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AICO Africa Limited FY2013 results presentation

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  • 1. AUDITED GROUP RESULTS IMPORTANT This presentation is podcast in full and will be published on our website www.aicoafrica.com Please use the microphone and identify yourself before asking questions. Please note that the information provided in these presentations is accurate as of the date of the original presentation. Presentations will remain posted on this web site from one to twelve months following the initial presentation, but content will not be updated to reflect new information that may become available after the original presentation posting. This presentation contains forward-looking statements, that is, statements related to future, not past, events. Like other businesses, AICO is subject to risks and uncertainties that could cause its actual results to differ materially from its projections or that could cause other forward-looking statements to prove incorrect. Reported results should not be considered as an indication of future performance. for the year ended 31 MARCH 2013 28 June 2013
  • 2. CORPORATE PROFILE Please refer to our Group corporate websites for generic corporate information:- www.thecottoncompany.com www.seedcogroup.co.zw www.olivine.co.zw Seed Co is Africa's largest proprietary seed breeding, production, processing and distribution group, operating in 15 countries Cottco is the largest cotton processor and marketer in sub- Saharan Africa Olivine is a dominant, Zimbabwe-based manufacturer & marketer of fast moving consumer goods (FMCG) www.aicoafrica.com
  • 3. AGENDA •OVERVIEW •OPERATIONS REVIEW AND OUTLOOK •FINANCIAL REVIEW •DISCUSSION
  • 4. OVERVIEW • The year under review has not been good for the Group • Zimbabwean operations performed below expectation • Regional economies are stable but flags are coming up in Zambia where economic policy changes are adversely affecting business • The Malawian economy is moving in the right direction • The Eastern African economies are promising with the stability that came after the successful holding of elections in Kenya • The West African market is risky but full of potential Salient Features 120.7 162.9 225.9 293.3 263.9 0 500 USDmillion Group Revenue FY2009 FY2010 FY2011 FY2012 FY2013 26.9 12.8 33.2 38.5 24.2 0 50 USDmillion Group Operating Profit FY2009 FY2010 FY2011 FY2012 FY2013 33.4 22.4 43.8 47.6 32.7 0 50 USDmillion EBITDA FY2009 FY2010 FY2011 FY2012 FY2013
  • 5. OPERATIONS REVIEW
  • 6. FMCG • Olivine’s performance is improving but still loss making. • Working Capital and liquidity constraints continue to hinder sustainable good performance • Improved soya bean supplies and toll crushing arrangements has resulted in improved margins • The Olivine Board together with its shareholders continue to explore avenues of improving the Company’s liquidity situation. Sales volume • 12,027 tonnes • 2% up on LY Sales Revenue • USD24.4 million • 27% higher than LY Salient Features 2.6 14.9 18.5 19.2 24.4 0 5 10 15 20 25 30 USDmillion Revenue FY2009 FY2010 FY2011 FY2012 FY2013
  • 7. COTTON • Cottco recorded an intake of 150 000 tonnes supported by a high inputs scheme • The price impasse experienced resulted in a delayed and compressed buying season resulting in side marketing. • This scenario adversely affected our inputs recoveries • The high inputs underrecovery resulted in a huge debtors impairment. Revenue • USD138.0 million • 20% down on LY Profit before tax • USD7.6 million loss • 225% below LY Salient Features 78.8 77.8 119.0 170.9 138.0 - 50.0 100.0 150.0 200.0 USDmillion Revenue FY2009 FY2010 FY2011 FY2012 FY2013
  • 8. COTTON (Continued) • Current season inputs scheme participants were thoroughly screened. • We have learnt our lessons from the 2012 season • Core debt still the biggest problem facing this business
  • 9. SEED • Lower volume uptake by the Government and NGOs reduced sales figures in Zimbabwe. • Slower debt payment by Government affected the business’ liquidity resulting in higher borrowings. • The Malawi factory is under Construction. • Research has delivered some exciting new varieties. • Newly acquired breeding technology will lead to faster product development cycle Profit before tax • USD12.4 million • 47% lower than LY Salient Features 42344 47898 55063 67241 59406 0 20000 40000 60000 80000 Tonnes Sales Volumes FY2009 FY2010 FY2011 FY2012 FY2013 53.9 77.0 97.8 117.8 110.6 - 50.0 100.0 150.0 USDmillion Revenue FY2009 FY2010 FY2011 FY2012 FY2013
  • 10. PEOPLE • The Group has retained its key staff. • Staff development and training at all levels continue to be the Group’s priority.
  • 11. OUTLOOK • The Group continues to focus on cost containment and right sizing initiatives. • We expect a resurgent performance in Seed Co • Need to strike a balance on key operating and strategic variables in Cottco Intake volumes, buying prices, lint prices and input scheme recoveries • Olivine, performance dependant on funding • At Group level, the key issue is to get the balance sheet in shape Get funding into the SBU’s Negotiations with potential partners in progress
  • 12. FINANCIAL REVIEW
  • 13. •Accounting policies – Consistent with those used in prior year Group financial statements •Presentation – Financial statements are presented in US$, which is the Group’s functional currency •Compliance with IAS/IFRS – Compliant •Audit opinion – Clean, with emphasis of matter in respect of going concern issues in Olivine BASIS OF PREPARATION
  • 14. • Good improvement in gross margins • But interest bill is still a major concern ….diluting earnings and earnings per share • Downgrading of profits in Cotton and Seed a major issue SALIENT FEATURES 120.7 162.9 225.9 293.3 263.9 0 500 USDmillion Group Revenue FY2009 FY2010 FY2011 FY2012 FY2013 26.9 12.8 33.2 38.5 24.2 0 50 USDmillion Group Operating Profit FY2009 FY2010 FY2011 FY2012 FY2013 33.4 22.4 43.8 47.6 32.7 0 50 USDmillion Group EBITDA FY2009 FY2010 FY2011 FY2012 FY2013 Sales volume: 18% up Revenue: 10% down Gross profit: 5% up Operating profit: 37% down PAT: 114% down Attributable earnings: 209% down Borrowings: 9% lower
  • 15. Key Issues • High intake volumes in Cotton 45% higher to 150,000 tonnes, Sales 42% higher to 141,838 tonnes • Lower sales volumes in Seed - 12% down especially in Zimbabwe – 35% down on LY • Higher factory throughput in FMCG Though still constrained by working capital challenges SALES VOLUME 136.7 193.6 189.9 180.5 213.7 - 50.0 100.0 150.0 200.0 250.0 SalesVolumes(‘000tonnes) Group Sales Volume FY2009 FY2010 FY2011 FY2012 FY2013 5 % 2 %42 % Cotton 141,838 66% Seed 59,406 28% FMCG 12,027 6% FY2013 Sales Volume Cotton 99,753 55% Seed 67,241 37% FMCG 11,798 7% Spinning 1,659 1% FY2012 Sales Volume 18 %
  • 16. Key Issues • Sales volumes, were 18% higher than LY in Cotton  …but Lint prices were 45% lower • Lower revenue in Seed  …lower sales volumes in Zimbabwe • FMCG sales volumes were 2% higher than LY REVENUE 120.7 162.9 225.9 293.3 263.9 0 50 100 150 200 250 300 350 SalesRevenue(USDmillion) Group Sales Revenue FY2009 FY2010 FY2011 FY2012 FY2013 30 % 39 % 35 % Cotton 138 51% Seed 110.6 40% FMCG 24.4 9% FY2013 Revenue Cotton 170.9 55% Seed 117.7 38% FMCG 19.2 6% Spinning 4.5 1% FY2012 Revenue 10 %
  • 17. INCOME STATEMENT SUMMARY Mar-13 Mar-12 % Change Sales volumes 213.3 180.5 18 Revenue 263.9 293.3 (10) Operating profit 24.2 38.5 (37) Profit before tax (0.5) 18.1 (103) Profit after tax (2.1) 15.4 (114) EBITDA 32.7 47.6 (31) Attributable earnings (6.7) 6.2 (109) EPS (US cents) (1.26) 1.16 (109) • Firm prices during the year • But lint prices 45% lower • Working capital induced supply chain constraints • Higher margins than LY • Includes Total impairment charges of USD19.2m Interest charges of USD25.4 m • Corporate overheads 29% higher to USD73.4 m (incl. impairments) 11% higher (excl. impairments) Loss for the year caused by: • low sales volumes in Seed • lower lint prices in Cotton • interest costs, • impairment charges • supply chain inefficiencies
  • 18. Key issues • Cotton: cost reduction initiatives bearing fruit • Seed: cost management and stable prices • FMCG: higher efficiencies/better product mix MARGINS Group Cotton Seed FMCG Gross profit FY2013 94.4 40.8 50.9 3.1 FY2012 89.9 36.1 53.0 0.3 Y-o-y growth (%) 5% 13% (4%) 1033% Group Cotton Seed FMCG Gross margins (%) FY2013 36 30 46 13 FY2012 31 21 45 1 Cotton 40.8 43% Seed 50.9 54% FMCG 3.1 3% Gross profit by SBU 2013 Cotton 36.1 41% Seed 53 59% FMCG 0.3 0% Gross profit by SBU 2012 • Gross profit affected by lower sales volumes and revenue in Seed
  • 19. OVERHEADS 48.6 45.0 57.5 56.7 73.4 - 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 USDmillions Group Overheads FY2009 FY2010 FY2011 FY2012 FY2013 40% 23% 25% 19% 28% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% FY2009 FY2010 FY2011 FY2012 FY2013 Group Overheads - % of Revenue •Group overheads were USD73.4 m (last year: USD56.7 m) • 80% up on last year • 24% of revenue (LY: 11%) • Affected by impairment charges Cotton • 16% higher than last year • 31% of revenue (LY: 25%) • Costs running ahead of production and sales Seed • 7% higher than last year • 17% of revenue (LY20%) • …still need further growth in revenue FMCG 29% higher last year • Includes impairments of USD16.4 m (LY: USD5.5 m) • 28% of revenue (LY: 19%)
  • 20. •Impairment provisions charged to income statement amounted to USD19.2 m USD16.4 charged directly to operating expenses/overheads IMPAIRMENT Cotton Seed FMCG Total PPE - 0.7 - 0.7 Inventories 1.7 - 1.1 2.8 Trade and other receivables 0.5 3.1 - 3.6 Input scheme receivables 12.0 - 0.1 12.1 Total 14.2 3.8 1.2 19.2 Last Year 1.8 2.4 0.6 4.8
  • 21. •xx INTEREST COST 9.0 10.8 17.2 24.4 25.4 - 5.0 10.0 15.0 20.0 25.0 30.0 USDmillion Group Interest Costs FY2009 FY2010 FY2011 FY2012 FY2013 7% 7% 8% 8% 10% 11% 12% 11% 11% 12% 5% 3% 3% 4% 7% 0% 1% 10% 12% 8% 0% 2% 4% 6% 8% 10% 12% 14% FY2009 FY2010 FY2011 FY2012 FY2013 Group Interest Costs Group Cotton Seed FMCG •Group interest costs were USD25.4 m (last year: USD24.4 m) • USD16.8 m (LY: USD18.5 m) • 9% down on last year • 12% of revenue (LY: 11%) • High borrowings Cotton • USD7.4 m (LY: USD4.3 m) • 72% higher than last year • 7% of revenue (LY: 4%) • High inventory & trade receivables Seed • USD1.9 m (LY: USD2.3 m) • 17% down on last year • 8% of revenue (LY12%) • Lower borrowing/equity injection FMCG 4% higher than last year • 10% of revenue (LY: 8%)
  • 22. PROFITS AND EPS 26.9 16.8 15.3 7.8 12.8 4.9 2.4 (4.3) 33.2 20.0 17.5 8.9 38.5 18.1 14.8 6.2 24.2 (0.5) (2.1) (6.7) (10.0) (5.0) - 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 Operating profit Profit before tax Profit after tax Attributable earnings USDmillions Profit Trends FY2009 FY2010 FY2011 FY2012 FY2013 Operating profit down 37% • Lower lint prices • Lower seed sales volumes • Weighed down by impairments PBT down 103% • Lower profits in Seed and Cotton PBT FY2013 USD m % Cont FY2012 USD m % Cont % Change Cotton (7.6) (1520%) 6.1 34% (225%) Seed 12.4 2480% 23.5 130% (47%) FMCG (2.8) (560%) (5.8) (32%) 52% Spinning - - (3.1) (17%) n/a Other (2.5) (500%) (2.6) (15%) 4% PAT down 114% • Low PBTAE & EPS down 109% • US1.26 cents loss versus US1.16 LY • Lower earnings • Impairments
  • 23. • EBITDA softened to USD32.7 m  dropped 31% over LY  affected by high impairment charges  …and lower profits in Cotton/Seed • Significant improvement in FMCG required  Funding, raw material availability and supply chain efficiencies still an issue EBITDA 33.4 16.8 18.2 0.1 22.4 (2.7) 18.3 3.6 43.8 17.7 29.3 (2.2) 47.6 23.7 29.8 (1.8) 32.7 11.4 23.2 1.2 (10.0) - 10.0 20.0 30.0 40.0 50.0 60.0 Group Cotton Seed FMCG USDmillions EBITDA FY2009 FY2010 FY2011 FY2012 FY2013 FY2013 FY2012 % Change Cotton 11.4 23.7 (52%) Seed 23.2 29.8 (22%) FMCG 1.2 (1.8) 167% 28% 14% 19% 16% 21% -3% 15% 14% 33% 24% 30% 25% 0% 24% -12% -10% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% FY2009 FY2010 FY2011 FY2012 USDmillions EBITDA Margin Group Cotton Seed FMCG
  • 24. • Deferred tax assets grew 5% to USD10.1 m • Deferred tax liabilities fell 9% to USD24.2 m • Total borrowings fell by 9% to USD125.9 million BALANCE SHEET SUMMARY Asset category Mar-13 Mar-12 % change Non-current assets 105.8 105.6 0% Assets held for sale 1.5 5.3 (71%) Other current assets 181.0 201.6 (10%) Total Assets 288.3 312.5 (8%) Equity 113.2 124.8 (9%) Non current Liabilities 26.3 28.0 (6%) Liabilities held for sale 0.5 2.9 (83%) Other Current Liabilities 148.3 156.8 (5%) Total Equity & Liabilities 288.3 312.5 (8%) Equity down 9% over last year • Affected by low earnings • Reduction in capital reserves – re: disposal 212.9 224.7 251.7 312.5 288.3 - 50.0 100.0 150.0 200.0 250.0 300.0 350.0 USDmillion Total Assets FY2009 FY2010 FY2011 FY2012 FY2013
  • 25. •Total assets declined by 8% •Spent USD10.9 m in capex  Last year: USD17.8 m •High inventories and trade receivables  Slow debtors payments in Seed SBU •Also, high input scheme impairment TOTAL ASSETS Cotton 113.7 38%Seed 157.8 53% FMCG 27 9% Other 0.2 0% Total Assets by SBU 2013Asset category Mar-13 Mar-12 % change PPE 103.3 105.0 (2%) Inventory 72.4 81.6 (11%) Input Schemes 10.6 29.2 (64%) Trade receivables 83.3 70.2 19% Other 18.7 26.5 (29%) Total Assets 288.3 312.5 (8%) Cotton 161.5 47% Seed 157.4 45% FMCG 25 7% Spinning 1 0% Other 1.6 1% Total Assets by SBU - 2012
  • 26. BORROWINGS 35.0 48.5 47.4 66.3 62.5 55.0 8.8 30.4 59.7 51.6 - - 14.5 11.7 11.8 - 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 FY2009 FY2010 FY2011 FY2012 FY2013 USDmillion Borrowings Short term Overdrafts Long term Total borrowings were USD125.9 m • 9% lower than LY • 91% is cheaper offshore loans • High working capital requirements • Does not include USD4.9 m of shareholder loans to FMCG Cotton 72.0 57% Seed 46.8 37% FMCG 7.1 6% Total Borrowings – FY2013 Cotton 80.0 60% Seed 46.0 34% FMCG 7.9 6% Total Borrowings – FY2012
  • 27. •Gearing going up Interest cover weakening Equity/total assets ratio going down •Working capital a concern  low quick ratio: high inventory levels •Financial returns are volatile •Possible undervaluation of counter PERFORMANCE STATISTICS FY2013 FY2012 FY2011 Interest cover (times) 0.96 1.61 2.10 Equity/total assets 0.39 0.40 0.46 Current ratio 1.23 1.30 1.45 Quick ratio 0.61 0.52 0.53 Return on total assets 8% 13% 14% Return on equity (9%) 7% 11% Return on capital employed 17% 26% 24% 180.0 160.0 120.0 60.0 29.4 154.9 114.6 116.5 124.8 113.3 7.8 (4.3) 8.9 6.2 (6.7) (8.0) (6.0) (4.0) (2.0) - 2.0 4.0 6.0 8.0 10.0 - 50.0 100.0 150.0 200.0 FY2009 FY2010 FY2011 FY2012 FY2013 USDmillion USDmillion Market Cap vs Net Assets Market cap Net assets AE 40.5 57.3 92.0 137.7 125.9 33.4 22.4 43.8 47.6 32.7 1.2 2.6 2.1 2.9 3.9 - 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 - 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 USDmillion USDmillion Borrowings vs EBITDA Borrowings EBITDA Borrowings/EBITDA (times)
  • 28. KEY ISSUES – Focus areas • Reduction of debt levels and annual interest bill • Improvement in input scheme recoveries Cotton • Downward management of inventory levels • Collection of outstanding trade receivables Seed • Raw material supply • Margin improvement • Funding and supply chain efficiencies FMCG • Harness supply chain based synergies • Fund raising and correction of capital structure • Reduction of Groupwide debt and gearing levels Group
  • 29. THANK YOU
  • 30. DISCUSSIONAUDITED GROUP RESULTS for the year ended 31 MARCH 2013 28 June 2013