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OPERATION NAME : MILL XXXBOARD REPORT FOR THE PERIOD ENDED: MARCH 2011
MONTH / YEAR TO DATE
1. Key indicators – Financial / Actual / Budget / Prior Year / Actual / Budget / Prior Year
Income Statement
Volumes Total / Tons
Volumes - External / Tons
Volumes - Internal / Tons
Turnover / R’000
Raw Material Cost / R’000
Raw Material Cost / R/t
Naked Gross margin / R’000
Naked Gross margin / R/t
Production Cost / R’000
Production Cost / R/t
Gross Profit / R’000
Gross Profit / R/t
Gross Profit margin / %
Delivery Cost / R/t
Marketing Cost / R/t
Operating Cost / R/t
Total Expenses / R/t
Other Income / R/t
PBIT / R’000
PBIT / R/t
PBIT margin / %
PBIT per employee / R’000
RONA / %
EVA / R’000
Balance Sheet / September 2010
Property Plant and Equipment / R’000
Working capital / R’000
Stock / R’000
Debtors / R’000
Creditors / R’000
Working capital / Days
Stock / Days
Debtors / Days
Creditors / Days
MONTH / YEAR TO DATE
Actual / Budget / Prior Year / Actual / Budget / Prior Year
Cashflow
Cash operating profit/(loss) / R’000
(Increase)/decrease in working capital / R’000
Capital Expenditure / R’000
Subtotal / R’000
Interest received/(paid) / R’000
Dividends received/(paid) / R’000
Tax paid / R’000
Other / R’000
Net cash in/(out) flow for the period / R’000
2. Key Indicators / MONTH / YEAR TO DATE
2.1 Productivity & Efficiency / Actual / Budget / Prior Year / Actual / Budget / Prior Year
Total plant capacity / Tons
Plant utilization / %
Pellet Capacity / Tons
Pellet Production / %
Mash Production / %
Bulk Feed / %
Bagged Feed / %
External Sales per TA / Tons
Vehicle utilization / %
MONTH / YEAR TO DATE
2.2 Sustainability / Actual / Budget / Prior Year / Actual / Budget / Prior Year
Electricity / KWh/Ton
produced
Electricity Cost / Cost per Ton produced
Coal / Kgs/Ton produced
Coal Cost / Cost per Ton produced
HFO/Diesel / Liters/Ton produced
HFO/Diesel Cost / Cost per Ton produced
Gas / Kgs/Ton
produced
Gas Cost / Cost per Ton produced
Water / KL/Ton
produced
Water Cost / Cost per Ton produced
MONTH / YEAR TO DATE
3.PBIT Reconciliation /
Quality of earnings / Notes / Budget
R’000 / Prior Year
R’000 / Budget
R’000 / Prior Year
R’000
PBIT (Budget/Prior Year)
Sales
Volume variance / (a)
Price variance / (b)
Mix variance
Other
Cost of sales
Raw material cost
- Volume variance / (c)
- Price variance / (d)
Milling yield
Rebates
Intake contractors
Settlement discount
Other / (e)
Recoveries variance
Transport recovery
Transport expense
Pelleting
Medication
Bags
Other
Expense variance
Depreciation
Personnel cost / (f)
Repairs and maintenance / (g)
Contractors
Power and water / (h)
Marketing costs
Other overheads
Other expenses and sundry income
ACTUAL PBIT
Notes
The following commentary relates to the year to date results, unless otherwise stated.
(a)Sales volume variance
The sales volume variance against the prior year ismainly due to lowersales in pigfeed of 701 tons, lower sales in broiler feed of 3 488 tons and higher sales in sheep feed of 1 806tons. The volume variance against the budget is mainly due to lower sales in dairy feed of 1 295 tons, lower sales in broiler feed of 3 723 tons, higher sales in sheep feed of 1 216 tons and higher sales in broiler breeder feed of 1 183 tons.
(b)Selling price variance
The sellingprice variance to the budget and prior year exists due to lower raw material costs than in the budget and in the prior year.
(c)Raw material cost volume variance
The raw material cost volume variance against the budget and prior year is due to lower sales volumes.
(d)Raw material cost price variance
The raw material cost price variance against the prior year is due to lower raw material prices.
(e)Other margin variance
The other margin variance against the budget and prior yearisdue mainly to stock take inaccuracies.
(f)Personnel costs
Personnel costs are higher than the prior year due to annual salary increases implemented on 1 October 2010.
(g)Repairs and maintenance
Repairs and maintenance expenses for the year to dateare lowerthan the budget and in line with the prior year.
(h)Power and water
Power and water costs were higher than the prior year due to increases in the cost of electricity and coal. The power and water costs are lower than the budgetdue to the lower volumes of feed produced.
4.Market environment
Market development
Dairy producers throughout the Cape Region remain under pressure due to low milk prices. This is unlikely to change in the second quarter of F2011. Milk flow in the region has decreased as farmers take management decisions such as reducing cow numbers and feeding levels to avoid penalties for milk produced in excess of quotas. Dairy products are still in a surplus therefore subduing milk prices. Smaller private dairies have indicated that farm gate prices may fall further, but Parmalat is actively searching for high solids milk and it is expected that winter premiums will be temporarily re-introduced in the months ahead. Milk production in the Eastern Cape has peaked which should lead to less pressure on farmers in the other areas. Imports of long life milk and cheese have reduced, but stock levels remain problematic.
Pork prices have, but the market remains buoyant. Pork sales have slowed, but stock levels of carcasses remains under control due to production planning. Efficient producers appear to be in a good financial position with units remaining profitable.Roelcor is reportedly experiencing cashflow problems which affects some of our largest customers. New entrants, increasing sow numbers and further investment in housing by certain producers, all point towards a positive outlook in the pork industry.
Egg prices are suffering a similar fate to milk where regional and national surpluses have prices on the retreat. The historical price increases in December have not been realized.
Broiler realizations are again under pressure and stock levels are on the rise following firm December demand. Imports have increased substantially. Good farm performances at County Fair continue to support a lower live bird cost as a result of good feed conversions.However, a reduction in slaughter age of one day is now starting to affect feed off-take. Tydstroomhas expanded in the Western Cape with the construction of two 10 house broiler sites in the past six months and further expansions are under consideration. Rainbow Chickens is rumoured to be looking for additional contract growers.
Mutton and lamb prices remain high, although down from December peaks,due to scarcity in supply. The effect of the Rift Valley Fever outbreak is still being felt with low supplies of feeder lambs to the feedlots. Three sheep feedlots are currently expanding their operations in the Western Cape. . Imports of sheep from Namibia are a renewed threat.
Competitor activity
Meadow Feeds Paarl increased feed prices againin February 2011, and Afgri have used this as an opportunity to target certain key Meadow dairy clients, particularly in the South Western Districts. Afgri announced a moderate feed price increase for January, but they remain below our current pricing.
Novalast passed on a price increase into the market on 1 November 2010 following the increase in Meadow’s prices. They continue to apply pressure on Meadow through targeting selected pig feed customers in the region with competitive prices, and have extended pricing to these customers until April.
Profile is at capacity with very competitive prices. More recently there have been some concerns about performance on farm.
Influence of weather, legislation and economic climate on our market
Consumer demand remains soft as economic pressure and unemployment continues; bonus payments were once again the exception. Lower sales realizations in pork and chicken following the holiday season has impacted positively on those industries. As the economy emerges from recession, demand for affordable protein should improve. However, the strength of the Rand will continue to support the threat of high import levels of chicken and other agricultural products. South Africa’s food security is under threat as imports become more entrenched.
Effect of raw material prices/procurement
Raw material costscontinue to increase as raw material commodity markets have moved higher. This has placed pressure on feed margins which necessitated a price increase on feeds for February 2011. Higher input costs are difficult to pass on due to the high capcity levels currently available. Seasonal availability of Canola Oilcake and Lupins have provided some opportunities.
Sales performance
YEAR TO DATEActual / Budget / Prior Year / % Change Prior Year
Volumes (tons)
Price (Rand per ton)
Total sales are 4 084 tons lowerthan the budget for the year to date and 3 439 tons lower than the prior year. The variance to budget is due mainly to lower dairy feed salesof 1 295 tons ( this was mainly due to the NeelsNeethling trial which impacted heavily on off-take in November),lower broiler feed sales of 3 723 tons, higher sheep feed sales of 1 216 tons and higher broiler breeder feed sales of 1 183 tons for the year to date.The variance to the prior year is due mainly to lower broiler feed sales of 3 488 tons and higher sheep feeds sales of 1 806 tons for the year to date.Broiler feed sales to County Fair were2 213tons lower than the prior year.
The average selling price of feed is lower than the prior year due to lower raw material costs and reduced dairy margins.
6.Margin performance and productivity/efficiency and sustainability
The naked gross marginfor the year to date at R520 per ton is R31 per ton lower than the budget at R551 per ton, and R15 per ton higher than the prior year at R505 per ton. A price increase was implemented in October 2010.
The PBIT reported for the year to date at R27,6 million is R3,1 million lower than the budget at R30,7 million and R2,2 million lowerthan the prior year at R29,8 million. This predominantly reflects the under recovery of dairy marginswhich should improve in the second quarter. A PBIT margin of 7.5% is reported for the year to date against the budget of 8.0% and the prior year at 7.5%. On a Rand per ton basis a net margin of R226 per ton was achieved versus the budget of R244 per ton and the prior year at R238 per ton.
7.Asset and cash management
The table reflects the actual expenditure per the cash flow.
Capital Expenditure / YEAR TO DATEExpansion / Replacement
R’000 / R’000
Beckhoff PLC upgrade
Bulk outloading control room fire protection system
Caterpillar shunter repair
Caterpillar standby generator
Filing cabinet for COO
Hand addition scale display upgrade
Installation of 2 X 10 kg scales for mixing lines 1 and 2
Purchase of spare soya plant expander gearbox
Replace finished product bag pallets
Replace micro organ unit dischargers
Replace raw material and finished product conveying and distribution piping
Replacement of coal boiler control system
Replacement of compressed air drier
Upgrade 100 Mb LAN backbone from 100 Mb/s to 1000Mb/s
Total
Stock
The closing physical stock balance of R49,0 million was higher than the budget at R39,4 million and higher thanSeptember 2010 at R36,6 million. The increase in stock levels is due to the necessary stabilization of stock levels after year end, and logistical constraints of the raw material transport contractors’ availability from the middle of December to the middle of January.
Debtors
Debtors at R92,6millionwerelower than the budget at R98,5million and lower than the prior year end at R97,4 million..Debtors on mid-month and 40 day credit terms account for 6 days of the debtors days sales outstanding.
Creditors
Creditors at R158,2 millionwerelower than the budget of R167,5 million and the prior year end at R159,2 million. Creditor days at 65 days, waslower than the budget of 66 days and the prior year end at 66 days outstanding.Credit terms from suppliers are the same as the prior year and all creditors were paid according to the trading terms and agreements in place.
Other Debit and Credit Balances
Other debit balances decreased by R2,5 million when compared to the prior year end and is mainly as a result of andecrease in VAT due of R3,2 million and an increase in prepaid expenses of R0,7 million.
Other credit balances decreased by R2,3 million when compared to the prior year end and is mainly due to bonuses provided in the prior year of R1,8 million, paid to staff in November and December andan increase in the Provision for post-retirement medical aid of R0,4 million and an increase in the Long term retention provision of R0,4 million.
Working Capital Days
A net working capital requirement of (R48,4million) was R12,2 million higher than the budget at (R60,6 million) and R0,8 million higher than the prior year at (R49,2 million).
Cash Flow
A cash inflow of R16,8 million is R6,6 million lower thanthe budgeted inflow of R23,4 million and R11,1million lower than the prior year at R27,9 million and is mainly due to theimpact of the movement in working capital.
- Missed opportunities
A missed opportunity that has impacted the earnings to end January2011, relates to capacity under-utilization which highlights lost profit potential together with the impact of fixed costs due to lower volumes sold against the actual plant capacity. The impact of this is quantified in the table below.
R’mReported PBIT
Volumes not sold versus budget
Mill Capacity not filled at reduced margin
Restated PBIT
9.Prospects
Paarl expects to be R5,4 million xxxxx on PBIT for the year ending September 2011 at Rxx.x, despite lower County Fair volumes and margins, and lower dairy margins achieved.
PBIT / R’mCurrent year forecast
Budget
Prior year
10.Capital Expenditure Forecast
Capital expenditure for the year ending September 2011 is forecast as follows.
Capital Expenditure / Actual/ForecastR’000 / Budget
R’000
Quarter 1 - Forecast
Quarter 2 - Forecast
Quarter 3 – Forecast
Quarter 4 – Forecast
TOTAL
Chief Operating OfficerDate
Financial ManagerDate
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