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MAS - Masonite (Africa) Limited - Unaudited interim results for the six months
ended 30 June 2011 and renewal of cautionary announcement
MASONITE (AFRICA) LIMITED
Incorporated in the Republic of South Africa
Registration number: 1942/015502/06
Share: MAS ISIN: ZAE000004289
("Masonite" or "the company")
UNAUDITED INTERIM RESULTS
for the six months ended 30 June 2011 and RENEWAL OF CAUTIONARY ANNOUNCEMENT
Statement of comprehensive income
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
Rand thousands Notes 2011 2010 2010
Revenue 303 036 257 659 548 521
Cost of sales (219 592) (188 026) (423 667)
Gross profit 83 444 69 633 124 854
Fair value adjustment of
biological assets 16 966 6 951 (3 909)
Other operating income 2 500 1 424 3 621
Distribution expenses (45 822) (35 470) (76 300)
Administrative expenses (5 793) (5 189) (15 155)
Selling and marketing expenses (6 685) (6 602) (12 540)
Other expenses (7 896) (9 225) (16 630)
Results from operations 36 714 21 522 3 941
Finance income 1 345 1 075 1 750
Finance cost (1 146) (1 026) (2 083)
Profit before tax 36 913 21 571 3 608
Income tax expense 8 (10 355) (5 885) (567)
Net profit for the period 26 558 15 686 3 041
Other comprehensive income - - -
Total comprehensive income
for the period attributable
to ordinary shareholders 26 558 15 686 3 041
Earnings per share (cents)
Basic 9.1 373 220 43
Diluted 9.2 373 220 43
Statement of financial position
Unaudited Audited
Unaudited restated restated
Half-year Half-year Year ended
30 June 30 June 31 December
Rand thousands Notes 2011 2010 2010
ASSETS
Non-current assets
Property, plant and equipment 111 585 108 922 109 010
Intangible assets 480 528 556
Biological assets 2 180 371 174 265 163 405
Investments 30 30 30
Total non-current assets 292 466 283 745 273 001
Current assets
Inventories 76 736 90 988 69 137
Trade and other receivables 88 809 77 008 80 370
Amounts due from fellow
subsidiaries 236 939 139
Tax receivable 6 069 2 497 2 714
Financial assets 3 971 205 1 033
Cash and cash equivalents 71 891 53 147 69 790
Total current assets 244 712 224 784 223 183
Total assets 537 178 508 529 496 184
EQUITY AND LIABILITIES
Capital and reserves
Share capital 3 562 3 562 3 562
Share premium 3 156 3 156 3 156
Share-based payment reserve 1 987 - -
Retained income 377 010 363 097 350 452
Total equity 385 715 369 815 357 170
Non-current liabilities
Deferred tax 54 433 54 480 49 381
Post-retirement benefit
obligation 4 24 654 22 976 23 707
Straight-lining lease accrual 81 44 71
Total non-current liabilities 79 168 77 500 73 159
Current liabilities
Trade and other payables 65 465 53 338 58 864
Provisions 5 5 585 6 574 4 812
Amounts payable to fellow
subsidiaries 1 055 487 1 439
Financial liabilities 3 184 793 734
Straight-lining lease accrual 6 22 6
Total current liabilities 72 295 61 214 65 855
Total equity and liabilities 537 178 508 529 496 184
Net asset value per share (cents) 5 386 5 191 5 013
Condensed statement of cash flows
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
Rand thousands 2011 2010 2010
Cash flow from operating activities
Operating profit 36 714 21 522 3 941
Adjusted for:
Fair value adjustment of
biological assets (16 966) (6 951) 3 909
Depreciation and amortisation 8 311 6 808 14 807
IFRS 2: Share-based Payment Charge 1 987 - -
Foreign exchange gain - unrealised (734) (1 277) (459)
Provisions utilised (2 157) (2 267) (5 828)
Increase in liability for retirement
benefit obligation 947 731 1 462
Loss on disposal of property, plant
and equipment 14 36 49
Other non-cash items 10 6 17
Tax payments (8 658) (7 088) (7 086)
Change in working capital (6 909) (11 239) 13 691
Cash flow from operations 12 559 281 24 503
Net financing income/(expense) 324 306 (264)
Net cash flow from operating activities 12 883 587 24 239
Cash flow from investing activities
Expenditure on property, plant
and equipment
Replacement (10 885) (8 810) (16 936)
Proceeds on disposal of property,
plant and equipment 61 145 145
Net cash outflow from investing
activities (10 824) (8 665) (16 791)
Net increase/(decrease) in cash and
cash equivalents 2 059 (8 078) 7 448
Effects of exchange rates on the
balance of cash held in
foreign currencies 41 (45) 1 072
Net cash and cash equivalents at the
beginning of the year 69 790 61 270 61 270
Net cash and cash equivalents at the
end of the year 71 890 53 147 69 790
Segment revenues and results
Segment revenue
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
Rand thousands 2011 2010 2010
Segment revenue
Hardboard 229 769 199 722 399 336
Other products 35 736 17 075 67 465
Forestry 54 496 54 107 110 012
Intersegment (17 299) (14 223) (29 571)
Unallocated 334 978 1 279
Total 303 036 257 659 548 521
Segment PBIT
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
Rand thousands 2011 2010 2010
Segment revenue
Hardboard 20 277 12 469 14 258
Other products (3 476) 189 (9 512)
Forestry 25 373 13 075 13 120
Intersegment - - -
Unallocated 333 978 1 230
Total 42 507 26 711 19 096
Administrative expenses (5 793) (5 189) (15 155)
Results from operations 36 714 21 522 3 941
Finance income 1 345 1 075 1 750
Finance expense (1 146) (1 026) (2 083)
Profit before tax 36 913 21 571 3 608
Income tax expense (10 355) (5 885) (567)
Total per statement
of comprehensive income 26 558 15 686 3 041
Condensed statement of changes in equity
Share-
based
Share Share payment
Rand thousands capital premium reserve
Balance at 1 January 2010 - audited 3 562 3 156 -
Total comprehensive income attributable to
ordinary shareholders - - -
Balance at 30 June 2010 - unaudited 3 562 3 156 -
Total comprehensive income attributable to
ordinary shareholders - - -
Balance at 30 June 2011 - audited 3 562 3 156 -
Share-based payment charge - - 1 987
Total comprehensive income attributable to
ordinary shareholders - - -
Balance at 30 June 2011 - unaudited 3 562 3 156 1 987
Retained Total
Rand thousands income equity
Balance at 1 January 2010 - audited 347 411 354 129
Total comprehensive income attributable to
ordinary shareholders 15 686 15 686
Balance at 30 June 2010 - unaudited 363 097 369 815
Total comprehensive income attributable to
ordinary shareholders (12 645) (12 645)
Balance at 30 June 2011 - audited 350 452 357 170
Share-based payment charge - 1 987
Total comprehensive income attributable to
ordinary shareholders 26 558 26 558
Balance at 30 June 2011 - unaudited 377 010 385 715
Notes
1. Basis of preparation
The condensed financial information has been prepared in accordance with the
framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards (IFRS), the AC 500 standards as
issued by the Accounting Practices Board and the information as required by IAS
34: Interim Financial Reporting. The report has been prepared using accounting
policies that comply with IFRS which are consistent with those applied in the
financial statements for the year ended 31 December 2010, except for the
separate disclosure of derivative instruments in the statement of financial
position, previously included in either trade and other receivables or trade and
other payables.
2. Biological assets
Land, logging roads and related facilities are accounted for under property,
plant and equipment. Trees and sugar cane are generally felled at the optimum
age when ready for their intended use. After harvest, timber to be utilised at
the Mill is accounted for under inventories.
Timber and sugar cane are accounted for as biological assets. Biological assets
are stated at fair value with any resultant gain or loss recognised in profit
for the year. The company owns timber plantations which it operates in order to
supply the Mill at Estcourt with its primary raw material. Sugar cane has been
planted in areas unsuitable for timber, in order to use the land productively.
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
Rand thousands 2011 2010 2010
Timber plantations
Establishment costs 28 557 19 698 28 778
Immature timber 46 914 57 795 43 003
Mature timber 94 197 91 308 80 611
Total 169 668 168 801 152 392
Sugar cane
Establishment costs 3 286 3 188 3 085
Immature sugar cane 5 226 1 406 6 609
Mature sugar cane 2 191 870 1 319
Total 10 703 5 464 11 013
Total biological assets 180 371 174 265 163 405
3. Financial assets and liabilities
The fair value of derivative
instruments at year end was:
Forward exchange contracts - hedge
accounted 787 (588) 299
Summarised as:
Financial assets 971 205 1 033
Financial liabilities (184) (793) (734)
787 (588) 299
Results from operations in the
statement of comprehensive
income includes:
Forward exchange contracts hedge gain 971 205 1 033
Forward exchange contracts hedge loss (184) (793) (734)
787 (588) 299
The above gains and losses have been included in either other operating income
or other expenses respectively.
4. Post-retirement benefit obligation
The company provides post-retirement medical benefits to retired employees who
were employed before January 1997.
The liability in respect of this post-retirement medical benefit is actuarially
valued on an annual basis using the projected unit credit method. Actuarial
gains or losses in respect of post-retirement medical benefits are recognised as
income or expenses if the net cumulative unrecognised actuarial gains or losses
at the end of the previous period exceed 10% of the present value of the post-
retirement obligation at that date. There are no plan assets held. The amount
recognised is the excess determined above, divided by the average remaining
working lives of the employees participating in the plan.
Past service costs are recognised as an expense on a straight-line basis over
the average period until the benefits vest.
To the extent that benefits have already vested, past service costs are
recognised immediately.
5. Provisions
The amounts at the statement of financial position date comprise provisions for
leave pay.
6. Employee Share Incentive Scheme
The adoption of IFRS 2: Share-based Payment (IFRS 2) in 2005 required that all
awards made after 7 November 2002 be accounted for in the financial statements
of the company. IFRS 2 requires a "fair value" to be placed on employee share
options. Fair value is measured as the market price of the entity`s options
adjusted for the terms and conditions applicable to the option. Since employee
share options are not traded, there is no market price available, hence the use
of an option-pricing model in determining its fair value. The fair value of the
share option is measured using a stochastic model, based on the standard
binomial options pricing model (which is mathematically consistent with the
Black-Scholes model) but allows for the particular features of employee share
options to be modelled realistically. IFRS 2 has therefore been applied to the
Masonite Share Incentive Scheme in respect of the awards made to executive
directors and senior management on 4 January 2011.
7. Segmental reporting
A segment is a distinguishable component of the company that is engaged in
providing products or services which are subject to risks and rewards that are
different from those of other segments. The basis of segment reporting is
representative of the internal structure used for management reporting, as well
as the structure in which the chief operating decision maker reviews the
information.
The basis of segmental allocation is determined as follows:
- revenue that can be directly attributed to a segment and the relevant portion
of the profit that can be allocated on a reasonable basis to a segment, whether
from sales to external customers or from transaction with other segments of the
company;
- operating profit that can be directly attributed to a segment and a relevant
portion of the operating profit that can be allocated on a reasonable basis to a
segment, including profit relating to external customers and the expenses
relating to transactions with other segments of the company; and
- The company`s reportable segments are as follows:
- Hardboard;
- Other products; and
- Forestry.
8. Income tax expense Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
Rand thousands 2011 2010 2010
Current tax 5 303 3 886 3 667
Deferred tax 5 052 1 999 (3 100)
Total 10 355 5 885 567
9. Earnings per share
9.1 Basic
Basic earnings per share is calculated
by dividing the profit attributable to
ordinary shareholders by the weighted
average number of shares in issue
during the year.
Profit attributable to ordinary
shareholders 26 558 15 686 3 041
Weighted average number of ordinary
shares in issue 7 124 225 7 124 225 7 124 225
Basic earnings per share (cents) 373 220 43
9.2 Diluted
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
potential ordinary shares. The dilution of earnings per share is the result of
options granted to executive directors and senior management, on 4 January 2011,
to acquire 210 000 (2010: Nil) shares at a weighted average price of R29,69 per
share on or before December 2020. The calculation of diluted earnings per share
at 30 June 2011 was based on profit attributable to ordinary shareholders and
the number of shares that could have been acquired at fair value (determined as
the average annual market share price of the company`s shares) based on the
monetary value of the subscription rights attached to the outstanding share
options. The number of shares calculated is compared with the number of shares
that would have been issued assuming the exercise of the share options. No share
options were exercised as at 30 June 2011.
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
Rand thousands 2011 2010 2010
Profit attributable to ordinary
shareholders 26 558 15 686 3,041
Weighted average number of ordinary
shares (diluted) at 30 June 7 124 225 7 124 225 7 124 225
Diluted earnings per share 373 220 43
9.3 Headline earnings
Reconciliation of headline earnings
Profit for the year 26 558 15 686 3 041
Adjusted for:
Loss on disposal of assets 14 37 49
Tax effect of loss on disposal of assets (4) (10) (14)
Headline earnings 26 568 15 713 3 076
Headline earnings per share (cents) 373 221 43
10. Comparative figures
Comparative figures are restated in the event of a change in accounting policy
or prior period error. The statement of financial position as at 30 June 2010
and 31 December 2010 have been restated to separately disclose derivative
instruments which were previously included in either trade and other receivables
or trade and other payables.
11. Subsequent events
Other than the strike action noted below, no material fact or circumstance has
occurred between the end of the period and the date of this report.
Commentary
Revenue increased 17,6% to R303 million (2010: R257,6 million) during a period
of slower growth in the building and construction industries.
Profit from operations (excluding the effect of the adjustment of biological
assets - IAS 41: Agriculture) showed a welcome improvement and was 35,5% higher
than the previous year. Margins have improved due to an improved product mix and
the success of a robust cost reduction programme. The Mill at Estcourt operated
at capacity, and while domestic demand was depressed, export volumes increased.
The increase in timber prices in the market had a positive impact on the fair
value of biological assets. Accordingly headline earnings increased by 69,1% to
R26,5 million (2010: R15,7 million) and earnings per share by 68,8% to 373 cents
(2010: 221 cents).
Strikes during July and August affected many industrial sectors as employees and
unions could not agree on the level of wage increases. The company, being a
member of the wood and paper bargaining council, had to endure some industrial
action and the Mill lost four weeks of production. After being on pace to
achieve earnings comparable to the level achieved during 2009, this strike
action will negatively impact second half earnings.
However, we remain confident that sales and earnings over the balance of the
year will reduce the impact of this temporary setback.
The above information has not been reported on or reviewed by Masonite`s
auditors.
Renewal of cautionary announcement
Further to the cautionary announcement published on 5 September 2011, Masonite
shareholders are advised that circumstances relating to the company are still
being determined, which may have a material effect on the price of the company`s
securities. Accordingly, Masonite`s shareholders are advised to continue to
exercise caution when dealing in the company`s securities until a full
announcement is made in this regard.
AH Wilson MJ Slater
Chairman Managing Director
28 September 2011
DIRECTORS
AH Wilson (Chairman), MJ Slater (British) (Managing), NCK Vinay (Financial),
WP Coetzee, MM Clark (USA), CA Virostek (Canadian), KMP Spencer, AG Venton,
GE Coulter (USA), MJ Erceg (USA), LP Repar (Canadian)
COMPANY SECRETARY MP Govender
TRANSFER SECRETARIES
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001
SPONSOR
Nedbank Capital
135 Rivonia Road, Sandton, 2196
Date: 28/09/2011 16:00:01 Supplied by www.sharenet.co.za
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