Wrap Text
Unaudited interim results for the six months ended 30 June 2013
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 2013
Condensed statement of comprehensive income
Restated Restated
Unaudited Unaudited Unaudited
Half-year Half-year Year ended
30 June 30 June 31 December
Rand thousands Notes 2013 2012 2012
Revenue 327 918 333 569 674 393
Cost of sales (246 497) (245 229) (504 688)
Gross profit 81 421 88 340 169 705
Fair value adjustment of biological assets 675 3 824 10 455
Other operating income 2 774 4 784 10 876
Distribution expenses (49 296) (45 896) (96 586)
Selling and marketing expenses (6 177) (10 982) (14 423)
Administrative expenses (7 184) (7 228) (17 510)
Other operating expenses (12 495) (9 579) (19 693)
Profit from operations 9 718 23 263 42 824
Finance income 1 029 807 1 564
Finance expense (1 170) (1 134) (2 359)
Profit before tax 9 577 22 936 42 029
Income tax expense 6 (2 149) (6 220) (10 150)
Profit for the period attributable to ordinary shareholders 7 428 16 716 31 879
Other comprehensive income
Remeasurement of investments 1 369
Remeasurement of post-retirement medical benefit obligation (666) (1 344) (2 688)
Decrease of income tax 186 376 753
Total comprehensive income for the period
attributable to ordinary shareholders 6 948 15 748 31 313
Earnings per share (cents)
Basic 7,1 104 235 447
Diluted 7,2 104 234 447
Condensed statement of financial position
Restated Restated
Unaudited Unaudited Unaudited
Half-year Half-year Year ended
30 June 30 June 31 December
Rand thousands Notes 2013 2012 2012
ASSETS
Non-current assets
Property, plant and equipment 108 606 104 925 112 677
Intangible assets 402 504 484
Biological assets 2 172 476 165 169 171 801
Investments 1 399 30 1 399
Total non-current assets 282 883 270 628 286 361
Current asset
Inventories 119 206 103 781 115 044
Trade and other receivables 120 380 118 944 68 504
Amounts due from fellow subsidiaries 503 518
Tax receivable 2 760 8 457 4 483
Derivative financial instruments 567 1 074 1 680
Cash and cash equivalents 51 128 48 773 93 902
Total current assets 294 041 281 532 284 131
Total assets 576 924 552 160 570 492
EQUITY
Capital and reserves
Share capital 3 566 3 562 3 562
Share premium 3 156 3 156 3 156
Share-based payment reserves 1 923 3 702 1 773
Retained earnings 397 050 374 537 390 102
Total equity 405 695 384 957 398 593
LIABILITIES
Non-current liabilities
Deferred tax liabilities 45 212 45 941 45 177
Post-retirement benefit obligations 32 731 29 337 31 116
Straight-line lease accrual 107 104 107
Total non-current liabilities 78 050 75 382 76 400
Current liabilities
Trade and other payables 85 673 89 605 92 329
Amounts due to fellow subsidiaries 4 416 1 003 2 945
Derivative financial instruments 3 080 1 204 215
Straight-line lease accrual 10 9 10
Total current liabilities 93 179 91 821 95 499
Total equity and liabilities 576 924 552 160 570 492
Condensed statement of cash flows
Restated Restated
Unaudited Unaudited Unaudited
Half-year Half-year Year-end
30 June 30 June 31 December
Rand thousands 2013 2012 2012
Cash flow from operating activities
Profit from operations 9 718 23 263 42 824
Adjusted for:
Fair value adjustment of biological assets (675) (3 824) (10 455)
Depreciation and amortisation 11 231 9 920 20 478
IFRS 2: Share-based Payment charge/(gain) 150 722 (1 207)
Foreign exchange (gain)/loss unrealised 2 635 (2 912) (4 093)
Increase in liability for retirement benefit obligation 949 955 1 390
Gain/(loss) on disposal of property, plant and equipment 28 (36)
Other non-cash items 3 7
Tax payments (206) (8 208) (8 550)
Change in working capital (57 980) (59 805) (16 005)
Cash flow from operations (34 178) (39 858) 24 353
Net financing expense (68) (304) (847)
Net cash flow from operating activities (34 246) (40 162) 23 506
Cash flow from investing activities
Expenditure on property, plant and equipment
Replacement (7 078) (7 194) (25 504)
Proceeds on disposal of property, plant and equipment 17 95
Net cash outflow from investing activities (7 078) (7 177) (25 409)
Cash flow from financing activities
Proceeds on issue of ordinary shares 4
Net cash flow from investing activities 4
Net decrease in cash and cash equivalents (41 320) (47 339) (1 903)
Effects of exchange rates on the balance of cash held
in foreign currencies (1 454) 847 540
Net cash and cash equivalents at the beginning of the period 93 902 95 265 95 265
Net cash and cash equivalents at the end of the period 51 128 48 773 93 902
Condensed statement of changes in equity
Share-based
Share Share payment Retained Total
Rand thousands capital premium reserve income equity
Balance as at 1 January 2012 (as previously reported) 3 562 3 156 2 980 360 280 369 978
Remeasurement of post-retirement medical benefit obligation
(see note 8) (1 491) (1 491)
Balance as at 1 January 2012 (restated) 3 562 3 156 2 980 358 789 368 487
Share-based payment charge 722 722
Net profit for the period attributable to ordinary shareholders 16 716 16 716
Other comprehensive income for the period, net of tax (968) (968)
Balance as at 30 June 2012 (restated) 3 562 3 156 3 702 374 537 384 957
Share-based payment gain for the period (1 929) (1 929)
Net profit for the period attributable to ordinary shareholders 15 163 15 163
Other comprehensive income for the period, net of tax 402 402
Balance as at 31 December 2012 (restated) 3 562 3 156 1 773 390 102 398 593
Issue of ordinary shares under the share incentive scheme 4 4
Share-based payment charge for the period 150 150
Net profit for the period attributable to ordinary shareholders 7 428 7 428
Other comprehensive income for the period, net of tax (480) (480)
Balance as at 30 June 2013 3 566 3 156 1 923 397 050 405 695
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 2013 2012 2012 2013 2012 2012
Segment revenue
Hardboard 255 098 253 677 517 537 13 407 27 278 33 202
Other products 38 475 39 649 83 348 12 (1 635) 4 953
Forestry 52 919 54 098 102 439 2 082 7 969 21 048
Intersegment (19 975) (14 509) (30 026)
Unallocated 1 401 654 1 095 1 401 633 1 131
Total 327 918 333 569 674 393 16 902 34 245 60 334
Administrative expenses (7 184) (10 982) (17 510)
Profit from operations 9 718 23 263 42 824
Finance income 1 029 807 1 564
Finance expense (1 170) (1 134) (2 359)
Profit before tax 9 577 22 936 42 029
Income tax expense (2 149) (6 220) (10 150)
Profit for the period attributable to ordinary shareholders 7 428 16 716 31 879
Notes
1. Basis of preparation
The condensed financial information has been prepared in accordance with the framework concepts and measurement requirements
of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Pratices
Committee 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 2012, except for the application of IAS 19: Employee Benefits as revised in 2011.
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 theland productively.
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
Rand thousands 2013 2012 2012
Timber plantations
Establishment costs 55 489 38 889 41 007
Immature timber 50 631 54 740 55 130
Mature timber 56 943 60 873 66 256
Total 163 063 154 502 162 393
Sugar cane
Establishment costs 2 513 4 841 2 456
Immature sugar cane 2 842 4 362 3 942
Mature sugar cane 4 058 1 464 3 010
Total 9 413 10 667 9 408
Total biological assets 172 476 165 169 171 801
3. 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. All actuarial gains and losses are recognised immediately through other comprehensive
income in order for the liability recognised in the statement of financial position to reflect the full value of the plan
deficit or surplus. 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.
4. Masonite 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 options
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 Employee Share Incentive Scheme in respect of the awards made to executive directors and senior management on
4 January 2011.
5. 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 transactions 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 activities 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 2013 2012 2012
6. Income tax expense
Current tax 1 929 5 081 9 397
Deferred tax 220 1 139 753
Total 2 149 6 220 10 150
7. Earnings per share
7.1 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 period.
Profit for the period attributable to ordinary shareholders 7 428 16 716 31 879
Weighted average number of ordinary shares in issue 7 129 558 7 124 225 7 124 225
Basic earnings per share (cents) 104 235 447
7.2 Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of 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
(2012: 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 2013 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. As at 30 June 2013,
8 000 (2012: nil) share options were exercised.
Profit for the period attributable to ordinary shareholders 7 428 16 716 31 879
Weighted average number of ordinary shares in issue 7 129 558 7 124 225 7 124 225
Adjusted for weighted average share options outstanding 8 413 24 931 14 075
Weighted average number of ordinary shares (diluted) at 30 June 7 137 971 7 149 156 7 138 300
Diluted earnings per share (cents) 104 234 447
7.3 Headline earnings
Reconciliation of headline earnings for the period
Profit for the period attributable to ordinary shareholders 7 428 16 716 31 879
Adjusted for:
Loss/(profit) on disposal of assets 28 (36)
Tax effect of loss/(profit) on disposal of assets (8) 10
Headline earnings 7 428 16 736 31 853
Headline earnings per share (cents) 104 235 447
Diluted headline earnings per share (cents) 104 234 446
8. Change in accounting policy
In the current year, the company has applied IAS: 19 Employee Benefits (as revised in 2011) and the related consequential amendments.
The company has applied IAS 19 (as revised in 2011) retrospectively and in accordance with the transitional provisions as set out in
IAS 19.173 (as revised in 2011). The opening balance of the earliest comparative period presented (1 January 2012) has been restated.
The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The most significant
changes relate to accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of
changes in defined benefit obligations and in fair value of plan assets when they occur, and hence eliminate the "corridor approach"
permitted under the previous version of IAS 19 and accelerate the recognition of past service costs. All actuarial gains and losses
are recognised immediately through other comprehensive income in order for the net plan asset or liability recognised in the statement
of financial position to reflect the full value of the plan deficit or surplus. Furthermore, the interest cost and expected return on plan
assets used in the previous version of IAS:19 is replaced with a "net-interest" amount under IAS 19 (as revised in 2011), which is calculated
by applying the discount rate to the net defined benefit liability or asset. IAS 19 (as revised in 2011) introduces certain changes in the
presentation of the defined benefit cost, including more extensive disclosures.
The effect on the statement of financial position was as follows:
Post-retirement Deferred tax Retained
Rand thousands benefit obligation liability income
Balance as reported at 1 January 2012 24 967 45 757 360 280
Effect of adoption of IAS 19 (as revised in 2011) 2 071 (580) (1 491)
Restated balance as at 1 January 2012 27 038 45 177 358 789
Balance as reported at 30 June 2012 25 922 46 897 376 996
Effect of adoption of IAS 19 (as revised in 2011) 2 071 (580) (1 491)
Effect on other comprehensive income 1 344 (376) (968)
Restated balance as at 30 June 2012 29 337 45 941 374 537
Balance as reported at 31 December 2012 26 357 46 510 393 528
Effect of adoption of IAS 19 (as revised in 2011) 2 071 (580) (1 491)
Effect on other comprehensive income 2 688 (753) (1 935)
Restated balance as at 31 December 2012 31 116 45 177 390 102
Unaudited Audited
Half-year Year ended
30 June 31 December
Rand thousands 2012 2012
The effect on the statement of comprehensive income was as follows:
Previously reported total comprehensive income for the period attributable to ordinary shareholders 16 716 33 248
Effect of adoption of IAS 19 (as revised in 2011) (1 344) (2 688)
Deferred tax on the effect of adoption of IAS 19 (as revised in 2011) 376 753
Restated total comprehensive income for the period 15 748 31 313
9. Changes in directorate
Mr AG Venton (executive director) resigned from the board on 23 May 2013 and retired from the company with effect 30 June 2013.
Commentary
Revenue declined by 1,7% to R327,9 million (2012: R333,6 million) in the period under review. The decline was mainly due to
competitive pricing in the local market, weakness in the packaging sector and slowdown in the export markets. Timber revenue
also declined due to lower timber availability from the plantations.
Profit from operations, (excluding the effect of adjustment to the fair value of biological assets), was 53,5% lower than
that of the prior comparative period due to increased costs, notably distribution, energy, labour (exacerbated by the
introduction of sectorial wage determination in the forestry sector) and foreign exchange translation loss as the Rand weakened.
The fair value adjustment to biological assets was lower than the prior comparative period due to lower timber volumes following
the high snowfalls and fires in prior periods and no timber price increase in the first half of 2013. Headline earnings declined
by 55,7% due to the lower profit from operations.
Cash and cash equivalents improved by 4,4% on the prior comparative period due to a refund of prior period tax overpayment.
Continuous cost improvement initiatives, both at the Mill and Forestry, are on track and are expected to achieve positive results
in due course.
MG Leitch HJ Loring
Chairman Chief Executive Officer 16 August 2013
Corporate information
DIRECTORS MG Leitch (Chairman), HJ Loring (Chief Executive Officer), NM Stromnes
(Chief Financial Officer), WP Coetzee, N Maharajh, CA Virostek (Canadian),
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
SPONSOR
Nedbank Capital
135 Rivonia Road, Sandton, 2196
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