| Thu 7 Sep 2006, 7:02 | | Consol - Audited Results For The Year Ended 30 Jun |
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CSL
CSL
Consol - Audited Results For The Year Ended 30 June 2006 And Further
Cautionary Announcement
Consol Limited
Registration number: 1946/021828/06
Share code: CSL ISIN: ZAE000063251
("Consol" or "the Group")
AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2006 AND FURTHER CAUTIONARY
ANNOUNCEMENT
Key features
- Volume growth of 8,6%
- Headline earnings per share up 5,1% to 115,3 cents
- Cash flow from operations increased by R289,3 million to R735,7 million
- Final dividend of 39 cents per share
- Capacity increase of 15% with a further 10% in 2007
Mike Arnold, Group Managing Director commented: ?Though we delivered impressive
volume growth our operating margin was constrained by higher than expected input
costs that have not yet been recovered from the market. Strategically, we
continue to ensure our competitiveness both in the short and long term. Real
growth in earnings for the next year should be achievable within the current
economic environment and as the group capitalises on the additional planned 25%
production capacity.?
Enquiries
Consol +27 11 874 0000
Mike Arnold, Group Managing Director
Karuna Nayager, Group Financial Director
College Hill +27 11 447 3030
Johannes van Niekerk
Group overview
Consumer markets over the past year have continued to show good demand. The
growth in Gross Domestic Product is estimated to have reached 4,5% with the
increase in Household Consumption Expenditure for non durables an equally
notable 5%. This has had a positive effect on the demand for beverage and food
products, the main volume drivers of the glass packaging industry and has
resulted in an impressive growth in group volumes of 8,6%. Group revenue growth
of 9,4% was constrained by a decline in plastic revenue and lower glass
realisations as a result of mix changes. Earnings before interest, tax,
depreciation and amortisation (EBITDA) increased by 3,1% to R734,9 million and
headline earnings increased by 4,5% to R361,0 million.
While trading conditions and the demand for glass packaging has been good,
operating profit growth has been constrained as a result of higher than expected
input costs in particular soda ash, crude oil linked energy, and distribution.
These costs have not yet been recovered from the market and selling price
adjustments thus lag cost increases. Strategically, we continue to ensure
industry competitiveness both in the short and long term.
In addition, operating profit at Consol Speciality Glass (Proprietary) Limited,
a wholly owned subsidiary, was negatively impacted due to a strong rand
affecting selling prices for tableware which competes directly with imports and
adverse production output primarily as a result of initial commissioning
problems experienced with the press ware plant.
Strategic Overview
Consol aims to leverage off its position as the leading food and beverage glass
packaging company in South Africa to service glass packaging requirements in the
pharmaceutical, cosmetic, tableware and export segments.
We are a highly focused business based on a customer and consumer driven culture
that places partnerships with customers at the centre of the business. Our drive
for operational excellence has enabled the delivery of lower costs, improved
quality and an accelerated rate of innovation to our customers.
In order to cater for projected growth Consol commissioned a third furnace and
production line at Clayville in July 2006 with a capacity of 90 000 tons at a
cost of R320 million. In addition, the Bellville number one furnace will be
rebuilt during the second half of the 2007 financial year adding 60 000 tons of
capacity. This increase of 25% will bring Consol"s total glass capacity to 780
000 tons per annum.
The glass tableware market in South Africa remains attractive with demand being
met by imports and increasingly Consol production sourced out of our Pretoria
facility.
During the course of the year the company acquired the minority interests in
Consol Specialty Glass located in Pretoria making the company a wholly owned
subsidiary of Consol Limited.
The group disposed of the Flexibles plastic operation with effect from 1 May
2006 and signed an agreement to dispose of the Plastform plastic operation
subject to the approval of the Competition Commission.
Financial Overview
Revenue increased by 9,4% to R2,5 billion and EBITDA increased by 3,1% to R734,9
million. Depreciation was up by R15,9 million as a result of the capital
investment programme.
The operating profit increased by 1,2% to R515,2 million. Whilst selling price
adjustments were in line with CPI, the operating profit margin of 21,0% was
lower than the prior year"s 22,8% due to raw material and energy input costs
being higher than inflation, increased depreciation, and strike costs.
The net finance income amounted to R19,3 million compared to the net finance
charge of R1,7 million in the prior year. Included in finance income is an
amount of R21,2 million of interest received from the South African Revenue
Service arising from prior year over payments of provisional tax.
The group"s effective tax rate increased to 32,8% (2005: 30,4%) in part due to
higher STC payments during the current year.
Headline earnings for the year increased by 4,5% to R361,0 million, with
headline earnings per share increasing by 5,1% to 115,3 cents.
Strong cash flow from operations of R735,7 million (2005: R446,4 million)
enabled the group to comfortably fund investments to support its existing
operations and build additional capacity. Capital expenditure for the year
amounted to R433,4 million which includes R287,6 million for expansion. Ordinary
dividend and tax payments for the year amounted to R193,9 million and R154,3
million respectively. This resulted in the net debt position at year end
decreasing by R40,2 million to R130,9 million (2004: R171,1 million).
Segmental Review
Glass Plastics Total
Division Division
Rm Rm Rm
Revenue
- 30 June 2006 2 218.0 238.9 2 456.9
- 30 June 2005 1 980.2 265.5 2 245.7
Percentage change 12.0 -10.0 9.4
Operating profit
- 30 June 2006 503.5 11.7 515.2
- 30 June 2005 492.8 16.4 509.2
Percentage change 2.2 -28.7 1.2
Net assets
- 30 June 2006 1 410.7 130.4 1 541.1
- 30 June 2005 1 220.7 159.4 1 380.1
Percentage change 15.6 -18.2 11.7
Glass Division
Revenue grew by 12,0% to R2,2 billion as a result of volume growth of 9,4% and
price adjustments averaging 2,8%. Price increases were offset by a change in
product mix and lower realisation for the tableware category due to import
competition and a strong rand.
Excellent volume growth of 20,4% was recorded in the alcohol beverage category
(excluding wine) driven by alcoholic fruit beverages and the non returnable beer
segment. The fruit juice and mineral water category reflected good growth of
12,2%. Volume in the food category was flat due to lower promotion activity in
the key salad dressing, sauce, and spreads segments. Wine growth was also flat
largely as a result of a strong rand and increased global competition limiting
growth in South African wine exports. Albeit off a smaller base, tableware and
pharmaceutical volumes grew by 14,6% and 12,3%, respectively.
The increase in operating profit was limited to 2,2% even though the division
experienced volume growth of 9,4%. This was primarily due to operating profit of
the glass division being impacted by higher than expected input costs in
particular soda ash, crude oil linked energy, and distribution. These cost
increases have not yet been recovered from the market and thus selling price
adjustments lagged cost increases. Strike costs also negatively affected
profits. In addition, operating profit at Consol Speciality Glass, a wholly
owned subsidiary, was negatively impacted by a strong rand affecting selling
prices of tableware which competes directly with imports, and adverse production
output primarily as a result of initial commissioning problems experienced with
the new press ware plant. All glass manufacturing facilities operated at full
capacity and above standard efficiency.
Net assets increased by 15,6% to R1,4 billion and total capital expenditure for
the division amounted to R416,3 million. The major projects were Bellville
number 4 furnace partial rebuild, glass recycling cullet plant in the North,
glass forming machines at the Wadeville plant and the Clayville number 3 furnace
and production line.
Plastics Division
Revenue decreased by 10% to R238,9 million as a result of volume declining by
17% but was 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 declined to R11,7 million (2005: R16,4 million) excluding the
loss on disposal of the flexible packaging operation.
Capital expenditure for the year amounted to R17 million and was mainly for new
replacement injection moulding machines at the rigid plastics operations.
CORPORATE ACTIVITY AND FURTHER CAUTIONARY ANNOUNCEMENT
Shareholders are reminded of our cautionary announcement on SENS on 20 July 2006
and are accordingly advised to continue to exercise caution when dealing in
their Consol shares until a further announcement is made.
DIVIDENDS
A final dividend of 39 cents per share has been declared after taking into
account the interim dividend of 23 cents per share.
PROSPECTS
Consumer demand is forecast to be positive in line with GDP growth and the food
and beverage industries, our key markets, are expected to generate commensurate
growth. Real growth in earnings for the next year should be achievable within
the current economic environment and as the group capitalises on the additional
planned 25% production capacity.
Group balance sheet
at 30 June
2006 2005
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 1 308.7 1 131.5
Intangible asset 48.4 -
Investments 15.0 11.2
Loans and non-current receivables 20.3 25.5
1 392.4 1 168.2
Current assets
Inventories 503.4 538.4
Trade and other receivables 364.5 345.3
Assets classified as held-for- 60.7 -
sale
Cash and cash equivalents 18.6 15.5
947.2 899.2
TOTAL ASSETS 2 339.6 2 067.4
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 14.0 11.8
Non-distributable reserves 4.1 2.8
Other reserves 37.5 -
Treasury shares (47.6) (31.2)
Retained earnings 1 533.1 1 372.2
Shareholders" interests 1 541.1 1 355.6
Minority interests - 24.5
Total equity 1 541.1 1 380.1
Non-current liabilities
Deferred tax liabilities 205.6 177.0
Long term liabilities and 77.4 73.5
provisions
283.0 250.5
Current liabilities
Trade and other payables 342.8 235.1
Liabilities classified as held- 2.6 -
for-sale
Tax payable 20.6 15.1
Short-term borrowings 149.5 186.6
515.5 436.8
TOTAL EQUITY AND LIABILITIES 2 339.6 2 067.4
Group income statement
For the year ended 30 June
Increase 2006 2005
Rm Rm
Revenue 9.4% 2 456.9 2 245.7
Cost of sales 1 574.4 1 415.0
Gross profit 882.5 830.7
Operating expenses 367.3 321.5
Operating profit 1.2% 515.2 509.2
Capital loss on disposal 6.6 -
of an operation
Profit before finance 508.6 509.2
income/expense
Finance income 23.9 6.0
Finance expense 4.6 7.7
Profit before tax 527.9 507.5
Income tax expense 173.1 154.3
Profit for the year 0.5% 354.8 353.2
Attributable to:
- Equity holders of 354.8 344.7
Consol Limited
- Minority interests - 8.5
354.8 353.2
Determination of headline
earnings
Attributed to equity 354.8 344.7
holders of Consol Limited
Capital loss on disposal 6.6 -
of an operation
After tax (gain)/loss on 0.8
disposal of property, (0.4)
plant and equipment
Headline earnings 4.5% 361.0 345.5
Earnings per share (cents)
Basic earnings per share 3.7% 113.4 109.4
Basic headline earnings 5.1% 115.3 109.7
per share
Diluted earnings per share 2.7% 112.2 109.2
Diluted headline earnings 4.3% 114.1 109.4
per share
Weighted average number of 312 994 885 314 996 243
shares
Weighted average number of 316 248 767 315 714 188
shares - diluted
Group cash flow statement
For the year ended 30 June
2006 2005
Rm Rm
OPERATING ACTIVITIES
Cash generated by operations 870.7 568.5
Finance income 23.9 6.0
Finance expense (4.6) (7.7)
Tax paid (154.3) (120.4)
Cash flows from operations 735.7 446.4
Dividends paid (193.9) (500.4)
Net cash flows from operating 541.8 (54.0)
activities
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment
acquisitions (433.4) (210.6)
disposals 0.8 0.4
Net investment in property, plant and (432.6) (210.2)
equipment
Decrease in loans and non-current 5.2 3.9
receivables
Own shares acquired (16.4) (31.2)
Net proceeds on disposal of an 18.9 -
operation
(Increase)/decrease in investments (3.8) 213.8
Minority interests acquired (72.9) -
Net cash outflow from investing (501.6) (23.7)
activities
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS 40.2 (77.7)
Net cash and cash equivalents at (171.1) (93.4)
beginning of year
Net cash and cash equivalents at end of (130.9) (171.1)
year
Condensed statement of changes in equity
For the year ended 30 June
Share Non- Other Retained Total
capital distributable reserves earnings
and reserves and
premium treasury
shares
Rm Rm Rm Rm Rm
At 1 July 2004 10.5 (188.7) - 1 715.6 1 537.4
Treasury (0.3) 190.8 (190.5) -
shares
cancelled
Scheme shares (31.2) (31.2)
purchased
Shares issued 1.6 1.6
Profit for the 344.7 344.7
year
Equity settled 0.7 0.7
share-based
payments
Ordinary (497.6) (497.6)
dividends
At 30 June 11.8 (28.4) - 1 372.2 1 355.6
2005
Cash flow 37.5 37.5
hedge
Scheme shares (16.4) (16.4)
purchased
Shares issued 2.2 2.2
Profit for the 354.8 354.8
year
Equity settled 1.3 1.3
share-based
payments
Ordinary (193.9) (193.9)
dividends
At 30 June 14.0 (43.5) 37.5 1 533.1 1 541.1
2006
Notes to the financial statements
Basis of preparation
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (`IFRS"), the interpretations
adopted by the International Accounting Standards Board and the requirements of
the South African Companies Act.
Supplementary notes
Contingent liabilities
The Competition Commission referred in 2004 a complaint by Enviroglass to the
Competition Tribunal relating to the purchase of cullet by the glass division of
the Nampak Limited group of companies and by the Consol glass division. The
Competition Commission has requested the Competition Tribunal to impose on each
of the parties an administrative penalty of up to 10% of their respective annual
revenues in and exports from South Africa during their respective preceding
financial years. In the event of the Competition Tribunal making an adverse
finding against Consol, the Consol directors believe that any penalty to be
levied would be based on the value of the input, being cullet. The value of the
cullet purchased by Consol during the period under review amounted to
approximately R40 million per annum. Consol is defending the matter before the
Competition Tribunal.
The South African Revenue Service (SARS) has issued an assessment for 2005 for
Capital Gains Tax (CGT) payable by San Marco (Proprietary) Limited a wholly
owned subsidiary. SARS contends that CGT of R3,1 million is payable on the
disposal of treasury shares by San Marco (Proprietary) Limited as part of the
unbundling process. The company has lodged an objection with SARS and the
directors are confident that SARS will accept the treatment adopted by the
company.
Capital commitments
2006 - 2005 - Rm
Rm
Capital expenditure authorised
by the directors:
- contracted for 119.4 14.4
- not contracted for 420.9 7.7
Total 540.3 22.1
It is anticipated that this expenditure will be financed from cash resources,
borrowings and cash generated from activities.
Post balance sheet events
To the date of this report, there have been no material adjusting post balance
sheet events or transactions.
Report of the independent auditors
The annual financial statements have been audited by the group"s auditors, KPMG
Inc., and their unqualified report is available for inspection at the registered
office of the company.
Annual report
The annual financial statements for the year ended 30 June 2006 will be posted
to shareholders on or about Wednesday, 27 September 2006. The financial
statements will include the notice of the annual general meeting of shareholders
to be convened on Thursday, 19 October 2006.
Final dividend declaration and payment
The directors have resolved to declare a final dividend, number 61, of 39 cents
per share.
Last day to trade ?cum? the dividend on Friday, 13 October 2006
the JSE Limited
First trading day ?ex? the dividend on Monday, 16 October 2006
the JSE Limited
Record date Friday, 20 October 2006
Payment date Monday, 23 October 2006
Share certificates may not be dematerialised or rematerialised between Monday,
16 October 2006, and Friday, 20 October 2006, both days inclusive.
For and on behalf of the board
RT Vice M Arnold
Chairman Group Managing 6 September 2006
Director
Corporate information
Directors
RT Vice (Chairman) *
M Arnold #
AWB Band *
SW Mncwango *
K Nayager
HC Turner *
* Independent non-executive
# British
Administration
Group Company Secretary
HR Falgate
Business address and registered office
Consol House
Osborn Road
Wadeville
1407
Postal address
PO Box 562
Germiston
1400
Telephone: +27 (11) 874-0000
Telefax: +27 (11) 827-0213
e-mail: information@consol.co.za
Auditors
KPMG Inc.
Sponsor
The Standard Bank of South Africa Ltd
Transfer secretaries
Computershare Investor Services 2004 (Pty) Ltd
Business address Postal address
70 Marshall Street PO Box 61051
Johannesburg Marshalltown
2001 2107
Telephone: +27 (11) 370-5000
Telefax: +27 (11) 370-5271
For more information visit - www.consol.co.za
Date: 07/09/2006 07:02:18 AM Produced by the JSE SENS Department
