The Board of Directors of Colcom Holdings Limited is pleased to announce the Unaudited Results for the Six Months ended 31 December 2007. - Download This Document
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Operating Environment
Economic conditions continued to deteriorate during the period. Price controls, implemented in July continued in force; Inflation rose from 7 251% in June 2007 to 66 212% in December 2007, which led to a further reduction in consumer spending power. High levels of inflation in December contributed to severe cash shortages which led to falling demand for most goods and services. Despite these challenges, the Group produced a solid performance for the period.
Pigs
Triple C increased its pig output by 4,5% mainly due to the first deliveries from the outgrower project. The outgrower herd now has three fully stocked nucleus units totaling over 1000 sows. The progeny of these animals will be available to the Group over the coming twelve months, and improve pig availability to Colcom by 25%.
Manufacturing
Overall pig throughput was up 2% over the prior period, but pig deliveries were constrained at times due to unviable pricing. Although sales volumes were up 4% over prior year, there was a severe decline in demand in December, primarily due to the cash shortages. The Group has worked closely with the offices of the National Incomes and Pricing Commission (NIPC) to ensure a balance between viability and affordability in the pricing of
its products.
Exports
Exports volumes from the Danmeats plant declined 15% over prior period mainly due to product volumes being diverted to local sales, particularly in the first quarter. However, the division has supplemented this by toll manufacturing, which together with own production, increased total export tonnage by 6%. Regional demand remained firm.
Ostriches
The number slaughtered increased to 4 298 birds against 1 381 birds in the prior year. Total output for this season is projected to be 5 700 birds all of which are destined for the export market. This has significantly contributed to group revenues and profitability.
Beef
The beef industry remains subdued. This situation was reflected in the performance of the beef division which suffered a decline in volumes of 71% principally because farmers were reluctant to sell animals at unviable prices. On the other hand, the breeding herd grew by 15% in the period despite extensive grass burning which hindered pasture and grazing availability.
Financial (Historical Cost)
Higher ostrich exports contributed to increased export revenues of $9.1 trillion for the period, which together with local sales brought total turnover to $14.3 trillion, a 91,686% increase. Operating margins increased to 87% of turnover principally due to inflationary increases in stock values, particularly in the last quarter. The fair value adjustments of $22.5 trillion relate to the revaluation of biological assets and investments to their current fair value. The Group's associated company, Freddy Hirsch Group, produced satisfactory results in a difficult trading environment.
Future Prospects
The Group has a strong balance sheet and with it strong prospects going forward. Cash availability since December has improved and so has demand for the Group's products. The additional throughput from the outgrower scheme together with strong regional and international demand for both pork and ostrich products should translate into real growth for the Group in the period ahead.
Dividend
In light of current economic conditions, your Board considers it prudent not to declare an interim dividend in respect of the year ending 30 June 2008.
By order of the Board
P. Marufu (Mrs)
Company Secretary
19 March 2007
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