News last update:6 Aug 2012

Afgri revenue up on better maize market

South Africa based agri services business Afgri Limited achieved an 18,7% increase in headline earnings per share on a 65,9 % increase in revenue from continuing operations over the 16-month period to June 2008 (2007 financial year: R6,4 billion or € 552m).

The financial year-end was changed to June to better reflect the agricultural growing season in future years.

"These results reflect two years of poor crops followed by a much improved season for agriculture in general, helped by higher commodity prices, a large maize crop and our ongoing focus on internal efficiencies," says Afgri CEO John Mooney. "This set the scene for improved results in all our businesses, with the exception of Daybreak Farms and AFGRI Seed.

Despite higher agricultural commodity prices, input costs such as fuel, chemicals and fertiliser increased dramatically, which will place pressure on farmers' margins next season."

The group reported a sharp increase in sales of primary inputs as a result of a bumper maize planting season.

Increased turnover Logistics
Turnover in Afgri Logistics Services was up 17,2 % to R273 million (€ 23.5m) for the 16- month reporting period (12 months to February 2007: R233 million or € 20m).

Headline profit before tax fell by a third to R72 million (€ 6.2m) (2007: € 9.7m) due to the low carry-over effect of the previous two years of poor maize crops.

This business is one of the largest suppliers of handling and storage services to the South African grain industry and represents nearly a third of South Africa's total silo capacity of 14 million tonnes.

Silo volumes improved dramatically from about May 2008 as AFGRI started to receive deliveries of this season's maize crop from farmers.

Seed business poor
It was a satisfactory period for Afgri Producer Services, with turnover up 51% to R5,7 billion (€ 490m), though headline profit before tax declined by 11% to R32 million (€ 2.74m) due to a poor performance by the Seed business, which recorded a loss of R33 million (€ 2.83m).

Reasons for the loss include the large volumes of carry-over seed stock due to low sales in the prior two years, which had to be written off during the trading period, and the high cost of developing new cultivars.

Animal feed turnover doubled
It was an excellent trading period for Afgri Products with a 92,8% increase in turnover to R3,3 billion (€ 283.7m) and headline profit before tax of R170 million (€ 14.6m), 24,8% up on the previous year.

Animal Feeds had an outstanding trading period, doubling turnover to R1,99 billion (€ 171m), and growing headline profit before tax by 82% to R151,6 million (€ 13m).

Tough times for Daybreak
Daybreak Farms recorded a loss of R2 million (€ 171,000) for the period, compared to a R37 million (€ 3.2m) profit for the previous year.

Daybreak had a challenging year due to excess capacity in the market, with producers unable to recover increased feed costs.

Daybreak invested R145 million (€ 12.4m) over the period to expand its hatchery, farming and abattoir facilities and by November 2008 this expansion should be completed with the abattoir's capacity increasing to 650,000 broilers per week.

Emerging farming looses
The group's emerging farming business reported a loss for the period and was discontinued. This operation, aimed at developing emerging farmers, will be revisited in the coming season as AFGRI remains committed to the goal of contributing to the creation of a vibrant emerging farming sector.

Margins under pressure
Commenting on the outlook for the results over the coming trading period, Mooney says the large crop expected for the season just passed will have a positive effect on the group, particularly the Logistics Services business.

However, rising input costs, such as fuel, fertiliser and chemicals, together with high animal and poultry feed prices, will place margins under pressure.

Continued good performances are expected from the Financial Services, Producer Services and Animal Feeds businesses and the results of Daybreak Farms will be positively impacted if there is the anticipated recovery in the broiler market. Afgri expects to show positive real growth in the coming financial period, says Mooney.

Related website: AFGRI Ltd

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