afgri a5 booklet feb2012
TRANSCRIPT
Unaudited condensed consolidated financial results for the six months ended 31 December 2011
and cash dividend declaration
AFGRI LIMITED (Incorporated in the Republic of South Africa)
(Registration number: 1995/004030/06) ISIN number: ZAE000040549 Share code: AFR
Growth the natural outcome
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Administration
Business address and registered officeAFGRI Building, 12 Byls Bridge BoulevardHighveld Ext 73, Centurion, 0157 Tel 011 063 2347Fax 087 942 5010
Company SecretaryMs M ShikwinyaPO Box 11054Centurion, 0046 BankersABSA Bank LimitedFirstRand Bank LimitedHong Kong and Shanghai Banking CorporationInvestec Bank LimitedLand and Agricultural Development Bank of SA LimitedNedcor LimitedStandard Bank of SA LimitedStandard Chartered Bank
AuditorsPricewaterhouseCoopers Inc.32 Ida StreetMenlyn Park, 0102PO Box 35296Menlo Park, 0102Tel (012) 429 0000
Transfer secretariesComputershare Investor Services Proprietary Limited70 Marshall StreetJohannesburg, 2001 PO Box 61051Marshalltown, 2107 Tel: 011 370 5000
SponsorInvestec Bank Limited100 Grayston DriveSandton, 2196PO Box 785700Sandton, 2146Tel (011) 286 7000
Directorate
Non-executiveJPR Mbau (Chairman), DD Barber, L de Beer, LM KoyanaBA Mabuza, NL Shirilele, CT Vorster, NC Wentzel
ExecutiveCP Venter (Chief Executive Officer)JA van der Schyff (Financial Director)
www.afgri.co.zaThis announcement is available on SENS and AFGRI’S website at
page 1
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Revenue from all operations 24%
Improvement in debt equity ratio from 2,9 to 1,8
Substantial reduction in contribution from poultry business unit
HEPS from all operations 17% to 36,9 cents (2010: 44,6 cents)
Retail and equipment profits on the back of record tractor sales
Continued expansion into the Foods sector
Strong grain management performance despite lower silo volumes
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
page 2
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Commentary
The directors of AFGRI Limited (“AFGRI”) are pleased to present the unaudited condensed consolidated interim financial results of the AFGRI Group of companies (“the Group”) for the six months ended 31 December 2011.
Operating environment The final 2011 summer crop in the AFGRI area, estimated at 2,9 million tons, was 19% below the 2010 season’s crop. During the 2011 calendar year, the grain storage industry saw high despatch rates, the result of higher maize exports, leading to generally lower stock levels. The opening stock stored in AFGRI silos at 1 July 2011 was 600 000 tons lower than 1 July 2010 as a result of these factors. At 31 December 2011, stock stored in AFGRI silos of 915 000 tons is 37% down on the stock holding on 1 January 2011. The impact of these reduced volumes in the silos had an estimated R48 million negative effect on profit before tax, compared to the prior period.
Maize prices reached record levels at the end of 2011, increasing from approximately R1 400/ton in March to over R2 600/ton during December 2011.
The increasing maize price encouraged farmer spending on mechanisation and other farming requisites, leading to improved results from the Group’s retail and equipment division, but placed pressure on margins in AFGRI’s foods sector business units. In particular, higher raw material prices and increased competitiveness in the market negatively affected the animal feeds division’s results. A 33% increase in feed prices, driven primarily by maize prices, placed margins under pressure at the AFGRI poultry division which only managed to pass some of this increase on to consumers with an 18% increase in average selling prices.
Rand strength inhibited price increases of imported goods such as farming implements and inputs, but encouraged poultry imports. Low interest rates failed to stimulate growth in consumer spending due to concerns over rising inflation and the continuing hangover of the 2008 financial crisis.
The financial services division posted an increase in fee income which resulted in an improvement in profits.
Agricultural conditions in Western Australia improved and this business unit posted an increase in mechanisation sales.
Operational review AFGRI continues to focus its activities in three segments – AFGRI Agri Services, AFGRI Financial Services, and AFGRI Foods. The acquisition of the yellow maize 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 acquisition of Rossgro Poultry was only effective from 1 March 2011 and as such the comparative period figures do not include any results from this operation.
The results of the Group’s African and Australian activities are reported under the retail and equipment division.
AFGRI’s John Deere dealership increased its market share for the period to 31%, from 27%. This was achieved through record sales of tractors across all operations. 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. Greater competition by suppliers and the increasing availability of credit resulted in a reduction in the division’s bulk direct sales to farmers.
On 1 December 2011, AFGRI successfully concluded the sale of its farmers debtors book to the Land Bank. This resulted in R1,57 billion (R1,80 billion by 31 December 2011) of farmers’ debtors being sold to the Land Bank and a concomitant reduction in the Group’s liabilities by a similar amount. The cash collateral deposits associated with this liability had been renegotiated and released in the previous financial year. The Rabo Bank debt securitisation structure was also unwound on 1 December, resulting in the release of R75 million of cash collateral deposits. A further R88 million of cash collateral deposits were released through the renegotiation of the Group’s Wesbank facility. Management hopes to finalise a similar transaction for its corporate debtors book by 30 June 2012. These transactions resulted in a much stronger balance sheet and provides AFGRI with a solid foundation to grow its financial services offering to the agricultural sector.
Despite the current challenging trading environment for poultry, other sectors in the Group remain strong and committed to growing their representation in the industrial foods processing sector. 51% of the Group’s year-to-date capital expenditure has been invested in the foods segment, notably at Nedan and Animal Feeds. 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 six months ended 31 December 2011 are disappointing. The main cause is market forces putting pressure on margins, and operational inefficiencies which are currently receiving serious attention. To this end, the management team at AFGRI Poultry has been strengthened by the appointment of Mr Izaak Breitenbach, as Managing Director, to ensure the success of both the continuing operations and expansion projects. Mr Breitenbach has 25 years’ experience in the poultry industry, and is highly regarded and well placed to direct the operations of AFGRI Poultry. The operations at Rossgro have been integrated into AFGRI Poultry. The opportunity to reduce this processing plant’s relatively high unit costs will be addressed to realise the full value of the operation. In order to extract synergies throughout the entire poultry production chain, from grandparent stock to processing plant capacity, further expansion is being considered.
page 3
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Following a preliminary investigation into the dumping of chicken products, the International Trade Administration Commission found enough evidence of dumping by Brazilian exporters to request the South African Revenue Service to increase duties on imported Brazilian chicken products for an interim 26-week period. AFGRI welcomes these provisional findings and is confident of a similar finding once the investigation is finalised.
Another notable development during the period was the purchase of business premises, including offices, showroom and workshop in Lusaka, and the establishment of a bunker in the Mkushi area of Zambia. Both of these exciting projects are reported under the retail and equipment division.
Financial review Higher commodity prices, in particular maize, drove the Group’s revenue up by 27% to R4,4 billion (2010: R3,5 billion) for the six months ended 31 December 2011. 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, margins were maintained in the retail and equipment division.
The lower interest rates and the sale of the farmer debtors book with effect from 1 December 2011 saw interest on trade receivables decline during the period. The finance cost of R200 million (2010: R205 million) do not reflect a commensurate reduction due to increased borrowings resulting from the Group’s Rossgro acquisition and its capital expenditure of R111 million (2010: R171 million). Included with finance cost is an amount of R39 million (2010: R40 million), relating to the finance charge on the borrowings associated with the Group’s B-BBEE ownership structure.
The Group controlled its selling and administration expenses well by limiting it to an 8% increase.
Profit for the period from continuing operations of R134 million is 16% lower than the comparative period’s R159 million. This decrease of R25 million is analysed in the Group’s business segment results below. The Group has reported no results for discontinued operations for the current period (2010: loss of R12 million). Profit for the period from all operations is 9% lower than the prior year.
Given the challenging environment in the foods and grain management segments, headline earnings per share from all operations for the period reflect a decrease of 17% from 44,6 cents to 36,9 cents and earnings per share from all operations of 39,7 cents, reflect a decrease of 11%.
The Group’s net asset value per share has increased by 10% during the six months from 30 June 2011. Inventory levels have been well controlled and the increase in inventory values is the result of higher commodity prices and the consolidation of Pride Milling’s inventory.
Trade and other receivables have decreased by R1,5 billion from 30 June 2011 due to the sale of the farmer debtors book. Bank borrowings to finance trade receivables reflects a similar reduction. This transaction has allowed AFGRI to reduce its debt to equity ratio to 1,8 at period end compared to 2,9 at 30 June 2011.
The period leading up to December is traditionally a period when the Group experiences negative cash flow due to the advancing of funding to farmers and increasing inventories during the growing season. However, during 2011, working capital increases were well managed given the higher commodity prices. The purchase of the yellow maize milling operation of Pride Milling was finalised at R220 million. This, together with selected items of capital expenditure, were funded through general banking facilities.
Changes to the Board of Directors and Company SecretaryMs Marion Shikwinya was appointed as AFGRI’s Company Secretary with effect from 1 February 2012, replacing Ms Niki van Wyk.
On 13 February 2012, AFGRI announced the appointment of Mr Nick Wentzel as an independent Non-executive Director to the Board of AFGRI.
ProspectsThe recent 2012 summer crop estimates indicate a maize crop of 16% higher than 2011, and receipts into the silos are not expected to begin until mid-April. Low silo stock levels are therefore expected over the second half of the financial year in the grain management division. Maize prices are expected to remain high until harvesting of the 2012 crop, depending on the final crop size and international prices. This could result in continued margin pressure in the food businesses. Given the difficult trading conditions and low maize stock, cost control will remain a focus area of the Group’s operations during the second half of the financial year.
Sales of farming mechanisation are expected to remain strong throughout the summer crop harvest.
With the sale of the farmer debtors book completed, AFGRI Financial Services now has the platform and the requisite funding stream from which to expand its offerings.
Animal protein, especially AFGRI Poultry, is expected to remain under pressure for the second half of the financial year with the remainder of AFGRI’s performance expected to be in line with the market prospects for the various business units.
By order of the Board
JPR Mbau CP VenterChairman Chief Executive Officer28 February 2012
page 4
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Group balance sheet (R’millions)
Note
31 December Unaudited
2011
31 DecemberUnaudited
2010
30 JuneAudited
2011
ASSETS
Non-current assets 2 718 2 196 2 464
Property, plant and equipment 1 845 1 512 1 699
Goodwill 248 37 118
Other intangible assets 256 286 269
Investments in associates 48 36 41
Available-for-sale financial assets 41 42 41
Financial receivables 164 161 164
Deferred income tax assets 116 122 132
Current assets 4 310 5 656 5 474
Inventories 1 227 934 1 024
Biological assets 47 64 53
Trade and other receivables 630 509 450
Trade receivables financed by banks 5 1 895 3 290 3 425
Derivative financial instruments 44 64 91
Current income tax assets 22 2 26
Cash and cash equivalents and cash collateral deposits 445 793 405
Cash collateral deposits 54 399 147
Cash and cash equivalents 391 394 258
Assets of disposal groups classified as held-for-sale 7 17 40
Total assets 7 035 7 869 7 978
EQUITY
Capital and reserves attributable to equity holders 1 734 1 592 1 571
Share capital – – –
Treasury shares (86) (90) (90)
Incentive trust shares (130) (151) (133)
Fair value and other reserves (22) (63) (64)
Retained earnings 1 972 1 896 1 858
Non-controlling interest 5 6 4
Total equity 1 739 1 598 1 575
LIABILITIES
Non-current liabilities 770 1 016 748
Borrowings 572 832 560
Deferred income tax liabilities 183 184 188
Provisions for other liabilities and charges 15 – –
Current liabilities 4 526 5 255 5 648
Trade and other payables 1 393 1 164 1 221
Derivative financial instruments 44 79 41
Current income tax liabilities 7 15 2
Short-term borrowings – – 10
Call loans and bank overdrafts 1 187 674 951
Bank borrowings to finance trade receivables 5 1 895 3 323 3 423
Liabilities of disposal groups classified as held-for-sale – – 7
Total liabilities 5 296 6 271 6 403
Total equity and liabilities 7 035 7 869 7 978
Net asset value per share attributable to equity holders (cents) 486 446 441
page 5
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Business segment results (R’millions)
AGRI SERVICES FINANCIAL SERVICES FOODS OTHER TOTALS
Six months ended 31 December 2011 and six months ended 31 December 2010
Retail andequipment
GrainManagement Animal protein Oil, milling and protein Corporate BEE SPVs Inter-group eliminations Continuing operations Discontinued operations All operations
Unaudited 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
Revenue 2 014 1 620 252 287 201 214 1 780 1 390 379 264 – – – – (47) (106) 4 579 3 669 – 36 4 579 3 705
– sale of goods and or services 2 007 1 609 252 287 74 63 1 780 1 390 379 264 – – – – (47) (106) 4 445 3 507 – 36 4 445 3 543
– interest 7 11 – – 127 151 – – – – – – – – – – 134 162 – – 134 162
Operating profit/(loss) (before the items below) 86 61 134 151 118 131 103 153 24 24 (9) (30) – – – – 456 490 – (13) 456 477
– other operating income – – – – 3 10 – – – – 5 6 – – – – 8 16 – – 8 16
– depreciation and amortisation (8) (7) (10) (9) (12) (16) (36) (33) (4) (2) (13) (5) – – – – (83) (72) – (2) (83) (74)
Operating profit/(loss) 78 54 124 142 109 125 67 120 20 22 (17) (29) – – – – 381 434 – (15) 381 419
Other items of profit and loss 7 – – – – – – – – – – – – – – – 7 – – – 7 –
– share of profit/(loss) of associates 7 – – – – – – – – – – – – – – – 7 – – – 7 –
Profit/(loss) before finance costs 85 54 124 142 109 125 67 120 20 22 (17) (29) – – – – 388 434 – (15) 388 419
Finance costs (23) (19) (18) (10) (74) (93) (34) (37) (9) (3) (3) (3) (39) (40) – – (200) (205) – (2) (200) (207)
Profit/(loss) before income tax 62 35 106 132 35 32 33 83 11 19 (20) (32) (39) (40) – – 188 229 – (17) 188 212
Income tax (54) (70) – 5 (54) (65)
Profit after tax 134 159 – (12) 134 147
Assets 1 612 1 737 882 898 2 023 3 402 1 938 1 551 720 191 653 526 (43) (256) (750) (180) 7 035 7 869 7 035 7 869
Non-current assets 296 235 397 378 319 541 1 110 879 337 86 302 333 (43) (256) – – 2 718 2 196 2 718 2 196
Other current assets 836 819 98 109 40 5 253 260 177 33 39 35 – – (96) (180) 1 347 1 081 1 347 1 081
Trade and other receivables 387 495 371 358 1 597 2 435 547 402 206 72 71 37 – – (654) – 2 525 3 799 2 525 3 799
Cash and cash equivalents 93 188 16 53 67 421 28 10 – – 241 121 – – – – 445 793 445 793
Liabilities 512 760 237 318 1 600 2 676 750 652 294 76 1 856 1 470 558 550 (511) (231) 5 296 6 271 5 296 6 271
Non-current liabilities 6 103 2 1 20 19 97 277 22 8 65 63 558 545 – – 770 1 016 770 1 016
Other current liabilities 493 579 235 317 222 77 653 372 272 68 80 71 – 5 (511) (231) 1 444 1 258 1 444 1 258
Borrowings to finance trade receivables – – – – 1 358 2 542 – – – – 537 781 – – – – 1 895 3 323 1 895 3 323
Call loans and overdrafts 13 78 – – – 38 – 3 – – 1 174 555 – – – – 1 187 674 1 187 674
Net assets 1 100 977 645 580 423 726 1 188 899 426 115 (1 203) (944) (601) (806) (239) 51 1 739 1 598 1 739 1 598
Capital expenditure 38 9 10 16 – 11 48 46 9 11 6 78 – – – – 111 171 111 171
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
page 6
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
AGRI SERVICES FINANCIAL SERVICES FOODS OTHER TOTALS
Six months ended 31 December 2011 and six months ended 31 December 2010
Retail andequipment
GrainManagement Animal protein Oil, milling and protein Corporate BEE SPVs Inter-group eliminations Continuing operations Discontinued operations All operations
Unaudited 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
Revenue 2 014 1 620 252 287 201 214 1 780 1 390 379 264 – – – – (47) (106) 4 579 3 669 – 36 4 579 3 705
– sale of goods and or services 2 007 1 609 252 287 74 63 1 780 1 390 379 264 – – – – (47) (106) 4 445 3 507 – 36 4 445 3 543
– interest 7 11 – – 127 151 – – – – – – – – – – 134 162 – – 134 162
Operating profit/(loss) (before the items below) 86 61 134 151 118 131 103 153 24 24 (9) (30) – – – – 456 490 – (13) 456 477
– other operating income – – – – 3 10 – – – – 5 6 – – – – 8 16 – – 8 16
– depreciation and amortisation (8) (7) (10) (9) (12) (16) (36) (33) (4) (2) (13) (5) – – – – (83) (72) – (2) (83) (74)
Operating profit/(loss) 78 54 124 142 109 125 67 120 20 22 (17) (29) – – – – 381 434 – (15) 381 419
Other items of profit and loss 7 – – – – – – – – – – – – – – – 7 – – – 7 –
– share of profit/(loss) of associates 7 – – – – – – – – – – – – – – – 7 – – – 7 –
Profit/(loss) before finance costs 85 54 124 142 109 125 67 120 20 22 (17) (29) – – – – 388 434 – (15) 388 419
Finance costs (23) (19) (18) (10) (74) (93) (34) (37) (9) (3) (3) (3) (39) (40) – – (200) (205) – (2) (200) (207)
Profit/(loss) before income tax 62 35 106 132 35 32 33 83 11 19 (20) (32) (39) (40) – – 188 229 – (17) 188 212
Income tax (54) (70) – 5 (54) (65)
Profit after tax 134 159 – (12) 134 147
Assets 1 612 1 737 882 898 2 023 3 402 1 938 1 551 720 191 653 526 (43) (256) (750) (180) 7 035 7 869 7 035 7 869
Non-current assets 296 235 397 378 319 541 1 110 879 337 86 302 333 (43) (256) – – 2 718 2 196 2 718 2 196
Other current assets 836 819 98 109 40 5 253 260 177 33 39 35 – – (96) (180) 1 347 1 081 1 347 1 081
Trade and other receivables 387 495 371 358 1 597 2 435 547 402 206 72 71 37 – – (654) – 2 525 3 799 2 525 3 799
Cash and cash equivalents 93 188 16 53 67 421 28 10 – – 241 121 – – – – 445 793 445 793
Liabilities 512 760 237 318 1 600 2 676 750 652 294 76 1 856 1 470 558 550 (511) (231) 5 296 6 271 5 296 6 271
Non-current liabilities 6 103 2 1 20 19 97 277 22 8 65 63 558 545 – – 770 1 016 770 1 016
Other current liabilities 493 579 235 317 222 77 653 372 272 68 80 71 – 5 (511) (231) 1 444 1 258 1 444 1 258
Borrowings to finance trade receivables – – – – 1 358 2 542 – – – – 537 781 – – – – 1 895 3 323 1 895 3 323
Call loans and overdrafts 13 78 – – – 38 – 3 – – 1 174 555 – – – – 1 187 674 1 187 674
Net assets 1 100 977 645 580 423 726 1 188 899 426 115 (1 203) (944) (601) (806) (239) 51 1 739 1 598 1 739 1 598
Capital expenditure 38 9 10 16 – 11 48 46 9 11 6 78 – – – – 111 171 111 171
page 7
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
AGRI SERVICES FINANCIAL SERVICES FOODS OTHER TOTALS
Six months ended 31 December 2011 and six months ended 31 December 2010
Retail andequipment
GrainManagement Animal protein Oil, milling and protein Corporate BEE SPVs Inter-group eliminations Continuing operations Discontinued operations All operations
Unaudited 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
Revenue 2 014 1 620 252 287 201 214 1 780 1 390 379 264 – – – – (47) (106) 4 579 3 669 – 36 4 579 3 705
– sale of goods and or services 2 007 1 609 252 287 74 63 1 780 1 390 379 264 – – – – (47) (106) 4 445 3 507 – 36 4 445 3 543
– interest 7 11 – – 127 151 – – – – – – – – – – 134 162 – – 134 162
Operating profit/(loss) (before the items below) 86 61 134 151 118 131 103 153 24 24 (9) (30) – – – – 456 490 – (13) 456 477
– other operating income – – – – 3 10 – – – – 5 6 – – – – 8 16 – – 8 16
– depreciation and amortisation (8) (7) (10) (9) (12) (16) (36) (33) (4) (2) (13) (5) – – – – (83) (72) – (2) (83) (74)
Operating profit/(loss) 78 54 124 142 109 125 67 120 20 22 (17) (29) – – – – 381 434 – (15) 381 419
Other items of profit and loss 7 – – – – – – – – – – – – – – – 7 – – – 7 –
– share of profit/(loss) of associates 7 – – – – – – – – – – – – – – – 7 – – – 7 –
Profit/(loss) before finance costs 85 54 124 142 109 125 67 120 20 22 (17) (29) – – – – 388 434 – (15) 388 419
Finance costs (23) (19) (18) (10) (74) (93) (34) (37) (9) (3) (3) (3) (39) (40) – – (200) (205) – (2) (200) (207)
Profit/(loss) before income tax 62 35 106 132 35 32 33 83 11 19 (20) (32) (39) (40) – – 188 229 – (17) 188 212
Income tax (54) (70) – 5 (54) (65)
Profit after tax 134 159 – (12) 134 147
Assets 1 612 1 737 882 898 2 023 3 402 1 938 1 551 720 191 653 526 (43) (256) (750) (180) 7 035 7 869 7 035 7 869
Non-current assets 296 235 397 378 319 541 1 110 879 337 86 302 333 (43) (256) – – 2 718 2 196 2 718 2 196
Other current assets 836 819 98 109 40 5 253 260 177 33 39 35 – – (96) (180) 1 347 1 081 1 347 1 081
Trade and other receivables 387 495 371 358 1 597 2 435 547 402 206 72 71 37 – – (654) – 2 525 3 799 2 525 3 799
Cash and cash equivalents 93 188 16 53 67 421 28 10 – – 241 121 – – – – 445 793 445 793
Liabilities 512 760 237 318 1 600 2 676 750 652 294 76 1 856 1 470 558 550 (511) (231) 5 296 6 271 5 296 6 271
Non-current liabilities 6 103 2 1 20 19 97 277 22 8 65 63 558 545 – – 770 1 016 770 1 016
Other current liabilities 493 579 235 317 222 77 653 372 272 68 80 71 – 5 (511) (231) 1 444 1 258 1 444 1 258
Borrowings to finance trade receivables – – – – 1 358 2 542 – – – – 537 781 – – – – 1 895 3 323 1 895 3 323
Call loans and overdrafts 13 78 – – – 38 – 3 – – 1 174 555 – – – – 1 187 674 1 187 674
Net assets 1 100 977 645 580 423 726 1 188 899 426 115 (1 203) (944) (601) (806) (239) 51 1 739 1 598 1 739 1 598
Capital expenditure 38 9 10 16 – 11 48 46 9 11 6 78 – – – – 111 171 111 171
page 8
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
AGRI SERVICES FINANCIAL SERVICES FOODS OTHER TOTALS
Six months ended 31 December 2011 and six months ended 31 December 2010
Retail andequipment
GrainManagement Animal protein Oil, milling and protein Corporate BEE SPVs Inter-group eliminations Continuing operations Discontinued operations All operations
Unaudited 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
Revenue 2 014 1 620 252 287 201 214 1 780 1 390 379 264 – – – – (47) (106) 4 579 3 669 – 36 4 579 3 705
– sale of goods and or services 2 007 1 609 252 287 74 63 1 780 1 390 379 264 – – – – (47) (106) 4 445 3 507 – 36 4 445 3 543
– interest 7 11 – – 127 151 – – – – – – – – – – 134 162 – – 134 162
Operating profit/(loss) (before the items below) 86 61 134 151 118 131 103 153 24 24 (9) (30) – – – – 456 490 – (13) 456 477
– other operating income – – – – 3 10 – – – – 5 6 – – – – 8 16 – – 8 16
– depreciation and amortisation (8) (7) (10) (9) (12) (16) (36) (33) (4) (2) (13) (5) – – – – (83) (72) – (2) (83) (74)
Operating profit/(loss) 78 54 124 142 109 125 67 120 20 22 (17) (29) – – – – 381 434 – (15) 381 419
Other items of profit and loss 7 – – – – – – – – – – – – – – – 7 – – – 7 –
– share of profit/(loss) of associates 7 – – – – – – – – – – – – – – – 7 – – – 7 –
Profit/(loss) before finance costs 85 54 124 142 109 125 67 120 20 22 (17) (29) – – – – 388 434 – (15) 388 419
Finance costs (23) (19) (18) (10) (74) (93) (34) (37) (9) (3) (3) (3) (39) (40) – – (200) (205) – (2) (200) (207)
Profit/(loss) before income tax 62 35 106 132 35 32 33 83 11 19 (20) (32) (39) (40) – – 188 229 – (17) 188 212
Income tax (54) (70) – 5 (54) (65)
Profit after tax 134 159 – (12) 134 147
Assets 1 612 1 737 882 898 2 023 3 402 1 938 1 551 720 191 653 526 (43) (256) (750) (180) 7 035 7 869 7 035 7 869
Non-current assets 296 235 397 378 319 541 1 110 879 337 86 302 333 (43) (256) – – 2 718 2 196 2 718 2 196
Other current assets 836 819 98 109 40 5 253 260 177 33 39 35 – – (96) (180) 1 347 1 081 1 347 1 081
Trade and other receivables 387 495 371 358 1 597 2 435 547 402 206 72 71 37 – – (654) – 2 525 3 799 2 525 3 799
Cash and cash equivalents 93 188 16 53 67 421 28 10 – – 241 121 – – – – 445 793 445 793
Liabilities 512 760 237 318 1 600 2 676 750 652 294 76 1 856 1 470 558 550 (511) (231) 5 296 6 271 5 296 6 271
Non-current liabilities 6 103 2 1 20 19 97 277 22 8 65 63 558 545 – – 770 1 016 770 1 016
Other current liabilities 493 579 235 317 222 77 653 372 272 68 80 71 – 5 (511) (231) 1 444 1 258 1 444 1 258
Borrowings to finance trade receivables – – – – 1 358 2 542 – – – – 537 781 – – – – 1 895 3 323 1 895 3 323
Call loans and overdrafts 13 78 – – – 38 – 3 – – 1 174 555 – – – – 1 187 674 1 187 674
Net assets 1 100 977 645 580 423 726 1 188 899 426 115 (1 203) (944) (601) (806) (239) 51 1 739 1 598 1 739 1 598
Capital expenditure 38 9 10 16 – 11 48 46 9 11 6 78 – – – – 111 171 111 171
page 9
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Group income statement (R’millions)
Group statement of comprehensive income (R’millions)
Note
Six months ended
31 December Unaudited
2011
Six monthsended
31 DecemberUnaudited
2010
Yearended
30 JuneAudited
2011
Continuing operationsSales of goods and rendering of services 4 445 3 507 6 998 Interest on trade receivables 134 162 292
Total revenue 4 579 3 669 7 290 Cost of sales* (3 477) (2 578) (5 231)
Gross profit 1 102 1 091 2 059 Other operating income 8 16 27 Other operating expenses* (729) (673) (1 407)
Operating profit 381 434 679 Finance costs 2 (200) (205) (387)Share of profit of associates 7 – 1
Profit before income tax 188 229 293 Income tax expenses (54) (70) (68)
Profit for the period from continuing operations 134 159 225
Discontinued operationsLoss for the period from discontinued operations – (12) (34)
Profit for the period 134 147 191
Profit for the period attributable to:Equityholders of the Company 133 146 190 Non-controlling interest 1 1 1
Profit for the period 134 147 191
Number of shares in issue (’m) 375,5 375,5 375,5Weighted average number of shares in issue (’m) 333,3 328,7 328,5Diluted weighted average number of shares in issue (’m) 356,7 356,5 356,5
Earnings per share from continuing operations (cents) 39,7 47,0 65,5Losses per share from discontinued operations (cents) – (2,6) (7,5)Earnings per share from all operations (cents) 39,7 44,4 58,0
Diluted earnings per share from continuing operations (cents) 37,1 43,4 60,3Diluted losses per share from discontinued operations (cents) – (2,5) (6,9)Diluted earnings per share from all operations (cents) 37,1 40,9 53,4
* Prior year information has been reclassified. Refer to note 8.
Six months ended
31 December Unaudited
2011
Six monthsended
31 DecemberUnaudited
2010
Yearended
30 JuneAudited
2011
Profit for the period 134 147 191
Other comprehensive income Exchange differences on translating foreign operations 35 (3) 8 Cash flow hedges (4) 2 7 Other comprehensive profit/(loss) for the period, net of tax 31 (1) 15
Total comprehensive income for the period 165 146 206
Total comprehensive income attributable to:Equityholders of the Company 164 145 205 Non-controlling interest 1 1 1
165 146 206
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
page 10
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Group cash flow statement (R’millions)
Six months ended
31 December Unaudited
2011
Six monthsended
31 DecemberUnaudited
2010
Yearended
30 JuneAudited
2011
Operating activities
Cash generated by operations before changes in working capital and tax paid 259 279 381
Changes in working capital (340) (554) (360)
Tax paid (27) (12) (48)
Net cash utilised in operating activities (108) (287) (27)
Net cash utilised in investing activities (282) (122) (467)
Net cash generated from/(utilised in) financing activities 287 (139) (467)
Net decrease in cash and cash equivalents (103) (548) (961)
Cash and cash equivalents at the beginning of the period (693) 268 268
Cash and cash equivalents at the end of the period (796) (280) (693)
Cash collateral deposits 54 399 147
Cash and cash equivalents and cash collateral deposits (742) 119 (546)
page 11
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Group statement of changes in equity (R’millions)
Sharecapital
Fair valueand otherreserves
Retained earnings
Treasuryshares
Incentivetrust
share
Totalshare-
holdersequity
BEEpartners
Othernon-
controllinginterest Total
Balance 30 June 2010 (audited) – 43 1 820 (90) (171) 1 602 670 13 2 285
Profit for the period – – 146 – – 146 – 1 147
Other comprehensive loss for the period – (1) – – – (1) – – (1)
Payment to non-controlling interests – – – – – – – (8) (8)
Dividends paid – – (57) – – (57) – – (57)
Share-based payments – 2 – – – 2 – – 2
Sale of incentive shares – – – – 20 20 – – 20
Consolidation of BEE SPVs – (120) – – – (120) (670) – (790)
BEE partners share to NDR – 13 (13) – – – – – –
Balance 31 December 2010 (unaudited) – (63) 1 896 (90) (151) 1 592 – 6 1 598
Profit for the period – – 44 – – 44 – – 44
Other comprehensive income for the period – 16 – – – 16 – – 16
Payment to non-controlling interests – – – – – – – (2) (2)
Dividends paid – – (80) – – (80) – – (80)
Share-based payments – 4 – – – 4 – – 4
Sale of incentive shares – – – – 18 18 – – 18
Transaction with non-controlling interests – – (23) – – (23) – – (23)
BEE partners share to NDR – (21) 21 – – – – – –
Balance 30 June 2011 (audited) – (64) 1 858 (90) (133) 1 571 – 4 1 575
Profit for the period – – 133 – – 133 – 1 134
Other comprehensive income for the period – 31 – – – 31 – – 31
Payment to non-controlling interests – – – – – – – 0 0
Dividends paid – – (10) – – (10) – – (10)
Share-based payments – 2 – – – 2 – – 2
Sale of incentive shares – – – – 7 7 – – 7
Transfer of Group shares – – – 4 (4) – – – –
BEE partners share to NDR – 9 (9) – – – – – –
Balance 31 December 2011 (unaudited) – (22) 1 972 (86) (130) 1 734 – 5 1 739
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
page 12
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Declaration of cash dividend
Notice is hereby given that the directors of AFGRI have declared an interim cash dividend of 18,45 cents per share for the six months ended 31 December 2011. In accordance with settlement procedures of STRATE, the following dates will apply to the interim dividend:
Last day to trade cum the dividend Thursday, 15 March 2012Trading ex dividend commences Friday, 16 March 2012Record date Friday, 23 March 2012Dividend payment date Monday, 26 March 2012
There will be no dematerialisation or rematerialisation of AFGRI shares between Friday, 16 March 2012 and Friday, 23 March 2012, both dates inclusive.
By order of the Board
M ShikwinyaGroup Company Secretary Centurion
page 13
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Notes to the condensed consolidated interim financial statements
1. Basis of preparation and accounting policiesThese condensed consolidated interim 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 period.
2. Finance costs
(R’millions)
Six months ended
31 December2011
Six monthsended
31 December2010
Interest paid on bank borrowings used to finance trade receivables (110) (105)
Other interest paid to financial institutions (91) (100)
Finance cost – continuing operations (201) (205)
Less: Borrowing costs capitalised on qualifying assets 1 –
Finance cost – continuing operations (income statement) (200) (205)
Finance cost – discontinued operations – (2)
Finance cost – total (200) (207)
3. Reconciliation of headline earnings per share
Earnings 39,7 44,4
(Profit)/loss on disposal of assets (2,8) 0,2
Headline earnings 36,9 44,6
Diluted headline earnings 34,5 41,2
4. Business segment resultsThe 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 operating unit’s net assets throughout the period. With the exception of the acquisition of the yellow 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 period. The Group changed the way it allocates Head office expenses during the 2011 financial year. Only centralised costs are now distributed with corporate head office cost remaining in the Corporate segment. Comparatives have been restated to ensure comparability.
5. Trade receivables financed by banks and related liabilityThe only security for the liability is the trade receivables themselves, and in certain cases, additional cash collateral deposits or cash trade receivables of between 10% and 15% of the facility. The Group carries the risk of loss on these trade receivables.
page 14
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Notes to the condensed consolidated interim financial statements continued
6. Agency agreementsThe Group manages Agri debtors on behalf of third party financial institutions to the amount of R3 532 million (2010: R1 546 million). 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 GroCapital Financial Services (Pty) Limited (a wholly owned subsidiary of AFGRI Operations Limited, “GroCapital”) sold its farmers lending debtors at book value to the Land and Agricultural Development Bank of South Africa (“Landbank”) for a purchase consideration of R1,57 billion. Part of this transaction is the origination of a Service Level Agreement under which GroCapital will manage, administer and service the farmer lending book on behalf of the Landbank. Under this agreement GroCapital is only liable for bad debts on a second loss basis. In accordance with IFRS, and as a result of the residual risk retained in the book sold, R12,0 million of the farmer debtors were not derecognised as part of the sale. A further R4,0 million guarantee provision was raised to accommodate the potential second loss in the book sold. Refer to the announcement on SENS on 5 December 2011 for further details regarding this transaction.
On all other service level agreements, the Group is liable for bad debts to a maximum of between 5% and 10% of the value of 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 R3 023 million (2010: R2 412 million) and are fully insured by the Group.
7. Business combinations
On 1 December 2011 the Group acquired the yellow grits and by-products milling business of Pride Milling Company (Pty) Limited, conducted at Ermelo, Kinross and Bethal, as a going concern. Purchase consideration amounted to R240 million, which includes contingent consideration of R20 million which will be payable on 30 November 2013 should certain profit targets be met. The initial accounting for this business combination in terms of IFRS 3 is incomplete as the purchase price allocation exercise is still to be finalised. The fair values of the assets and liabilities acquired were preliminarily determined as follows: property, plant and equipment of R98,5 million, inventory of R22,3 million, trade and other receivables of R76,8 million and trade and other payables of R83,2 million. Goodwill of R136,5 million arose as the difference between the fair value of purchase consideration and the fair value of the net assets acquired. The Group will revisit the assumptions and finalise the impact of IFRS 3 in the forthcoming year. Revenue of R29,7 million and a net profit of R0,3 million were included in the current period results.
8. Comparative figures
During the 2011 financial year certain costs, previously disclosed under operating expenses, have been disclosed as part of cost of sales. The prior year information has been reclassified to ensure comparability and a total amount of R25,5 million has been reclassified from other operating expenses to cost of sales for the six months ending 31 December 2010.
Interim results presentation
Growth the natural outcome
page 16
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Agenda
2
The past six months
Operational overview
Financial overview
Prospects
Questions and answers
Interim results presentation29 February 2012
1 March 2012
page 17
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Trading conditions
• Challenges for the period
• Grain Management
• Animal Protein
• General margin pressure in Foods segment
• Positive influences for the period
• Retail, Equipment and Australia
• Balance sheet strengthening
• Working capital
• Financial Services
• Procurement process (strategic sourcing)
• Cost control
4
Lower silo volumes+
Price and input cost pressure in Foods =
HEPS decline
Highlights
• Revenue
• HEPS (continuing operations)
• Interim dividend• Retain 2x dividend cover
• No discontinued operations
• Improved gearing
3
24.8%
(17.3) %
18.45 cps
page 18
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Agri services segment
6
2 013 1 732 1 620
2 014
308 283 287 252
2008 2009 2010 2011
Revenue (R’m)Retail & Equipment Grain Management
6959
35
62
95114
132
106
2008 2009 2010 2011
Profit before tax (R’m)Retail & Equipment Grain Management
Retail and Equipment:• High maize price contributed to enhanced earnings• Improved retail conditions in Australia
Grain Management:• Significant volume reduction in silos
Operational overviewChris Venter
page 19
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Agri services: Tractor sales
8
* Value of tractors sold only includes new tractors sold
Sales value of AFGRI tractors sold in South Africa:2011 (interim) R250 million2010 (interim) R174 million
2 2542 715
2 417
3 117
3 709
4 382
2 907
3 577
5 143
615814 609
863 7911 024
687 8211 130
191 240 182 309 302 426 237 2200
1 000
2 000
3 000
4 000
5 000
6 000
2003 2004 2005 2006 2007 2008 2009 2010 2011
National AFGRI area AFGRI sales
Current market share of 31% (27% - 2010)
513
AFGRI Africa
354
Agri services segment
7
Retail & Equipment• High maize price and good rainfall brought recovery from second half
• Strong maize price boosted revenue
• Strong volume growth
• Margins maintained
• Farmers positive on agricultural sector
page 20
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Agri services segment
10
• Lower silo volumes
• Exports continued during the six months
• Successful move of Procurement arm of Trading into Grain Management
• Expanded Collateral Management footprint
• Plantings – (AFGRI area of operation):• 9% increase - maize
• 4% decrease - soya
• 24% decrease - sunflower
Grain Management
Grain Current year (ha) Prior year (ha)White maize 226 056 223 807 Yellow maize 408 851 358 220 Total maize 634 907 582 027 Sunflower 28 099 36 927 Soya beans 221 107 230 037 TOTAL HA 896 424 861 185
Agri services segment
9
Africa
• John Deere dealership established in Zimbabwe and Zambia
• Tractor sales:• Zimbabwe – 25 (Aug – Dec 2011)
• One center in Zimbabwe• Cash sales
• Zambia – 134
• In process of negotiating an additional two John Deere agencies in Africa
• Supporting 24 farmers in Congo Brazzaville
page 21
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
AFGRI closing silo stocks (‘000)
12
Source: AFGRI
-
500 000
1 000 000
1 500 000
2 000 000
2 500 000
3 000 000
Dec-
03M
ar-0
4Ju
n-04
Sep-
04De
c-04
Mar
-05
Jun-
05Se
p-05
Dec-
05M
ar-0
6Ju
n-06
Sep-
06De
c-06
Mar
-07
Jun-
07Se
p-07
Dec-
07M
ar-0
8Ju
n-08
Sep-
08De
c-08
Mar
-09
Jun-
09Se
p-09
Dec-
09M
ar-1
0Ju
n-10
Sep-
10De
c-10
Mar
-11
Jun-
11Se
p-11
Dec-
11
December –
Drought conditions & low plantings
White and yellow maize plantings
11
1 73
7 00
0
1 48
9 00
0
1 71
9 70
0
1 41
8 30
0
1 59
0 20
0
500 000
700 000
900 000
1 100 000
1 300 000
1 500 000
1 700 000
1 900 000
2008 2009 2010 2011 2012
White maize: area planted (ha)
1 06
2 00
0
938
500
1 02
2 70
0
954
000
1 04
0 00
0
840 000
880 000
920 000
960 000
1 000 000
1 040 000
1 080 000
2008 2009 2010 2011 2012
Yellow maize: area planted (ha)
page 22
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Import and export price parity
14
Source: SAFEX
500.00
900.00
1 300.00
1 700.00
2 100.00
2 500.00
2 900.00
3 300.00
3 700.00
2-Ja
n-08
1-Fe
b-08
2-M
ar-0
81-
Apr-0
81-
May
-08
31-M
ay-0
830
-Jun
-08
30-J
ul-0
829
-Aug
-08
28-S
ep-0
828
-Oct
-08
27-N
ov-0
827
-Dec
-08
26-J
an-0
925
-Feb
-09
27-M
ar-0
926
-Apr
-09
26-M
ay-0
925
-Jun
-09
25-J
ul-0
924
-Aug
-09
23-S
ep-0
923
-Oct
-09
22-N
ov-0
922
-Dec
-09
21-J
an-1
020
-Feb
-10
22-M
ar-1
021
-Apr
-10
21-M
ay-1
020
-Jun
-10
20-J
ul-1
019
-Aug
-10
18-S
ep-1
018
-Oct
-10
17-N
ov-1
017
-Dec
-10
16-J
an-1
115
-Feb
-11
17-M
ar-1
116
-Apr
-11
16-M
ay-1
115
-Jun
-11
15-J
ul-1
114
-Aug
-11
13-S
ep-1
113
-Oct
-11
12-N
ov-1
112
-Dec
-11
11-J
an-1
210
-Feb
-12
R/to
n
PRICES OF YELLOW MAIZE DELIVERED (RANDFONTEIN)
Import parity
SAFEX
Export parity
SAFEX, Jul ‘12
AFGRI closing silo stocks (‘000) Dec ‘10 – Dec ‘11
13
Source: AFGRI
Tons
1 928 000
2 748 000 2 605 000
2 259 000
1 967 000
1 668 000
1 463 000
1 207 000
932 000
686 000 573 000
705 000
1 308 000
1 838 000
1 691 000
1 460 000
1 231 000 1 090 000
915 000
-
500 000
1 000 000
1 500 000
2 000 000
2 500 000
3 000 000
Jun-
10
Jul-1
0
Aug-
10
Sep-
10
Oct
-10
Nov-
10
Dec-
10
Jan-
11
Feb-
11
Mar
-11
Apr-1
1
May
-11
Jun-
11
Jul-1
1
Aug-
11
Sep-
11
Oct
-11
Nov-
11
Dec-
11
Low closing stock levels resulted in R48 million shortfall in income
Key:Jun ‘10 – Jun ‘11Dec ‘10 – Dec’11
page 23
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Yellow and white maize price
16
Year White maize Yellow maize
Average for the year
2008 1 830 1 8442009 1 537 1 4252010 1 201 1 2632011 1885 18952012 (Jan) 2738 2764 Source: JSE and SAGIS
R / t
on
90011001300150017001900210023002500270029003100
02/1
1/20
07
02/0
1/20
08
02/0
3/20
08
02/0
5/20
08
02/0
7/20
08
02/0
9/20
08
02/1
1/20
08
02/0
1/20
09
02/0
3/20
09
02/0
5/20
09
02/0
7/20
09
02/0
9/20
09
02/1
1/20
09
02/0
1/20
10
02/0
3/20
10
02/0
5/20
10
02/0
7/20
10
02/0
9/20
10
02/1
1/20
10
02/0
1/20
11
02/0
3/20
11
02/0
5/20
11
02/0
7/20
11
02/0
9/20
11
02/1
1/20
11
02/0
1/20
12
WMAZ YMAZ
Maize exports (total)
15
Source: SA Grain Information Service
‘000
tons
0
50
100
150
200
250
300
350
400
450
May
-10
Jun-
10
Jul-1
0
Aug-
10
Sep-
10
Oct
-10
Nov-
10
Dec-
10
Jan-
11
Feb-
11
Mar
-11
Apr-1
1
May
-11
Jun-
11
Jul-1
1
Aug-
11
Sep-
11
Oct
-11
Nov-
11
Dec-
11
page 24
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Financial services segment
18
GroCapital
• Product diversification
• Focus on commodities in Africa reaping rewards
• Sale of corporate debtors book
• Enhancing structured finance and procurement business and mitigating risk with a logistics partner
1 315
817
1 208
-
200
400
600
800
1 000
1 200
1 400
2009 2010 2011
Corporate debtors book (R’m)
Source: AFGRI data
Financial services segment
17
485
339
214 201
2008 2009 2010 2011
Revenue (R’m)Financial Services
27
7
3235
2008 2009 2010 2011
Profit before tax (R’m)Financial Services
GroCapital• Restructure in 2009 – demonstrates positive trend• Strategic direction well entrenched with proven results
AFGRI Capital• Position for fee income rather than interest income
page 25
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Financial services segment
20
AFGRI Capital
• AFGRI retains strong working relationship with clients
• Farmers experienced no negative effect or change in service level
• Marketing opportunity exists now that available capital funding is in place
How is AFGRI experiencing the relationship with the Land Bank?
Is AFGRI still of the opinion that this transaction was the correct one?
Financial services segment
19
AFGRI Capital• Successful implementation of sale of debtors book
• Improve financial position and gearing
• Increase access to funding
• Opportunity to utilise capacity and infrastructure
• Change from interest income to fee income model
5 3894 864
3 965
2 886
0
1 000
2 000
3 000
4 000
5 000
6 000
2009 2010 2011 2012
Farm debtors under management (R’m)
Source: AFGRI data
Farm debtors under management(Land Bank and Wesbank)
page 26
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
22
• External market factors
• Increased raw material price - therefore increased margin
pressure
• Year - year increase of 33%
• NSV increased by 18%
• Imports continued at 39%
• Internal efficiency factors• Hubbard breed
• Impact of volume on unit costs
• Changes in Animal Protein• New appointments – Nick Wentzel and Izaak Breitenbach
• Focus on increased volume to reduce unit costs
• Appointed as YUM’s 3rd supplier
Animal Protein
Foods segment
AFGRI Board
Nick WentzelIndependent Non-Executive Director
AFGRI Poultry
Izaak BreitenbachMD
21
260 296 264 379
1 287 1 581
1 390
1 780
2008 2009 2010 2011
Revenue (R’m)Oil, Milling & Protein Animal Protein
13 1219
11
5568
83
33
2008 2009 2010 2011
Profit before tax (R’m)Oil, Milling & Protein Animal Protein
• Yellow maize milling integration• Margin pressure on Foods segment as a result of high raw material prices
Foods segment
page 27
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
24
Oil, Milling and Protein• One month inclusion of yellow maize milling business revenue
• Higher raw material price
• Margins remain under pressure
• Nedan expansion project progressing well
Foods segment
Impact of new crushing plants around South Africa?
Broiler pricing
23
Source: South African Poultry Association
10
11
12
13
14
15
16Ja
n-07
Mar
-07
May
-07
Jul-0
7Se
p-07
Nov-
07Ja
n-08
Mar
-08
May
-08
Jul-0
8Se
p-08
Nov-
08Ja
n-09
Mar
-09
May
-09
Jul-0
9Se
p-09
Nov-
09Ja
n-10
Mar
-10
May
-10
Jul-1
0Se
p-10
Nov-
10Ja
n-11
Mar
-11
May
-11
Jul-1
1Se
p-11
Nov-
11
Total sales realised of frozen broilers
R / k
g
page 28
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
26
• Income statement impact• Increase in interest paid : R 39 million• Increase in taxation : R 7 million• Increase in profit attributable to ordinary shareholders : R 9 million
• Balance sheet impact• Decrease in total equity : R 838 million• Decrease in net assets : R 838 million
Consolidation of BEE structure
Financial overviewJan van der Schyff
page 29
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
49%
4%
47%
Revenue - 31 December 2011
Agri ServicesFinancial ServicesFoods
50%
6%
44%
Revenue - 31 December 2010
Agri ServicesFinancial ServicesFoods
Segmental overview
51%
27%
22%
Operating profit - 31 Decmber 2011
Agri ServicesFinancial ServicesFoods
42%
27%
31%
Operating profit - 31 December 2010
Agri ServicesFinancial ServicesFoods
28
27
DescriptionR’ million
6 months to31 Dec 2011
6 months to31 Dec 2010 Change
Total revenue 4 579 3 669 24.8%Cost of Sales (3 477) (2 578) (34,9)%Gross Profit 1 102 1 091 1,0%Net operating expenses (721) (657) (9,7)%Operating profit 381 434 (12,2)%Finance cost / associate profit (193) (205) (5,9)%Profit before taxation - continuing 188 229 (17.9)%Taxation (54) (70) 22.9%Profit for continuing operations 134 159 (15.7)%Discontinued operations - (12) (100)%Profit for the period 134 147 (8.8)%
Diluted weighted average number of shares in issue (‘m) 356.7 356.5 -Diluted EPS (cents) 37.1 40.9 (9.3)%Diluted HEPS (cents) 34.5 41.2 (16.3)%
Consolidated income statement
page 30
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
30
Agri Services – Retail & Equipment
DescriptionR’ million
6 months to 31 Dec 2011
6 months 31 Dec 2010
Change
Total revenue 2 014 1 620 24.3%
PBIT 85 54 57.4%
PBT 62 35 77.1%
Profit before interest margin
4.2% 3.3% 27.3%
2 014
1 620
62
35
30
35
40
45
50
55
60
65
0
500
1000
1500
2000
2500
2011 2010Revenue (R'm) PBT (R'm)
Business Results
DescriptionR’ million
6 months to 31 Dec 2011
6 months 31 Dec 2010
Change
Analysis of PBT
Normalised 44 35 25.7%
Sale of assets 18 0 -
Total 62 35 77.1%
Segmental overview
68%
14%
18%
PBT 2011
Agri ServicesFinancial ServicesFoods
55%
11%
34%
PBT 2010
Agri ServicesFinancial ServicesFoods
52%
27%
21%
PBIT - 2011
Agri ServicesFinancial ServicesFoods
42%
27%
31%
PBIT - 2010
Agri ServicesFinancial ServicesFoods
29
page 31
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
32
Agri Services – Grain Management
DescriptionR’ million
6 months to 31 Dec 2011
6 months to 31 Dec 2010
Change
Total revenue 252 287 (12.2)%
PBIT 124 142 (12.7)%
PBT 106 132 (19.7)%
Total tonnage received (million)
2.3 2.6 (11.5)%
Opening stock (million)
1.3 1.9 (31.6)%
Average storageperiod (months)
3.3 3.8 (13.2)%
• Notes• Low opening stock• Impact of volumes and storage period on HEPS (R48 million)• Offset by:
- Handling out- Trading- Grain sales
252
287
106
132
0
20
40
60
80
100
120
140
230
240
250
260
270
280
290
2011 2010Revenue (R'm) PBT (R'm)
Business Results
31
Agri Services – Retail & Equipment
DescriptionR’ million
6 months to31 Dec 2011
% Contribution
6 months to31 Dec 2010
% Contribution
Revenue – Retail (Continuing**) 523 26% 391 24%Revenue – Mechanisation 627 31% 457 28%Revenue – Primary Inputs 123 6% 164 10%Revenue – Other services 518 26% 416 26%Revenue – Australia 223 11% 192 12%Total revenue 2 014 100% 1 620 100%PBT – Retail 16 26% 10 29%PBT – Mechanisation 23 37% 15 43%PBT – Primary Inputs 1 2% 3 9%PBT – Other services 24 39% 12 34%PBT – Australia (2) (4)% (5) (15)%Total profit before taxation* 62 100% 35 100%Net Profit – Retail 3.1% 2.6%Net Profit – Mechanisation 3.7% 3.3%Net Profit – Primary Inputs 0.8% 1.8%Net Profit – Other services 4.6% 2.9%Net Profit – Australia (0.9)% (2.6)%Net profit margin 3.1% 2.2%
* Other operating income (including capital profits), other services and Africa
page 32
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Net interest calculation
34* - Included in other operating income ** - Included in other operating expenses
DescriptionR’ million
6 months to 31 Dec 2011
6 months to 31 Dec 2010
Finance cost: continuing (201) (205)Interest related to debtors finance 110 105Other interest paid: continuing (91) (100)Other interest paid: discontinued - (2)Other interest paid (91) (102)Dividend income* 3 3Interest received: Guarantee deposit* 3 13Interest received: Other** 12 12Net interest (73) (74)Interest effect of consolidation 39 40Interest: Other guarantee deposits** 3 4Net interest and dividends (31) (30)
33
Financial Services
DescriptionR’ million
6 months to 31 Dec 2011
6 months to 31 Dec 2010
Change
Total revenue 201 214 (6.1)%
PBIT 109 125 (12.8)%
PBT 35 32 9.4%
Loan book margin 2.7% 2.6% 3.8%
• Notes• Sale of debtors book• Cash collateral deposit releases• Fee income improved• Good capital profits• Reduction in OPEX
201
24135
32
30.53131.53232.53333.53434.53535.5
180
190
200
210
220
230
240
250
2011 2010Revenue (R'm) PBT (R'm)
Business Results
page 33
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
36
Animal Protein
DescriptionR’ million
6 months to 31 Dec 2011
6 months to 31 Dec 2010
Change
Total revenue 1 780 1 390 28.1%
PBIT 67 120 (44.2)%
PBT 33 83 (60.2)%
• Notes• Animal Feeds
• Lower margins• Broilers
• Higher feed costs• Lower NSV• High cost per unit
1 780
1 390
33
83
0102030405060708090
0200400600800
100012001400160018002000
2011 2010Revenue (R'm) PBT (R'm)
Business Results
Impact of debtors book sale
35
31 Dec 2010 31 Dec 2011DescriptionR’ million
Actuals Before
Actuals After
Debt 4 036 3 209Equity 1 598 1 739Debt: Equity ratio 2.53 1.85
• Before = Before sale of farming lending book• After = After sale of farming lending book
30 Jun 2011 30 Jun 2011 30 Jun 2011 30 Jun 2011Farmer lending
included
Farmer lending
excluded
Corporate lending
excluded
BEEstructure
completedDescriptionR’ million
Actual Pro-forma After
Pro-forma After
Pro-forma After
Debt 4 539 2 662 2 062 1 362Equity 1 575 1 575 1 575 2 275Debt: Equity ratio 2.88 1.69 1.31 0.60
page 34
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
38
DescriptionR’ million
6 Months toDec 2011
6 Months toDec 2010
Change%
AssetsNon-current assets 2 718 2 196 23.8%Property, plant and equipment 1 845 1 512 22.0%Goodwill 248 37 570.3%Other intangible assets 256 286 (10.5)%Investments in associates 48 36 33.3%Available-for-sale financial assets 41 42 (2.4)%Financial receivables 164 161 1.9%Deferred income tax assets 116 122 (4.9)%Current assets 4 310 5 656 (23.8)%Inventories 1 227 934 31.4%Biological assets 47 64 (26.6)%Trade and other receivables 630 509 23.8%Trade receivables financed by banks 1 895 3 290 (42.4)%Derivative financial instruments 44 64 (31.3)%Current income tax assets 22 2 1 000%Cash and cash equivalents and cash collateral deposits 445 793 (43.9)%Assets of disposal groups classified as held-for-sale 7 17 (58.8)%Total assets 7 035 7 869 (10.6)%
Balance sheet - assets
37
Oil, Milling and Protein
DescriptionR’ million
6 months to 31 Dec 2011
6 months to 31 Dec 2010
Change
Total revenue 379 264 43.6%
PBIT 20 22 (9.1)%
PBT 11 19 (42.1)%
• Notes• Lower volumes• Reduced margins• Offset by lower OPEX
379
264
11
19
02468101214161820
0
50
100
150
200
250
300
350
400
2011 2010Revenue (R'm) PBT (R'm)
Business Results
page 35
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
40
Cash generated from ops
Working capital utilised
Taxation
Investments made
Finance activities
31 Dec 2011R’million
Movement in guarantee deposits
(103)(93)
1 528(2)
1 330
-139
-122
-12
-554
279
-600 -400 -200 - 200 400
31 Dec 2010R’million
Cash flow statement
287
-282
-27
-340
259
-400 -200 - 200 400
(548)(23)572
(554)(553)
Net movement in overdraft
Movement in debt to finance debtors
Movement in borrowings (incl short term)
Movement in net debt
39
Balance sheet - liabilities
DescriptionR’ million
6 Months toDec 2011
6 Months toDec 2010
Change%
Equity - Capital & reserves attributable to equity holders 1 734 1 592 8.9%Treasury shares (86) (90) 4.4%Incentive trust shares (130) (151) 13.9%Fair value and other reserves (22) (63) 65.1%Retained earnings 1 972 1 896 4.0%Non-controlling interest 5 6 (16.7)%Total equity 1 739 1 598 8.8%Liabilities - Non-current liabilities 770 1 016 (24.2)%Borrowings 572 832 (31.3)%Deferred income tax liabilities 183 184 (0.5)%Provisions for other liabilities and charges 15 - -Liabilities - Current liabilities 4 526 5 255 (13.9)%Trade and other payables 1 393 1 164 19.7%Derivative financial instruments 44 79 (44.3)%Current income tax liabilities 7 15 (53.3)%Call loans and bank overdrafts 1 187 674 76.1%Bank borrowings to finance trade receivables 1 895 3 323 (43.0)%Total liabilities 5 296 6 271 (15.5)%Total equities and liabilities 7 035 7 869 (10.6)%
page 36
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
ProspectsChris Venter
41
DescriptionR’ million
6 Months to31 Dec 2011
Agri Services 48Financial Services -Foods 57Corporate 6Total 111
Group capex and activities
page 37
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
AFGRI DNA with value added services
Retail
Production Grain Management Industrial Processing
Partrite
GroCap
Mechan-isation
Insurance Farmer Lending
LabWorld
Tobacco
44
AFGRI DNA
Production Grain Management Industrial Processing
Grain value chain will always remain embedded in the AFGRI DNA
43
page 38
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Investment case
46
Food securitySustainable
Balance sheet restructured
Outstanding knowledge on
agricultural market place
Strategic assets with good market
share
Brand equityVision
People
Assets
Liquidity
Strategic operations being
strengthened
To be the leading agricultural
services and food company
If correct calibre is not in place -
replace
AFGRI main asset group has an
average RONA of 30% +
Debt:equityratio improved
to 1.69
AFGRI will continue to strive for a balance of growth through capex spend, acquisition and other organic growth
Strengthening exercise remains
focus
Value added services
Retail
Partrite
GroCap
Mechan-isation
Insurance Farmer Lending
LabWorld
TobaccoFocus on service delivery
and financial returns (RONA and ROE)
45
page 39
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
48
• Current external environment
• Price expected to remain strong
• Margin pressure on Poultry will remain
• Expect good crop in AFGRI area
Price expectation
White maize R1,800 – R2,600
Yellow maize R1,800 – R2,600
Wheat R2,700 – R3,100
Sunflower R4,100 – R4,700
Soybean R3,100 – R3,600
• Focus areas for the period ahead
• Counter empty silos
• Financial services will continue to grow
• Poultry expansion and efficiencies
• Sale of corporate debtors book
• Potential to take BEE funding off balance sheet
Prospects
Investment case
47
2009 - 2010 2011 2012 2014 onwards
Disposal and closure of non-core,
unprofitable divisions
Successful restructure of balance sheet
Strong operations and board
members appointed to assist in Foods
strategy development
2013
Purchase of Rossgro and Pride Milling to bolster Foods division
Consolidation of ongoing operations
Establish additional bunker and collateral
management sites
Focus on efficiencies in
Poultry
Increased capacity for DOC and
slaughter birds
Nedan expansion completed with
intention of doubling capacity
Benefit of Africa
Expansion of Milling
Daybreak abattoir extensions completed
Daybreak and Delmas abattoir
production to increase
Benefits across GP, parent, broiler and abattoir operations will improve
Implemented new SAP system - extraction of value continues with the benefit of the procurement initiative
Focus on increased ROE and value added services
Benefit of new Financial Services structure – fee income
Continue to expand Grain management footprint across Africa
Key:GroupAgri ServicesFinancial ServicesFoods
page 40
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
Thank you for your attendance and participation
www.afgri.co.za
For any further Investor Relations questions please contact:
Chris Venter (CEO) – 011 063 2001Vanessa Rech (Keyter Rech Investor Solutions) – 011 447 8656
Appendix
page 41
Unaudited condensed consolidated financial results for the six months ended 31 December 2011 and cash dividend declaration
52
Debt / cash flow calculation
DescriptionR’ million 6 months ending Dec 2010 6 months ending Dec 2011
Jun 2010 Dec 2010 Movement Jun 2011 Dec 2011 MovementOverdraft (207) (674) (467) (951) (1 187) (236)Cash 475 394 (81) 258 391 133Net overdraft (excl guarantee deposits) 268 (280) (548) (693) (796) (103)Cash guarantee deposits 422 399 (23) 147 54 (93)Net overdraft 690 119 (571) (546) (742) (196)Short tem debt (105) 0 105 (10) 0 10Debt to finance debtors (3 895) (3 323) 572 (3 423) (1 895) 1 528Net short term debt (3 310) (3 204) 106 (3 979) (2 637) 1 342Long term borrowings (173) (832) (659) (560) (572) (12)Net debt (3 483) (4 036) (553) (4 539) (3 209) 1 330
51
Loan book: margin calculation
DescriptionR’ million
6 Months toDec 2011
6 Months toDec 2010 Change
Total interest received 154 161 (4.3)%Total interest received 151 151 -Interest on cash guarantees 3 10 (70.0)%
Total interest paid (115) (110) 4.5%Total interest paid (110) (105) 4.7%
Other interest (paid) / received (5) (5) -Net interest 39 51 (23.5)%
Average debtors balances 2 886 3 965 (27.2)%
Loan book margin 2.7% 2.6% 3.8%
BA
ST
ION
GR
AP
HIC
S
www.afgri.co.za
AFGRI LimitedPO Box 11054
Centurion0046
Tel: +27 11 063 2347Fax: +27 87 942 5010
E-mail: [email protected]
AFGRI Operations LimitedPO Box 11054Centurion0046
Tel: +27 11 063 2347Fax: +27 87 942 5010E-mail: [email protected]