| Fri 7 Apr 2006, 9:01 | | Afgri To Sell Clark Cotton To Cargill |
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AFR
AFR
Afgri To Sell Clark Cotton To Cargill
Afgri Limited
Incorporated in the Republic of South Africa)
Registration number: 1995/004030/06
Share Code: AFR
(ISIN: ZAE000040549)
("AFGRI" or "the Company")
JSE-listed agricultural services group Afgri Limited has announced the
sale of its cotton ginning interests to Cargill under which Cargill will
acquire, subject to certain conditions, the cotton ginning interests
of Clark Cotton, comprising three gins in Zambia, three in South Africa
and a majority interest in a company owning two gins in Malawi.
Under the agreement, Cargill will acquire the fixed and intangible
assets of Clark Cotton and, at book value, the inventory and debtors
of Clark Cotton in Zambia and South Africa, as well as working capital
loans to Clark Cotton Malawi. In Malawi, Cargill will partner with
Admarc, the government"s agricultural and marketing corporation, which
owns the minority interest in Clark Cotton Malawi.
Afgri Products CEO Louis Wolthers says the total value of the transaction
is approximately R260 million, which includes the fixed and intangible
assets of Clark Cotton, as well as inventory, debtors and working
capital loans.
The pro forma financial effects of the transaction on Afgri"s results
will be to reduce basic earnings per share by 2,1% to 17,7 cents.
Headline earnings per share will increase 10% to 16,7 cents, and net
tangible
asset value will be boosted by 1.9% to 307,7 cents.
The effective date of the transaction is expected to be 1 May 2006.
Explaining the rationale for the sale, Wolthers says, "Clark Cotton was
not part of our core business and the decision to sell is consistent
with our philosophy of exiting businesses that fail to meet our required
rate of investment return," he says.
Says Wolthers: "Clark Cotton is increasingly exposed to the international
cotton commodity market as the market for cotton lint with the South
African textile industry declines. Furthermore, Clark Cotton does not
have the expertise or the critical mass to effectively market its
cotton lint in the international market, whereas Cargill does.
"Cargill has the international presence and reputation to make
a success of this business. Clark Cotton will double the size of
Cargill"s Africa cotton business, and the enlarged operation makes
far better sense from a commercial point of view for an international
company such as Cargill. Cargill will be able to derive the kind of
economies that Clark Cotton could never achieve as a stand-alone
operation."
Clark Cotton produces about 150 000 bales of cotton a year and
supplies the international spinning industry and regional oilseed
market. Its eight gins will be integrated with Cargill"s own three
gins in Zimbabwe - where it processes approximately 25% of the
country"s cotton - and two in Tanzania. The company currently works
with more than 150 000 communal farmers and has a combined total of
400 cotton buying stations in the two countries.
About 500 permanent Clark Cotton employees in Zambia, South Africa
and Malawi will be transferred to Cargill. During the high
season - between July and October - an additional 3 000 to 4 000
seasonal workers are employed at the gins.
Wolthers says the proceeds of the transaction will be deployed
for future acquisitions and business expansion.
About AFGRI
Afgri is South Africa"s leading agricultural services group, with
operations in South Africa, southern Africa and Australia.
Listed on the JSE Limited, Afgri"s business success is vested in
providing world-class full-spectrum service to targeted
producers, processors and consumers of agricultural products and
services, as well as adding long-term value to shareholders.
Afgri"s business is housed in three business
pillars: Products, Logistics & Financial Services and Producer Services.
About Cargill
Cargill is an international provider of food, agricultural and risk management
products and services. With 142 000 employees in 61 countries, the company is
committed to using its knowledge and experience to collaborate with customers to
help them succeed. . The company merchandises cotton worldwide, originating
produce grown primarily in the western hemisphere for international sale to
textile mills. From its Liverpool office in the UK, it originates cotton from
parts of the developing world for sale to European and Asian textile mills and
manages the operations of cotton gins in Tanzania and Zimbabwe.
For more information, visit http://www.cargill.com
ends
ISSUED FOR AFGRI LIMITED
CONTACT: Louis Wolthers 011 549 0601 / 082 451 6313
FAX NO: 011 463 4139
E-MAIL: lwolthers@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: 07 April 2006
Date: 07/04/2006 09:01:25 AM Produced by the JSE SENS Department
