Wrap Text
Unaudited interim results for the six months ended 31 March 2019
Astral Foods Limited
Incorporated in the Republic of South Africa
Registration number 1978/003194/06
Share code: ARL
ISIN: ZAE000029757
Unaudited Interim Results
for the six months ended
31 March 2019
Financial highlights
Revenue Up 3%
Operating profit Down 51%
Earnings per share Down 52%
Headline earnings per share Down 52%
Interim dividend R4.75 per share
Financial Statements
Condensed consolidated statement of comprehensive income
Unaudited Unaudited Audited
6 months ended 6 months ended 12 months
31 March 2019 31 March 2018 ended
(restated) 30 Sept 2018
R'000 R'000 % change R'000
Revenue 6 775 389 6 600 507 3 12 978 561
Cost of sales (5 395 325) (4 660 738) (9 304 535)
Gross profit 1 380 064 1 939 769 (29) 3 674 026
Administrative expenses (356 093) (450 489) (817 013)
Distribution costs (423 008) (360 956) (733 738)
Marketing expenditure (98 608) (93 117) (185 404)
Other net income and gains 705 837 3 690
Profit before interest and tax (note 5) 503 060 1 036 044 (51) 1 941 561
Finance costs - net 17 667 21 960 52 527
Finance income 23 830 26 569 62 903
Finance costs (6 163) (4 609) (10 376)
Profit before income tax 520 727 1 058 004 (51) 1 994 088
Tax expense (150 662) (297 305) (559 738)
Profit for the period 370 065 760 699 (51) 1 434 350
Other comprehensive income
Items that will not be reclassified to profit or loss:
Remeasurement of post-employment benefit obligations (net of deferred tax) 2 598
Items that may be subsequently reclassified to profit or loss:
Foreign currency (loss)/gain on investment loans to foreign subsidiaries (585) 526 5
Foreign currency translation adjustments 2 861 (12 014) (13 439)
Total comprehensive income for the period 372 341 749 211 (50) 1 423 514
Profit attributable to:
Equity holders of the holding company 367 723 758 980 (52) 1 431 076
Non-controlling interests 2 342 1 719 36 3 274
370 065 760 699 (51) 1 434 350
Comprehensive income attributable to:
Equity holders of the holding company 369 999 747 492 (51) 1 420 240
Non-controlling interests 2 342 1 719 36 3 274
372 341 749 211 (50) 1 423 514
Earnings per share (Rand)
- basic R 9.48 R 19.58 (52) R 36.91
- diluted R 9.47 R 19.56 (52) R 36.87
Condensed consolidated balance sheet
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 March 2019 31 March 2018 30 Sept 2018
(restated)
R'000 R'000 R'000
Assets
Non-current assets 2 507 239 2 301 542 2 409 499
Property, plant and equipment 2 311 150 2 103 837 2 212 205
Intangible assets 59 954 61 570 61 159
Goodwill 136 135 136 135 136 135
Current assets 3 506 857 3 580 376 3 764 715
Biological assets 779 089 759 316 770 461
Inventories 736 293 593 618 836 690
Trade and other receivables 1 517 909 1 226 851 1 328 418
Current tax asset 19 656 30 579 7 303
Cash and cash equivalents 453 910 970 012 821 843
Total assets 6 014 096 5 881 918 6 174 214
Equity
Capital and reserves attributable to equity holders of the parent company 3 689 815 3 438 883 3 726 922
Issued capital 87 065 83 727 86 751
Treasury shares (204 435) (204 435) (204 435)
Reserves 3 807 185 3 559 591 3 844 606
Non-controlling interest 11 188 12 241 10 496
Total equity 3 701 003 3 451 124 3 737 418
Liabilities
Non-current liabilities 656 794 597 500 649 979
Deferred tax liability 519 385 453 738 481 732
Employment benefit obligations 137 409 143 762 168 247
Current liabilities 1 656 299 1 833 294 1 786 817
Trade and other liabilities 1 399 497 1 393 173 1 360 469
Employment benefit obligations 220 428 341 225 373 195
Current tax liabilities 11 197 61 213 17 480
Borrowings (note 7) 22 496 35 556 33 277
Shareholders for dividend 2 681 2 127 2 396
Total liabilities 2 313 093 2 430 794 2 436 796
Total equity and liabilities 6 014 096 5 881 918 6 174 214
Condensed consolidated statement of cash flows
Unaudited Unaudited Audited
6 months ended 6 months ended 12 months ended
31 March 2019 31 March 2018 30 Sept 2018
(restated)
R'000 R'000 R'000
Cash operating profit 407 384 1 094 040 2 156 086
Changes in working capital 100 196 (41 661) (425 201)
Cash generated from operating activities 507 580 1 052 379 1 730 885
Income tax paid (131 881) (258 974) (516 236)
Cash flows from operating activities 375 699 793 405 1 214 649
Cash used in investing activities (321 200) (69 031) (254 708)
Purchases of property, plant and equipment (343 224) (127 003) (346 551)
Costs incurred on intangibles (1 829) (8 645) (11 391)
Proceeds on disposal of property, plant and equipment 23 48 331
Finance income 23 830 26 569 62 903
Payment received on investment sold during previous year 40 000 40 000
Cash flows to financing activities (411 633) (338 701) (729 577)
Dividends paid (408 784) (338 988) (729 752)
Proceeds from shares issued 314 2 264 5 288
Finance expense (3 163) (1 977) (5 113)
Net movement in cash and cash equivalents (357 134) 385 673 230 364
Effects of exchange rate changes (18) (3 792) 5 627
Cash and cash equivalent balances at beginning of year 788 566 552 575 552 575
Cash and cash equivalent balances at end of period (note 8) 431 414 934 456 788 566
Condensed consolidated statement of changes in equity
Unaudited Unaudited Audited
6 months ended 6 months ended 12 months ended
31 March 2019 31 March 2018 30 Sept 2018
(restated)
R'000 R'000 R'000
Balance beginning of year 3 737 418 3 038 832 3 038 832
Profit for the period 370 065 760 699 1 434 350
Other comprehensive income/(loss) for the period, net of tax 2 276 (11 488) (10 836)
Dividends to shareholders (409 069) (339 183) (730 216)
Proceeds on shares issued 313 2 264 5 288
Balance at end of period 3 701 003 3 451 124 3 737 418
Condensed consolidated segmental analysis
Unaudited Unaudited Audited
6 months ended 6 months ended 12 months ended
31 March 2019 31 March 2018 30 Sept 2018
R'000 R'000 % change R'000
Revenue
Poultry 5 471 655 5 415 014 1 10 603 727
Feed 3 303 235 3 096 521 7 6 198 202
Other Africa 223 063 184 519 21 410 787
Inter-group (2 222 564) (2 095 547) (4 234 155)
6 775 389 6 600 507 3 12 978 561
Operating profit
Poultry 257 706 827 698 (69) 1 452 762
Feed 238 595 191 479 25 456 622
Other Africa 6 759 16 867 (60) 32 177
503 060 1 036 044 (51) 1 941 561
Additional information
Unaudited Unaudited Audited
6 months ended 6 months ended 12 months ended
31 March 2019 31 March 2018 30 Sept 2018
(restated)
R'000 R'000 % change R'000
Headline earnings (R'000) - (note 6) 368 033 759 489 (52) 1 439 236
Headline earnings per share (Rand)
- basic R 9.49 R 19.59 (52) R 37.12
- diluted R 9.48 R 19.57 (52) R 37.08
Dividends per share (Rand) - declared out of earnings for the period
- Interim dividend R 4.75 R 10.00 (53) R 10.00
- Final dividend R 10.50
- Total dividend R 20.50
Number of ordinary shares
- Issued net of treasury shares 38 801 808 38 773 208 38 798 808
- Weighted-average 38 800 638 38 762 630 38 774 025
- Diluted weighted-average 38 814 198 38 806 822 38 809 443
Cash and cash equivalents (R'000) 431 414 934 456 788 566
Net asset value per share (Rand) R 95.09 R 88.69 R 96.06
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 2019 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 2018, except for the adoption of IFRS 9 - Financial
Instruments and IFRS 15 - Revenue from Contracts with Customers. Neither of these two new standards had any material impact on the
reported results.
4. Restatement of comparative amounts for prior periods
Following a re-assessment of management's judgement of the nature of certain sales transactions during 2018 it was concluded that the risks
and rewards of certain goods delivered during September 2017 have passed on to a customer who thereby acted as a principal as opposed to
an agent. The revenue related to these transactions should have been recognised in the 2017 financial year, and not during the first half of the
2018 financial year.
Revenue, cost of sales and tax have been restated with the corresponding adjustments to the opening balance of equity.
Details of the impact on prior period disclosure is as per note 10.
Unaudited Unaudited Audited
6 months ended 6 months ended 12 months ended
31 March 2019 31 March 2018 30 Sept 2018
(restated)
R'000 R'000 R'000
5. Profit before interest and tax
The following items have been accounted for in the profit before interest and tax:
Biological assets - fair value (loss)/gain (1 514) 996 5 149
Amortisation of intangible assets 3 044 2 911 6 048
Depreciation on property, plant and equipment 84 881 75 459 145 714
Loss on sale of property, plant and equipment 434 705 417
Foreign exchange losses 60 1 885
Assets scrapped 10 891
Insurance recoveries 3 776 1 324
6. Reconciliation to headline earnings
Net profit attributable to shareholders 367 723 758 980 1 431 076
Loss on sale of property, plant and equipment (net of tax) 310 509 301
Loss on assets scrapped (net of tax) 7 859
Headline earnings for the period 368 033 759 489 1 439 236
Unaudited Unaudited Audited
6 months ended 6 months ended 12 months ended
31 March 2019 31 March 2018 30 Sept 2018
(restated)
R'000 R'000 R'000
7. Borrowings
Current - Bank overdrafts 22 496 35 556 33 277
8. Cash and cash equivalents per cash flow statement
Bank overdrafts (included in current borrowings) (22 496) (35 556) (33 277)
Cash at bank and in hand 453 910 970 012 821 843
Cash and cash equivalents per cash flow statement 431 414 934 456 788 566
9. Commitments
Capital expenditure approved not contracted 515 258 21 920 1 267 807
Capital expenditure contracted not recognised in financial statements 581 885 122 070 127 012
Cost on intangibles contracted not recognised in financial statements 6 252
Raw material contracted amounts not recognised in the statement of financial position 1 371 734 1 522 389 1 090 415
10. Effect of re-assessment of certain sales transactions
Decrease in revenue 65 824
Decrease on cost of sales 57 707
Decrease in gross profit and operating profit 8 117
Decrease in tax expense 2 273
Decrease in profit after tax, earnings and headline earnings 5 844
Increase in the opening balance of equity 5 844
Decrease in earnings per share and headline earnings per share - cents per share 15
Impact on cash generated from operations nil
Financial overview
The external revenue increased by 2.6% to R6.8 billion (1H2018: R6.6 billion), whilst revenue
from the Poultry segment, the major contributor to the group's external revenue, only increased
by 1.0%.
The group's lower operating profit at R503 million (1H2018: R1 036 million) was as a result of a
R570 million decline in poultry profitability to R258 million. Feed price and production cost
increases could not be recovered by increasing sales realisations, due to the consumer market
not being able to absorb price increases.
The cash inflow from operating activities of R375 million, included an inflow of R100 million
from lower working capital, mainly as a result of lower poultry finished goods stock compared
to the prior financial year ending stocks (30 September 2018). Capital expenditure incurred of
R343 million, includes payments totalling R253 million in respect of the expansion project at the
Festive processing plant and the Meadow Feeds Standerton silo complex.
A net cash outflow of R357 million for the first half was reported, following the payment of the final
2018 dividend of R408 million. The cash and cash equivalents at 31 March 2019 were, however,
in a surplus of R431 million.
The board declared an interim dividend of R4.75 per share which was well within the liquidity
capabilities of the group.
Operational overview
Poultry Division
The broiler operations reported a decline in revenue as both broiler selling prices and sales
volumes decreased for the period under review. However, revenue for the division increased by
1.0% to R5.5 billion (1H2018: R5.4 billion) supported by a marked increase in revenue from the
group's breeding operations.
Broiler sales volumes were marginally down by 1.1% (2 538 tons), despite sales realisations
decreasing by 3.4% on the comparable period. Consumer demand was subdued, resulting in
deeper promotional activity to better balance supply and demand.
Broiler feed prices increased 9.2% due to higher raw material costs for the reporting period.
Feed conversion efficiency improved further, slightly offsetting the higher feeding cost per
broiler produced.
Profitability for the poultry division decreased by 68.9% to R258 million (1H2018: R828 million),
driven largely by the higher feed input costs and lower sales realisations. The under recovery of
increased input costs, as well as the influence of extraordinary expenses, negatively impacted
profitability for this division. The newly legislated minimum wage, the impact of load-shedding
nationally, water supply interruptions in Standerton, and costs associated with industrial action
in KwaZulu-Natal, all contributed to a higher base cost of production. The net profit margin
decreased to 4.7%, compared to historically one of the highest reported profit margins of 15.4%
achieved in the prior period.
Total poultry imports remained high, with the average monthly total poultry imports for the
period under review equalling approximately 38% of local production, or an average of 41 771 tons
per month.
Feed Division
Revenue increased by 6.7% to R3.3 billion (1H2018: R3.1 billion) as a direct result of higher feed
selling prices on the back of increases in raw material costs. Safex yellow maize prices increased
to an average of R2 579 per ton for the period under review (1H2018: R1 981).
Feed sales volumes in the division decreased marginally by 0.9% as the internal requirement for
broiler feed decreased (0.6%), on an improved broiler feed conversion rate. Lower external sales
volumes (1.3%) were reported as all livestock sectors came under pressure on the back of higher
feed costs.
The operating profit for this division increased by 24.6% to R239 million (1H2018: R191 million),
with an improvement in the operating profit margin to 7.2% (1H2018: 6.2%). The division
benefitted from well controlled expenses and effective raw material cost recovery.
Other Africa Division
This division, consisting of both feed and poultry operations in three countries namely; Zambia,
Mozambique and Swaziland, reported an increase in revenue of 20.9% to R223 million (1H2018: R185
million), due largely to higher selling prices on the back of an increase in raw material input costs. Sales
volumes increased by 11.7% driven largely by higher feed sales in Zambia. However, the operating profit
decreased to R7 million (1H2018: R17 million) impacted by a provision for the doubtful recovery from
the Mozambican government of VAT on imported raw materials, as well as margin pressure in Zambia as
feed selling prices could not be increased sufficiently to fully recover higher input costs.
Outlook
Astral's view on the near-term prospects can be regarded as a mixed bag of both negative and positive
factors, each of which could potentially have an influence on its business performance.
- Raw material price increases, will negatively impact Astral's largest input cost, namely feed, which
makes up 66% of broiler live cost.
- Traditionally slower trading conditions for the second half of Astral's financial year, exacerbated by
continued high levels of unemployment.
- The negative impact of high fuel prices on consumer disposable income, leading to continued
pressure on poultry selling prices.
- Higher local poultry production levels together with imports from Brazil and the USA, will negatively
impact the supply and demand balance in the short term.
- The newly legislated minimum wage will continue to impact poultry production costs.
- Municipal infrastructure deterioration in Standerton, leading to water supply interruptions at a cost
to the business.
- Sufficient international coarse grain stocks with good prevailing planting conditions in the USA and South America.
- Maize imports into the Western Cape at a discount to local Safex pricing, will contribute positively to
feed input costs in that region.
- Local maize stocks together with maize imports will meet demand, despite early season SA maize crop concerns.
- Recent late rainfall received in the maize growing areas of the country, will benefit soil moisture
conditions for the new planting season.
- Supply and distribution of the Ross poultry genetics in South Africa, has been secured for a further
10-year period with the conclusion of a renewed supply agreement with Aviagen.
Astral remains committed to its strategy of being the best cost integrated poultry producer, and
embarked on identified capital projects that will support its stated strategy.
Declaration of ordinary dividend No 36
The board has approved an interim dividend of R4.75 per ordinary share (gross) in respect of the
six months ended 31 March 2019.
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 R4.75 per ordinary share for shareholders exempt from the
Dividend Tax;
- The net local dividend is R3.80 per ordinary share for shareholders liable to pay Dividend Tax;
- Astral Foods Limited has currently 42 890 385 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 final dividend:
Last date to trade cum-dividend Tuesday, 4 June 2019
Shares commence trading ex-dividend Wednesday, 5 June 2019
Record date Friday, 7 June 2019
Payment of dividend Monday, 10 June 2019
Share certificates may not be dematerialised or rematerialised between Wednesday,5 June 2019 and
Friday, 7 June 2019, both days inclusive.
On behalf of the board
T Eloff C E Schutte
Chairman Chief Executive Officer
Pretoria
7 May 2019
Sponsor Nedbank Corporate and Investing Banking,
a division of Nedbank Limited
135 Rivonia Campus Rivonia Road
Sandown, 2196
Tel +27 (0) 294 4444
www.astralfoods.com
13 May 2019
Date: 13/05/2019 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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