority interests acquired (24,5) (24,5)
Scheme shares disposed 0,7
Share-based payments 1,1
At 31 December 2005 - unaudited - 1 441,1
HALF-YEAR ENDED 31 DECEMBER 2004
At 1 July 2004 - audited 18,8 1 556,2
Profit for the period 3,4 187,0
Ordinary dividends (2,8) (300,4)
Share-based payments 0,2
At 31 December 2004 - unaudited 19,4 1 443,0
Group cash flow statement
Audited
for the
Unaudited for the year
half-year ended
ended 31 December 30 June
2005 2004 2005
Rm Rm Rm
OPERATING ACTIVITIES
Profit before interest and tax 303,3 279,9 509,2
Net finance income/(expense) 3,0 2,0 (1,7)
Depreciation 109,6 102,2 203,8
Other non-cash items 3,1 1,0 6,9
Decrease/(increase) in working 54,1 (42,2) (151,4)
capital
Cash flows from operations 473,1 342,9 566,8
Net tax paid (56,2) (82,6) (116,5)
Cash retained from operating 416,9 260,3 450,3
activities
INVESTING ACTIVITIES
Property, plant and equipment
- acquisitions (123,6) (106,6) (210,6)
- disposals - - 0,4
Net investment in property, plant (123,6) (106,6) (210,2)
and equipment
(Increase)/decrease in (4,9) 225,0 213,8
investments
Net cash flows from investing (128,5) 118,4 3,6
activities
FINANCING ACTIVITIES
(Decrease)/increase in short-term (182,7) (110,6) 51,7
borrowings
Own shares disposed of/(acquired) 0,7 - (31,2)
by employee share trust
Dividends paid (121,9) (297,6) (500,4)
Payment to minority shareholder - (2,8) -
Net cash flows from financing (303,9) (411,0) (479,9)
activities
Net decrease in cash and cash (15,5) (32,3) (26,0)
equivalents
Net cash and cash equivalents at 15,5 41,5 41,5
beginning of period/year
Net cash and cash equivalents at - 9,2 15,5
end of period/year
Segmental review
Glass Plastics
division division Total
Rm Rm Rm
Unaudited - six-month period
Revenue*
- 31 December 2005 1 202,9 150,5 1 353,4
- 31 December 2004 1 081,7 153,6 1 235,3
Percentage change 11,2 (2,0) 9,6
Operating profit
- 31 December 2005 291,3 12,0 303,3
- 31 December 2004 267,2 12,7 279,9
Percentage change 9,0 (5,5) 8,4
Net assets
- 31 December 2005 1 270,5 170,6 1 441,1
- 31 December 2004 1 266,6 176,4 1 443,0
Percentage change (0,3) (3,3) (0,1)
* Before elimination of inter-company revenue
Glass division
Revenue increased by 11,2% to R1,2 billion during the first six months of
trading, arising from excellent volume growth of 10,3%, price increases of about
2,2% and negative product mix of 1,3%. Volume growth in the alcohol beverage
category (excluding wine) was 16% supported by strong growth in the alcoholic
fruit beverage and non-returnable beer segment. Wine category growth was 5%
largely as a result of exports and non-alcoholic volumes were up 1% with fruit
juice and mineral water up by 13%. Growth in the food category slowed down to
1%.
Operating profit increased by 9,0% after incurring higher distribution and
energy costs and abnormal expenses as a result of a wage strike in July 2005. As
a consequence, operating profit margin was 24,2% as compared to prior year of
24,7%.
All glass manufacturing facilities operated at full capacity and above standard
efficiency. The 90 000 ton per annum planned expansion at the Clayville facility
is within budget and on track to be commissioned during August 2006. The
Bellville number 1 furnace rebuild and 60 000 ton capacity expansion planned for
end of first quarter 2007 is also on schedule. This will bring total production
capacity to 780 000 tons per annum.
Plastics division
Revenue declined by 2,0% to R150,5 million as a result of a decline in sales
volumes of 10,0% which were partially off-set by price increases of 6,6%. The
decline in volumes was due to import substitution as well as increased local
competitor activity.
Operating profit of R12,0 million was slightly lower than the comparative prior
period (2004: R12,7 million) with operating profit margin at 8,0% as compared to
prior year at 8,3%.
Prospects
Trading conditions supported by continued growth in consumer expenditure are
expected to remain positive. This should result in continued real growth in
earnings during the second half of the financial year.
Notes to the consolidated interim financial statements
Basis of preparation
The unaudited results of Consol Limited for the six months ended 31 December
2005 have been prepared on a basis consistent with the audited financial
statements at 30 June 2005. The accounting policies conform with International
Financial Reporting Standards (IFRS) and the interpretations adopted by the
International Accounting Standards Board. The interim results have been prepared
and presented in accordance with IAS 34 - Interim Financial Reporting.
Dividend payment and declaration
The directors have declared an interim dividend, number 60, of 23 cents per
share for the 2006 financial year. The group dividend policy of two times annual
cover of basic headline earnings remains unchanged. The relevant dates for the
payment of the dividend are as follows:
Last day to trade cum dividend on the JSE Friday, 31 March 2006
Limited
First trading day ex dividend on the JSE Limited Monday, 3 April 2006
Record date Friday, 7 April 2006
Payment date Monday, 10 April 2006
In accordance with the requirements of STRATE, no share certificates may be
dematerialised or rematerialised between Monday, 3 April 2006 and Friday, 7
April 2006, both days inclusive.
Where applicable, dividends in respect of certificated shareholders will be
transferred electronically to shareholders" bank accounts on payment date. In
the absence of specific mandates, dividend cheques will be posted to
shareholders.
Shareholders who hold dematerialised shares will have their accounts at their
Central Securities Depository Participant (CSDP) or broker credited on Monday,
10 April 2006.
Litigation statement
As set out in the Consol annual financial statements for the year ended 30 June
2005, the Competition Commission referred a complaint to the Competition
Tribunal relating to the purchase of cullet by Consol during the period
September 1999 to June 2002. The Consol directors disagree with the findings of
the Competition Commission and Consol will defend the matter before the
Competition Tribunal. Although no trial date has been set, it is expected that
the hearing will take place before the end of 2006.
Capital commitments and contingent liabilities
The capital expenditure commitments are set out below:
Audited
Unaudited 31 30 June
December
2005 2004 2005
Rm Rm Rm
Contracted for 345,4 92,8 14,4
Authorised, but not contracted for - - 7,7
345,4 92,8 22,1
Authorised and committed capital expenditure of R345,4 million includes the new
Clayville number 3 furnace, the replacement and optimisation of Wadeville
forming machines, a new cullet processing plant at Clayville and the rebuild of
the Bellville number 4 furnace.
Consol has sufficient available resources to fund its capital expenditure. There
were no other commitments entered into other than in the normal course of
business.
There have been no material changes to contingent liabilities as disclosed in
the Consol annual financial statements for the year ended 30 June 2005.
Consol has entered into forward exchange contracts and option contracts in the
normal course of business to hedge against unfavourable movements in exchange
rates.
General
To the date of this report there have been no material adjusting post balance
sheet events or transactions.
For and on behalf of the board
RT Vice M Arnold
Chairman Group Managing Director
9 March 2006
Corporate information
Directors:
Executive:
M Arnold (Group Managing Director)*, K Nayager (Group Financial Director) *
British
Independent non-executive:
RT Vice (Chairman), AWB Band, SD Jagoe, SW Mncwango, HC Turner
Divisional directors:
D Carolin, JHE du Plessis, A Reddy, BT Rodger
Group Company Secretary:
HR Falgate
Business address and registered office
Consol House Postal address
Osborn Road PO Box 562
Wadeville Germiston
1407 1400
Telephone: +27 11 874 0000
Fax: +27 11 827 0213
Website: www.consol.co.za
E-mail: information@consol.co.za
Auditors:
KPMG Inc.
Sponsor:
The Standard Bank of South Africa Limited
Transfer secretaries:
Computershare Investor Services 2004 (Pty) Limited
Business address: 70 Marshall Street, Johannesburg, 2001
Postal address: PO Box 61051, Marshalltown, 2107
Telephone: +27 11 370 5000
Fax: +27 11 370 5271
Contact Details:
Consol Limited
Mike Arnold
+27 11 874 2228
Karuna Nayager
+27 11 874 2272
Investor Relations:
College Hill
Fred Cornet
Johannes van Niekerk
+27 11 447 3030
Date: 13/03/2006 07:00:19 AM Produced by the JSE SENS Department
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