ASTRAL FOODS LIMITED - Unaudited interim results and dividend declaration for the six months ended 31 March 2018

Release Date: 14/05/2018 07:05
Code(s): ARL
 
Wrap Text
Unaudited interim results and dividend declaration for the six months ended 31 March 2018

Astral Foods Limited 
Incorporated in the Republic of South Africa
Registration number 1978/003194/06
Share code: ARL
ISIN: ZAE000029757

UNAUDITED INTERIM RESULTS AND DIVIDEND DECLARATION
for the six months ended 31 March 2018

Revenue increased 15%
Operating profit increased 393%
Earnings per share increased 460%
Headline earnings per share increased 455%
Interim dividend R10.00 per share

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

                                                          Unaudited       Unaudited                    Audited
                                                         six months      six months                  12 months
                                                              ended           ended                      ended
                                                      31 March 2018   31 March 2017               30 Sept 2017
                                                              R'000           R'000   % change           R'000
Revenue                                                   6 666 331       5 794 696         15      12 351 125
  Cost of sales                                         (4 718 445)     (4 853 542)        107     (9 780 667)
Gross profit                                              1 947 886         941 154                  2 570 458
  Administrative expenses                                 (450 489)       (310 574)                  (714 222)
  Distribution costs                                      (360 956)       (331 757)                  (673 805)
  Marketing expenditure                                    (93 117)        (90 737)                  (168 944)
  Other income and gains                                        837           3 889                     64 974
  Profit before interest and tax (note 4)                 1 044 161         211 975        393       1 078 461
  Finance costs - net                                        21 960        (15 970)                   (14 839)
  Finance income                                             26 569             343                      5 088
  Finance costs                                             (4 609)        (16 313)                   (19 927)
Profit before income tax                                  1 066 121         196 005        444       1 063 622
  Tax expense                                             (299 578)        (59 939)                  (308 709)
Profit for the period                                       766 543         136 066        463         754 913
Other comprehensive income
  Items that will not be reclassified to profit or loss
  Remeasurement of post-employment benefit
  obligations (net of deferred tax)                                                                      3 742
  Items that may be subsequently reclassified to
  profit or loss
  Foreign currency gain on investment loans to
  foreign subsidiaries                                          526           2 857                      5 747
  Foreign currency translation adjustments                 (12 014)         (1 524)                    (3 080)
Total comprehensive income for the period                   755 055         137 399        450         761 322
Profit attributable to:
  Equity holders of the holding company                     764 824         136 448        461         754 405
  Non-controlling interests                                   1 719           (382)      (550)             508
                                                            766 543         136 066        463         754 913
Comprehensive income attributable to:
  Equity holders of the holding company                     753 336         137 769        447         760 792
  Non-controlling interests                                   1 719           (370)      (565)             530
                                                            755 055         137 399        450         761 322
Earnings per share (Rand)
- basic                                                      R19.73           R3.53        460          R19.48
- diluted                                                    R19.71           R3.52        459          R19.47

CONDENSED CONSOLIDATED BALANCE SHEET
                                                                  Unaudited         Unaudited          Audited
                                                                 six months        six months        12 months
                                                                      ended             ended            ended
                                                              31 March 2018     31 March 2017     30 Sept 2017
                                                                      R'000             R'000            R'000
ASSETS
Non-current assets                                                2 301 542         2 221 219        2 228 052
  Property, plant and equipment                                   2 103 837         2 037 796        2 036 033
  Intangible assets                                                  61 570            44 544           55 884
  Goodwill                                                          136 135           136 135          136 135
  Investments and loans                                                                 2 744
Current assets                                                    3 580 376         2 625 619        3 128 210
  Biological assets                                                 759 316           718 981          658 047
  Inventories                                                       593 618           832 713          551 278
  Trade and other receivables                                     1 226 851           989 918        1 221 039
  Current tax asset                                                  30 579            32 141           30 579
  Cash and cash equivalents                                         970 012            51 866          667 267
Assets held for sale                                                                   24 826
Total assets                                                      5 881 918         4 871 664        5 356 262
EQUITY
Capital and reserves attributable to equity 
holders of the parent company                                     3 438 883         2 467 166        3 022 466

  Issued capital                                                     83 727            79 450           81 463
  Treasury shares                                                 (204 435)         (204 435)        (204 435)
  Reserves                                                        3 559 591         2 592 151        3 145 438
Non-controlling interest                                             12 241             9 622           10 522
Total equity                                                      3 451 124         2 476 788        3 032 988
LIABILITIES
Non-current liabilities                                             597 500           630 976          609 699
  Deferred tax liability                                            453 738           481 047          433 469
  Employment benefit obligations                                    143 762           149 929          176 230

Current liabilities                                               1 833 294         1 763 900        1 713 575
  Trade and other liabilities                                     1 393 173         1 365 946        1 248 050
  Employment benefit obligations                                    341 225           174 633          306 511
  Current tax liabilities                                            61 213             6 961           42 390
  Borrowings (note 6)                                                35 556           214 431          114 692
  Shareholders for dividend                                           2 127             1 929            1 932

Total liabilities                                                 2 430 794         2 394 876        2 323 274
Total equity and liabilities                                      5 881 918         4 871 664        5 356 262

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                                                  Unaudited         Unaudited          Audited
                                                                 six months        six months        12 months
                                                                      ended             ended            ended
                                                              31 March 2018     31 March 2017     30 Sept 2017
                                                                      R'000             R'000            R'000
Cash operating profit                                             1 102 157           281 579        1 428 219
  Changes in working capital                                       (49 778)          (38 607)         (63 512)
Cash generated from operating activities                          1 052 379           242 972        1 364 707
  Income tax paid                                                 (258 974)          (49 649)        (310 259)
Cash flows from operating activities                                793 405           193 323        1 054 448
Cash used in investing activities                                  (69 031)          (67 899)        (145 256)
  Purchases of property, plant and equipment                      (127 003)          (60 810)        (157 606)
  Costs incurred on intangibles                                     (8 645)           (8 034)         (22 492)
  Proceeds on disposal of property, plant and equipment                  48               945            1 510
  Finance income                                                     26 569                              5 088
  Payment received on investment sold during previous year           40 000
  Cost incurred with disposal of investment                                                              (624)
  Government grant received                                                                             28 868
Cash flows to financing activities                                (338 701)          (71 118)        (152 349)
  Dividends paid                                                  (338 988)          (38 697)        (108 429)
  Proceeds from shares issued                                         2 264             5 493            7 506
  Finance expense                                                   (1 977)          (14 417)         (16 140)
  Decrease in borrowings                                                             (23 497)         (35 286)


Net movement in cash and cash equivalents                           385 673            54 306          756 843
  Effects of exchange rate changes                                  (3 792)             (338)              476
  Cash and cash equivalent balances at beginning of year            552 575         (204 744)        (204 744)
Cash and cash equivalent balances at end of period (note 7)         934 456         (150 776)          552 575

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                                                  Unaudited         Unaudited          Audited
                                                                 six months        six months        12 months
                                                                      ended             ended            ended
                                                              31 March 2018     31 March 2017     30 Sept 2017
                                                                      R'000             R'000            R'000
Balance at beginning of year                                      3 032 988         2 372 534        2 372 534
Profit for the period                                               766 543           136 066          754 913
Other comprehensive income for the period, net of tax              (11 488)             1 333            6 409
Dividends to the company's shareholders                           (339 183)          (38 706)        (108 441)
Proceeds on shares issued                                             2 264             5 493            7 506

Option value of share options granted                                                      68               67
Balance at end of period                                          3 451 124         2 476 788        3 032 988

CONDENSED CONSOLIDATED SEGMENTAL ANALYSIS

                                                      Unaudited         Unaudited                      Audited
                                                     six months        six months                    12 months
                                                          ended             ended                        ended
                                                  31 March 2018     31 March 2017                 30 Sept 2017
                                                          R'000             R'000    % change            R'000
Revenue
  Poultry                                             5 480 838         4 455 856           23       9 850 348
  Feed                                                3 096 521         3 448 115         (10)       6 583 184
  Other Africa                                          184 519           215 613         (14)         426 530
  Inter-group                                       (2 095 547)       (2 324 888)                  (4 508 937)
                                                      6 666 331         5 794 696           15      12 351 125
Profit before interest and tax
  Poultry                                               835 815            22 301          Inf.        629 760
  Feed                                                  191 479           184 404            4         391 376
  Other Africa                                           16 867             5 270          220          26 775
  Profit on sale of investment                                                                          30 550
                                                      1 044 161           211 975          393       1 078 461

ADDITIONAL INFORMATION
                                                       Unaudited         Unaudited                     Audited
                                                      six months        six months                   12 months
                                                           ended             ended                       ended
                                                   31 March 2018     31 March 2017    % change    30 Sept 2017
Headline earnings (R'000) - (note 5)                     765 333           137 645         456         735 323
Headline earnings per share (Rand)
  - basic                                                 R19.74             R3.56         455          R18.99
  - diluted                                               R19.72             R3.55         456          R18.97
Dividends per share (Rand) - declared out of
earnings for the period
  - Interim dividend                                      R10.00             R1.80                       R1.80
  - Final dividend                                                                                       R8.75
  - Total dividend                                                                                      R10.55
Number of ordinary shares
  - Issued net of treasury shares                     38 773 208        38 739 308                  38 752 208
  - Weighted - average                                38 762 630        38 705 146                  38 724 902
  - Diluted weighted - average                        38 806 822        38 732 173                  38 753 283
Net cash/(debt) - cash and cash equivalents less
borrowings (R'000)                                       934 456         (162 565)                     552 575
Net debt to equity percentage                                                 6.6%
Net asset value per share (Rand)                          R88.69            R63.69                      R77.99

NOTES
1.    Nature of business
      Astral is a leading South African integrated poultry producer. Key activities consist of manufacturing of animal feeds,
      broiler genetics, production and sale of day-old chicks and hatching eggs, integrated breeder and broiler production
      operations, abattoirs and sale and distribution of various key poultry brands.

2.    Basis of preparation
      The condensed interim financial statements for the six months ended 31 March 2018 have been prepared in
      accordance with International Financial Reporting Standards ("IFRS"), IAS 34 - Interim Financial Reporting, the Listings
      Requirements of the JSE Limited and the South African Companies Act (2008). These condensed interim financial
      statements have been prepared under the supervision of the financial director, DD Ferreira CA(SA).

      These condensed interim financial statements have not been reviewed or audited by the group's auditors.

3.    Accounting policies
      The accounting policies applied in these condensed interim financial statements comply with IFRS and are consistent
      with those applied in the preparation of the Group's annual financial statements for the year ended 30 September 2017.

                                                                                Unaudited         Unaudited         Audited
                                                                               six months        six months       12 months
                                                                                    ended             ended           ended
                                                                            31 March 2018     31 March 2017    30 Sept 2017
                                                                                    R'000             R'000           R'000
4.    Profit before interest and tax
      The following items have been accounted for in the profit before
      interest and tax:
      Biological assets - fair value gain/(loss)                                      996           (3 951)           2 856
      Amortisation of intangible assets                                             2 911             2 119           5 243
      Depreciation on property, plant and equipment                                75 459            70 776         143 490
      (Loss)/profit on sale of property, plant and equipment                        (705)           (1 574)             753
      Foreign exchange (losses)/gains                                             (1 885)             2 302           3 681
      Assets scrapped                                                                                                 3 572
      Insurance recoveries                                                                                           13 476
      Breeding and egg stock written off                                                                             53 512
      Profit on sale of investment                                                                                   30 550

                                                                                Unaudited        Unaudited          Audited
                                                                               six months       six months        12 months
                                                                                    ended            ended            ended
                                                                            31 March 2018    31 March 2017     30 Sept 2017
                                                                                    R'000            R'000            R'000
5.    Reconciliation to headline earnings
      Net profit attributable to shareholders                                     764 824          136 448          754 405
      Loss/(profit) on sale of property, plant and equipment (net of tax)             509            1 197            (549)
      Loss on assets scrapped (net of tax)                                                                            2 575
      Profit on sale of investment (net of tax)                                                                    (20 627)
      Insurance payments received in respect of assets written off (net
      of tax)                                                                                                         (481)
      Headline earnings for the period                                            765 333          137 645          735 323

6.    Borrowings
      Non-current
      Unsecured loans                                                                               11 789
      Portion payable within 12 months included in current liabilities                            (11 789)
      Current
      Bank overdrafts                                                              35 556          202 642          114 692

7.    Cash and cash equivalents per cash flow statement
      Bank overdrafts (included in current borrowings)                           (35 556)        (202 642)        (114 692)
      Cash at bank and in hand                                                    970 012           51 866          667 267
      Cash and cash equivalents per cash flow statement                           934 456        (150 776)          552 575

8.    Capital commitments
      Capital expenditure approved not contracted                                  21 920           46 886           30 101
      Capital expenditure contracted not recognised in financial
                                                                                  122 070           60 735          117 764
      statements
      Cost on intangibles contracted not recognised in financial
                                                                                                                        426
      statements
      Raw material contracted amounts not recognised in the
                                                                                1 522 389        1 386 663        1 254 312
      statement of financial position

FINANCIAL OVERVIEW
The group's headline earnings for the six months ended 31 March 2018 at R765 million was an increase of 456% on the
R138 million for the previous year's first six months. The Group benefited from favourable trading conditions in its poultry
businesses, resulting in the improvement on the previous year's profits for the comparative period.

External revenue increased by 15.0% to R6 666 million, supported by a 23.0% increase in the poultry segment's revenue.
The revenue of the feed businesses was lower in monetary value due to the lower input costs of maize raw materials.

The group's profit before interest and tax increased by 392.6% to R1 044 million. The Poultry segment's contribution
of R836  million (March 2017: R22 million) was the main contributor to the group's profits, whilst the Feed segment's
contribution at R191 million was 3.8 % up on the profit for the comparative period. The Other Africa segment's contribution
to profits at R17 million, was a good improvement on the previous year's R5 million, however, still a relative low contribution
to the group's results. The administrative expenses include a provision of R188 million for annual incentive bonuses to
management and other employees, based on the financial performance to date and calculated in terms of the group's
remuneration policy on short-term bonuses.

The group received net finance income of close to R22 million as result of its South African operations being in a net cash
surplus position during the reporting period.

Cash inflow from operating activities at R1 052 million was a marked improvement on the previous year's inflow of
R243 million following the improved operating profits, which also resulted in higher tax payments at R259 million. Additions
to property, plant and equipment and to intangible assets during the reporting period amounted to R162 million of which
R33 million was paid towards the end of the previous financial year. This, together with payments of outstanding amounts
on the previous year's capital expenditure resulted in net capital expenditure of R136 million during the period 
(March 2017: R69 million). A payment of R40 million was received following the conclusion of the sale of an investment 
during September 2017. The outflow on dividends paid represents the final dividend declared in respect of the 2017 
financial year, which was substantially higher due to the recovery in the profitability during the second half of the 
previous financial year.The net movement in cash and cash equivalents was positive with an inflow of R386 million for 
the period and a net surplus of R934 million at 31 March 2018.

The Board has declared an interim dividend of R10.00 per share which is based on a dividend cover of two times.
The distribution will be accommodated within the liquidity capabilities of the group.

OPERATIONAL OVERVIEW
Poultry Division
Revenue increased by 23.0% to R5.5 billion (2017: R4.5 billion) largely driven by an increase in sales realisations as an
improvement in poultry supply and demand balance gave pricing support. Imports during the period remained high but
at a stable level. The change in legislated brine levels in combination with industry cutbacks, contributed to firmer market
conditions.

Sales volumes were up by 12.6% (25 823 tons) mostly due to higher broiler production numbers (9 million birds) and
increased sales that reduced finished good stock levels. Sales realisations increased by 11.2%, of which a portion relates
to the necessary price adjustment to offset the legislated change in brine levels of specific product lines in the prior period.

Broiler feed prices decreased 11.2% due to significantly lower raw material costs in the reporting period versus the prior year.
Feed conversion efficiency further improved, contributing to a reduced feeding cost per broiler produced.

Profitability for the poultry division improved to R836 million (2017: R22 million) driven largely by the materially lower feed
input costs and an improvement in sales realisations. The net profit margin improved to 15.2% (2017: 0.5%), in relation to
one of the lowest reported profits in the prior period.

Poultry imports into the country continued unabated. Poultry imports from the European Union (EU) have reduced
considerably due to the ongoing outbreaks of highly pathogenic bird flu in those exporting countries; with a major swing in
imports towards Brazil and the United States of America (USA). On average the monthly total poultry imports for the period
under review equalled approximately 44% of local production or an average of 46 850 tons per month.

The outbreak of highly pathogenic bird flu in South Africa caused significant damage to the local poultry industry in the
prior calendar year. However, Astral's contingency plans allowed the group to avert a short supply of broilers, with the result
that the group was able to maintain broiler slaughter volumes at approximately 5.1 million birds per week (2017: 4.9 million
birds per week) for the period under review. No further incidents of bird flu and related costs were experienced during the
period under review.

Feed Division
Revenue decreased by 10.2% to R3.1 billion (2017: R3.5 billion) as a direct result of lower feed selling prices on the back of
markedly lower maize prices, notwithstanding an increase in sales volumes (up by 7.3%).

Higher external sales volumes (7.4%) were reported as livestock sectors recovered following the high feed costs associated
with the 2016 drought. Internal sales increased (7.2%) due to a higher internal feed requirement as broiler placement
numbers increased year-on-year.

The operating profit increased by 3.8% to R192 million (2017: R184 million) with an improvement in the operating profit
margin to 6.2% (2017: 5.3%).

The record local maize crop for the 2017/18 marketing year of 16.8 million tons resulted in a significant decrease in feed
prices for the reporting period.

Other Africa Division
This division, consisting of both feed and poultry operations in three countries namely; Zambia, Mozambique and Swaziland,
reported a drop in revenue of 14.4% to R185 million (2017: R215 million), due largely to lower feed selling prices on the back
of a reduction in raw material input costs. Sales volumes decreased by 5.0% driven largely by lower feed sales in Zambia.
Operating profit increased to R17 million (2017: R5 million) driven by improved performances across all countries, and a
turnaround in the profits of the Mozambican businesses.

OUTLOOK
- General business confidence improved as well as the prospect for foreign direct investment following the election of a
  new President for the country;
- A bumper maize crop in 2017 and the country set to harvest an above average maize crop in 2018 will stand us in good
  stead over the next period from a feed input cost point of view;
- Further unlocking the inherent genetic potential of the Ross broiler breed through optimised broiler nutrition therefore
  cementing Astral's best cost strategy;
- Higher level of competitiveness as producers have expanded broiler production numbers, and the pork industry has been
  forced to sell product at lower prices following the listeria outbreak;
- Continued high levels of poultry imports especially from the USA and Brazil, equivalent to over 40% of local poultry
  production;
- Highly Pathogenic Avian Influenza remains a threat and major concern for the poultry industry with the upcoming winter
  season.

Astral remains committed to its strategy of being the best cost integrated poultry producer, and will embark on various
identified capital projects that will support its stated strategy, as well as organic growth and efficiency improvement
opportunities.

DECLARATION OF ORDINARY DIVIDEND No 34
The board has approved an interim dividend of R10.00 per ordinary share (gross) in respect of the six months ended 
31 March 2018.

The dividend will be subject to Dividends Tax that was introduced with effect from 1 April 2012. In accordance with
paragraphs 11.17 (a)(i) to (x) and 11.17 (c) of the JSE Listings Requirements the following information is disclosed:

- The dividend has been declared out of income reserves
- The local Dividend Tax is 20% (twenty per centum)
- The gross local dividend is R10.00 per ordinary share for shareholders exempt from the Dividend Tax
- The net local dividend is R8.00 per ordinary share for shareholders liable to pay Dividend Tax
- Astral Foods Limited has currently 42 861 785 ordinary shares in issue(which includes 4 088 577 treasury shares
  held by a subsidiary), and
- Astral Foods Limited's income tax reference number is 9125190711

Shareholders are advised of the following dates in respect of the interim dividend:

Last date to trade cum-dividend                                                                  Tuesday, 5 June 2018
Shares commence trading ex-dividend                                                            Wednesday, 6 June 2018
Record date                                                                                       Friday, 8 June 2018
Payment of dividend                                                                              Monday, 11 June 2018

Share certificates may not be dematerialised or rematerialised between Wednesday, 6 June 2018 and Friday, 8 June 2018,
both days inclusive.

On behalf of the board

T Eloff                                                     CE Schutte
Chairman                                                    Chief Executive Officer

Pretoria
9 May 2018

                                                                 
Registered office 
92 Koranna Avenue, Doringkloof, Centurion, 0157, South Africa, 
Postnet Suite 278, Private Bag X1028, Doringkloof, 0140, 
Telephone: +27 (0)12 667 5468

Directors 
Dr T Eloff (Chairman), *CE Schutte (Chief Executive Officer), *GD Arnold, *AB Crocker, *DD Ferreira (Chief Financial Officer), 
DJ Fouché, Dr MT Lategan, TP Maumela, TM Shabangu, (*Executive director)

Company secretary 
MA Eloff

Transfer secretaries 
Computershare Investor Services Proprietary Limited, 
Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196, 
PO Box 61051, Marshalltown, 2107 
Telephone: +27 (0)11 370 5000

Sponsor 
Nedbank Corporate and Investing Banking, a division of Nedbank Limited, 
135 Rivonia Campus, Rivonia Road, Sandown, 2196, 
Tel +27 (0) 11 294 4444

www.astralfoods.com

Date: 14/05/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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