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Audited condensed consolidated financial results
AFGRI LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1995/004030/06)
ISIN number: ZAE000040549
Share code: AFR
AUDITED CONDENSED CONSOLIDATED FINANCIAL RESULTS
for the year ended 30 June 2012 AND CASH DIVIDEND DECLARATION
OUR RESULTS AT A GLANCE
Revenue from all operations up 28,2%
HEPS from all operations up 3,5% to 56,6 cents (2011: 54,7 cents)
AFGRI Poultry under pressure on the back of high import volumes and high feed prices
Expansion into the Foods sector continues with conclusion of the Pride Milling acquisition
Improved gearing with debt to equity ratio of 1.8 (2011: 2.9)
Excellent results from the Agri Services Segment
COMMENTARY
The directors of AFGRI Limited ("AFGRI") are pleased to present the audited condensed consolidated financial
results of the AFGRI Group of companies ("the Group") for the year ended 30 June 2012.
Operational review
Maize prices reached record levels during the year, increasing from approximately R1 400/ton in March 2011 to over
R2 700/ton during 2012. The higher maize price encouraged farmer spending on mechanisation and other farming requisites,
leading to improved results from the Group's retail and equipment division. The high maize price plus the early harvest
supported the Agri Services Segment to end the year in a strong position. Unfortunately the higher maize price had a
negative impact on margins in the Foods Segment. In particular, higher raw material prices and increased competitiveness
in the market negatively affected the animal protein division's results. An average 17% increase in feed prices, driven
primarily by maize prices, placed margins under pressure at AFGRI Poultry which could only realise a 7% increase in average
selling prices. This, together with high volumes of imports, continued to negatively impact the poultry industry.
AFGRI continues to focus its activities in three segments - Agri Services, Financial Services and Foods.
The acquisition of the yellow grits and by-products milling business of Pride Milling was approved by the Competition
Commission and the results of this operation have been included from 1 December 2011 under the renamed oil, milling and
protein division.
The results of the Group's Zambian and Australian operations are reported under the retail and equipment division.
AFGRI's John Deere dealership increased its market share for the year from 23% to 32%. This was achieved through record sales
of tractors. AFGRI entered the mechanisation market in Zimbabwe by establishing a John Deere dealership in which AFGRI owns 49%.
Sales in the Group's retail stores strengthened and margins were maintained.
The grain management division improved profits on the back of the early 2012 summer crop harvest and high maize prices.
The opening stock stored in AFGRI silos was 600 000 tons lower than the previous year due to a smaller summer crop and high export
activity. The lower stock levels of the first half of the year have been offset by an earlier than normal 2012 summer crop harvest
with 73% (2011: 44%) of the crop already received at 30 June 2012. This is from an estimated 2012 summer crop of 3,3 million
(2011: 2,9 million) tons in the AFGRI area. Closing stock was therefore 861 000 tons higher than the prior year.
On 1 December 2011, AFGRI successfully concluded the sale of its farmer lending book to the Land and Agricultural Development
Bank of South Africa (hereafter "Land Bank"). This resulted in R1,57 billion of farmer debtors being sold and a concomitant
reduction in the Group's liabilities by a similar amount. A similar transaction for AFGRI's corporate debtor book was
implemented on 29 June 2012. These transactions provide AFGRI with a solid foundation to grow its financial services offering to
the agricultural sector.
The Financial Services Segment posted an increase in fee income which resulted in an improved profitability. With the sale of
the farmer lending book and the corporate debtor book the focus was to implement the fee driven business model which proved
to be very successful. AFGRI also managed to renegotiate some of its existing facilities and converted short-term facilities
into long-term facilities. This, together with the unwinding of its Rabo Bank debt securitisation structure, resulted in a
reduction in cash collateral deposits of R71 million.
Despite the current challenging trading environment for the Foods Segment, other sectors in the Group remain strong. The Group remains
committed to growing its representation in the industrial foods processing sector. The planning and design of the new preparation
and extraction plants at Nedan, to be commissioned in April 2013, is progressing well.
The results of AFGRI Poultry for the year are disappointing. The main causes were high volumes of imports and high feed prices.
Operational inefficiencies received serious attention. To this end, the management team at AFGRI Poultry has been strengthened by the
appointment of Izaak Breitenbach, as Managing Director. Izaak has 25 years' experience in the poultry industry.
Financial review
Higher commodity prices, in particular maize, drove the Group's revenue from all operations up by 28,2% to R9,4 billion (2011:
R7,4 billion). Increased raw material and feed cost could not be fully recouped from customers resulting in lower gross margin
percentages, particularly in the animal protein division. However, gross margins were maintained in the retail and equipment division.
The lower interest rates and the sale of the farmer lending book saw interest on trade receivables decline during the year. The finance
cost of R350 million (2011: R372 million) does not reflect a commensurate reduction due to increased borrowings resulting from the Group's
Pride Milling acquisition and the Group's capital expenditure of R393 million (2011: R295 million). Included with finance cost is an
amount of R80 million (2011: R81 million), relating to the finance charge on the borrowings associated with the Group's B-BBEE ownership
structure.
Selling and administration expenses increased by 16%. The inclusion of Rossgro for the full year (2011: four months) and AFGRI
Milling for seven months represents 5,2% of the increase apart from normal inflation. Other factors affecting the increase are
foreign exchange translation losses, increased depreciation, higher fuel and energy cost.
Profit for the year from continuing operations of R182 million is 10% lower than the comparative period's R203 million.
This decrease of R21 million is analysed in the Group's business segment results. The recently announced proposed merger
with Senwes of the Group's retail business, excluding its equipment business, where the retail businesses of both AFGRI and
Senwes will be sold to a "Newco" in which each will own a 50% joint venture shareholding, resulted in the need to reflect the
retail business as a discontinued business. Profit for the period from all operations is 3% higher than the prior year.
Headline earnings per share from all operations for the period reflect an increase of 3,5% from 54,7 cents to 56,6 cents and
earnings per share from all operations of 58,3 cents, reflects an increase of 0,5% from 58,0 cents.
The Group's net asset value per share has increased by 11% during the year from 30 June 2011. Inventory levels have been well
controlled with the increase in inventory values being the result of higher commodity prices and the consolidation of AFGRI
Milling's inventory.
Trade and other receivables (including trade receivables financed by banks) have decreased by R1,5 billion from 30 June 2011
due to the sale of the farmer and corporate debtors books. Bank borrowings reflect a similar reduction. These transactions
have allowed AFGRI to reduce its debt to equity ratio to 1,8 at year end (2011: 2,9).
Furthermore, the Group's borrowing profile improved with long-term debt as a percentage of total debt rising from 11% to 56%.
The Land Bank borrowings associated with the Group's B-BBEE ownership structure of R0,5 billion which is included in short-term debt
(2011 part of long-term debt). The net cash flow for the year is R200 million after accounting for the sale of the farmer lending and
corporate debtor books, capex and the acquisition of the AFGRI Milling business.
Changes to the Board of Directors and Company Secretary
Marion Shikwinya was appointed as AFGRI's Company Secretary with effect from 1 February 2012, replacing Niki van Wyk.
On 13 February 2012, AFGRI announced the appointment of Nick Wentzel as an independent Non-executive Director to the Board of
AFGRI with effect from 9 February 2012.
Prospects
The 2012 summer crop estimate indicates a 16% higher maize crop. The 2012 storage periods are expected to be slightly longer than 2011.
Maize prices are expected to remain high, following international prices and poor growing conditions in the USA. This will result in
continued margin pressure in the Foods Segment. The animal protein division, especially AFGRI Poultry, is expected to remain under
pressure in the new financial year with the remainder of AFGRI's performance expected to be in line with the market prospects for the
various business units.
Sales of farming mechanisation units are expected to remain strong in the coming year. AFGRI Financial Services has the platform
and the requisite funding stream from which to expand its offerings.
The focus for AFGRI in the coming year is to ensure that costs are well managed and cost reduction opportunities are implemented.
By order of the Board
JPR Mbau CP Venter
Chairman Chief Executive Officer
4 September 2012
DECLARATION OF CASH DIVIDEND
Notice is hereby given that the directors of AFGRI, in terms of section 46 of the South African Companies Act (Act 71 of 2008),
have declared a final gross cash dividend of 9,85 cents per share (8,3725 cents per share net of dividend withholding tax, where
applicable) for the year ended 30 June 2012. The dividend has been declared from income reserves and no secondary tax on companies
credits has been used. A dividend withholding tax of 15% will be applicable to all shareholders who are not exempt. In accordance
with settlement procedures of STRATE, the following dates will apply to the final dividend:
Last day to trade cum the dividend Friday, 16 November 2012
Trading ex dividend commences Monday, 19 November 2012
Record date Friday, 23 November 2012
Dividend payment date Monday, 26 November 2012
There will be no dematerialisation or rematerialisation of AFGRI shares between Monday, 19 November 2012 and Friday, 23 November 2012,
both dates inclusive.
By order of the Board
M Shikwinya
Group Company Secretary
Centurion
GROUP BALANCE SHEET (R'millions)
Note 30 June 30 June
Audited Audited
2012 2011
ASSETS
Non-current assets 2 768 2 471
Property, plant and equipment 2 2 022 1 699
Goodwill 2 170 118
Other intangible assets 2 180 269
Investments in associates 47 41
Derivative financial instruments 6 -
Other financial assets 41 41
Financial receivables 154 164
Biological assets* 8 7
Deferred income tax assets 140 132
Current assets 3 764 5 467
Inventories 1 023 1 024
Biological assets* 89 46
Trade and other receivables 2 208 450
Trade receivables financed by banks 6 127 3 425
Derivative financial instruments 53 91
Other financial assets 9 -
Current income tax assets 16 26
Cash and cash equivalents and cash collateral deposits 239 405
Cash collateral deposits 76 147
Cash and cash equivalents 163 258
Assets of disposal groups classified as held-for-sale 9 664 40
Total assets 7 196 7 978
EQUITY
Capital and reserves attributable to equity holders 1 750 1 571
Share capital# - -
Treasury shares (86) (90)
Incentive trust shares (123) (133)
Fair value and other reserves (23) (64)
Retained earnings 1 982 1 858
Non-controlling interest 4 4
Total equity 1 754 1 575
LIABILITIES
Non-current liabilities 2 130 748
Borrowings 1 909 560
Derivative financial instruments 4 -
Deferred income tax liabilities 201 188
Other liabilities 16 -
Current liabilities 3 166 5 648
Trade and other payables 1 621 1 221
Derivative financial instruments 64 41
Current income tax liabilities 4 2
Short-term portion of long-term borrowings 678 10
Call loans and bank overdrafts 664 951
Bank borrowings to finance trade receivables 6 135 3 423
Liabilities of disposal groups classified as held-for-sale 9 146 7
Total liabilities 5 442 6 403
Total equity and liabilities 7 196 7 978
Net asset value per share attributable to equity holders (cents) 491 441
# Share capital issued to the value of R3 755 (2011: R3 755).
* Prior year information has been reclassified. Refer to note 11.
BUSINESS SEGMENT RESULTS (R'millions)
AGRI SERVICES
Retail and Grain
equipment management
R'million 2012 2011 2012 2011
Rm Rm Rm Rm
Revenue 2 274 1 486 492 396
- Sale of goods and services 2 273 1 483 492 396
- Interest 1 3 - -
Operating profit/(loss) (before items 97 16 239 192
listed below)*
Other amounts included in operating profit (9) (7) (19) (17)
- other operating income - - - -
- depreciation and amortisation (9) (7) (19) (17)
Operating profit/(loss) 88 9 220 175
Other items of profit and loss 7 - 1 1
- fair value adjustment to disposal group assets - - - -
- share of profit/(loss) of associates 7 - 1 1
Profit/(loss) before finance costs 95 9 221 176
Net finance costs* (26) (20) (27) (8)
Profit/(loss) before income tax 69 (11) 194 168
Income tax
Profit after tax
Assets 2 039 1 406 1 094 961
Non-current assets* 225 244 419 401
Other current assets* 1 345 757 208 183
Trade and other receivables 427 357 462 280
Cash and cash equivalents 42 48 5 97
Liabilities 708 458 424 406
Non-current liabilities 4 3 6 2
Other current liabilities 679 444 418 404
Borrowings to finance trade receivables - - - -
Call loans and bank overdrafts 25 11 - -
Capital expenditure 75 22 47 39
* Prior year information has been reclassified. Refer to note 11.
BUSINESS SEGMENT RESULTS (R'millions) (continued)
FINANCIAL SERVICES FOODS
Animal protein Oil, milling and protein
R'million 2012 2011 2012 2011 2012 2011
Rm Rm Rm Rm Rm Rm
Revenue 406 408 3 580 2 929 1 087 514
- Sale of goods and services 212 119 3 580 2 929 1 087 514
- Interest 194 289 - - - -
Operating profit/(loss) (before items 173 230 183 293 59 36
listed below)*
Other amounts included in operating profit (13) (9) (73) (65) (12) (6)
- other operating income 4 15 - - - -
- depreciation and amortisation (17) (24) (73) (65) (12) (6)
Operating profit/(loss) 160 221 110 228 47 30
Other items of profit and loss (2) - - - - -
- fair value adjustment to disposal group assets - - - - - -
- share of profit/(loss) of associates (2) - - - - -
Profit/(loss) before finance costs 158 221 110 228 47 30
Net finance costs* (100) (177) (70) (65) (25) (6)
Profit/(loss) before income tax 58 44 40 163 22 24
Income tax
Profit after tax
Assets 1 280 3 553 1 984 1 877 697 302
Non-current assets* 231 345 1 199 1 098 430 97
Other current assets* 158 137 301 247 94 131
Trade and other receivables 804 2 919 481 519 172 74
Cash and cash equivalents 87 152 3 13 1 -
Liabilities 408 3 024 1 298 677 349 168
Non-current liabilities 15 20 509 118 37 7
Other current liabilities 257 133 581 559 147 161
Borrowings to finance trade receivables 135 2 871 - - - -
Call loans and bank overdrafts 1 - 208 - 165 -
Capital expenditure 19 30 145 86 100 25
* Prior year information has been reclassified. Refer to note 11.
BUSINESS SEGMENT RESULTS (R'millions) (continued)
OTHER
Corporate BEE SPVs Inter-group eliminations
R'million 2012 2011 2012 2011 2012 2011
Rm Rm Rm Rm Rm Rm
Revenue - - - - (227) (69)
- Sale of goods and services - - - - (227) (69)
- Interest - - - - - -
Operating profit/(loss) (before items (29) (40) - - - -
listed below)*
Other amounts included in operating profit (17) (6) - - - -
- other operating income 10 12 - - - -
- depreciation and amortisation (27) (18) - - - -
Operating profit/(loss) (46) (46) - - - -
Other items of profit and loss - - - - - -
- fair value adjustment to disposal group assets - - - - - -
- share of profit/(loss) of associates - - - - - -
Profit/(loss) before finance costs (46) (46) - - - -
Net finance costs* 1 6 (80) (81) - -
Profit/(loss) before income tax (45) (40) (80) (81) - -
Income tax
Profit after tax
Assets 448 500 (38) (33) (308) (588)
Non-current assets* 256 319 8 (33) - -
Other current assets* 56 39 - - (308) (267)
Trade and other receivables 35 47 (46) - - (321)
Cash and cash equivalents 101 95 - - - -
Liabilities 1 898 1 621 557 538 (200) (489)
Non-current liabilities 1 559 64 - 534 - -
Other current liabilities 74 65 557 4 (200) (489)
Borrowings to finance trade receivables - 552 - - - -
Call loans and bank overdrafts 265 940 - - - -
Capital expenditure 7 93 - - - -
* Prior year information has been reclassified. Refer to note 11.
BUSINESS SEGMENT RESULTS (R'millions) (continued)
TOTALS TOTALS
Continuing operations Discontinued operations All operations
R'million 2012 2011 2012 2011 2012 2011
Rm Rm Rm Rm Rm Rm
Revenue 7 612 5 664 1 809 1 685 9 421 7 349
- Sale of goods and services 7 417 5 372 1 809 1 685 9 226 7 057
- Interest 195 292 - - 195 292
Operating profit/(loss) (before items 722 727 34 17 756 744
listed below)*
Other amounts included in operating profit (143) (110) (7) (12) (150) (122)
- other operating income 14 27 - - 14 27
- depreciation and amortisation (157) (137) (7) (12) (164) (149)
Operating profit/(loss) 579 617 27 5 606 622
Other items of profit and loss 6 1 - (2) 6 (1)
- fair value adjustment to disposal group assets - - - (2) - (2)
- share of profit/(loss) of associates 6 1 - - 6 1
Profit/(loss) before finance costs 585 618 27 3 612 621
Net finance costs* (327) (351) (11) (23) (338) (374)
Profit/(loss) before income tax 258 267 16 (20) 274 247
Income tax (76) (64) (2) 8 (78) (56)
Profit after tax 182 203 14 (12) 196 191
Assets 7 196 7 978 7 196 7 978
Non-current assets* 2 768 2 471 2 768 2 471
Other current assets* 1 854 1 227 1 854 1 227
Trade and other receivables 2 335 3 875 2 335 3 875
Cash and cash equivalents 239 405 239 405
Liabilities 5 442 6 403 5 442 6 403
Non-current liabilities 2 130 748 2 130 748
Other current liabilities 2 513 1 281 2 513 1 281
Borrowings to finance trade receivables 135 3 423 135 3 423
Call loans and bank overdrafts 664 951 664 951
Capital expenditure 393 295 393 295
* Prior year information has been reclassified. Refer to note 11.
GOUP INCOME STATEMENTS (R'millions)
Note Year ended Year ended
30 June 30 June
Audited Audited
2012 2011
Continuing operations
Sales of goods and services 7 417 5 372
Interest on trade receivables 195 292
Total sales 7 612 5 664
Cost of sales (5 611) (3 832)
Gross profit 2 001 1 832
Other operating income 14 27
Selling and administration expenses* (1 436) (1 242)
Operating profit 579 617
Interest income* 3.2 23 21
Finance costs 3.1 (350) (372)
Share of profit of associates 6 1
Profit before income tax 258 267
Income tax expenses (76) (64)
Profit for the year from continuing operations 182 203
Discontinued operations
Profit/(Loss) for the year from discontinued operations 9 14 (12)
Profit for the year 196 191
Profit for the year attributable to:
Equity holders of the Company 195 190
Non-controlling interest - Other non-controlling interest 1 1
Profit for the year 196 191
Number of shares in issue ('m) 375,5 375,5
Weighted average number of shares in issue ('m) 333,6 328,5
Diluted weighted average number of shares in issue ('m) 357,0 356,5
Earnings per share from continuing operations (cents) 55,3 60,6
Earnings/(Losses) per share from discontinued operations (cents) 3,0 (2,6)
Earnings per share from all operations (cents) 58,3 58,0
Diluted earnings per share from continuing operations (cents) 51,6 55,8
Diluted earnings/(losses) per share from discontinued operations (cents) 2,8 (2,4)
Diluted earnings per share from all operations (cents) 54,4 53,4
* Prior year information has been reclassified. Refer to note 11.
GROUP STATEMENT OF COMPREHENSIVE INCOME (R'millions)
Year ended Year ended
30 June 30 June
Audited Audited
2012 2011
Profit for the year 196 191
Other comprehensive income
Exchange differences on translating foreign operations 40 8
Cash flow hedges (4) 7
Other comprehensive income for the year, net of tax 36 15
Total comprehensive income for the year 232 206
Total comprehensive income attributable to:
Equity holders of the Company 231 205
Non-controlling interest - Other non-controlling interest 1 1
232 206
GROUP CASH FLOW STATEMENT (R'millions)
Year ended Year ended
30 June 30 June
Audited Audited
2012 2011
Operating activities
Cash generated by operations before changes in working capital 442 381
and tax paid
Changes in working capital (1 538) (360)
Tax paid (60) (48)
Net cash utilised in operating activities (1 156) (27)
Net cash utilised in investing activities (594) (467)
Net cash generated from/(utilised in) financing activities 1 950 (467)
Net increase/(decrease) in cash and cash equivalents 200 (961)
Cash and cash equivalents at the beginning of year (693) 268
Cash and cash equivalents at the end of the period (493) (693)
Cash collateral deposits 76 147
Cash and cash equivalents and cash collateral deposits (417) (546)
- Included in cash, cash equivalents and cash collateral deposits (425) (546)
- Included in assets of disposal group classified as held-for-sale 8 -
GROUP STATEMENT OF CHANGES IN EQUITY (R'millions)
Share Fair value Retained Treasury Incentive
capital and other earnings shares trust
reserves shares
Balance 30 June 2010 (audited) - 43 1 820 (90) (171)
Profit for the year - - 190 - -
Other comprehensive income
for the year - 15 - - -
Disposal of incentive shares - - - - 38
Dividends paid - - (137) - -
Payment to non-controlling
interests - - - - -
Share-based payments - 6 - - -
Transaction with non-controlling interests - - (23) - -
Consolidation of BEE SPVs - (120) - - -
BEE partners share to
non-distributable reserve - (8) 8 - -
Balance 30 June 2011 (audited) - (64) 1 858 (90) (133)
Profit for the year - - 195 - -
Other comprehensive income
for the year - 36 - - -
Disposal of incentive shares - - - - 16
Executive Award Scheme shares - - - - (6)
Dividends paid - - (73) - -
Payment to non-controlling
interests - - - - -
Treasury shares issued as
Executive Award Scheme shares - - - 4 -
Share-based payments - 7 - - -
BEE partners share to
non-distributable reserve - (2) 2 - -
Balance 30 June 2012 (audited) - (23) 1 982 (86) (123)
GROUP STATEMENT OF CHANGES IN EQUITY (R'millions) (continued)
Total BEE Other Total
share- partners non-controlling
holders interests
equity
Balance 30 June 2010 (audited) 1 602 670 13 2 285
Profit for the year 190 - 1 191
Other comprehensive income
for the year 15 - - 15
Disposal of incentive shares 38 - - 38
Dividends paid (137) - - (137)
Payment to non-controlling
interests - - (10) (10)
Share-based payments 6 - - 6
Transaction with non-controlling
interests (23) - - (23)
Consolidation of BEE SPVs (120) (670) - (790)
BEE partners share to
non-distributable reserve - - - -
Balance 30 June 2011 (audited) 1 571 - 4 1 575
Profit for the year 195 - 1 196
Other comprehensive income
for the year 36 - - 36
Disposal of incentive shares 16 - - 16
Executive Award Scheme shares (6) - - (6)
Dividends paid (73) - - (73)
Payment to non-controlling
interests - - (1) (1)
Treasury shares issued as
Executive Award Scheme shares 4 - - 4
Share-based payments 7 - - 7
BEE partners share to
non-distributable reserve - - - -
Balance 30 June 2012 (audited) 1 750 - 4 1 754
NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
1.Basis of preparation and accounting policies
The directors of AFGRI Limited ("AFGRI" or "the Company") present these audited condensed consolidated financial results of the AFGRI
group of companies ("the Group") for the year ended 30 June 2012. These condensed consolidated annual financial statements have been
prepared in accordance with International Financial Reporting Standards ("IFRS") IAS 34 under the historical cost convention, as
modified by the revaluation of available-for-sale financial assets and financial liabilities (including derivative financial instruments)
and biological assets at fair value through profit or loss, the Listings Requirements of the JSE Limited ("JSE") and the South African
Companies Act (Act 71 of 2008) as amended, on a basis consistent with that of the prior year. The preparation of the condensed consolidated
annual financial statements has been supervised by the Group Financial Director, JA van der Schyff CA(SA).
Property, plant Other intangible
and equipment assets and goodwill
Year Year Year Year
ended ended ended ended
30 June 30 June 30 June 30 June
(R'millions) 2012 2011 2012 2011
2.Property, plant and equipment, other intangible assets
and goodwill
Carrying value beginning of year 1 699 1 394 387 278
Additions 388 223 5 72
Borrowing costs capitalised 5 1 - 2
Disposals at book value (18) (49) - -
Foreign currency differences 10 3 2 1
Depreciation/amortisation (122) (103) (42) (46)
Purchase of subsidiaries 154 255 83 80
Net sale of subsidiary (including assets held for sale) (94) (25) (76) -
Impairment - - (9) -
Carrying value end of period 2 022 1 699 350 387
Year Year
ended ended
30 June 30 June
(R'millions) 2012 2011
3. Finance costs and interest Income
3.1 Finance costs
Interest paid on bank borrowings used to finance trade receivables (174) (205)
Other interest paid to financial institutions (101) (89)
Other interest paid to financial institutions as a result of the
consolidation of the BEE SPVs (80) (81)
Finance cost - continuing operations (355) (375)
Less: Borrowing costs capitalised on qualifying assets 5 3
Finance cost - continuing operations (per income statement) (350) (372)
Finance cost - discontinued operations (13) (27)
Finance cost - total (363) (399)
3.2 Interest income
Interest received from financial institutions 3 3
Interest received from independent third parties 20 18
Interest income - continuing operations (per income statement) 23 21
Interest income - discontinued operations 2 4
Interest income - total 25 25
Year Year
ended ended
30 June 30 June
(Cents) 2012 2011
4. Reconciliation of headline earnings per share
Earnings 58,3 58,0
Impairment of assets 2,5 0,3
(Profit)/Loss of the sale of business - (1,0)
Profit on disposal of assets (4,2) (2,6)
Headline earnings 56,6 54,7
Diluted headline earnings 52,9 50,4
5. Business segment results
The pre-tax segment results are presented without taking into account any headline earnings adjustments and before the allocation of
any minority share of profits. Operating profits after finance costs are shown after a charge for internal interest based on each
business unit's net assets throughout the year. With the exception of the acquisition of the yellow grits and by-products maize milling
business of Pride Milling (included under the renamed Oil, Milling and Protein division), no other significant changes to the Group's
structure and operations have occurred during the year.
6. Trade receivables financed by banks and related liability
The only security for the liability is the trade receivables and in certain cases, additional cash collateral deposits of 0% (2011: 20%)
and/orcash trade receivables of up to 10% (2011: 15%). The Group carries the risk of loss on these trade receivables. The total value of
additional debtors encumbered for these facilities is R13 million (2011: R363 million).
7. Agency agreements
The Group manages agri debtors on behalf of third party financial institutions to the amount of R4,2 billion (2011: R1,4 billion).
Administration and management fees are paid by these third parties to the Group for services rendered in accordance with the service level
agreements.
On 1 December 2011 and 29 June 2012 respectively the Group sold its farmer debtors- and corporate debtors book at book value to the Land
Bank for a purchase consideration of R1,57 billion and R1,12 billion (of which R922 million relates to internal debtors) respectively.
Part of these transactions were the origination of a service level agreement under which the Group will manage, administer and service the
farmer debtors- and corporate debtors book on behalf of the Land Bank. Under this agreement the Group is only liable for bad debts on a
second loss basis to the maximum of between 0,7% and 0,5%. In accordance with IFRS, and as a result of the residual risk retained in the
books sold, R12,0 million of the farmer debtors and R1,0 million of the external corporate debtors were not derecognised as part of the
sale. A further R4,3 million guarantee provisions, R4,0 million relating to the farmer debtors book and R0,3 million relating to the
corporate debtors book were raised to accommodate the potential second loss in the books sold. Shareholders are referred to the announcements
on SENS on 5 December 2011 and 3 July 2012 for further details regarding these transactions.
On all other service level agreements, the Group is liable for bad debts to a maximum of between 5% and 10% of specific debtors administered.
The Group receives a fee for the handling, grading, storing and administration of commodities on behalf of third parties. The value of these
commodities is R5,3 billion (2011: R3,4 billion).
8. Business combinations
On 1 December 2011 the Group acquired the yellow grits and by-products milling business of Pride Milling Company Proprietary Limited,
conducted at Ermelo, Kinross and Bethal, as a going concern. Purchase consideration amounted to R242 million, which includes contingent
consideration of R20 million, plus net working capital on effective date. Contingent consideration is payable should certain profit targets
be met on 30 November 2013. The initial accounting for this business combination in terms of IFRS 3 is complete and the fair values of
the assets and liabilities acquired were determined as follows: property, plant and equipment of R153,7 million, intangible assets of
R23,2 million, inventory of R25,3 million, trade and other receivables of R76,8 million and trade and other payables of R51,4 million. Goodwill
of R60,3 million arose as the difference between the fair value of purchase consideration and the fair value of the net assets acquired.
Since 1 December 2011 this business unit generated revenue of R282,6 million and a net profit before tax of R24,3 million (before the allocation
of internal interest) which were included in the current year results.
9. Assets of disposal groups classified as held-for-sale and discontinued operations
On 31 July 2012 the Group and Senwes Limited ("Senwes") entered into binding sale of business agreements with Business Venture Investments
No 1658 Proprietary Limited ("Newco") in terms of which the Group and Senwes will merge their respective agricultural retail businesses, as
well as the Partrite business of AFGRI.
In terms of the sale of business agreements, the Group will sell its retail agricultural business as well as its shareholding in Partrite
(Pty) Limited and Dormanco (Pty) Limited to Newco as a going concern. Senwes will sell to Newco its agricultural retail business as a going
concern, including Senwes Capital Proprietary Limited. The respective values of the AFGRI Retail Business and the Senwes Retail Business will
be determined and the party whose business's value is the lower of the two shall contribute a cash adjustment to the other party to ensure that
the respective values of the businesses are equal. This will ensure that upon completion of the transaction each party will hold 50% of the
issued shares in Newco. The transaction is subject to the fulfilment of various suspensive conditions, in particular the unconditional approval
of the South African Competition Authorities, both parties' satisfaction with the results of financial, legal and technical due diligence and the
determination of the respective values of both parties' retail businesses. Further details regarding this transaction were published on SENS on
31 July 2012.
As a result of this transaction, this group of assets ("disposal group") are disclosed as a disposal group held-for-sale as at 30 June 2012 as
its carrying values will be recovered principally through a sales transaction rather than through continuing use under the conditions specified
in IFRS 5. It also meets the definition of a discontinued operation, as it is a separate major line of business which will be disposed of in a
single transaction. Comparatives have been restated to ensure comparability.
During the year the Group entered into various discussions regarding the sale of its intellectual property right, trademark and patent on
automated banking machines registered as "Deposita" together with its 46% investment in Deposita Systems (Pty) Limited. A number of indicative
offers were received and final negotiations are underway. In accordance with IFRS5, these assets were disclosed as held-for-sale at 30 June 2012,
as all conditions within IFRS5 have been met.
During the prior financial year the Group concluded a sale agreement of one of its poultry breeder farms "Uitkyk", situated near Mokopane,
with Mike's Chicken (Pty) Limited. The affected assets and liabilities were disclosed as held-for-sale. The prior year further includes the
loss on the remeasurement of assets of the poultry breeder farm "Uitkyk" to fair value due to its held-for-sale classification. The prior year
also includes the loss from the discontinued business unit in the Group's trading division which were closed in 2011.
10. Subsequent event
On 31 July 2012 the Group and Senwes Limited ("Senwes") entered into binding sale of business agreements with Business Venture Investments
No 1658 Proprietary Limited ("Newco") in terms of which the Group and Senwes will merge their respective agricultural retail businesses, as
well as the Partrite business of AFGRI.
Although this represents a non-adjustable event after balance sheet date in terms of IAS10, the conditions for held-for-sale classification
under IFRS5 have all been met as at 30 June 2012 resulting in the affected assets and liabilities of the Group's affected businesses being
disclosed as held-for-sale as at 30 June 2012. Please refer to note 9 for more detail on this transaction.
11. Comparative figures
During the current financial year interest income was separately disclosed on the face of the income statement. The prior year information
has been reclassified to ensure comparability and a total amount of R24.7 million has been reclassified from selling and administration expenses
to interest income due to an incorrect classification in the prior year.
The Group also disclosed the non-current portion of biological assets for the year ended 30 June 2012. The prior year information has also been
reclassified from current to non-current due to its incorrect classification in the prior year, to the value of R7,4 million.
12. Going concern
The Board of Directors is satisfied that, after taking into account the current banking facilities, its utilisation thereof and the budgeted
profit and cash flows for the year ending 30 June 2013, the working capital available to AFGRI will be sufficient to meet its requirements for
the next 12 months.
13. Corporate governance and JSE Limited (JSE) compliance
The Group applied the principles of good corporate governance as set out in King III and complies with the JSE Listings Requirements regarding
the contents of the condensed consolidated annual financial statements.
14. Audit opinion
These condensed consolidated financial results have been audited by our auditors, PricewaterhouseCoopers Inc., who have performed their audit
in accordance with the International Standards on Auditing. A copy of their unqualified audit report is available for inspection at the
registered office of the company.
15. Annual financial statements
A copy of the Groups Annual financial statements for the year ended 30 June 2012 is available at the Groups registered office and can be obtained
from company secretary Ms M Shikwinya. The Groups Integrated Report will be distributed to shareholders on or before 18 September 2012.
Year Year
ended ended
30 June 30 June
(R'millions) 2012 2011
16. Capital commitments
Contracted for additions to property,
plant and equipment and intangibles 44 12
Authorised but not yet contracted for additions
to property, plant and equipment 91 18
135 30
Directorate
Non-executive
JPR Mbau (Chairman), DD Barber, L de Beer, LM Koyana, BA Mabuza, NL Shirilele, CT Vorster, NC Wentzel
Executive
CP Venter (Chief Executive Officer), JA van der Schyff (Financial Director)
Administration
Business address and registered office
AFGRI Building, 12 Byls Bridge Boulevard
Highveld Ext 73, Centurion, 0157
Tel 011 063 2347
Fax 087 942 5010
Income tax reference number
9217/001/71/9
Company Secretary
Ms M Shikwinya
PO Box 11054
Centurion, 0046
Bankers
ABSA Bank Limited
FirstRand Bank Limited
Investec Bank Limited
Land and Agricultural Development Bank of SA Limited Nedcor Limited
Standard Bank of SA Limited
Standard Chartered Bank
Auditors
PricewaterhouseCoopers Inc.
32 Ida Street, Menlyn Park, 0102
PO Box 35296, Menlo Park, 0102
Tel 012 429 0000
Transfer secretaries
Computershare Investor Services Proprietary Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Tel: 011 370 5000
Sponsor
Investec Bank Limited
100 Grayston Drive, Sandton, 2196
PO Box 785700
Sandton, 2146
Tel 011 286 7000
This announcement is available on SENS and
AFGRI's website at www.afgri.co.za
Date: 05/09/2012 07:35:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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