Wrap Text
PFG - Pioneer Food Group Limited - Audited preliminary condensed annual
financial statements for the year ended 30 September 2011
Pioneer Food Group Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1996/017676/06)
(Share code: PFG)
(ISIN code: ZAE000118279)
("Pioneer Foods" or "the Company" or "the Group")
Audited preliminary condensed annual financial statements for the year
ended 30 September 2011
Pioneer Foods Salient features
Revenue R17 billion up 7%
Operating profit (before items of a capital nature) R1 191 million up 58%
Headline earnings R726 million up 207%
After comparative figures were adjusted by R654 million for Competition
Commission penalties:
Adjusted change to operating profit (before items of a capital nature)
down 15%
Adjusted change to headline earnings down 18%
Final dividend per listed ordinary share (2010: Nil cents) 40 cents
CEO Andre Hanekom commented:
"We achieved satisfactory volume growth of 3% in an inflationary
environment with prices rising by some 4% on average across our product
basket. Margins compressed as continuing efficiency gains and cost
containment were outweighed by lagging price increases and start-up costs
in the expansion of operations in Gauteng.
In the trading environment, soft egg prices and heightened competitor
activity in the fruit concentrate mixture category together with the poor
raisin crop added to margin pressure. Vigilant margin maintenance and
consumer-focused product innovation places the Group in a favourable
position to participate in profitable volume growth, recognising the
constrained spending environment."
Enquiries
Pioneer Foods: +27 21 807 5100
Andre Hanekom +27 82 808 3549, ahanekom@pioneerfoods.co.za
Leon Cronje +27 82 801 7772, lcronje@pioneerfoods.co.za
CapitalVoice: Johannes van Niekerk +27 82 921 9110
Commentary
Pioneer Foods continued to grow and develop its operational base during
the year under review by adding much needed production capacity in key
categories, improving efficiencies, containing costs and broadening the
product range to meet changing customer tastes and preferences.
The Group`s performance for the year ended 30 September 2011 was impacted
by rising input costs, lagging price increases and volume pressure in
most categories. Revenue from specified bread and wheaten flour products
were impacted negatively by delayed price increases to implement the
gross profit reductions as agreed with the Competition Commission as part
of the settlement reached in November 2010.
Group revenue increased by 7% to R16.9 billion with volume growth of some
3% and inflation of 4% in our product basket.
Operating profit, before items of a capital nature, decreased by 15% to
R1 191 million, resulting in a declined margin of 7.1% (2010: 8.9%).
Headline earnings declined by 18% to R726 million or 407 cents per share.
All of the above comparisons are after the comparative numbers have been
adjusted to eliminate the impact of the Competition Commission settlement
in the previous year.
The investment in working capital increased by R447 million, largely as a
result of higher raw material prices. In addition to the increased
working capital investment, the first payment of R67 million, in terms of
the Competition Commission settlement, was made in this reporting period.
Net cash generated from operations amounted to R1 064 million.
Net cash outflow from investment activities was R933 million,
contributing to net interest-bearing debt increasing to R757 million from
R406 million a year ago, or 14% of equity at the reporting date.
Sasko
Sasko`s financial performance for 2011 was negatively impacted by the
gross profit reduction agreement with the Competition Commission which
was implemented between December 2010 and March 2011. Sasko agreed to
sacrifice gross profit on selected bread and wheaten flour products to
the value of R160 million for the benefit of its consumer base. This was
achieved by a lagged implementation of price increases required at the
time. Gross profit of R170.8 million was ultimately sacrificed. During
this period bread and wheaten flour sales responded positively to this
initiative, but volumes tapered off significantly thereafter.
International grain commodity prices, specifically maize, continued to
strengthen throughout the financial year. The decline in the
international maize stock to usage ratio confirms that demand is
currently outstripping production and thus supporting higher maize
prices. This trend is sustained by the increase in the use of maize for
the production of ethanol in the US. In rand terms, maize cost increased
by about 70% in the reporting period.
After an initial increase the price of wheat has traded down to levels
comparable with September 2010 with international pricing remaining
volatile. Local prices were moderated during the year by a relatively
strong rand.
In line with subdued wheat consumption on an industry level the second
half of the financial year presented a general decline in demand in the
wheaten and bread product categories, whereas maize volumes were largely
maintained.
Sasko Grain`s profitability remained solid and benefited from sound
volumes. The rice and legume business continued to post improved sales
volumes and profitability.
The Sasko Bakeries business was more directly affected by the gross
profit sacrifice and the general increase in the input cost base. Despite
this, an overall increase in sales volume was achieved for the full year,
although sales in the last quarter were significantly softer.
The performance of Sasko Pasta was constrained by the increase in lower-
priced imports, despite the current tariff structure in place and the
relatively high cost of wheat. Investment in additional warehouse
infrastructure is progressing as planned.
The Bowman Ingredients joint venture continued to perform well, despite
the slowdown in the economy and the sharp rise in input costs.
Group operations in Botswana and Zambia performed well, whereas the
Namibian and Ugandan businesses struggled in the highly competitive
trading environments. Business plans and strategies have been adjusted to
address these challenges.
Agri
Agri experienced a challenging trading environment, largely due to the
substantial increase in maize and other raw material prices, especially
in the second half of the financial year. Effective raw material
procurement strategies succeeded to protect the operating margin up to
the third quarter. Thereafter the margin was under severe pressure as
chicken and egg final product prices could not absorb the increased raw
material cost.
The feeds business performed well, supported by increased sales volumes
and a tight focus on costs. Margins in this business were sustained and
overall profitability was improved for the financial year.
Margin pressure was most apparent in the egg business as the industry as
a whole entered the start of a downswing during the reporting period.
While sales of eggs increased on the prior year, sales prices continued
to be weak, not responding to increased feed cost. The repositioning of
the egg business and improved efficiencies over the past two years
succeeded to limit the severity of these pressures.
Margins were also under pressure in the broiler business, despite
improved efficiencies realised throughout the value chain. Sales volumes
improved, but prices were negatively affected by an increase in imported
chicken meat resulting in severe margin pressure. Good farming practices
and the absence of poultry diseases supported efficiency gains.
The integration of recently acquired Tonko Chicks in Gauteng experienced
some start-up challenges, but is expected to render value-enhancing
returns in future. More capital will be spent in the new financial year
to address inefficiencies.
Bokomo Foods
The overall performance of the Bokomo Foods business improved during the
financial year. However, results were marginally down due to a R19
million abnormal gain included in the prior year relating to the
insurance recovery following the 2009 fire at the Upington raisin
factory.
Sales volumes were flat, with good performances from breakfast cereals
and baking aids. This was partly offset by a decreased performance from
the dried fruit business due to limited raisin crop availability as a
result of severe floods in the production areas. Results were further
impacted by the commissioning of the new biscuit plant in Clayville, and
the launch of the new biscuits range under the Moir`s brand at the end of
September 2011.
Breakfast cereals achieved steady volume growth in key products and good
recovery of raw material and overhead cost inflation from the market.
Increased marketing spend on Weet-Bix also stimulated growth into new
market segments. Bokomo Corn Flakes, Otees and Bokomo Instant Oats also
showed good growth.
The Heinz Foods business showed good growth in condiments and sauces and
posted an acceptable performance overall. However, growth in the frozen
foods category remained slow.
Ceres Beverages
Ceres Beverages achieved mixed results. A strong first half performance
was unfortunately negated by a disappointing performance in the second
half of the year, particularly in the fruit concentrate mixture category.
The fruit juice category performed well with volume growth achieved in
the local and international markets aided by new packaging formats and
juice flavours.
The first new bottling line was installed in the new fruit juice factory
in Wadeville in the second half of the financial year, with another line
to be commissioned early in 2012. We anticipate that the improvement in
service levels and cost savings on transport from moving production
closer to the market will largely mitigate the start-up costs.
The fruit concentrate mixture category had a disappointing second half as
aggressive competitor activity placed pressure on sales volumes. This
category is extremely competitive with relative low barriers of entry.
Carbonated soft drink sales volumes grew despite continued fierce
competition. Profitability improved and the increase in volumes
necessitated further capital investment. New equipment will be installed
in the Ceres factory in the space created by relocating the juice lines
to Wadeville. This will be commissioned in the second half of the new
financial year. The increased capacity will provide a more efficient
value chain and enhance profitability.
Lipton Ice Tea volumes grew strongly with good growth being forecasted
for the new financial year. The brand was also launched in paper-pack
formats to broaden consumer choice.
Prospects
The Group is in a favourable position to participate in profitable volume
growth, recognising the constrained consumer spending environment.
Continuing inflationary cost pressures and shifting consumer spending
patterns will influence the Group`s financial performance in the new
financial year.
The Group`s auditors have not reviewed nor reported on any of the
comments relating to future prospects.
Final Dividend
A final dividend of 40.0 cents (2010: Nil, 2009: 89.0 cents) per share
has been approved by the Board. The applicable dates are as follows:
Last date of trading cum dividend: Friday, 27 January 2012
Trading ex dividend commences: Monday, 30 January 2012
Record date: Friday, 3 February 2012
Dividend payable: Monday, 6 February 2012
A final dividend of 12.0 cents (2010: Nil, 2009: 26.7 cents) per class A
ordinary share, being 30% of the final dividend payable to ordinary share-
holders in terms of the rules of the relevant employee scheme, will be
paid during February 2012.
Share certificates may not be dematerialised or rematerialised between
Monday, 30 January 2012, and Friday, 3 February 2012, both days
inclusive.
By order of the Board
ZL Combi WA Hanekom
Chairman Managing Director
Paarl
24 November 2011
Group Statement of Comprehensive Income Audited Year Audited Year
ended 30 ended 30
September September
2011 2010
R`m R`m
Revenue 16 853.1 15 731.3
Cost of goods sold (11 804.1) (10 720.4)
Gross profit 5 049.0 5 010.9
Other income and gains/(losses) - net 291.7 261.4
Other expenses (4 149.4) (4 519.3)
Excluding Competition Commission penalties (4 149.4) (3 865.1)
Competition Commission penalties - (654.2)
Items of a capital nature (0.8) (10.3)
Operating profit 1 190.5 742.7
Investment income 19.2 33.4
Finance costs (160.0) (156.6)
Share of profit of associated companies 0.3 0.1
Profit before income tax 1 050.0 619.6
Income tax expense (319.9) (383.9)
Profit for the year 730.1 235.7
Other comprehensive income for the year 63.8 17.6
Movement in cash flow hedging reserve 36.7 31.5
Fair value adjustments:
For the year 118.6 (44.1)
Current income tax effect (40.2) 4.6
Deferred income tax effect 7.0 7.7
Reclassified to profit or loss (67.6) 87.9
Current income tax effect 36.2 (9.8)
Deferred income tax effect (17.3) (14.8)
Net fair value adjustment on available-for- 1.9 3.3
sale financial assets
Fair value adjustments:
For the year 3.9 5.8
Deferred income tax effect (0.3) (0.7)
Reclassified to profit or loss (1.7) (1.8)
Movement on foreign currency translation 25.2 (17.2)
reserve
Total comprehensive income for the year 793.9 253.3
Profit for the year attributable to:
Owners of the parent 728.8 234.5
Non-controlling interest 1.3 1.2
730.1 235.7
Total comprehensive income for the year
attributable to:
Owners of the parent 792.6 252.1
Non-controlling interest 1.3 1.2
793.9 253.3
Headline Earnings Reconciliation Audited Year Audited Year
ended ended
30 September 30 September
2011 2010
R`m R`m
Reconciliation between profit attributable to
owners of the parent and headline earnings
Profit attributable to owners of the parent 728.8 234.5
Remeasurement of items of a capital nature 0.8 10.3
Net profit on disposal of property, plant, (5.4) (11.8)
equipment and intangible assets
Net profit on disposal of available-for-sale (1.7) (2.1)
financial assets and subsidiaries
Impairment of property, plant, equipment and 7.9 24.2
intangible assets
Tax effect on remeasurement of items of a (3.4) (8.4)
capital nature
Headline earnings 726.2 236.4
Competition Commission penalties - 654.2
Adjusted headline earnings 726.2 890.6
Number of issued ordinary shares (million) 201.2 201.2
Number of issued treasury shares:
- held by subsidiary (million) 18.0 18.0
- held by share incentive trust (million) 3.9 5.1
Number of issued class A ordinary shares 9.3 10.4
(million)
Weighted average number of ordinary shares 178.4 177.0
(million)
Earnings per ordinary share (cents):
- basic 408.4 132.5
- diluted 399.7 130.2
- headline 407.0 133.5
- adjusted headline 407.0 503.0
- diluted headline 398.3 131.2
Dividend per ordinary share (cents) 80.0 -
Dividend per class A ordinary share (cents) 24.0 -
Net asset value per ordinary share (cents) 3 059.7 2 667.9
Debt to equity ratio (%) 13.8 8.5
Group Statement of Financial Position Audited Audited
30 September 30 September
2011 2010
R`m R`m
Assets
Property, plant and equipment 4 192.3 3 565.0
Goodwill 265.1 221.1
Other intangible assets 467.4 468.4
Biological assets 16.8 16.8
Investments in associates and loans to joint 29.9 35.2
ventures
Available-for-sale financial assets 43.6 39.1
Trade and other receivables 20.0 16.9
Deferred income tax 2.6 2.7
Non-current assets 5 037.7 4 365.2
Current assets 4 825.3 4 512.1
Inventories 2 313.4 1 936.6
Biological assets 210.1 187.6
Derivative financial instruments 14.1 5.2
Trade and other receivables 1 836.1 1 669.3
Current income tax 11.2 3.5
Cash and cash equivalents 440.4 709.9
Total assets 9 863.0 8 877.3
Equity and liabilities
Capital and reserves attributable to owners of 5 488.3 4 751.4
the parent
Share capital 20.1 20.1
Share premium 1 186.7 1 210.6
Treasury shares (220.3) (232.1)
Other reserves 115.2 28.3
Retained earnings 4 386.6 3 724.5
Non-controlling interest 7.5 6.5
Total equity 5 495.8 4 757.9
Non-current liabilities 1 891.0 2 074.0
Borrowings 849.0 946.2
Provisions for other liabilities and charges 113.3 109.1
Accrual for Competition Commission penalties 202.1 391.8
Share-based payment liability 146.0 102.2
Derivative financial instruments - 5.6
Deferred income tax 580.6 519.1
Current liabilities 2 476.2 2 045.4
Trade and other payables 1 871.5 1 732.6
Current income tax 22.1 8.4
Derivative financial instruments 10.4 57.4
Borrowings 348.4 169.5
Loan from joint venture 7.9 10.3
Accrual for Competition Commission penalties 215.5 66.7
Dividends payable 0.4 0.5
Total equity and liabilities 9 863.0 8 877.3
Group Statement of Cash Flows Audited Audited
Year ended Year ended
30 September 30 September
2011 2010
R`m R`m
Net cash profit from operating activities 1 563.3 1 609.9
Excluding Competition Commission penalties 1 563.3 1 805.6
paid
Competition Commission penalties paid - (195.7)
Cash effect from hedging activities 14.2 18.7
Working capital changes (446.8) 95.1
Accrual for Competition Commission penalties (66.7) -
paid
Net cash generated from operations 1 064.0 1 723.7
Income tax paid (261.5) (353.0)
Net cash flow from operating activities 802.5 1 370.7
Net cash flow from investment activities (933.4) (805.3)
Property, plant, equipment and intangible
assets
- additions and replacements (814.6) (751.0)
- proceeds on disposal 33.7 41.6
Business combinations (171.2) (144.7)
Proceeds on disposal of and changes in (3.6) 11.8
available-for-sale financial assets and loans
Disposal of subsidiaries - 3.6
Interest received 18.1 31.4
Dividends received 1.1 2.0
Dividends received from associates 3.1 -
Net cash flow from financing activities (232.3) (448.6)
Repayments of borrowings (11.9) (137.6)
Treasury shares - share incentive trust 11.8 14.4
Share schemes transactions (20.9) (4.8)
Interest paid (139.6) (163.0)
Dividends paid (71.7) (157.6)
Net (decrease)/increase in cash, cash (363.2) 116.8
equivalents and bank overdrafts
Net cash, cash equivalents and bank overdrafts 708.9 592.1
at beginning of the year
Net cash, cash equivalents and bank overdrafts 345.7 708.9
at end of the year
Group Statement of Changes in Equity Audited Audited
Year ended 30 Year ended 30
September September
2011 2010
R`m R`m
Share capital, share premium and treasury 986.5 998.6
shares
Opening balance 998.6 989.5
Movement in treasury shares 11.8 14.4
Ordinary shares issued - share appreciation 2.6 0.3
rights
Employee share scheme - repurchase of shares (26.5) (5.6)
Other reserves 115.2 28.3
Opening balance 28.3 (7.0)
Transfers from/(to) retained earnings 0.4 (0.4)
Equity compensation reserve transactions 15.0 13.2
Ordinary shares issued - share appreciation (2.6) (0.3)
rights
Deferred income tax on share-based payments 10.3 5.2
Other comprehensive income for the year 63.8 17.6
Retained earnings 4 386.6 3 724.5
Opening balance 3 724.5 3 645.5
Profit for the year 728.8 234.5
Dividends paid (71.6) (157.9)
Transfers (to)/from other reserves (0.4) 0.4
Management share incentive scheme - disposal 5.4 2.1
of shares
Employee share scheme - transfer tax on share (0.1) (0.1)
transactions
Non-controlling interest 7.5 6.5
Opening balance 6.5 5.8
Dividend paid (0.3) (0.5)
Profit for the year 1.3 1.2
Total equity 5 495.8 4 757.9
Group Segment Report Audited Audited
Year ended 30 Year ended 30
September September
2011 2010
R`m R`m
Segment revenue
Sasko 9 054.6 8 314.1
Agri Business 2 714.6 2 453.2
Bokomo Foods 2 760.3 2 683.2
Ceres Beverages 2 577.4 2 483.7
17 106.9 15 934.2
Less: Internal revenue (253.8) (202.9)
Total 16 853.1 15 731.3
Segment results (operating profit before items
of a capital nature)
Sasko 857.5 327.5
Excluding Competition Commission penalties 857.5 981.7
Competition Commission penalties - (654.2)
Agri Business 109.2 136.9
Bokomo Foods 216.4 230.7
Ceres Beverages 132.0 165.2
Unallocated (123.8) (107.3)
Total 1 191.3 753.0
Excluding Competition Commission penalties 1 191.3 1 407.2
Competition Commission penalties - (654.2)
Reconciliation of operating profit (before
items of a capital nature) to profit before
income tax
Operating profit before items of a capital 1 191.3 753.0
nature
Adjusted for:
Items of a capital nature (0.8) (10.3)
Interest income 18.1 31.4
Dividends received 1.1 2.0
Finance costs (160.0) (156.6)
Share of profit of associated companies 0.3 0.1
Profit before income tax 1 050.0 619.6
Notes to the preliminary condensed annual financial statements
1. Basis of preparation
These preliminary condensed annual financial statements are derived from
the audited annual financial statements of the Group for the year ended
30 September 2011 which have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), the Listings
Requirements of the JSE Limited, the Companies Act of South Africa, Act
61 of 1973, and the Companies Act of South Africa, Act 71 of 2008. The
preliminary condensed annual financial statements comply with the
requirements of IAS 34 - Interim Financial Reporting.
2. Accounting policies
These preliminary condensed annual financial statements incorporate
accounting policies that are consistent with those applied in the Group`s
annual financial statements for the year ended 30 September 2011 and with
those of previous financial years, except for the adoption of the
following interpretations and amendments to published standards that
became effective for the current reporting period beginning on 1 October
2010:
Amendment to IFRS 1 - First-time Adoption of International Financial
Reporting Standards
Amendment to IFRS 2 - Share-based Payments
Amendment to IAS 32 - Classification of Rights Issues
Improvements to IFRSs 2009 and 2010
IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments
The adoption of these amendments to standards and interpretations did not
have any material impact on the Group`s results and cash flows for the
year ended 30 September 2011 and the financial position at 30 September
2011.
Audited Audited
Year ended 30 Year ended 30
September September
2011 2010
3. Share capital
During the year under review the following
share transactions occurred:
Number of listed issued and fully paid
ordinary shares
At beginning of year 201 191 970 201 183 898
Shares issued in terms of employee share 44 959 8 072
appreciation rights scheme
At end of year 201 236 929 201 191 970
44,959 (2010: 8,072) listed ordinary shares
of 10 cents each were issued at an average
of R58.06 (2010: R42.58) per share
Number of treasury shares held by the share
incentive trust
At beginning of year 5 111 905 6 758 105
Movement in shares (1 230 504) (1 646 200)
At end of year 3 881 401 5 111 905
Proceeds on the sale of treasury shares by 18 661 18 061
the share incentive trust (R`000)
Number of treasury shares held by a
subsidiary
At beginning and at end of year 17 982 056 17 982 056
Number of unlisted class A ordinary shares
At beginning of year 10 408 650 11 397 190
Shares bought back and cancelled (1 114 120) (988 540)
At end of year 9 294 530 10 408 650
Purchase consideration paid for unlisted 26 526 5 497
class A ordinary shares bought back (R`000)
4. Borrowings
Ceres Fruit Juices (Pty) Limited, a Group subsidiary, entered into a new
borrowings agreement amounting to R120 million. No other material new
borrowings were concluded during the year under review. Other changes in
borrowings mainly reflect repayments made in terms of agreements. Short-
term borrowings fluctuate in accordance with changing working capital
needs.
5. Impairment
The Group re-assessed and impaired the carrying values of the underlying
assets of the Heinz chilled business (Spartan) and the KwaZulu-Natal
dilutables business and in 2010 of the Werda, Hooch and Kwality
businesses with after-tax amounts of R4,096,910 (2010: R17,421,898).
These impairment losses, with the exception of the calculations for the
KwaZulu-Natal dilutables business and the Kwality business in 2010, were
calculated by comparing the carrying amount of the cash-generating unit
(CGU) to the value-in-use of these CGUs. The calculations for the KwaZulu-
Natal dilutables business and the Kwality business were done by comparing
the carrying value of the CGUs to their fair value less cost to sell.
The Group also re-assessed and impaired the carrying values of goodwill
and intangible assets of the Heinz chilled business (Spartan) with an
amount of R2,168,155. This impairment loss was calculated by comparing
the carrying amount of the CGU to the value-in-use of this CGU. No
impairment losses on goodwill and intangible assets were recognised in
2010.
6. Events after the reporting date
6.1 Dividend
The board approved a final dividend of 40.0 cents per ordinary share.
This will approximately amount to R80,494,772, depending on the exact
amount of ordinary shares issued at the record date.
This is in addition to the interim dividend of 40.0 cents per ordinary
share that amounted to R80,487,571.
6.2 Proposed B-BBEE transaction
Shareholders are referred to the cautionary announcement published on 4
August 2011 and an update on this matter on 19 September 2011.
The Company concluded a B-BBEE transaction with its employees in 2006
which effectively equated to 10% black ownership of the Company at the
time. Pioneer Foods now proposes to increase and broaden the black
ownership of the Company to include a broad-based Educational and
Community Trust, strategic B-BBEE partners and black members of the board
of the Company ("proposed B-BBEE transaction").
The proposed B-BBEE transaction will be implemented by way of vendor and
third party finance, pursuant to which the B-BBEE shareholders will
acquire a direct equity interest in the Company of approximately 13.5% at
market related values. Third party BEE parties will be issued 8.5% and a
broad-based Educational and Community Trust approximately 5%.
Finalisation of funding is at an advanced stage.
Following the implementation of the proposed B-BBEE transaction, the
Company will have an effective black ownership of about 18% (including
the initial Pioneer Foods employees` scheme) as measured in terms of the
DTI Codes of Good Practice on Broad Based Black Economic Empowerment.
The proposed B-BBEE transaction will be subject to various conditions
including shareholder approval. Further details including salient dates
and the pro forma financial effects will be announced in due course, once
finalised.
6.3 Other material events
There have been no other material events requiring disclosure after the
reporting date and up to the date of approval of the annual financial
statements by the board.
7. Business combinations
During the period under review the following businesses were acquired and
all assets and liabilities relating to these acquisitions have been
accounted for on an acquisition basis:
Audited Year
ended 30
September 2011
Purchase considerations - settled in cash (R`m)
Mynsar poultry farm (on 1 November 2010) 34.9
Tonko abattoir (on 1 February 2011) 136.3
171.2
The combined assets and liabilities acquired of these
businesses can be summarised as follows:
Fair value (R`m)
Property, plant and equipment 121.8
Goodwill 41.2
Inventories 3.0
Current biological assets 8.9
Trade and other payables (0.6)
Deferred income tax (3.1)
Purchase consideration - settled in cash 171.2
Carrying value
As the Group acquired the assets and liabilities of these businesses
rather than the shares of the legal entities that previously owned such
assets and liabilities, it is impractical to disclose the carrying
amounts in the accounting records of the previous owners prior to these
acquisitions. In these circumstances the Group does not have access to
such carrying values.
The combined contribution of these businesses since acquisition (R`m):
Revenue 141.5
Operating loss before finance cost and income tax 9.0
The combined pro forma contribution of these businesses
assuming the acquisitions were at the beginning of the
year (R`m):
Revenue 212.3
Operating loss before finance cost and income tax 14.1
8. Contingent liabilities
8.1 Land claims
Regional Land Claim Commissioners acknowledged claims against the land of
a Group company in terms of the provisions of sections 2 and 11 of the
Restitution of Land Rights Act of 1994 (as amended), during 2007.
The valuations of the Commissioners were accepted for the two farms
involved and negotiations with the Commissioners regarding the proposed
sale for R10.5 million are ongoing. The impact of discontinuing
production at these two units is immaterial.
It is not anticipated that any material transactions will arise from
these land claims.
8.2 Dispute with egg contract producers
As previously reported six contract egg producers are proceeding with
their claims in the Western Cape High Court: Cape Town.
Pioneer Foods filed pleas to all these claims and in four of these claims
counter claims have been filed to recover damages suffered by Pioneer
Foods as a result of breach of contract by the contract producers.
All six these matters have been set down for trial in the Cape High Court
from Monday the 5th of March 2012. The court will in all likelihood not
hear all six matters simultaneously, but will direct a specific order in
which the matters are to be heard.
Management remains convinced, based on legal advice regarding the merits
of the claims against the Group, that the Group will not incur any
material liability in respect of this matter.
8.3 Dispute with broiler farms and breeder farms
Several breeder farms and broiler farms (five in total) have also now
filed claims against Pioneer Foods for the alleged breach of the terms of
their supply agreements with Pioneer Foods.
Only letters of demand have been received thus far and these claims
should eventually be finalised by means of arbitration. Although a date
for the arbitration has not yet been finalised the arbitration will in
all likelihood take place in the latter part of 2012.
Based on legal advice regarding the merits of this claim and at this
early stage of the proceedings, management is convinced that the Group
will not incur any material liability in respect of these matters.
8.4 Guarantees
The Group issued guarantees of R75.9 million (2010: R106.7 million) at
year-end, primarily for loans by third parties to contracted suppliers.
9. Future capital commitments
Capital expenditure approved by the board and contracted for amounts to
R608.0 million (2010: R627.4 million). Capital expenditure approved by
the board, but not contracted for yet, amounts to R163.9 million for 2012
(2010: R324.7 million and R349.7 million for 2011 and 2012 respectively).
Capital commitments of joint ventures amount to R29.2 million (2010:
R47.9 million).
10. Preparation of financial statements
These annual financial statements have been prepared under the
supervision of LR Cronje, CA(SA), group financial director.
11. Audit report
The external auditors, PricewaterhouseCoopers Inc., have audited the
Group`s annual financial statements for the year ended 30 September 2011
and their unqualified auditor`s report is available for inspection at the
registered office of the Company.
Directors:
ZL Combi (Chairman), Dr MI Surve (Vice-chairman), WA Hanekom (Managing)*,
LR Cronje*, TA Carstens*, MM du Toit, GD Eksteen, AE Jacobs, Prof ASM
Karaan, NS Mjoli-Mncube, JF Mouton, AH Sangqu (* Executive)
Company secretary:
J Jacobs E-mail: jjacobs3@pioneerfoods.co.za
Registered address:
32 Market Street, Paarl, 7646, PO Box 20, Huguenot, 7645, South Africa
Tel: 021 807 5100 Fax: 021 807 5280 E-mail: info@pioneerfoods.co.za
Transfer secretaries:
Computershare Investor Services (Pty) Limited, PO Box 61051,
Marshalltown, 2107, South Africa Tel: 011 370 5000 Fax: 011 688 5209
Sponsor:
PSG Capital (Pty) Limited, PO Box 7403, Stellenbosch, 7599, South Africa
Tel: 021 887 9602 Fax: 021 887 9624
Date: 28/11/2011 07:05:45 Supplied by www.sharenet.co.za
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