OREANDA-NEWS. Astral Foods Limited (Astral's) released final results for the year ended 30 September 2014. The increase in headline earnings from R165,1 million for the previous year, to R329,7 million for the 2014 financial year, is attributable to the continuation of the turnaround to profitability of the Poultry division which started in the second half of the previous financial year.

Revenue increased by 13% to R9 602 million, contributed by a 16% increase in poultry revenue and a 4% increase in Feed external revenue. The Group's operating profit increased by 88% to R492,9 million. The Poultry division's reported operating profit of R104,4 million, compared to the loss of R112,5 million for the previous year, is the main driver for the improvement in the Group's operating profit. Profitability of the Feed division at R353,7 million represents an increase of 7% on the previous year's operating profit. The Africa division's operating profit at R34,8 million is down on the previous year's R45,0 million following the disappointing results reported for the first six months of this financial year.

Net finance cost at R25,3 million was marginally lower than the previous year. Interest of R14,2 million on finance raised to fund major capital expenditure items has been capitalised. Going forward this finance cost will no longer be capitalised to property, plant and equipment but will be charged against operating profit in the statement of comprehensive income.

Profit before tax at R469,9 million is 63% higher than the previous year's R287,9 million which includes a profit of R46,6 million on the sale of a portion of an interest in an associate. This amount has been restated (previously reported at R79,4 million) following the mandatory adoption of a new accounting policy in terms of IFRS 11

The cash generated from operating activities at R704,1 million represents a substantial increase on the previous year's R237,7 million. The main driver was the improvement in the operating profit as well as an inflow from reduced working capital funding. Capital expenditure at R391,7 million is higher than the previous year due to the ongoing expenditure on the new feed mill, costs incurred to accommodate increased volumes at the County Fair abattoir, and other specific expenditure on efficiency improvements. A net inflow of R24 million has been received from additional financing for the new feed mill whilst an inflow of R65,8 million was received from shares issued in respect of share options exercised. The net movement in cash and cash equivalents was an inflow of R110,4 million. The net debt equity ratio including the funding of the new feed mill at 8,9% is down from the 15,5% as at 30 September 2013.

The board has declared a final dividend of 240 cents per share. The distribution is supported by the low debt to equity level and the underlying liquidity capabilities of the Group.

The Poultry Division reported a 16% increase in revenue to R7,0 billion (September 2013: R6,0 billion) on the back of higher volumes (up 7%) and higher poultry selling prices (up 8%). Profitability improved significantly to a positive R104 million off a loss of R112 million in 2013, resulting in a net margin for the division of 1,5% (September 2013: -1,9%).

The average broiler feed price increased by 2% year-on-year. Due to extremely low maize stocks following injudicious exports, local prices peaked towards the end of March 2014 directly impacting feed prices in the first six months of the reporting period. Following perfect conditions a record local maize crop topping 14 million tons was harvested, resulting in the price of maize decreasing substantially in the latter half of F2014.

In the last quarter of the reporting period lower maize prices were offset by higher soya prices. The lower maize prices will only be realised in the new financial year due to the lag brought about by forward procurement of soft commodities. It is envisaged that soya prices could soften on the back of good global crops.

Broiler production performances improved for the period in line with continued focus in this area, delivering value in improved feed efficiencies and better bird growth rates. An improvement in product mix was realised with Astral further reducing its exposure to Individually Quick Frozen (IQF) portions. An increase in the proportion of fresh sales and value added products was achieved off higher total sales volumes for the year versus the comparable period in the prior year.

The Feed division recorded an increase in revenue of 12% R5,5 billion (September 2013: R4,9 billion) as a direct result of the higher raw material and feed pricing, whilst sales volumes increased by 5% assisted by higher inter-group volumes as a result and of higher bird placements compared to the prior year and the take-on of the Afgri feed volumes. Operating profit increased by 7% to R354 million (2013: R329 million).

Total volumes increased year-on-year to 1,27 million tons per annum, with the increase in feed sales to Astral 's poultry operations offset by a drop in sales to the external market due to a contraction in demand from the independent poultry market.

The new feed mill in Standerton was officially opened and commissioned during the last quarter of F2014. All the feed volumes previously manufactured by Afgri for Astral's Goldi broiler operation in Standerton were moved into the new facility, with the income stream of these volumes accruing to Astral in the last two months of the period under review.

Other Africa operations delivered revenue growth of 13% to R499 million (September 2013: R442 million) supported by higher volumes (up 4%) as a result of the expansion in capacity at the broiler breeder and hatchery operations in both Zambia and Mozambique. The operating profit for the division decreased by 23% to R35 million (September 2013: R45 million).

The profitability at Tiger Animal Feeds in Zambia was impacted negatively through unfavourable raw material positions and the management thereof in the first half of the reporting period. A turnaround in the performance of this business unit in the second half of the year was delivered in line with expected returns.

Prospects

The slowing level of growth in the economy and higher unemployment levels will continue to depress consumer spending, and there is strong evidence that the average household will have to make ends meet off a reduced discretionary budget.

Through the South African Poultry Association an anti-dumping application was submitted to International Trade and Administration Commission of South Africa (ITAC) against three EU member countries. ITAC implemented provisional anti-dumping duties against poultry imports from the UK, the Netherlands and Germany until the 2nd January 2015. It is of paramount importance that these measures are sanctioned on a more permanent basis by the Minister of Trade and Industry in order to stem the tide of dumped poultry products into South Africa.

The recent South African harvest produced a record maize crop, and together with healthy global maize and soya crops the softening of grain prices will at least benefit feed prices and livestock production costs in the first half of the new reporting period.

Astral has engaged in an expansion drive over the past year, with sizeable investments in various value enhancing projects. The "bedding down" of these investments and achieving the projected returns will be a key focus area in the new financial year.

Appreciation

The Chief Executive Officer on behalf of the board, Astral Executive Management and staff, would like to express his sincere gratitude to Mr Jurie Geldenhuys who retired as Chairperson and board member in the past year, for his sterling contribution to Astral over the past 13 years.

DECLARATION OF ORDINARY DIVIDEND No. 27

The board has approved a final dividend of 240 cents per ordinary share (gross) in respect of the year ended 30 September 2014. 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 15% (fifteen per centum);

• There are no Secondary Tax on Companies (STC) credits utilised;

• The gross local dividend is 240 cents per ordinary share for shareholders exempt from the Dividend Tax;

• The net local dividend is 204 cents per ordinary share for shareholders liable to pay Dividend Tax;

• Astral Foods Limited has currently 42 722 685 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

Friday, 16 January 2015

Shares commence trading ex-dividend

Monday,19 January 2015

Record date

Friday, 23 January 2015

Payment of dividend

Monday, 26 January 2015

Share certificates may not be dematerialised or rematerialised between Monday, 19 January 2015 and Friday, 23 January 2015, both days inclusive.