7/29/2019 BRDR Audited results for FY ended 30 Jun 13.pdf

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COMMENTARY 

OVERVIEW

The year was, as expected, characterised by economic uncertainty within the country. This affected local uptake of your Company’s products, especially sawntimber. In our export markets, notably South Africa and Botswana demand remained rm, though value back to BTL in USD prices was weaker due to the currencymovements against the United States dollar. The market for poles also remained rm but delays in nalising tender awards affected the performance of this productline.

Liquidity challenges continue to plague the macroeconomic environment. The average cost of borrowing remained unsustainably high and funds availed continuedto be of a short term nature. Your Board is glad to report that, although later than expected due to delays in obtaining regulatory approval, the $7 million long termfunding provided by the German Development Bank was secured and has dramatically improved our balance sheet.

The benet from a signicantly lower average interest rate, improved debt prole and substantial release of management time will be realized going forward.

During the year a number of cost management initiatives were undertaken and the results are beginning to be realized. Further action is anticipated in order to aligncosts with revenues and increase productivity. Our focus was also on discontinuing product lines which were not contributing to prots and making alternative useof this lumber in more protable products. The rate of recapitalization has been slowed and to ensure productivity is increased, some production processes havebeen outsourced. This will improve the unit cost of production.

The nancial results for the year continue to be reective of a business continuing to rebuild, with the focus being a focused reduction of cost, developing andmaintaining the forests and efcient conversion of logs into sawn timber and other products.

Forestry & Sawmilling As forecast, the area of new plantings has decreased from the previous year and now equates to clear fellings. FY13 plantings decreased to 760 ha from the FY121 892 ha. Increased care and maintenance for recent plantings is in line with good forestry practice and continues to be a focus area but will taper off as plantingsdevelop. Total spend on silviculture activities for the year was US$3 433 318, against the prior year gure of US$4 099 352.

133 ha were lost to res during the current year. Since 2000, the total loss to res has been 9 917 ha. While this seasons loss was lower than in recent years, wecontinue to point out that in the comparative decade prior to the arson effects since 2000, average loss was SEVENTEEN hectares. After the reporting date, theGroup has subsequently lost about 441 ha of plantation to res at one of the estates. Management continues to engage the relevant authorities with a view of ensuring re losses are further reduced. The board and management appreciates the cooperation from authorities and chiefs in combatting res.

The total round wood production for the year was 198 071 m3, 8% below the prior year production. In order to increase production going forward, some harvestingand haulage operations will be outsourced and contractors will become a key element of the production process. Sawmill output was 12% lower than the previousyear. The decline was due to the decrease in round wood production exacerbated by the fact that a signicant portion of the timber came from thinning materialwhich invariably affected recovery at the mill.

Paulington FactoryThe total volume output for Paulington factory was at 5 849 m3, down 39% from prior year. Management made a decision in February 2013 to temporarily stopproduction on the veneer line as it was no longer protable. The factory now specializes in making one line of doors whose performance will continue to be reviewed.Due to the decreased production, total sales volume for the year decreased by 36 % to 5 958 m3. Long term plans for this facility are currently under assessment.

Border Timbers International (BTI)BTI which specialises in solid doors, shelving, and mouldings had a total production output of 6 206 m3 which was down 14% on the prior year, primarily as aresult of lower local demand. A lot of work has been undertaken in order to improve efciencies and power utilization which will allow us to price our products morecompetitively. Total sales volume decreased by 3% to 6 666 m3.

PolesTotal volume output for poles at 18 637 m3 was 13% up on prior year. This was aided by the conversion of one of the CCA tanks to both CCA and creosote inresponse to customer requests. Demand continues to be high regionally and is expected to remain rm for the foreseeable future. Total sales volumes increasedby 4% to 18 376 m3.

Financial reviewThe Group recorded revenues of $24 million during the year under review. This represented a 14% decrease from the $28 million in the same period prior year. Thisdecrease was primarily as a result of the closure of the veneer mill at Paulington factory which as noted above is expected to enhance protability going forward.Revenue for doors was 7% lower than the prior year and rough sawn timber 10% below owing to reduced production. Average selling prices were weaker as aresult of a higher proportion of export sales; this disadvantage is however partially offset by a shorter payment cycle. Strong performances were recorded for polesand mouldings which surpassed prior year results by 4% and 2% respectively.

Continued cost containment remains the focus, and efforts are underway to align overheads to the size of the operation. As a result, operating prots were betterthan last year despite the lower turnover. Finance costs at $2.8 million, up 49% from prior year, are a reection of the level and cost of borrowing for your Group.The full benet of the securing of long term funding and its effect on the Balance Sheet will be felt in 2014. These borrowings have been incurred to fund theaggressive replanting regime, care and maintenance of the biological assets and also the recapitalisation of key items of plant and equipment. Borrowings increasedby $3.2 million during the year.

Capital expenditure during the year amounted to $4.3 million of which $3.4 million was expenditure on plantation development.

The Group employed a total number of 2 311 employees as at year end.

OUTLOOK 

 Your Board and Management are working on and evaluating far-reaching options to reduce costs and stabilize borrowings. Restructuring of your Group’s borrowingand improving productivity will continue to be key areas of focus. Outsourcing of major production processes will be intensied where appropriate which willessentially mean a reallocation of capital expenditure to operating expenditure. Subject only to the outlook for the market, we are condent that the initiatives weare pursuing will positively impact on protability. DividendUnder the present circumstances, the Directors have resolved not to pass any dividends.

DirectorateMr. E Kuhn was appointed to the board on the 31st of March 2013, replacing Mr. D Dell who passed away on the 18th of April 2012. Mr. E Kuhn has over 36 years of forestry experience in South Africa and internationally and we look forward to his leading Border Timbers Limited. Mr. S Mattinson, Mr. E Mlambo and Ms. B Mtetwawere appointed to the board on the 26th of June 2013 after having served on the Radar Board for many years. Their diverse experience will be of enormous benetto the Board. Mr. I Kanyemba resigned from the board with effect 31 January 2013.

 ACKNOWLEDGEMENT

The Group greatly appreciates the support it has received from management and all staff. 

By order of the BoardRift Valley Services (Private) LimitedSecretariesHARARE25 September 2013

GROUP STATEMENT OF COMPREHENSIVE INCOME  Year ended Year ended30-Jun-13 30-Jun-12

  US$ US$

Revenue 24 122 232 27 963 463Cost of sales ( 22 322 947 ) ( 26 475 158 )

Gross prot 1 799 285 1 488 305Fair value gains on biological assets 9 373 587 10 070 422Other operating income 723 649 335 479Distribut ion and selling expenses ( 2 293 753 ) ( 2 649 429 )

 Administration expenses ( 4 012 272 ) (4 049 640 )Other operating expenses (272 735 ) (564 240 )

Operating prot 5 317 761 4 630 897Finance income 1 939 2 633Finance costs ( 2 840 128 ) (1 900 167 )Prot before income tax 2 479 572 2 733 363

Income tax expense ( 1 287 247 ) (906 388 )

Prot for the year 1 192 325 1 826 975

Other comprehensive income

Deferred tax on revaluation reserve transfer to retained earnings - 24 128

Total comprehensive income for the year 1 192 325 1 851 103

Earnings per share:

Basic earnings per share (cents) 2.78 4.25Headline earnings per share (cents) 2.97 4.33 

GROUP STATEMENT OF FINANCIAL POSITION  As at As at

30-Jun-13 30-Jun-12  US$ US$

 ASSETSNon-current assetsProperty, plant and equipment 46 352 726 47 858 556Biological assets 105 458 850 97 794 631

151 811 576 145 653 187

Current assetsInventori es 6 006 038 4 487 015Trade and other receivable s 4 156 938 4 891 045Cash and cash equivalents 1 613 705 193 593

11 776 681 9 571 653

Total assets 163 588 257 155 224 840 

EQUITY Equity attributable to the owners of the parentShare capital 429 425 429 425Non distribut able reserve 90 455 727 90 455 727Revaluatio n reserve 2 295 909 2 295 909Retained earnings 14 776 764 13 584 439

Total equity 107 957 825 106 765 500

LIABILITIESNon-current liabilitiesBorrowings 6 825 000 422 054Deferred income tax liabilit ies 32 910 973 31 623 725

39 735 973 32 045 779

Current liabilitiesTrade and other payables 5 319 208 4 636 319Provisions 430 455 275 206Borrowings 10 144 796 11 502 036

15 894 459 16 413 561

Total equity and liabilities 163 588 257 155 224 840 

GROUP STATEMENT OF CASH FLOWS  Year ended Year ended

30-Jun-13 30-Jun-12US$ US$

 

Cash ow from operating activitiesOperating prot 5 317 762 4 630 897

 Adjustment for non-cash items- Depreciat ion 2 163 642 2 042 228- Fair value gain on biological assets (9 373 587 ) (10 070 422)- Plantati on redemption 5 142 686 6 807 397- Loss on disposal of property, plant & equipment - 245 116- Increase in allowance for doubtful debts 162 255 250 878- Exchange gains and losses 272 735 319 124- Inventory write offs 316 005 497 438- Impairment loss 91 612 8 844

4 093 109 4 731 500Working capital changes- Inventori es (1 835 027 ) (403 892 )- Trade and other receivabl es 299 117 (1 620 000 )- Trade and other payables (304 211 ) 1 908 142

NET CASH GENERATED FROM OPERATING ACTIVITIES 2 252 987 4 615 750

Cash ows from investing activities Additions to property, plant and equipment (884 678 ) (3 315 175 )Expenditu re on biological assets (3 433 318 ) (4 099 352 )Proceeds on sale of property, plant and equipment - 51 801Interest received 1 939 2 633NET CASH USED IN INVESTING ACTIVITIES (4 316 057 ) (7 360 093 )

Cash ows from nancing activitiesProceeds from borrowings 10 924 228 45 044 623Repayments of borrowings (7 678 786 ) (39 769 789 )Interest paid (1 562 527 ) (1 900 167 )NET CASH GENERATED FROM FINANCING ACTIVITIES 1 682 915 3 374 667

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (380 154 ) 630 324

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR  (1 482 646 ) (2 112 970 )

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR  (1 862 800 ) (1 482 646 )

AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2013

Directors: K R R Schofeld (Chairman); R E Breschini; E Hwenga; E. Kuhn, S Dube; R von Pezold; H B A J von Pezold; S. Mattinson, E. Mlambo, B. Mtetwa, I. Kanyemba* (*Resigned 31 January 2013)

GROUP STATEMENT OF CHANGESIN EQUITY  Non

Share distributable Revaluation Retainedcapital reserves reserve earnings Total

US$ US$ US$ US$ US$ 

 Year ended 30 June 2012

Balance at 1 July 2011 429 425 90 455 727 2 365 481 11 663 763 104 914 396Comprehensive incomeProt for the year - - - 1 826 976 1 826 976

Other Comprehensive IncomeTransfer from revaluati on reserve of disposed assets - - (93 700) 93 700 -Deferred tax on revaluation reserve transferto retained earnings - - 24 128 - 24 128

Balance at 30 June 2012 429 425 90 455 727 2 295 909 13 584 439 106 765 500

 Year ended 30 June 2013

Balance at 1 July 2012 429 425 90 455 727 2 295 909 13 584 439 106 765 500Comprehensive incomeProt for the year - - - 1 192 325 1 192 325

Other Comprehensive IncomeTransfer from revaluati on reserve of disposed assets - - - - -Deferred tax on revaluation reserve transfer to retained earnings - - - - -

Balance at 30 June 2013 429 425 90 455 727 2 295 909 14 776 764 107 957 825

4. Related party transactions

(i) Transactions-sales of goods 921 163 1 432 790-purchase s of goods (1 639 491 ) (687 420)-managemen t fees (454 053 ) (520 828)-interest paid (46 848 ) (46 499)

(ii) Year-end balances-receivable from related parties 559 489 375 109-payable to related parties 158 828 517 681

(iii) Loans to related parties 232 976 232 496

(iv) Loans to directors or key management - -

(v) Key management remuneration (281 535 ) (232 449)

(vi) Guarantees from related party - 3 356 061

5. Capital expenditure:Property, plant and equipment 884 678 3 315 175Biologica l assets 3 433 318 4 099 352

Capital commitments:Property, plant and equipment 785 047 1 846 403Biologica l assets 3 158 478 3 071 935

Forestry Manufacturing TotalUS$ US$ 2013

 

6. Segment informationRevenue:Local 4 503 941 3 438 385 7 942 326Export 6 815 079 9 364 828 16 179 906Total 11 319 020 12 803 212 24 122 232

Prot/(loss) before interest and taxation 9 119 358 (3 801 597 ) 5 317 761Net interest expense (2 256 561 ) (581 628 ) (2 838 189 )Net prot/(loss) before tax 6 862 797 (4 383 225 ) 2 479 572

Total assets 146 668 329 16 919 929 163 588 258

Total liabilit ies 42 450 323 13 180 109 55 630 432

7. Subsequent to year end, the Group lost approximatly 441 ha of plantation to arson induced res at Charter Estate. The cost impact is in the process of being ascertained.

8. The auditors, PricewaterhouseCoopers Chartered Accountants (Zimbabwe) have indicated that the audit report on the nancial statements for the Groupfor the year ended 30 June 2013, will be unqualied.

NOTES TO THE ABRIDGED FINANCIAL STATEMENTS  

1.  Accounting policies

The principal accounting policies of the Company have been followed in all material respects and conform to International Financial Reporting Standards(IFRS) and the Zimbabwe Companies Act (Chapter 24:03). The same accounting policies and methods of computation are followed as compared with

those in the prior nancial year This publication should be read in conjunction with the annual nancial statements for the year ended 30 June 2013,

which have been prepared in accordance with IFRSs and Zimbabwe Companies Act (Chapter 24:03).

2. The nancial results are presented in United States Dollars which is the functional and presentation currency of the Group.

  2013 2012

US$ US$

3. Prot before tax is after the following:

Depreciation (2 163 642 ) (2 042 228)

Plantation re damage (69 354 ) (2 738 014)

Plantation redemption (5 073 332 ) (4 069 383)

Impairment loss on property, plant and equipment (91 612 ) (8 824)