Wrap Text
Unaudited Interim Results
for the six months ended 30 June 2012
MASONITE (AFRICA) LIMITED
Incorporated in the Republic of South Africa
Registration number: 1942/015502/06
Share code: MAS ISIN: ZAE000004289
("Masonite" or "the company")
UNAUDITED INTERIM RESULTS
for the six months ended 30 June 2012
Condensed statement of comprehensive income
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
Rand thousands Notes 2012 2011 2011
Revenue 333 569 303 036 654 373
Cost of sales (245 229) (219 592) (495 231)
Gross profit 88 340 83 444 159 142
Fair value adjustment of biological assets 3 824 16 966 (2 059)
Other income 4 784 2 500 2 361
Distribution expenses (45 896) (45 822) (91 521)
Administrative expenses (10 982) (5 793) (17 418)
Selling and marketing expenses (7 228) (6 685) (13 198)
Other expenses (9 579) (7 896) (26 021)
Results from operations 23 263 36 714 11 286
Finance income 807 1 345 3 145
Finance cost (1 134) (1 146) (2 162)
Profit before tax 22 936 36 913 12 269
Income tax expense 7 (6 220) (10 355) (2 441)
Net profit for the period 16 716 26 558 9 828
Other comprehensive income
Total comprehensive income for the period
attributable to ordinary shareholders 16 716 26 558 9 828
Earnings per share (cents)
Basic 8.1 235 373 138
Diluted 8.2 234 373 138
Condensed statement of financial position
Restated
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
Rand thousands Notes 2012 2011 2011
ASSETS
Non-current assets
Property, plant and equipment 104 925 111 585 107 700
Intangible assets 504 480 494
Biological assets 2 165 169 180 371 161 346
Investments 30 30 30
Total non-current assets 270 628 292 466 269 570
Current assets
Inventories 103 781 76 736 81 774
Trade and other receivables 118 944 88 809 88 309
Amounts due from fellow subsidiaries 503 236
Tax receivable 8 457 6 069 5 330
Derivative financial instruments 3 1 074 971 82
Cash and cash equivalents 48 773 71 891 95 265
Total current assets 281 532 244 712 270 760
TOTAL ASSETS 552 160 537 178 540 330
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 3 702 1 987 2 980
Retained income 376 996 377 010 360 280
Total equity 387 416 385 715 369 978
Non-current liabilities
Deferred tax 46 897 54 433 45 757
Post-retirement benefit obligation 4 25 922 24 654 24 967
Straight-lining lease accrual 104 81 103
Total non-current liabilities 72 923 79 168 70 827
Current liabilities
Trade and other payables 89 605 71 050 93 886
Amounts payable to fellow subsidiaries 1 003 1 055 2 069
Derivative financial instruments 3 1 204 184 3 563
Straight-lining lease accrual 9 6 7
Total current liabilities 91 821 72 295 99 525
TOTAL EQUITY AND LIABILITIES 552 160 537 178 540 330
Net asset value per share (cents) 5 438 5 414 5 193
Condensed statement of cash flows
Restated
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
Rand thousands 2012 2011 2011
Cash flow from operating activities
Operating profit 23 263 36 714 11 286
Adjusted for:
Fair value adjustment of biological assets (3 824) (16 966) 2 059
Depreciation and amortisation 9 920 8 311 17 462
IFRS 2: Share-based Payment Charge 722 1 987 2 980
Foreign exchange (gain)/loss unrealised (2 912) (734) 4 935
Increase in liability for retirement benefit obligation 955 947 1 260
Loss on disposal of property, plant and equipment 28 14 38
Other non-cash items 3 10 33
Tax payments (8 208) (8 658) (8 680)
Change in working capital (59 805) (9 066) 11 719
Cash flow from operations (39 858) 12 559 43 092
Net financing (expense)/income (304) 324 1 028
Net cash flow from operating activities (40 162) 12 883 44 120
Cash flow from investing activities
Expenditure on property, plant and equipment
Replacement (7 194) (10 885) (16 190)
Proceeds on disposal of property, plant and equipment 17 61 61
Net cash outflow from investing activities (7 177) (10 824) (16 129)
Net (decrease)/increase in cash and cash equivalents (47 339) 2 059 27 991
Effects of exchange rates on the balance of cash
held in foreign currencies 847 41 (2 516)
Net cash and cash equivalents at the beginning of the year 95 265 69 790 69 790
Net cash and cash equivalents at the end of the year 48 773 71 890 95 265
Segment revenues and results
Segment revenue Segment PBIT
Unaudited Unaudited Audited Unaudited Unaudited Audited
Half-year Half-year Year ended Half-year Half-year Year ended
30 June 30 June 31 December 30 June 30 June 31 December
Rand thousands 2012 2011 2011 2012 2011 2011
Segment revenue
Hardboard 253 677 229 769 494 309 27 278 20 277 22 965
Other products 39 649 35 736 75 589 (1 635) (3 476) (11 071)
Forestry 54 098 54 496 112 453 7 969 25 373 16 415
Intersegment (14 509) (17 299) (28 413)
Unallocated 654 334 435 633 333 395
Total 333 569 303 036 654 373 34 245 42 507 28 704
Administrative expenses (10 982) (5 793) (17 418)
Results from operations 23 263 36 714 11 286
Finance income 807 1 345 3 145
Finance expense (1 134) (1 146) (2 162)
Profit before tax 22 936 36 913 12 269
Income tax expense (6 220) (10 355) (2 441)
Total per condensed statement of comprehensive income 16 716 26 558 9 828
Condensed statement of changes in equity
Share-
based
Share Share payment Retained Total
Rand thousands capital premium reserve income equity
Balance at 1 January 2011 audited 3 562 3 156 350 452 357 170
Share-based payment charge 1 987 1 987
Total comprehensive income attributable
to ordinary shareholders 26 558 26 558
Balance at 30 June 2011 unaudited 3 562 3 156 1 987 377 010 385 715
Share-based payment charge 993 993
Total comprehensive loss attributable
to ordinary shareholders (16 730) (16 730)
Balance at 31 December 2011
audited 3 562 3 156 2 980 360 280 369 978
Share-based payment charge 722 722
Total comprehensive income attributable
to ordinary shareholders 16 716 16 716
Balance at 30 June 2012 unaudited 3 562 3 156 3 702 376 996 387 416
Notes
1. Basis of preparation
The condensed financial information has been prepared in accordance with the framework concepts and the measurement 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 and the requirements of the Companies Act of South Africa. This 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 2011. The condensed financial statements have been
prepared under the supervision of the Chief Financial Officer (NM Stromnes).
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
or loss. 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 2012 2011 2011
Timber plantations
Establishment costs 38 889 28 557 31 315
Immature timber 54 740 46 914 46 325
Mature timber 60 873 94 197 77 459
Total 154 502 169 668 155 099
Sugar cane
Establishment costs 4 841 3 286 2 321
Immature sugar cane 4 362 5 226 2 780
Mature sugar cane 1 464 2 191 1 146
Total 10 667 10 703 6 247
Total biological assets 165 169 180 371 161 346
3. Derivative financial instruments
The fair value of derivative financial instruments was:
Forward exchange contracts hedge accounted (130) 787 (3 481)
Summarised as:
Derivative financial instruments asset 1 074 971 82
Derivative financial instruments liability (1 204) (184) (3 563)
(130) 787 (3 481)
Results from operations in the statement of comprehensive
income includes:
Forward exchange contracts hedge gain 1 074 971 82
Forward exchange contracts hedge loss (1 204) (184) (3 563)
(130) 787 (3 481)
The above gains and losses have been included in either other income or other expenses.
4. 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. 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 options 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.
6. 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
- total assets are those that are employed by a segment in its operating actvities and that are directly attributable to the segment or can be allocated to
the segment on a reasonable basis.
The company's reportable segments are as follows:
- Hardboard;
- Other products; and
- Forestry.
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
Rand thousands 2012 2011 2011
7. Income tax expense
Current tax 5 081 5 303 6 065
Deferred tax 1 139 5 052 (3 624)
Total 6 220 10 355 2 441
8. Earnings per share
8.1 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 16 716 26 558 9 828
Weighted average number of ordinary shares in issue 7 124 225 7 124 225 7 124 225
Basic earinings per share (cents) 235 373 138
8.2 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 (2011: 210 000) 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 2012 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 2012.
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
Rand thousands 2012 2011 2011
Profit attributable to ordinary shareholders 16 716 26 558 9 828
Weighted average number of ordinary shares in issue 7 124 225 7 124 225 7 124 225
Adjusted for weighted average share options outstanding 24 931 10 315
Weighted average number of ordinary shares (diluted) at 30 June 7 149 156 7 124 225 7 134 540
Diluted earnings per share 234 373 138
8.3 Headline earnings
Reconciliation of headline earnings
Profit for the year 16 716 26 558 9 828
Adjusted for:
Loss on disposal of assets 28 14 38
Tax effect of loss on disposal of assets (8) (4) (11)
Headline earnings 16 736 26 568 9 855
Headline earnings per share (cents) 235 373 138
Diluted headline earnings per share (cents) 235 373 138
9. Comparative figures
Comparative figures are restated in the event of a change in accounting policy or prior period error. Leave pay liability of R5 585 000 as at 30 June 2011,
previously disclosed as provisions in the statement of financial position, has been included in trade and other payables. As at 30 June, provisions utilised
of R2 157 000, previously disclosed seperately in the statement of cash flows, has now been included in the change in working capital. This change had
no impact on the reported profit or earnings per share.
10. Change in directorate
Resignation
Mr AH Wilson (Independent non-executive director and Chairman) Monday, 16 July 2012
Mr KMP Spencer (Executive director) Thursday, 30 August 2012
Appointments
Mr MG Leitch (Independent non-executive director and Chairman) Monday, 16 July 2012
Mr RE Lewis (Non-executive director) Wednesday, 18 July 2012
11. Subsequent events
During the month of August, the KwaZulu-Natal Midlands experienced unusually heavy snowfall. On one of our timber plantations a significant area was
damaged by snow. In addition to the snow damage in August, unfavourable weather conditions with extremely dry conditions and strong winds resulted
in fires on two of our plantations. The extent of the damage, arising from the snow fall and the fire, is currently being assessed to quantify the losses on
both plantations. These losses, net of recovery from insurance, will be accounted for in the six months ending 31 December 2012.
With the exception of the above no other material fact or circumstance has occurred between the end of the period and the date of this report.
COMMENTARY
Revenue increased by 10,1% to R333,6 million (2011: 303 million) in the period under review. The increase in revenue was mainly due to improved pricing,
with volumes remaining flat as the local market continues to be depressed. Export volumes were similar to that of the prior comparative period despite increasing
market weakness.
Profit from operations, (excluding the effect of adjustment to the value of biological assets and a prior period bad debt of R4,0 million recovered in the first
six months of 2011), grew by 23,3% due to improved pricing and product mix. Headline earnings decreased by 37,0% due to the impact of lower timber prices
on the fair value of biological assets and a prior period bad debt recovered in the first six months of 2011.
Cash and cash equivalents were 32,2% lower than that of the prior comparative period due to a higher level of finished goods inventory and higher trade
receivables. In addition to the higher level of imported finished goods, lower demand for ceiling products resulted in high inventory levels. Trade receivables
were within terms despite the balances being higher than the prior year.
Continuous cost improvement initiatives, both at the mill and forestry, combined with moderate local market growth is likely to benefit the company in the future.
The potential benefits of increased government infrastructure spend, at this stage, remains uncertain.
Shareholders are advised that the Chairman, Mr Alan Wilson has announced his retirement from the Board of Masonite with effect 16 July 2012. Mr Wilson had
served on the Board since 1980, initially as an executive director and since 2001 as independent non-executive Chairman. The company thanks Mr Wilson for
his leadership and service over this period.
The company is pleased to announce the appointment of Mr Malcolm Leitch, with effect 16 July 2012, as independent non-executive Chairman to the Board.
Mr Leitch served on the Boards of various Unilever South Africa companies including the main board for twenty four years and is a non-executive director of
Smollan Holdings. Mr Leitch acts as a strategic consultant to CHEP South Africa and was closely involved in establishing the Consumer Goods Council of
South Africa.
Mr Leitch has also been appointed as a member of the Audit and Risk Committee and a member of the Remuneration and Nominations Committee.
MG Leitch HJ Loring
Chairman Chief Executive Officer
17 September 2012
DIRECTORS MG Leitch (Chairman), HJ Loring (Chief Executive Officer),
NM Stromnes (Chief Financial Officer), WP Coetzee, N Maharajh,
CA Virostek (Canadian), AG Venton, MJ Erceg (USA),
LP Repar (Canadian), RE Lewis (USA)
COMPANY SECRETARY MP Govender
TRANSFER SECRETARIES
Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg, 2001
MASONITE (AFRICA) LIMITED
Incorporated in the Republic of South Africa
Registration number: 1942/015502/06
Share code: MAS ISIN: ZAE000004289
("Masonite" or "the company")
SPONSOR
Nedbank Capital
135 Rivonia Road, Sandton, 2196
Date: 17/09/2012 10:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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