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ARL
ARL
Astral Foods - Audited results for the year ended 30 September 2006
Astral Foods
Incorporated in the Republic of South Africa
Registration no 1978/003194/06
Share code ARL
ISIN: ZAE000029757
Audited results for the year ended 30 September 2006
* Operating profit increase 28%
* Headline earnings per share increase 34%
* Dividend increase 54%
Condensed Income Statement
Restated
Audited Audited
Year Year
ended ended
30 Sept 30 Sept
2006 Change 2005
R"000 % R"000
Revenue 5 183 664 7 4 838 284
Operating profit (note 6) 765 953 28 596 709
Net finance income/(costs) 4 884 (11 323)
Profit before income tax 770 837 32 585 386
Income tax expense (254 (169 852)
339)
Profit for the year 516 498 24 415 534
Attributable to:
Equity holders of the parent 509 517 24 410 242
company
Minority interests 6 981 32 5 292
Profit for the year 516 498 24 415 534
Earnings per share (cents)
- basic 1 285 30 989
- diluted 1 268 32 961
Additional Information
Headline earnings (R"000) 509 803 28 397 466
Headline earnings per share
(cents)
- basic 1 286 34 958
- diluted 1 269 36 932
Dividend per share (cents)
- declared out of earnings 585 54 380
for the year
Ordinary shares
- Issued net of treasury 38 949 40 569
shares 578 574
- Weighted-average 39 643 41 482
913 050
- Diluted weighted-average 40 177 42 668
944 767
Net asset value per share 28,28 19 23,83
(rand)
Condensed Balance Sheet
Assets
Non-current assets 1 182 692 977 606
Property, plant and 1 038 328 833 477
equipment
Intangible assets 141 725 140 982
Investments and loans 1 394 2 284
Deferred income tax asset 1 245 863
Current assets 989 541 847 710
Inventories 198 228 155 200
Biological assets 214 354 198 474
Trade and other receivables 448 031 428 503
Cash and cash equivalents 128 928 65 533
Total assets 2 172 233 1 825 316
Equity
Capital and reserves
attributable to equity holders
of
the parent company 1 101 622 966 603
Issued capital 93 711 253 765
Reserves 1 007 911 712 838
Minority interests in equity 19 332 16 589
Total equity 1 120 954 983 192
Liabilities
Non-current liabilities 248 879 209 278
Long-term liabilities 9 600 1 759
Deferred income tax 171 399 146 095
liability
Retirement benefit 67 880 61 424
obligations
Current liabilities 802 400 632 846
Trade and other liabilities 734 601 571 657
Current income tax 55 787 58 965
liabilities
Short-term borrowings 12 012 2 224
Total liabilities 1 051 279 842 124
Total equity and liabilities 2 172 233 1 825 316
Net surplus cash 107 316 61 550
Condensed Cash Flow Statement
Cash operating profit 868 896 659 817
Working capital changes 84 384 170 466
Cash generated from operating 953 280 830 283
activities
Net finance income/(costs) 4 884 (11 323)
Income tax paid (234 434) (196 055)
Cash flows from operating 723 730 622 905
activities
Net cash used in investing (298 885) (154 863)
activities
Cash generated for the year 424 845 468 042
Cash used in financing (364 144) (447 270)
activities
Proceeds from issue of 6 117 8 209
shares
Buy-back of shares (190 (140 675)
589)
Dividends paid (195 114) (117 180)
- to the company"s (190 876) (112 009)
shareholders
- to minority interests (4 238) (5 171)
Increase/(decrease) in 15 442 (197 624)
borrowings
Net increase in cash and cash 60 701 20 772
equivalents
Effects of exchange rate 2 694 (520)
changes
Cash and cash equivalent 65 533 45 281
balances at beginning of year
Cash and cash equivalent 128 928 65 533
balances at end of year
Condensed Statement of Changes in Equity
Balance beginning of year as 915 371 764 828
previously stated
Revised useful life of 62 065 46 642
property, plant and equipment
Transfer of translation (785) -
reserves
Full consolidation of 6 541 5 908
business unit
Restated balance beginning of 983 192 817 378
year
Profit for the year 516 498 415 534
Movement in currency 974 19
translation difference during
the year
Dividends declared during the (195 238) (117 273)
year
Decrease in equity as result (190 589) (140 675)
of buy-back of shares
Shares issued 6 117 8 209
Balance at end of year 1 120 954 983 192
Segment Information
Revenue
Animal Nutrition 2 670 6 2 516
- South Africa 2 501 5 2 388
- Other Africa 169 32 128
Poultry
- South Africa and 3 623 8 3 356
Swaziland
Inter group (1 109) (1 034)
5 184 7 4 838
Operating profit
Animal Nutrition 272 27 214
- South Africa 235 21 194
- Other Africa 37 85 20
Poultry
- South Africa and 494 29 383
Swaziland
766 28 597
Notes
1. Basis of preparation
The condensed consolidated financial information announcement is based on
the audited financial statements of the Group for the year ended 30
September 2006 which have been prepared in accordance with International
Financial Reporting Standards ("IFRS"), the Listings Requirements of the
JSE Limited and the South African Companies Act (1973). The financial
statements for the year ended 30 September 2006 are Astral Foods
Limited"s first published financial statements stating compliance with
IFRS. Refer to the reconciliation of previous SA GAAP to IFRS for the
effects of IFRS compliance on previously reported financial statements.
The nature of all items reconciling SA GAAP to IFRS has been described in
detail in the financial statements for the year ended 30 September 2006.
2. Independent audit by the auditors
These condensed consolidated results have been audited by our auditors
PricewaterhouseCoopers Inc. who have performed their audit in accordance
with the International Standards in Auditing. A copy of their unqualified
audit report is available for inspection at the registered office of the
company.
3. Transition to IFRS
The Group has made the following elections in terms of IFRS 1 (First-time
Adoption of International Financial Reporting Standards) as at the
transition date (1 October 2004):
* Cumulative translation differences of foreign operations at date of
transition to IFRS amounting to R8 004 000, were set to zero.
* Goodwill resulting from acquisitions prior to the date of transition to
IFRS was not restated, and represents the written down value as
previously recorded under SA GAAP. Goodwill was tested for impairment at
date of transition.
* IAS 16 requires the reassessment of assets" useful life and residual
values at each balance sheet date. Applying this statement
retrospectively to the net book values of property, plant and equipment,
has had the effect of the results being restated.
* Except as stated above, the accounting policies of the Group are
consistent in all other material respects with those applied in the
previous financial year.
4. Adjustments of prior period results reported under SA GAAP
* Consolidation of a business unit at 100% (previously proportionately
consolidated at 82%).
* Reclassification of feed sales to contract growers as revenue,
previously set off against cost of goods sold. The effect of the
adjustment is to increase revenue and cost of goods sold each by R224 996
773.
* Application of offset to amounts in respect of contract growers
separately disclosed under trade receivables and trade payables where a
legal right of offset exists.
5. Reconciliation of previous reported SA GAAP to IFRS
Profit Equity
attributable to
Total Total for the equity holders of
assets Liabili- year the parent
ties
30 Sept 30 Sept 30 Sept 30 Sept 1 Oct
2005 2005 2005 2005 2004
R"000 R"000 R"000 R"000 R"000
As previously 1 802 484 887 113 397 768 906 092 754 953
reported
IFRS
adjustments
Property, 86 416 25 136 15 423 60 511 45 957
plant and
equipment (note
3)
SA GAAP
adjustments
Full 7 013 472 2 343 - -
consolidation
of business
unit (note 4)
Offset of (70 597) (70 597) - - -
trade
receivables and
trade payables
(note 4)
Restated under 1 825 316 842 124 415 534 966 603 800 910
IFRS
The comparative results have accordingly been restated in terms of the
International Reporting Standards accounting principles as set out in
this report.
Restated
Audited Audited
Year Year
ended ended
30 Sept 30 Sept
2006 2005
R"000 R"000
6. Operating profit
The following items have been accounted for in the operating profit:
Auditors" remuneration 3 503 2 637
Biological assets - fair value 710 (218)
gain/(loss)
Amortisation of intangible 2 969 1 046
assets
Depreciation on property, plant 85 766 76 693
and equipment
Profit on disposal of property, 47 15 287
plant and equipment
Foreign exchange (loss)/profit (390) 2 283
7. Reconciliation to headline earnings
Earnings for the year 509 517 410 242
Profit on sale of property, (303) (13 875)
plant and equipment
Loss related to investments 589 1 099
written off and sale of business
unit
Headline earnings for the year 509 803 397 466
8. Share capital
In terms of the share buy-back programme 2 344 247 shares were acquired
during the period under review at a total costs of R190 589 000.
In terms of the Group"s share incentive scheme, 724 251 shares were
issued in respect of share options exercised during the period under
review.
9. Capital commitments
Capital expenditure approved not 58 557 23 484
contracted
Capital expenditure contracted not 65 628 44 814
recognised in financial statements
Financial overview
Results for the year showed significant improvement with headline
earnings per share increasing by 34%.
While the performance of the second half of the year did not match the
first half due to substantially higher maize prices, they were
nevertheless better than last year"s record second half earnings.
Revenue increased by 7% from R4,8 billion to R5,2 billion and operating
profit by 28% from R597 million to R766 million with both the Animal
Nutrition and Poultry divisions reporting satisfactory growth of 27% and
29% respectively. Group operating margin of 14,8% was up on last year"s
12,3%.
Interest income of R4,9 million compares with the prior year"s interest
paid of R11,3 million.
The effective tax rate (inclusive of STC) of 33,0% is well up on last
year"s 29,0% following higher STC payments as the group increased its
dividend, prior year adjustments and the once off benefit last year
following the 1% reduction in the statutory tax rate.
The Group is gearing itself for further growth and as a result capital
expenditure increased from the prior year"s R178 million to R297 million.
Return on net assets improved from 51% to 65%.
Net cash inflow from operating activities of R723 million was up 16% from
the previous year. Following the share buy-back of R190 million (2005:
R145 million), high levels of capital expenditure and increased dividend
payments of R195 million (2005: R117 million), the year-end net cash
increased from R62 million to R107 million.
The dividend cover for the year has been lowered to 2,2 times (2005: 2,5
times). The total dividend for the year of R5,85 per share is 54% up on
last year"s R3,80. A final dividend of R3,60 (2005: R2,60) was declared.
Return on equity improved to 49% (2005: 46%) and economic value added
increased from R252 million to R418 million based on a weighted average
cost of capital of 14%.
Review of operations
Animal Nutrition
The final maize crop estimate for the 2006 season is 6,2 million tons,
the smallest crop since 1995. The large carry-out stocks in excess of 3,5
million tons from last year was depleted to a tight carry-out
stockholding of around 1,6 million tons this year. This situation
resulted in prices rising substantially over the past financial year. The
maize market is now focusing on the huge jump in international prices,
the recent volatility of the ZAR/USD exchange rate, intentions to plant
for the new season and local weather conditions. Other key raw materials,
soya beans and fish meal, also increased significantly. These market
conditions were anticipated.
Animal Nutrition reported strong results with revenue of R2,7 billion
(2005: R2,5 billion), 6% up on the prior year. Operating profit of R272
million (2005: R214 million) was a pleasing 27% up on the prior year.
Operating margins improved from 8,5% to 10,2%.
Other factors that contributed to this performance were the maintaining
of volumes in a competitive market, tight cost control and a strong
performance from the Zambian operation. The division managed to contain
operating costs in rand value at the same level as the prior year.
The teething problems experienced at the new Port Elizabeth mill during
previous years are being overcome. This mill recorded a significant
turnaround during the year and further improvements can be expected. A
small mill in Ladismith, Southern Cape has been acquired and is expected
to make a positive contribution in the new financial year.
NuTec SA and National Veterinary Services reported excellent profits for
the year but the results of Central Analytical Laboratories disappointed.
Increased sales of feed due to the poultry division"s expansion will be
realised in the coming financial year.
Poultry
The benefit of the previous year"s low maize prices continued into the
current year. Feed expenditure for the year on average for this division
decreased by 2%.
Revenue increased by 8% from R3,4 billion to R3,6 billion. With a 6%
increase in selling prices, and the reduction in feed costs, combined
with improved production efficiencies, operating profit increased by 29%
from R383 million to R494 million. Operating margins improved from 11,4%
to 13,6%.
Sporadic outbreaks of Newcastle disease continued into 2006.
Anti-dumping duties against the USA producers were renewed by the
Minister of Trade and Industry in October 2006.
The benefits of the expansion programme at the Earlybird division will
start to flow through from December 2006.
To date the Avian Influenza epidemic has not impacted on the South
African poultry industry. Strict bio-security measures have been
implemented to counter any outbreak of the disease.
All poultry operations reported strong results with the exception of
National Chicks which reported no growth as a result of the impact of
Newcastle disease.
Prospects
Subsequent to the year-end the Board approved a R202 million capacity
expansion and processing efficiency improvement project at the Earlybird
division which will be commissioned in the last quarter of the coming
financial year. Together with the current expansion project this will
result in significant benefits for both the feed mills and the poultry
division.
Earnings are expected to improve further in 2007.
Higher anticipated plantings of maize are expected to result in lower
prices.
Against the above background, and expected high consumer spending on
poultry products we look forward to another good year.
Declaration of Ordinary Dividend No. 12
Notice is hereby given that a final dividend (no.12) of 360 cents per
ordinary share has been declared in respect of the year ended 30
September 2006.
Salient dates 2007
Last date to trade cum-dividend Friday, 5 January
Shares commence trading ex-dividend Monday, 8 January
Record date Friday, 12 January
Payment of dividend Monday, 15 January
Share certificates may not be dematerialised or rematerialised between
Monday, 8 January 2007 and Friday, 12 January 2007, both days inclusive.
On behalf of the board
J L van den Berg Chairman N C Wentzel Chief Executive
Officer
Pretoria
9 November 2006
Registered office
Block E, Castle Walk Office Park, Erasmuskloof, Pretoria
Postnet 329, Private Bag X10, Elarduspark, 0048
Telephone: (012) 347-5077
Website address: www.astralfoods.com
Directors
J L van den Berg (Chairman),
*N C Wentzel (Chief Executive Officer),
*T Pritchard (Financial Director)
*M A Kingston, *C E Schutte,
J J Geldenhuys, C G van Veyeren,
M Macdonald, T C C Mampane
(*Executive director)
Company Secretary
M Eloff
Transfer secretaries
Computershare Investor Services 2004 (Pty) Limited
PO Box 61051
Marshalltown, 2107
Telephone: (011) 370-5000
Sponsor
JP Morgan Chase Bank NA,
(Johannesburg Branch)
1 Fricker Road, Illovo
Johannesburg, 2146
Private Bag X9936
Sandton, 2146
Telephone: (011) 507-0430
Date: 10/11/2006 07:00:27 AM Produced by the JSE SENS Department
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