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  • Contents

    Profile, strategy and vision 1

    Group activities 2

    Financial highlights 4

    Group structure 6

    Directorate 7

    Management 9

    Chairmans review 10

    Chief executive officers review 12

    Corporate governance 16

    Sustainability report 22

    Value-added statement 25

    Seven year review 26

    Ratios and statistics 27

    Annual financial statements 28

    Analysis of ordinary shareholders 84

    Notice of annual general meeting 85

    Shareholders diary 89

    Administration 90

    Form of proxy Inserted

    Astral Foods Annual Report 2007

    Designed by

    Printed by I

  • 1Astral Foods Annual Report 2007

    PROFILEAstral Foods is a leading South African food group with key

    activities in animal feed, animal feed pre-mix, broiler

    genetics, broiler operations and the production and sale of

    day-old broilers and hatching eggs.

    STRATEGYTo grow the business in selected food markets to remain a

    leading food commodity company.

    VISIONTo be a leading commodity food business.

  • 2 Astral Foods Annual Report 2007

    Group act iv it ies

    Animal Feed

    The Animal Feed Division operates from eleven strategically placed feed mills in Southern Africa, wellequipped to produce and distribute a wide range of specialised products for all commercially farmedanimal species.

    The South African operations consist of mills located in Randfontein, Delmas, Welkom, Paarl, PortElizabeth, Pietermaritzburg, Ladismith and a speciality mill in Richmond.

    The Africa operations consist of a feed mill in Lusaka (Zambia), a 33% shareholding in a feed mill inPort Louis (Mauritius) and an 80% shareholding in an operation in Maputo (Mozambique).

    Analytical Laboratories

    Central Analytical Laboratories (Pty) Limited analyses feed, soil, plant material, water, fertiliser, limeand growth medium samples for feed and fertiliser manufacturers as well as for the agricultural sector.

    Animal Healthcare

    NVS Biocare is involved in the marketing, sale and technical service of animal healthcare products, andmanufactures and markets a full range of speciality detergents and disinfectants focused on both theanimal health and the food processing industries.

    Animal Feed Premix

    NuTec Southern Africa (Pty) Limited, a 50% joint venture with Provimi Holdings, a leadinginternational feed technology company based in Holland, produces and markets vitamin and mineralpremixes for animal feed and also markets a wide range of feed additives and speciality raw materialsfor animal feed.

    A N I M A L N U T R I T I O N

  • 3Astral Foods Annual Report 2007

    P O U L T R Y

    Day-old broiler and hatching egg supplier

    The National Chicks division conducts business as a day-old chick and hatching egg supplier to theAstral integrated broiler operations and the independent non-integrated broiler producers in SouthAfrica, Swaziland and Moambique with a technical team servicing its customer base.

    Integrated broiler operations

    The group has three fully integrated broiler production, processing, distribution, sales and marketingoperations. The combined production of these three operations totals 3,660 million processed broilersper week made up as follows:

    Earlybird Standerton 1,250 millionEarlybird Olifantsfontein 1,250 millionCounty Fair Foods 1,160 million

    Both Earlybird Olifantsfontein and County Fair Foods market and distribute a full range of fresh andfrozen poultry products whereas Earlybird Standertons primary products are in the form of frozen IQFproducts.

    Both County Fair Foods and Earlybird market and distribute a full range of value added productscomprising frozen reformed filled products, ready to eat chicken products and a dedicated range ofemulsified products.

    Broiler genetics

    Ross Poultry Breeders (Pty) Limited is the sole distributor and supplier of both Ross 788 and 308 parentstock to the South African broiler industry. The company has a technology agreement with AviagenLimited, a multi-national company which holds the worldwide proprietary rights to the Ross brand.

    Elite Breeding Farms is a joint venture between Country Bird Holdings Limited and Astral Operations,in which Astral Operations holds an 82% interest. The joint venture is managed by Ross PoultryBreeders (Pty) Limited.The joint venture supplies parent stock to the participants in the joint venture.

  • 4 Astral Foods Annual Report 2007

    Operating profit up 6% to R808 million

    Headline earnings per share up

    7% to 1 381 cents

    Dividend per share up 20% to 700 cents

    Financial highl ights

    Operating profit increasedby 6% from R766 million

    to R808 million

    2003 2004 2005 2006 20070





    1 000


    Operating profitRm

    2003 2004 2005 2006 20070






    Cash generated from operatingactivities Rm


    Net cash inflow fromoperating activities

    at R446 million

  • 5Astral Foods Annual Report 2007

    2003 2004 2005 2006 20070

    1 000

    2 000

    3 000

    4 000

    5 000

    6 000

    7 000



    2003 2004 2005 2006 20070







    Dividends per sharecents



    Revenue increased by 22%from R5 184 million

    to R6 329 million

    Headline earnings per shareimproved by 7% to 1 381 cents

    Dividend increasedby 20%

    2003 2004 2005 2006 20070




    1 200

    1 400


    Headline earnings per sharecents

    1 000


    We place great emphasis on return ofcapital employed. Despite the high capitalexpenditure the return on net assets achieved

    was 55%.

  • Astral Operations Limited

    Meadow Feeds

    NVS Biocare

    Earlybird Olifantsfontein

    Earlybird Standerton

    County FairFoods

    Animal Nutrition Operations

    100%National Chicks Limited

    67%National Chicks

    Swaziland (Pty) Limited

    50%NuTec SA (Pty) Limited

    100%Africa Feeds Limited


    33%Meaders Feeds Limited


    Poulty Operations

    Investment Holding

    100%Meadow Feeds

    (Eastern Cape) (Pty) Limited

    100%Central Analytical

    Laboratories (Pty) Limited

    90%Ross Poultry Breeders

    (Pty) Limited

    82%Elite Breeding Farms

    80%Meadow Moambique


    National Chicks


    6 Astral Foods Annual Report 2007

    Group structure

  • 7Astral Foods Annual Report 2007


    Thabang Charlotte Christine Mampane (49)

    BA Hons (Public Administration), Masters in Management, Group Executive in theGroups CEOs office and Regions: South African Broadcasting Corporation. Appointedto the board on 14 November 2003. Member of the human resources andremuneration committee.

    Started career at the SABC as a junior announcer on Radio Seswana and remained in thisposition until promoted into the role of senior announcer in 1989. Promoted to Manager:Drama, Culture and Language in 1991. Joined Telkom as Manager of the Audio Visual Sectionin 1995 but returned to the SABC in 1996 as General Manager of the portfolio of eight radiostations, thereafter appointed as Chief Executive, Radio division for three years. Head ofRegions from 2002 to 2005 before being appointed to her current position as GroupExecutive in the Groups CEOs office and Regions. Non-executive director of the National Filmand Video Foundation.

    Jan Louis van den Berg (71)

    BCom, Chairman, Director of companies, Appointed to the board on 19 February 2001.Member of the human resources and remuneration committee and the audit and riskmanagement committee.

    Independent director of companies including Tiger Brands Limited until 2006 and Iscor Limited(now ArcelorMittal South Africa) until 2002. Previous positions included executive director ofGeneral Mining and Finance Corporation (Gencor) and director of other companies in the GencorGroup, managing director of Finansbank until its acquisition by Nedbank in 1989.

    Malcolm Macdonald (65)

    BCom, CA(SA), ACIMA, Director of companies. Appointed to the board on 14 November 2003. Chairman of the audit and risk management committee.

    Served as financial director of Iscor Limited (now ArcelorMittal South Africa) and itsinternational steel marketing company until retirement in 2004. Previously general manager ofthe Industrial Development Corporation of SA Limited and non-executive director of many of itsassociated companies in a variety of industries (engineering, agriculture, chemicals, shipping,financial services, minerals extraction and processing).

    Currently serves on the board and as chairman of the audit committee of the listed GijimaASTGroup Limited.

    Charles Gustav van Veyeren (73)

    BSc Agric, Director of companies. Appointed to the board on 19 February 2001. Memberof the human resources and remuneration committee.

    Chairman of Onderberg Processing Co-operative Limited, Malelane Citrus Co-operative, MalelaneIrrigation Board and Crocodile River Major Irrigation Board. Previously an executive member of theSouth African Agricultural Union and served on the boards of the Land & Agricultural Bank ofSouth Africa, Agricultural Research Council and Citrus Industry Trust. Also served on theTariffs/Marketing Development Committee, National Water Advisory Committee and as aCouncil Member of Eskom.

    Independent non-executive directors

  • 8 Astral Foods Annual Report 2007

    Directorate (continued)

    Theunis Eloff (52)

    BJur (Econ), ThB, ThM, ThD. Vice-Chancellor of North-West University. Appointed to theboard on 8 May 2007.

    Ordained as minister of religion of a congregation at the University of Pretoria. Completed hisDoctorate in Theology with a dissertation on Government, Justice and Race Classification. Left the ministry in 1989 and joined the Consultative Business Movement and was appointed asExecutive Director in 1990.

    In 1995 appointed as Chief Executive of the National Business Initiative. Served on the EconomicAdvisory Council of the Northwest Province, the Board of Business Against Crime and the Boardof the Centre for Conflict Resolution. In 2002 became Vice-Chancellor of the PotchefstroomUniversity for Christian Higher Education. Currently serving as chairman of Higher Education SouthAfrica (HESA) and deputy chairman of the Association of Commonwealth Universities (ACU).

    Nombasa Tsengwa (42)

    BSc, MSc, PhD (Biotechnology). General Manager: Safety, Health andEnvironment, Exxaro Resources Limited. Appointed to the board on 8 May 2007.

    Started career as Research Assistant, University of Transkei. Previous positions includeLecturer: Department of Genetics, University of Pretoria and Senior Co-ordinator:Agriculture and Agro-processing Sector within the National Research and TechnologyForesight Project. Appointed as Corporate Manager: Biotechnology and InnovationFutures at the Council of Scientific and Industrial Research in 1999 before beingappointed as Deputy-Director General: Environmental Management at the NationalDepartment of Environmental Affairs and Tourism in 2000.

    Nicolaas Cornelius Wentzel (52)

    BCom (Hons), CA(SA), Chief Executive Officer. Appointed to the board on 9 February 2001.Member of the human resources and remuneration committee and the audit and riskmanagement committee.

    Appointed divisional director of Tiger Agri-Poultry in 1995 and divisional chairman of Tiger Millingand Baking operations in 1997. Left Tiger Brands Limited in 1997 to take up position of chiefexecutive officer of the unlisted Genfood Group. Appointed as the first CEO of Astral FoodsLimited in 2001.

    Executive directors

    Jurie Johannes Geldenhuys (64)

    BSc (Eng Elec), BSc (Eng Mining), MBA, Director of companies. Appointed to the board on24 May 2001. Chairman of the human resources and remuneration committee.

    Previously served on the boards of Anglovaal Limited, Avmin Limited and its various gold mines, andIscor Limited (now ArcelorMittal South Africa). Served as the Chamber of Mines president (1993 1994) and served on its Executive Council, Gold Producers Committee and various other chamberrelated board committees. Resigned as a director of Sallies on 30 June 2006.

    Previously served on the Council of the Atomic Energy Corporation and on the National WaterAdvisory Council. Retired as managing director of Avgold Limited during 2001. Currently a directorof the listed Exxaro Resources Limited (chairman of safety, health and environmental committee).

  • 9Astral Foods Annual Report 2007

    Michael Andrew Kingston (56)

    Director: Astral Operations: Poultry. Appointed to the board on 19 February 2001.

    Has extensive experience in the poultry industry having been with Rainbow Chicken for 12 yearsand prior to that involved in commercial farming operations in Mid-Illovo. Joined poultry producerCountry Bird in 1986 and returned the company to profitability. In 1994 appointed as managingdirector of County Fair Foods.

    Currently accountable for County Fair Foods, Earlybird Farm, National Chicks, Ross Poultry Breedersand Elite Breeders.

    He has served on the South African Poultry Association for the past 21 years and is a pastchairman of the Broiler Organisation Committee. Awarded Poultry Man of the Year in 1999.

    Christiaan Ernst Schutte (47)

    Management Business Administration and Finance Diploma. Director: Astral Operations:Animal Feed. Appointed to the board on 18 August 2005.

    Joined Golden Lay Farms, a division of Tiger Brands Limited, the leading egg producingorganisation in Southern Africa, in October 1984 as assistant farm manager. Spent 18 yearswith the group in various positions. Joined Astral Foods Limited in 2002 as manager of retailsales for Meadow Feeds.

    Appointed as managing director for the Animal Feeds Division in July 2004. Vice chairmanand director of Animal Feed Manufacturers Association of South Africa.


    Corporate officeM Eloff Group company secretary S Burger Group credit managerD Ferreira Group financial manager E Potgieter Group internal auditorL Hansen Group human resources manager O Lukhele Group technical manager

    Veterinary Services

    PoultryM Gericke Ross Poultry BreedersF Greyling Earlybird StandertonD Stock National ChicksS Vermaak Earlybird OlifantsfonteinG Visser County Fair Foods

    Animal NutritionG Arnold Animal Feed Cape RegionD Barnard Animal Feed NutritionJ Berry NuTecT Botha Central Analytical LaboratoriesA Crocker Animal Feed Eastern Cape RegionG de Wet NVS BiocareC Neumann Animal Feed Central RegionM Schmitz Animal Feed Natal RegionW Stander Animal Feed ProcurementR Steenkamp Animal Feed Africa

  • In my review last year, I anticipated that the probability of a drop in world prices and substantiallyhigher maize plantings in South Africa would tend to drive down the price of maize, which constitutesthe groups major input cost. This did not materialise. On the contrary, erratic weather conditionsseverely disrupted world production and the South African maize producing industry experienced itsworst drought conditions in thirty years. In the event, the domestic price of yellow maize increased62% over the previous year, as measured by the average Safex price. Prices of other feed inputcomponents also rose substantially. The effect of these higher input prices on our operations wassevere, although it was partly mitigated by good procurement positioning achieved by managementduring the first part of the year.

    Revenue for the year increased by 22% to R6,3 billion but, as the increased commodity input costscould only be partially recovered during the year, operating margins dropped to 12,8% from 14,8%.

    Under these circumstances, the financial results for the past year, culminating in headline earnings ofR536 million, were satisfactory. This is equivalent to a 7% increase in headline earnings per share to1 381 cents.

    Dividends declared out of the years earnings increased by 20% to 700 cents per share. Thiscomparatively higher distribution is justified by our robust underlying cash flow and strong balance sheet.

    Expansion programmesIn line with our strategic plan to invest in organic expansion, two majorprojects were undertaken at our Earlybird poultry operation. The first project,to increase broiler capacity by 12% to 2,5 million broilers per week, wassuccessfully completed at the end of June at a cost of R162 million. The secondproject, to improve product mix and flexibility at the processing plants, at a costof R202 million, is expected to be fully operational by the end of December2007. Earlybird plans to increase its capacity by an additional 100 000 broilersper week from April 2008.

    The new Gauteng hatchery of our National Chicks division was successfullycommissioned in December 2006 to increase capacity by 8% at a cost ofR24 million. The production of day-old broiler chicks is in the correct locationand transportation of chicks is reduced.

    County Fair is currently completing its expansion project, started in 2005,which will increase its broiler production by 100 000 to 1,25 million per weekby April 2008.

    Chairmans review

    10 Astral Foods Annual Report 2007

    Consumption of poultry meatincreased steadily over the past fewyears and the trend is expected to continue.

    JL van den BergChairman

  • 11Astral Foods Annual Report 2007

    As a result of the broiler expansion programmes, our Animal Feeds division will continue to grow aswell. The Meadow mill at Delmas was upgraded at a cost of R7,2 million to supply additional feedto Earlybird.

    During the year we increased our shareholding in Meadow Mozambique from 33% to 80% at aconsideration of R2,5 million. The operation has recorded good sales volumes and profit growth isexpected to continue into 2008.

    We have spent and committed R611 million on expansion capital over the past two years and we aregearing ourselves for further expansion as the market continues to grow.

    Share repurchase programmeWe repurchased a further 1,04 million (2006: 2,3 million) shares during the year in terms of our sharerepurchase programme, at a total cost of R115 million (2006: R190 million) and at an average price ofR110 (2006: R60) per share. This brings the total repurchases since the inception of the programmein 2003 to 7,3 million shares at an average price of R67 per share, representing 16% of issued sharesat the start of the programme.

    ProspectsConsumption of poultry meat has increased steadily over the past few years and the trend is expectedto continue, driven by the positive economic climate in the country, the growing middle class and therelative price advantage of poultry meat over alternative sources of protein such as red meat.

    The current strength of the rand, if it persists, will continue to make imports of poultry meat verycompetitive.

    Due to the good rains recently experienced and currently high maize prices, farmers are expectedto increase their maize plantings, which could result in lower local maize prices going forward.International agricultural commodity prices are likely to remain relatively high, placing upwardpressure on food inflation.

    The full potential of our poultry expansions is expected to flow through during the new financial yearand we expect an improvement in earnings for the coming year.

    The boardDuring the year we appointed two new directors to the board, Dr Nombasa Tsengwa and Dr TheunsEloff. We look forward to their contributions to the successful future of your company.

    Tom Pritchard, group financial director since 2001, retired at the end of August 2007. Our thanks fora job well done and our best wishes accompany him into the future.

    AppreciationI would like to take this opportunity to thank my colleagues on the board for their wise counsel andto congratulate Nick Wentzel, his management team and all the people at Astral on yet another fineeffort during the past year under difficult conditions

    JL van den BergChairman8 November 2007

  • Gearing for future growth expansioncapital expenditure increased to R240 million.

    12 Astral Foods Annual Report 2007

    Chief Executive Off icer s review

    Financial resultsResults for the year showed an improvement with headline earnings increasing by 5% and headlineearnings per share by 7% as a result of the share buy-back programme approved by shareholders.

    Revenue increased by 22% to R6,3 billion (2006: R5,1 billion). Operating profit of R808 million (2006: R766 million) increased by 5% with the Animal Nutrition division reporting strong growth of22%. Group operating margins at 12,8% were down on last years 14,8%.

    The groups Share Appreciation Option Scheme provides cash settled incentive remuneration based onthe increase in the value of the shares of the company. The fair value of options granted is recognisedas an expense in the income statement. Due to the substantial increase in the share price the expensefor the year amounted to R37 million (2006: R14,1 million). A hedge was taken out against theoutstanding options issued in 2005 and 2006. This should limit the charge against the incomestatement for outstanding options to less than R20 million per annum. Further awards from thisscheme have been curtailed in favour of the traditional share option scheme.

    As we gear ourselves for further growth, expansion capital expenditure increased from R212 million to R240 million, including:

    R67 million for Earlybird to expand capacity to 2,5 million broilers per week; R129 million to increase product mix and flexibility at Earlybird; and R24 million to increase product mix and flexibility at County Fair.

    Replacement capital expenditure of R80 million (2006: R82 million) was very much in line with thedepreciation and amortisation charge of R106 million (2006: R88 million).

    We place great emphasis on return on capital employed. It is pleasing to report that despite the highcapital expenditure the return on net assets achieved was 55% (2006: 65%). Net asset turn remainedconstant.

    Return on equity decreased from 49% to 44%.

    Animal NutritionThe division comprises three arms Animal Feeds, Animal Feed Pre-Mixes and Services.

    Animal FeedsThe division, trading under the Meadow Feeds trade name, consolidated its position further as theleading feed manufacturer in Southern Africa by increasing its shareholding from 33% to 80% inMeadow Feeds Mozambique.

  • 13Astral Foods Annual Report 2007

    The operations outside South Africa now consist of a wholly owned feed mill in Lusaka (Zambia),a 33% shareholding in a mill in Port Louis (Mauritius) and an 80% shareholding in a mill in Maputo(Mozambique).

    In view of the highly competitive animal feeds market characterised by under utilised capacity, theresults for the year were most pleasing. Revenue of R3,5 billion (2006: R2,7 billion) increased by 32%,operating profit of R333 million (2006: R272 million) improved by 22%. Operating margins decreasedfrom an all time high last year of 10,2% to 9,3% as the increased input costs related to the highermaize prices could not be fully recovered.

    The South African animal feed market is mature with the only significant growth prospects comingfrom the expanding poultry industry and our division is well positioned to take full advantage of theexpansion in the Poultry division.

    Quality remains one of our core focus areas and a major reason for our strong market position.Our division has achieved certification with regard to ISO 9001/2000, Good Manufacturing Practices(GMP) and Hazard Analysis and Critical Control Point (HACCP) at all of the main feed mills, whichoffer complete product traceability in line with European Union (EU) standards of feed safety.Complementary to this, the Paarl and Randfontein mills achieved the Excellence Award from theinternationally acclaimed 20 Keys Management Programme and Meadow Paarl won the ProductivitySA Award in the industrial sector.

    The technical agreement with Provimi, a leading international animal feed research and developmentorganisation, was renewed, giving us access to the latest developments in animal feed nutrition.

    Maans Manuel (Meadow Paarl), Paulus van Rooyen (Meadow Paarl), Len Hansen (Astral Operations) Chris Schutte (MD Animal Feed Division),Nikki Moodley (NuTec SA), Gary Arnold (Meadow Paarl), Dickson Khanyile (NuTec SA), James Berry (NuTec SA)

  • 14 Astral Foods Annual Report 2007

    Chief Executive Off icer s review(continued)

    Animal Feed Pre-MixNuTec SA, a 50% joint venture with Provimi, produced an excellent financial performance despitesignificantly higher vitamin prices brought about by world wide shortages. The operation achieved theExcellence Award from the 20 Keys Management programme and was one of three finalists in theProductivity SA competition.

    Service companiesNational Veterinary Supplies showed good progress in both its animal health and chemical divisions.Central Analytical Laboratories reported satisfactory results.

    PoultryThe division comprises three separate business units integrated broiler operations, broiler geneticsand the production and sale of day-old broiler chicks and hatching eggs.

    Integrated broiler operationsThe integrated broiler operations are represented by Earlybird, with production and processing facilitiesin Gauteng and Mpumalanga, and County Fair in the Western Cape.

    Imported poultry remains a strong competitor in the local market.

    The steady growth of the South African economy has increased disposable income, resulting in theper capita consumption of poultry meat increasing by 14% over the past six years from 19,74 kg in2000 to 22,41 kg in 2006. The poultry market in South Africa remains highly competitive.

    Revenue from Poultry increased by 21% from R3,6 billion to R4,4 billion. With a 13% increase inrealisations and a 29% increase in feed costs, operating profit fell by 4% from R494 million toR475 million and operating margins reduced from 13,6% to 10,9%.

    Sporadic outbreaks of Newcastle disease continued into 2007. Avian Influenza remains a threat to theindustry and its status is constantly monitored.

    Broiler geneticsThe broiler genetics company, Ross Poultry Breeders (Pty) Limited, operates in association with one ofthe two largest global providers of broiler breeding stock, Aviagen, which is a 10% shareholder.Despite high feed costs the company recorded strong results.

    Day-old broiler and hatching eggsThis business unit, consisting of the National Chicks group with activities in South Africa andSwaziland, operated at full capacity throughout the year due to the shortage of eggs in the industry.The division produced an excellent financial performance.

    The R24 million project to expand the Gauteng hatchery was successfully commissioned in December 2006.

    ConclusionThe poultry expansion programme to improve product mix and flexibility in the plants will becompleted during the coming year and is expected to have a significant impact on the profitabilityof the Poultry division.

    The higher anticipated plantings of maize are expected to result in lower feed prices going forward.

  • 15Astral Foods Annual Report 2007

    AppreciationI would like to thank our customers for their support during the past year. We remain committed todelivering excellent client service and providing products of the highest quality.

    I also wish to express our thanks to our suppliers for assisting us in achieving high performancestandards.

    To my colleagues in management and to our staff, thank you for your support and contribution toanother successful year.

    Finally, the support received from our chairman, Jan van den Berg, and the board is highly valued. The group has benefited from their wise counsel and depth of experience during the past year.

    NC WentzelChief Executive Officer8 November 2007

    Quality remains one of our corefocus areas and a major reason for ourstrong market position.

  • The groups governance practicesare sound and in all material respectsthe group conforms to the King Code 2002


    16 Astral Foods Annual Report 2007

    Corporate governance

    The group subscribes to the principles of discipline, transparency, independence, accountability,responsibility, fairness and social responsibility identified as the primary characteristics of goodgovernance in the second report of the King Committee.

    The board believes that the groups governance practices are sound and that in all material respects,the group conforms to the principles embodied within the King Code 2002 and the listingrequirements of the JSE Limited. The board remains committed to ensure that these principlescontinue to be an integral part of the way in which the groups business is conducted.

    The constitution and the operation of the board of directorsThe boardThe board operates in terms of a formally approved charter which sets out its role and responsibilities,namely:

    Chairman of the board is an independent, non-executive director; A formal orientation programme for new directors is followed; Specific clauses, in line with the second report of the King Committee, exist with regard to conflicts

    of interest and the maintenance of a register; The board conducts self-evaluation on an annual basis; Directors have access to staff, records and the advice and services of the company secretary; Succession planning for executive management is in place and is regularly updated; A strategic plan and approvals framework exist and are regularly reviewed; Policies and processes necessary to ensure the integrity of internal controls and risk management

    have been formulated; and The nature and extent of social transformation, ethical, safety and health, human capital and

    environmental management policies and practices are monitored and reported on.

    Astral has a unitary board structure, presently comprising ten directors, including seven independentnon-executive directors.

    On 9 May 2007, Drs T Eloff and N Tsengwa were appointed as independent non-executive directors. Mr T Pritchard retired as financial director on 31 August 2007.

    Astral believes that the non-executive directors are of suitable calibre and number for their views tocarry significant weight in the boards decisions. An independent non-executive chairman leads theboard. A schedule of beneficial interests of directors appears on page 38 of this report.

    A complete list of board members appears on pages 7, 8 and 9 of this report. In terms of thecompanys articles of association all new directors appointed during the year, as well as one third ofthe existing directors, have to retire on a rotational basis each year and they may offer themselves forre-election.

  • 17Astral Foods Annual Report 2007

    The directors are experienced business people and are required to exercise leadership, enterprise,integrity and judgment based on the principles of good governance. The board is committed toguiding and monitoring those high standards. The directors complete questionnaires on an annualbasis to evaluate the effectiveness of the board.

    The board is aware that it is accountable for the actions of the management and has retained full andeffective control of the organisation over the last year. The board defines levels of materiality, reservingspecific powers to itself, and delegates other matters with the necessary written authority tomanagement. These matters are monitored and evaluated on a regular basis.

    The board, in terms of its charter, is required to meet at least quarterly so as to monitor importantissues and meet its objectives. Matters reviewed include strategy, planning, operational performance,acquisitions, disposals, shareholder communications and other material aspects pertaining to theachievement of the groups objectives.

    The board periodically reviews the mix of skills and experience available within the board. Proceduresfor appointment to the board are formal and transparent and are vested with the board. An inductionprogramme is followed for newly appointed directors.

    Management ensures that the information needs of the board are well defined and regularlyreviewed. The board of directors is ultimately responsible for ensuring that Astral is a viable businessand to this end effectively controls the company and its subsidiaries, monitors executive managementand is involved in all decisions that are material for this purpose.

    Attendance at meetings The following is a list of scheduled board meetings and board committee meetings attended by eachdirector during the year:


    2006 2007

    Director 9/11 15/2 10/5 14/5 16/8

    T Eloff * * A JJ Geldenhuys MA Kingston M Macdonald TCC Mampane T Pritchard ACE Schutte A N Tsengwa * * A A JL Van den Berg CG Van Veyeren NC Wentzel

    Key: PresentA Absent* Appointed as directors on 8 May 2007

  • 18 Astral Foods Annual Report 2007

    Corporate governance(continued)

    A number of ad-hoc meetings of non-executive directors took place during the year.Audit and risk management committee

    2006 2007

    Director 8/11 11/5 7/11

    M Macdonald JL van den Berg

    NC Wentzel

    Key: Present

    Human resources and remuneration committee


    Director 3/5 7/8 27/8*

    JJ Geldenhuys TCC Mampane A AJL van den Berg CG van Veyeren ANC Wentzel

    Key: PresentA Absent


    Board committeesTo enable the board to properly discharge its responsibilities and duties, certain responsibilities of theboard have been delegated to board committees. The board is satisfied that all committees have mettheir respective responsibilities for the period under review. All board committees are chaired by anindependent non-executive director. Particulars of the composition of the board of directors andcommittees appear on pages 7, 8 and 9 of this report. The board committees are as follows:

    The audit and risk management committeeThe audit and risk management committee consists of three members, two of whom are independentnon-executive directors, and meets at least twice a year with management, internal and external auditas well as the groups risk managers. The opportunity is also created for discussion between the non-executive directors and the external auditors without the presence of management.

    Responsibilities of the audit and risk management committee include:

    Overseeing the internal and external audit function; Assisting the board in the discharge of its duties relating to the safeguarding of assets, the

    implementation of adequate systems and internal controls; Monitoring the preparation of accurate financial reports and statements and application of

    corporate governance and accounting standards; and Providing support to the board on the risk profile and risk management of the group.

    Both the group internal audit manager and the external auditors have unfettered access to the chiefexecutive officer, the chairman of the board and the audit and risk management committee.

  • 19Astral Foods Annual Report 2007

    To further enhance the effectiveness of the groups audit and risk management functions, the groupalso has bi-annual divisional audit committee meetings for each operation. As part of the groupsenterprise wide risk management programme, quarterly risk management meetings are held atoperational and corporate level under the chairmanship of a risk control manager who reports to thegroup audit and risk management committee.

    Human resources and remuneration committeeThe human resources and remuneration committee consists of four members, including threeindependent non-executive directors. The committee meets at least twice a year.

    Responsibilities of the human resources and remuneration committee include:

    Development of the groups general policy and remuneration system for executive and seniormanagement and making recommendations to the board on remuneration packages applicableto directors;

    Measuring the performance of executive directors and ensuring that they are fairly rewarded; Employment equity and skills retention matters; and Management succession planning.

    Remuneration policy, share incentive schemes and management bonus incentiveschemesAstrals remuneration policy is to attract, retain and incentivise management and personnel of thehighest calibre.

    Executive directors, senior management and middle management participate in a management bonusincentive scheme based on an Economic Value Added (EVA) formula.

    During this financial year, the share option scheme was reintroduced and replaces the shareappreciation rights scheme. The number of options outstanding, forfeited and exercised is shown innote 10 to the annual financial statements.

    Organisational integrity and ethicsThe group maintains a code of ethics, which requires all employees to comply with the letter and spiritof the code by observing the highest ethical standards and to ensure that all business practices areconducted in a manner which is beyond reproach.

    Directors and employees are prohibited from dealing in Astral shares during price-sensitive periods.Closed periods extend from 31 March and 30 September, being the commencement of the interim andyear end reporting dates up to the date of announcement of interim and year end financial results andinclude any other period during which the company is trading under a cautionary announcement.There is also a formal clearance procedure in respect of directors dealing in Astral shares.

    The group maintains a zero-tolerance approach to unethical behaviour. Any employee found to beacting unethically is subject to disciplinary proceedings, which can lead to dismissal. An independenthotline is available where unethical behaviour may be reported anonymously.

    The code of ethics describes the following relationships or events:

    Application and general obligation; Compliance with laws and regulations and codes; Culture, ethics and values; Client service;

  • 20 Astral Foods Annual Report 2007

    Corporate governance(continued)

    Privacy and confidentiality; Respect and dignity; Social responsibility; and Conflict of interest.

    The board has no reason to believe that there has been any material non-adherence to the code ofethics during the year under review. A detailed disciplinary procedure supports the code of ethics withbreaches of either code resulting in disciplinary action.

    Risk management and internal controlRisk management is an integral part of the groups culture and strategic thinking. The audit and riskmanagement committee is responsible for assessing the groups management of identified risk issues.

    The board believes its focus on risk issues is appropriate and that an adequate system of internalcontrol is in place to mitigate significant risks and to provide the board with a reliable means ofmonitoring the groups operational sustainability.

    Internal control self-appraisal systems are in place for all operations and are reviewed at divisional auditcommittee meetings. Annual audits are conducted in respect of health and safety, risk control organisation,emergency planning and fire and loss control. Documented crisis management plans are in place for alloperations. In addition, the group promotes ongoing commitment to risk management and control byparticipating in externally organised risk management and safety programmes such as ISO 9001/2000,Good Manufacturing Processes (GMP) and Hazard Analysis and Critical Control Points (HACCP) at itsvarious operations.

    The board believes that it has reasonable, but not absolute, assurance with regard to the effectivenessand efficiency of the groups operations, protection of its assets and information, and regulatory andlegal compliance.

    Internal auditAstral has established an independent, objective and effective internal audit department governed bya charter approved by the board. The internal audit function reports to the chief executive officer andhas unfettered access to higher levels of authority as set out above.

    The role of internal audit is to review compliance with internal controls, systems and procedures. Theboard is satisfied that the groups internal controls are adequate in safeguarding the groups assets,preventing and detecting errors and fraud, ensuring the accuracy and completeness of accountingrecords and preparing reliable financial statements.

    External auditThe audit and risk management committee recommends to the board the appointment of externalauditors. It also considers the independence of the external auditors, and has set principles for the useof external auditors to provide non-audit services. Consultation and co-operation between externalauditors and internal auditors is encouraged by the board.

    The external auditors provide an independent assessment of Astrals systems of internal financialcontrol and express an independent opinion on the annual financial statements. The external auditorsplan is reviewed by the audit and risk management committee to ensure that significant areas ofconcern are covered, without infringing on the external auditors independence.

  • 21Astral Foods Annual Report 2007

    Management reportingThe group has comprehensive management reporting disciplines, which include the preparation ofannual strategic plans and budgets by all operations. Group strategic plans and budgets areconsidered and approved by the board. Results and the financial status of the operations are reportedmonthly and compared with approved budgets and results of the previous year. Working capitalrequirements and borrowing levels are monitored on an ongoing basis and corrective or remedialaction taken as appropriate.

    Company secretaryAll directors have access to the advice of the company secretary and are entitled and authorised toseek independent and professional advice about the affairs of the company at the companys expense.The company secretary is responsible for the duties set out in Section 268G of the Companies Act.The certificate required to be signed in terms of Section 268G(d) appears on page 29.

    CommunicationThe board ensures that material matters of significant interest and concern to shareholders and otherstakeholders are addressed in the companys public disclosures and communication. In this regard, theboard ensures that the group provides adequate transparency on all pertinent financial and non-financial matters.

    After the bi-annual release of group results, the results are presented to investors, analysts and thePress. Presentations of results are also done to employees on a national basis. Astral meets regularlywith institutional shareholders and investment analysts.

    Going concernThe annual financial statements set out on pages 32 to 83 have been prepared on the going-concernbasis since the directors, after due deliberation at the last meeting of the board, have every reason tobelieve that the group has adequate resources to continue in operation for the foreseeable future.

    All employees comply with a code ofethics which ensures that all businesspractices are conducted in a manner which

    is beyond reproach.

  • The group is committed to the

    implementation of triple-bottom-line

    reporting to ensure the futureof the business.

    22 Astral Foods Annual Report 2007

    Sustainabi l i ty report

    Being conscious of its social, environmental and economic responsibility to shareholders, employees,the broader community and future generations, the group subscribes to the principles of sustainabledevelopment and is committed to the implementation of triple-bottom-line reporting.

    Organisational developmentHuman resources developmentThe training and development of employees in all key areas is an integral part of the 20 Keysworkplace improvement programme referred to below. Each employee attends a number of trainingsessions in this regard. A learnership programme in Supervision has been introduced at severalworkplaces.

    Emphasis is placed on the development of technical skills, which includes training under our technicalagreement with Provimi of Holland, a world leader in animal nutrition solutions.

    Other training and development interventions include:

    IT skills Supervisory skills Sales Quality systems Production and processing skills

    The group is committed to the Skills Development Act. Our submission of skills development plansand our implementation against targets have ensured the maximum benefit in this regard.

    In terms of a study loan policy the Group provides employees with financial assistance to further theiracademic qualifications in line with current and future job requirements.

    Attraction and retention of peopleThe group continuously evaluates its recruitment processes to ensure that high calibre talent isemployed, taking cognisance of leadership capabilities, identified competencies for positions andemployment equity plans. Our approach is to attract the best people in the industry.

    Workplace improvement programmeOur drive for excellence continues through the implementation of the 20 Keys total workplaceimprovement programme. This programme, which originated in Japan, aims to energise the workforceto work faster, cheaper and better. All employees at the various workplaces participate as teams toimprove productivity and efficiencies. As a group we can claim that we have made the best progressin South Africa with the implementation of these concepts. NuTec SA has recently been awarded theInternational Excellence Award and together with Meadow Feeds Paarl, Meadow Feeds Randfonteinand Earlybird Standerton are the only four operations in South Africa to have received this award.

  • 23Astral Foods Annual Report 2007

    We expect that Meadow Feeds Pietermaritzburg and the National Veterinary Supplies operation willachieve this status during 2008.

    The Meadow Feeds plants in Paarl and Randfontein will also strive to attain the Bronze award during2008, which will also be a first in the world for an animal feed company.

    Safety and healthThe group has implemented a risk control programme with emphasis on compliance with theOccupational Health and Safety Act (the Act). A three tiered approach is followed in order to ensurecompliance with the Act.

    The first tier concentrates on employee awareness of their responsibilities in terms of the Act. Executivemanagement and employees are regularly updated on issues pertaining to the implementation andcompliance with the Act through established structures and seminars.

    The second tier comprises education. All employees are put through induction training. This trainingspecifically deals with health and safety in the workplace and compliance with regulations of the Act.Furthermore, legislatively required responsible persons such as safety representatives and first aiders aretrained on a regular basis.

    The third tier comprises the implementation, monitoring and auditing of OSHACT management systemsto ensure compliance with the Act. A step by step documentary system is applied for each site, crossreferenced to the actual sections of the Act. The system has received much praise from the Department ofLabour inspectors conducting site inspections. Annual audits are done and results reported throughestablished structures.

    Items affecting the wider risk management of each site are discussed at monthly corporate riskmanagement meetings under the chairmanship of the groups risk control officer. Matters arising fromthese meetings are referred to the group audit and risk management committee (board subcommittee).An annual group risk management meeting is held where senior management representing all the sitesin the group, are present.

    HIV/AIDSThe group recognises the implications of the pandemic on the family structure, the community andlong-term issues of sustainability. The reality is that the prevalence of HIV/AIDS among the Astralworkforce is currently estimated to be about 15%.

    The group has implemented a policy on HIV/AIDS focusing on:

    Educational programmes at all operations; Voluntary testing to determine the prevalence of HIV/Aids; and Counselling of affected employees.

    Recently an AIDS Rating has been introduced for the group, which will focus on strategy andimplementation to increase awareness and decrease HIV/AIDS infections.

    TransformationEmployment EquityThe Group is committed to providing equal opportunities to all its employees.

  • 24 Astral Foods Annual Report 2007

    Sustainabi l i ty report(continued)

    All our operations comply with the Employment Equity Act, 55 of 1998, and annual reports aresubmitted to the Department of Labour. Employment equity committees have been established at everybusiness unit to set and monitor progress. The different occupational levels within the group reflect thatbetween 35% and 92% of employees are from the designated group. The figure on the managementlevel is 18%, which is already good progress, considering that the target set by the Department ofTrade and Industry is 25% 30% within 10 years. We believe that no unfair discrimination exists inthe workplace.

    Black Economic EmpowermentThe group is supportive of and committed to the concept of black economic empowerment andactively promotes the empowerment of staff members and the communities in which it operates. Thecompany has embarked on a rating of its BEE status by EmpowerDEX.

    As a group the score for skills development came out high as a result of our focused approach to thetraining and development of staff.

    The group has established a procurement committee to focus on securing the services of providerswho meet certain BEE requirements. A formal policy in this regard has been implemented.

    Our rating by the Financial Mail as a company supporting BEE has improved to the top 30% of listedcompanies on the JSE.

    The environmentAwareness of the need to protect the environment is of utmost importance to the group. Theimplementation of quality systems, ie ISO 9001-2000, Good Manufacturing Practices (GMP) andHazard Analysis and Critical Control Point (HACCP) enable the group to have full traceability of theproduct that goes into the market. In accordance with our group environmental philosophy, thirdparty environmental compliance audits are conducted at key sites regularly. No significantenvironmental incidents were recorded during the year under review.

    All new project developments are preceded by environmental impact assessments in terms ofenvironmental legislation.

    Corporate Social InvestmentWe support various feeding schemes ie Meals on Wheels, adoption homes, hospices, schools, etc.Sponsorships are mainly farmers days, agricultural shows and fund raising projects.

    ConclusionWe believe that the sustainability of our business lies firmly in the hands of our people, as they are thegreatest source of our competitive advantage. We implement best practices in all areas of ouroperations in order to achieve meaningful improvement in the productivity of our people and in thequality of life for them and their communities.

  • 25Astral Foods Annual Report 2007

    The value-added statement measures performance in terms of value added by the group through the collective efforts ofmanagement, employees and the providers of capital. The statement shows how value has been distributed to thosecontributing to its creation, and the portion retained for future investments.

    2007 2006 R'000 % R'000 %

    Value addedSales of goods and services 6 329 311 5 183 664 Less cost of materials and services (4 773 801) (3 718 291)

    Value added from trading operations 1 555 510 99,4 1 465 373 99,6Income from investments 9 407 0,6 6 301 0,4

    Total value added 1 564 917 100,0 1 471 674 100,0

    Value distributedTo labour 635 313 40,6 600 242 40,8To government 266 755 17,0 264 782 18,0

    Taxation 261 089 254 339 Regional Service Council levies 6 114Skills development levies 5 666 4 329

    To providers of capital 254 889 16,3 196 655 13,3

    Dividends to shareholders 243 891 195 238 Interest on borrowings 10 998 1 417

    Total distributions 1 156 957 73,9 1 061 679 72,1Income retained in the business 407 960 26,1 409 995 27,9

    Depreciation/amortisation 106 293 88 735 Retained profit for the year 301 667 321 260

    Total value distributed and reinvested 1 564 917 100,0 1 471 674 100,0

    Value-added statementfor the year ended 30 September 2007


    Providers of capital


    Income retained in the business






    40,6% 40,8%




  • 26 Astral Foods Annual Report 2007

    Review of operat ionsSeven year review

    2007* 2006* 2005* 2004 2003 2002 2001

    Income statement informationRevenue R million 6 329 5 184 4 838 4 053 3 947 3 692 2 792 EBITDA R million 915 855 674 464 396 278 248 EBITDA margin % 14,5 16,5 13,9 11,4 10,0 7,5 8,9 Operating profit R million 808 766 597 389 327 220 203 Operating profit margin % 12,8 14,8 12,3 9,6 8,3 5,9 7,3 Profit for year R million 546 516 415 264 210 140 115 Headline earnings for year R million 536 510 397 263 208 140 117

    Balance sheet informationTotal assets R million 2 867 2 172 1 825 1 838 1 328 1 389 1 027 Total equity R million 1 308 1 121 983 765 615 467 366 Total liabilities R million 1 559 1 051 842 1 073 713 922 661 Net assets R million 1 663 1 240 1 126 1 133 681 680 547

    Profitability and asset managementReturn on total assets % 32,2 38,6 31,3 27,1 23,0 14,8 17,0 Return on equity % 45,0 49,3 46,4 38,6 39,0 33,4 31,2 Return on net assets % 54,8 64,7 51,3 48,3 48,1 35,8 37,1 Net asset turn times 4,3 4,4 4,2 4,7 5,8 6,0 5,1

    Shareholders' ratiosBasic earnings per share cents 1 387 1 285 989 630 487 323 266 Headline earnings per share cents 1 381 1 286 958 631 487 326 272 Dividend per share cents 700 585 380 230 168 108 90 Dividend cover times 2,0 2,2 2,5 2,7 2,9 3,0 3,0

    Stock exchange statisticsMarket value per share At year end cents 12 100 8 650 7 100 4 071 2 395 1 310 1 185 Highest cents 14 347 10 400 7 500 4 100 2 400 1 555 1 220 Lowest cents 8 600 6 580 4 020 2 385 1 300 1 000 760Closing dividend yield % 5,1 5,6 3,8 4,7 5,0 8,2 7,6 Closing earnings yield % 11,3 13,9 10,3 13,7 15,2 24,9 22,9 Closing price/earnings ratio times 8,8 7,2 7,7 6,5 4,9 4,0 4,4 Number of shares issued# '000 42 728 43 277 44 520 43 499 42 867 42 867 42 924 Number of transactions 15 030 8 809 6 807 5 401 2 793 4 760 5 564 Number of shares traded '000 25 027 22 317 19 530 21 783 15 158 20 178 32 663 Number of shares traded as a percentage of issued shares % 59 52 44 50 35 47 76 Value of shares traded R million 2 889 1 846 1 185 679 270 249 304 Closing market capitalisation R million 5 170 3 743 3 161 1 786 1 027 562 509

    # Refer to note 9 of the financial statements for the number of shares effectively in issue net of treasury shares* Figures presented on IFRS basis

  • 27Astral Foods Annual Report 2007

    DefinitionsOperating profit marginOperating profit before interest and taxation as a percentage of revenue.

    EBITDAEarnings before interest, tax, depreciation and amortisation.

    Net assetsTotal assets less total liabilities excluding cash and cash equivalents, borrowings, normal and deferredtax, and shareholders for dividends.

    Return on total assetsOperating profit less finance costs as a percentage of average total assets.

    Return on equityNet profit attributable to ordinary shareholders as a percentage of average ordinary shareholders'interest.

    Return on net assets Operating profit before interest and taxation as a percentage of average net assets.

    Net asset turnRevenue divided by average net assets.

    Basic earnings per shareNet profit for the year divided by the weighted average number of ordinary shares in issue duringthe year.

    Headline earnings per shareHeadline earnings divided by the weighted average number of ordinary shares in issue during the year.

    Headline earningsNet profit for the year adjusted for profit/loss on sale of property, plant and equipment,and investments.

    Dividend coverHeadline earnings per share divided by dividend per share declared out of earnings for the year.

    Closing dividend yieldDividends per share as a percentage of market value per share at year end.

    Closing earnings yieldHeadline earnings per share as a percentage of market value per share at year end.

    Closing price/earnings ratioMarket value per share divided by headline earnings per share at year end.

    Ratios and stat ist ics

  • 28 Astral Foods Annual Report 2007

    Annual financial statementsFor the year ended 30 September 2007


    Approval of annual financial statements 29

    Certificate by company secretary 29

    Statement of directors responsibility 30

    Independent auditors report 31

    Directors report 32

    Directors remuneration report 36

    Segment report group 39

    Accounting policies 40

    Balance sheet 54

    Income statement 55

    Statement of changes in equity 56

    Cash flow statement 57

    Notes to the cash flow statement 58

    Notes to the annual financial statements 60

    Astral Foods Annual Report 2007

  • 29Astral Foods Annual Report 2007

    The annual financial statements and group annual financial statements of Astral Foods Limited for theyear ended 30 September 2007 set out on pages 32 to 83, were approved by the board of directorson 8 November 2007 and signed on its behalf by:

    JL van den Berg NC WentzelChairman Chief executive officerPretoria8 November 2007

    Approval of annual financial statements

    I certify in accordance with section 268G of the Companies Act, 1973, that the company has lodgedwith the Registrar of Companies all such returns as are required by a Public Company in terms of thisAct and that all such returns are true, correct and up to date.

    MA EloffCompany Secretary8 November 2007

    Certificate by company secretary

  • 30 Astral Foods Annual Report 2007

    The directors are responsible for the preparation, integrity and fair presentation of the financialstatements of Astral Foods Limited and its subsidiaries. The financial statements presented on pages32 to 83 have been prepared in accordance with International Financial Reporting Standards (IFRS),and include amounts based on judgements and estimates made by management.

    The preparation of financial statements in conformity with IFRS requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilities at the date of thefinancial statements and the reported expenses during the reporting period. Actual results could differfrom those estimates.

    The directors consider that in preparing the financial statements they have used the most appropriateaccounting policies, consistently applied and supported by reasonable and prudent judgements andestimates, and that all IFRS that they consider to be applicable have been followed. The directors aresatisfied that the information contained in the financial statements fairly presents the results ofoperations for the year and the financial position of the company and the group at year end.

    The directors have responsibility for ensuring that accounting records are kept. The accounting recordsshould disclose with reasonable accuracy the financial position of the company and the group toenable the directors to ensure that the financial statements comply with the relevant legislation.

    Astral Foods Limited and its subsidiaries operated in an established control environment, which is welldocumented and regularly reviewed. This incorporates risk management and internal controlprocedures, which are designed to provide reasonable, but not absolute, assurance that assets aresafeguarded and the risks facing the business are being controlled.

    The going concern basis has been adopted in preparing the financial statements. The directors haveno reason to believe that the company and the group will not be a going concern in the foreseeablefuture based on forecasts and available cash resources. These financial statements support the viabilityof the company and the group.

    The financial statements have been audited by the independent auditors, PricewaterhouseCoopersIncorporated, who were given unrestricted access to all financial records and related data, includingminutes of all meetings of shareholders, the board of directors and committees of the board. Thedirectors believe that all representations made to the independent auditors during their audit are validand appropriate.

    The audit report of PricewaterhouseCoopers Incorporated is presented on page 31.

    Statement of directors responsibility

  • 31Astral Foods Annual Report 2007

    To the members of Astral Foods Limited

    We have audited the annual financial statements and group annual financial statements of AstralFoods Limited, which comprise the directors report, the balance sheet and the consolidated balancesheet as at 30 September 2007, the income statement and the consolidated income statement, thestatement of changes in equity and the consolidated statement of changes in equity, the cash flowstatement and the consolidated cash flow statement for the year then ended, and a summary ofsignificant accounting policies and other explanatory notes, as set out on pages 32 to 83.

    DIRECTORS RESPONSIBILITY FOR THE FINANCIAL STATEMENTSThe companys directors are responsible for the preparation and fair presentation of these financialstatements in accordance with International Financial Reporting Standards and in the manner required bythe Companies Act of South Africa. This responsibility includes: designing, implementing andmaintaining internal control relevant to the preparation and fair presentation of financial statements thatare free from material misstatement, whether due to fraud or error; selecting and applying appropriateaccounting policies; and making accounting estimates that are reasonable in the circumstances.

    AUDITORS RESPONSIBILITYOur responsibility is to express an opinion on these financial statements based on our audit.We conducted our audit in accordance with International Standards on Auditing. Those standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance whether the financial statements are free from material misstatement.

    An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the financial statements. The procedures selected depend on the auditors judgement, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal control relevant to the entityspreparation and fair presentation of the financial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entitys internal control. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting estimates made by management, aswell as evaluating the overall presentation of the financial statements.

    We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion.

    OPINIONIn our opinion, the financial statements present fairly, in all material respects, the financial position ofthe company and of the group as of 30 September 2007, and their financial performance and theircash flows for the year then ended in accordance with International Financial Reporting Standards andin the manner required by the Companies Act of South Africa.

    PricewaterhouseCoopers Inc Director: DJ FouchRegistered Auditor Johannesburg8 November 2007

    Independent auditors report

  • 32 Astral Foods Annual Report 2007

    Directors report

    The directors report is presented, which forms part of the audited financial statements of thecompany and the group for the year ended 30 September 2007.

    1. NATURE OF BUSINESSThe company holds investments in subsidiary and joint venture companies, with key activities inanimal feeds, animal feed pre-mixes, broiler genetic breeding, broiler operations, and theproduction and sale of day-old broilers and hatching eggs.

    2. BUSINESS REVIEWProfit for the year at R546 million showed a 6% increase over the corresponding period despite asignificant increase in the prices of all agricultural input commodities.

    Revenue increased by 22% from R5,184 million to R6,329 million and operating profit by 6%from R766 million to R808 million. Poultry operating profit was down 4% whilst Animal Nutritionshowed an increase of 22% on last year. The groups operating margin of 12,8% was down onlast years 14,8%.

    Cash generated for the year of R88 million was impacted by abnormally higher debtor levels dueto the financial year ending on a Sunday.

    Headline earnings per share increased by 7% from 1 286 cents to 1 381 cents per share.

    The financial position of the group for the financial year ended 30 September 2007 can besummarised as follows:

    2007 2006R'000 R'000

    Operating resultsRevenue 6 329 311 5 183 664

    Operating profit 808 238 765 953 Net finance (costs)/income (1 591) 4 884

    Profit before income tax 806 647 770 837 Income tax expense (261 089) (254 339)

    Profit for the year 545 558 516 498

    Attributable to:Equity holders of the company 537 858 509 517 Minority interests 7 700 6 981

    545 558 516 498

    Financial positionNon-current assets 1 416 775 1 183 199 Current assets 1 449 933 989 541

    Total assets 2 866 708 2 172 740

    Total equity 1 307 513 1 120 954 Non-current liabilities 327 014 245 538Current liabilities 1 232 181 806 248

    Total equity and liabilities 2 866 708 2 172 740

  • 33Astral Foods Annual Report 2007

    2. BUSINESS REVIEW (continued)

    Segment analysisA segment analysis of the revenue, operating profit and liabilities is set out on page 39 of theannual financial statements.

    AcquisitionsNo major acquisitions took place during the reporting period.

    3. SHARE CAPITALDetail of share capital is reflected under note 9 of the financial statements.

    At the annual general meeting of shareholders held on 15 February 2007, shareholders passed aspecial resolution authorising the company, or a subsidiary, to acquire the companys own ordinaryshares.

    In terms of the share repurchase programme a total of 1 036 886 (2006: 2 344 247) shares wereacquired at a cost of R115 million (2006: R190 million) and subsequently cancelled.

    In terms of the groups share incentive scheme, 547 100 (2006: 724 251) options were exercised.

    The companys authorised share capital remained unchanged during the year.

    4. SUBSIDIARIES AND JOINTLY CONTROLLED ENTITIESDetails of the jointly controlled entities and subsidiaries of Astral Foods Limited are set out in notes30 and 31 respectively of the annual financial statements.

    The attributable interest of the company in the profits and losses of its subsidiaries and jointventures for the year ended 30 September 2007 is as follows:

    2007 2006R'000 R'000

    SubsidiariesTotal profit after tax 564 526 534 913 Total loss 677

    Joint venturesTotal profit after tax 9 999 7 579

    5. DIVIDENDSThe following ordinary dividends were declared:

    Interim dividend (No. 13) of 260 cents per share (2006: 225 cents per share) 112 026 97 138 Less: Dividends received on treasury shares held by a subsidiary (11 248) (9 961) Final dividend (No. 14) of 440 cents per share(declared post year end) (2006: 360 cents per share) 188 005 155 651 Less: Dividends receivable on treasury shares held by a subsidiary (18 782) (15 577)

    Total dividend at 700 cents per share (2006: 585 cents per share) 270 001 227 251

    Directors report (continued)

  • 34 Astral Foods Annual Report 2007

    Directors report (continued)

    6. PROPERTY, VEHICLES, PLANT AND EQUIPMENTThere has been no major change in the nature of and policy relating to property, vehicles, plantand equipment.

    Details of property, vehicles and equipment are set out in note 1 of the annual financialstatements.

    7. DIRECTORSThe names of the directors who currently hold office are set out on pages 7, 8 and 9 of thisreport. Two additional directors, namely Drs T Eloff and N Tsengwa, were appointed on 8 May2007 and in terms of article 13.2 of the companys articles of association, Drs Eloff and Tsengwaretire as directors at the annual general meeting of shareholders and are eligible for re-election. Interms of Article 14 of the companys articles of association, Messrs JL van den Berg, MA Kingstonand CE Schutte retire by rotation at the annual general meeting of shareholders and are eligiblefor re-election. No director holds more than 1% of the ordinary shares in the company. Thedirectors beneficially and non-beneficially hold 334 512 (2006: 406 412) ordinary shares in thecompany see directors remuneration report on page 38 for details.

    Mr T Pritchard retired as financial director of the company on 31 August 2007.

    Particulars of the company secretary and her business and postal address appear on page 90 ofthis report.

    No material contracts involving directors interests were entered into in the year. A register ofdirectorships and interests is disclosed and circulated at every board meeting.

    8. RESOLUTIONSNo special resolutions (other than the special resolution referred to under Item 3 relating to therepurchase of shares), the nature of which might be significant to members in their appreciationof the state of affairs of the group, were passed by any subsidiary companies during the periodcovered by this report.

    9. SHARE INCENTIVE SCHEMEThe number of shares put under the control of the directors by the shareholders for purposes ofthe companys employee share incentive scheme was limited to 10% of the issued share capital ofAstral Foods Limited from time to time. The directors have decided to limit this to about 7,5% ofthe issued share capital.

    As at 30 September 2007, options in respect of 855 416 shares remained outstanding, being2% of issued share capital.

    Details of the dates and prices at which the options were granted are given in note 10 to thefinancial statements.

    10. SHAREHOLDERSDetails of shareholders are set out on page 84 of the annual financial statements.

    11. EVENTS SUBSEQUENT TO BALANCE SHEET DATENo events took place between year end and the date of the report that would have a materialeffect on the financial statements as disclosed.

  • 35Astral Foods Annual Report 2007

    12. LITIGATIONThe board is not aware of any legal or arbitration proceedings, pending or threatening, that mayhave or have had a material effect on the groups financial position.

    13. TRADING WEEKSThe reporting period for the poultry segment ends on the last Saturday of the financial year,resulting in a 53 week reporting period for 2007 (2006: 52 weeks). The extra trading weekyielded additional revenue and operating profit of R78 million and R6 million respectively.

    14. DATE FOR AUTHORISATION FOR ISSUE OF FINANCIAL STATEMENTSThe financial statements have been authorised for issue by the board of directors on 8 November2007. No authority was given to anyone to amend the financial statements after the date ofissue.

    Directors report (continued)

  • 36 Astral Foods Annual Report 2007

    Directors remuneration report


    Perfor- Retire- benefitsmance ment andrelated fund con- allow- Total Total

    Salary bonus tributions ances 2007 2006R'000 R'000 R'000 R'000 R'000 R'000

    Executive directorsFor managerial servicesNC Wentzel 2 527 1 988 452 161 5 128 4 996MA Kingston 1 476 1 208 354 210 3 248 3 021CE Schutte 1 072 899 216 212 2 399 2 182T Pritchard @ 1 198 210 53 1 461 2 537CA du Toit @ 255 72 32 359 3 380

    6 528 4 095 1 304 668 12 595 16 116

    Non-executive directors' feesFor services as directorsJL van den Berg 410 695 Dr T Eloff **# 62 JJ Geldenhuys 215 304 M Macdonald 235 332 TCC Mampane 175 237 Dr Tsengwa # 62 CG van Veyeren 175 267

    1 334 1 835

    Total paid to directors by the company and its subsidiaries 13 929 17 951

    Performance related bonuses based on accrual for the current year. Previous years figures wererestated from payment basis to accrual basis# Remuneration from date of appointment as [email protected] Remuneration to date of retirement/resignation** Directors fee paid to the North West University

    Summary of benefits received from options exercisedShare

    Share appreciationoption option 2007 2006

    scheme scheme Total TotalR000 R000 R000 R000

    NC Wentzel 23 871 6 779 30 650 18 084MA Kingston 4 900 4 900 CE Schutte 1 003 2 711 3 714 759T Pritchard 11 872 2 711 14 583 1 336CA du Toit 1 198

    41 646 12 201 53 847 21 377

    For the year ended 30 September 2007

  • 37Astral Foods Annual Report 2007

    SHARE INCENTIVE SCHEME INTERESTSShare option schemeOptions outstanding Number of options

    Grant date Exercise price 2007 2006

    NC Wentzel 17 April 2001 R7,75 17 716 237 716 28 August 2007 R122,00 81 100

    MA Kingston 5 July 2001 R7,75 51 600 28 August 2007 R122,00 49 400

    CE Schutte 2 May 2002 R11,80 8 400 28 August 2007 R122,00 33 600

    T Pritchard 17 April 2001 R7,75 121 600

    181 816 419 316

    Options exercised Benefit received 2007 2006

    Number Average price R'000 R'000

    NC Wentzel 220 000 R114,50 23 871 18 084 MA Kingston 51 600 R102,50 4 900 CE Schutte 8 400 R131,23 1 003 759 T Pritchard 121 600 R105,39 11 872 1 336 CA du Toit 1 198

    41 646 21 377

    The scheme provides the right to purchase shares in the company at the exercise price.

    One third of the options are exercisable per year after each of the third, fourth and fifth year from dateof granting the option.

    Any balance not exercised after ten years for the 2001 and 2002 grants, and seven years for the 2007grants from date of granting the option, will lapse.

    None of the non-executive directors have share incentive scheme interests.

    Share appreciation option schemeOptions outstanding Number of options

    Grant date Exercise price 2007 2006

    NC Wentzel 85 000 160 000

    19 August 2004 R33,82 75 000 15 July 2005 R63,87 45 000 45 000 15 July 2006 R77,75 40 000 40 000

    MA Kingston 87 000 87 000

    19 August 2004 R33,82 42 000 42 000 15 July 2005 R63,87 24 000 24 000 15 July 2006 R77,75 21 000 21 000

    CE Schutte 32 500 62 500

    19 August 2004 R33,82 30 000 15 July 2005 R63,87 17 400 17 400 15 July 2006 R77,75 15 100 15 100

    T Pritchard 67 600

    19 August 2004 R33,82 30 000 15 July 2005 R63,87 20 000 15 July 2006 R77,75 17 600

    CA du Toit 68 000

    19 November 2004 R47,52 39 000 15 July 2005 R63,87 29 000

    204 500 445 100

    Directors remuneration report (continued)For the year ended 30 September 2007

  • 38 Astral Foods Annual Report 2007

    Options exercised Benefit received2007 2006

    Number Average price R'000 R'000

    NC Wentzel 75 000 R124,20 6 779 CE Schutte 30 000 R124,20 2 711 T Pritchard 30 000 R124,20 2 711

    12 201

    The scheme provides incentive remuneration based on the increase in the value of shares of thecompany.

    The right to receive payment based on the options granted, vests after three years and lapses afterfive years from the grant date.

    The benefit received includes the value of the share options exercised. (Details of options granted andoutstanding are set out in note 10.)

    ISSUED SHARE CAPITAL INTERESTDirectly held Indirectly heldno of shares no of shares

    2007 2006 2007 2006

    Beneficial interestsNon-executive directorsJL van den Berg 146 219 146 219 M Macdonald 60 000 60 000 CG van Veyeren 4 860 4 860 Executive directorsNC Wentzel 75 833 65 833 15 000 15 000 MA Kingston 17 500 17 500 CE Schutte 15 100 11 000 T Pritchard 50 000 CA du Toit 36 000

    113 293 185 193 221 219 221 219

    Directors remuneration report (continued)For the year ended 30 September 2007

  • 39Astral Foods Annual Report 2007

    2007 2006 2007 2006R'000 R'000 R'000 R'000

    Revenue Operating profitAnimal Nutrition 3 530 610 2 669 705 332 707 272 265

    South Africa 3 347 738 2 500 371 294 752 235 085 Other Africa 182 872 169 334 37 955 37 180

    Poultry South Africa and Swaziland 4 382 651 3 623 545 475 531 493 688

    7 913 261 6 293 250 Intergroup revenue (1 583 950) (1 109 586)

    6 329 311 5 183 664 808 238 765 953

    Assets Liabilities Animal Nutrition 923 615 778 942 686 724 533 606

    South Africa 826 690 696 356 640 684 487 559 Other Africa 96 925 82 586 46 040 46 047

    Poultry South Africa and Swaziland 2 097 183 1 530 174 1 026 561 654 556 Set-off of intergroup balances (154 090) (136 376) (154 090) (136 376)

    2 866 708 2 172 740 1 559 195 1 051 786

    Capital expenditure Depreciation Animal Nutrition 30 292 44 368 28 236 23 385

    South Africa 26 055 29 326 25 965 21 332 Other Africa 4 237 15 042 2 271 2 053

    Poultry South Africa and Swaziland 291 457 253 138 78 057 65 350

    321 749 297 506 106 293 88 735

    Segment report groupFor the year ended 30 September 2007


    1 000

    2 000

    3 000

    4 000

    5 000

    Animal Nutrition

    RevenueRm 2007







    Animal Nutrition

    Operating profitRm





  • 40 Astral Foods Annual Report 2007


    The principal accounting policies applied in the preparation of these consolidated financialstatements are set out below. These policies have been consistently applied to all the yearspresented, unless otherwise stated.


    The consolidated financial statements of Astral Foods Limited Group have been prepared inaccordance with International Financial Reporting Standards (IFRS). The consolidated financialstatements have been prepared under the historical cost convention, as modified by therevaluation of financial assets and financial liabilities (including derivative instruments) at fairvalue through profit or loss.

    The preparation of financial statements in conformity with IFRS requires the use of certain criticalaccounting estimates. It also requires management to exercise its judgment in the process ofapplying the groups accounting policies. The areas involving a higher degree of judgment orcomplexity, or areas where assumptions and estimates are significant to the consolidated financialstatements, are disclosed in paragraph 24 of the accounting policies.

    Standards, interpretations and amendments to published standards that are not yet effective.

    Certain new standards, amendments and interpretations to existing standards have beenpublished that are mandatory for the groups accounting periods beginning on or after 1 January2007 or later periods but which the group has not early adopted. The groups assessment of theimpact of these new standards and interpretations is set out below:

    a) Standards, amendments and interpretations effective in 2007

    IFRS 7, Financial instruments: Disclosures, and the complementary amendment to IAS 1,Presentation of financial statements Capital disclosures, introduces new disclosuresrelating to financial instruments and does not have any impact on the classification andvaluation of the groups financial instruments, or the disclosures to taxation and trade andother payables.

    IFRIC 8, Scope of IFRS 2, requires consideration of transactions involving the issuance ofequity instruments where the identifiable consideration received is less than the fair value ofthe equity instruments issued in order to establish whether or not they fall within the scopeof IFRS 2. This standard does not have any impact on the groups financial statements.

    IFRIC 10, Interim financial reporting and impairment, prohibits the impairment lossesrecognised in an interim period on goodwill and investments in equity instruments and infinancial assets carried at cost to be reversed at a subsequent balance sheet date. Thestandard does not have any impact on the groups financial statements.

    b) Interpretation early adopted by the group

    IFRIC 11, IFRS 2 Group and treasury share transactions, was early adopted in 2007. IFRIC 11 provides guidance on whether share-based transactions involving treasury sharesor involving group entities (for example, options over a parents shares) should beaccounted for as equity-settled or cash-settled share-based payment transactions in thestand-alone accounts of the parent and group companies. This interpretation does nothave an impact on the groups financial statements.

    Accounting policiesFor the year ended 30 September 2007

  • 41Astral Foods Annual Report 2007

    2. BASIS OF PREPARATION (continued)

    c) Standards, amendments and interpretations effective in 2007 but not relevant

    The following standards, amendments and interpretations to published standards aremandatory for accounting periods beginning on or after 1 January 2007 but they are notrelevant to the groups operations:

    IFRS 4, Insurance contracts; IFRIC 7, Applying the restatement approach under IAS 29, Financial reporting in

    hyperinflationary economies; and IFRIC 9, Re-assessment of embedded derivatives.

    d) Standards, amendments and interpretations to existing standards that are not yet effective and

    have not been early adopted by the group

    The following standards, amendments and interpretations to existing standards have beenpublished and are mandatory for the groups accounting periods beginning on or after1 January 2008 or later periods, but the group has not early adopted them:

    IAS 23 (Amendment), Borrowing costs (effective from 1 January 2009). The amendment tothe standard is still subject to endorsement by the European Union. It requires an entity tocapitalise borrowing costs directly attributable to the acquisition, construction or productionof a qualifying asset (one that takes a substantial period of time to get ready for use orsale) as part of the cost of the asset. The option of immediately expensing those borrowingcosts will be removed. The group will apply IAS 23 (Amended) from 1 October 2009.

    IFRS 8, Operating segments (effective from 1 January 2009). IFRS 8 replaces IAS 14 andaligns segment reporting with the requirements of the US standard SFAS 131, Disclosuresabout segments of an enterprise and related information. The new standard requires amanagement approach, under which segment information is presented on the samebases as that used for internal reporting purposes. The group will apply IFRS 8 from1 October 2009. This statement will not have an impact on the groups financial statements.

    IFRIC 14, IAS 19 The limit on a defined benefit asset, minimum funding requirementsand their interaction (effective from 1 January 2008). IFRIC 14 provides guidance onassessing the limit in IAS 19 on the amount of the surplus that can be recognised as anasset. It also explains how the pension asset or liability may be affected by a statutory orcontractual minimum funding requirement. The group will apply IFRIC 14 from 1 October2008, but it is not expected to have any impact on the groups accounts.

    e) Interpretations to existing standards that are not yet effective and not relevant for the groups


    The following interpretations to existing standards have been published and are mandatoryfor the groups accounting periods beginning on or after 1 January 2008 or later periods butare not relevant for the groups operations:

    Accounting policies (continued)For the year ended 30 September 2007

  • 42 Astral Foods Annual Report 2007

    2. BASIS OF PREPARATION (continued)

    IFRIC 12, Service concession arrangements (effective from 1 January 2008). IFRIC 12applies to contractual arrangements whereby a private sector operator participates in thedevelopment, financing, operation and maintenance of infrastructure for public sectorservices. IFRIC 12 is not relevant to the groups operations because none of the groupscompanies provide for public sector services.

    IFRIC 13, Customer loyalty programmes (effective from 1 July 2008). IFRIC 13 clarifies thatwhere goods or services are sold together with a customer loyalty incentive (for example,loyalty points or free products), the arrangement is a multiple element arrangement andthe consideration receivable from the customer is allocated between the components ofthe arrangement in using fair values. IFRIC 13 is not relevant to the groups operationsbecause none of the groups companies operate any loyalty programmes.


    SubsidiariesSubsidiaries are all entities (including special purpose entities) over which the group has the powerto govern the financial and operating policies generally accompanying a shareholding of morethan one half of the voting rights.

    Subsidiaries are fully consolidated from the date on which control is transferred to the group. Theyare de-consolidated from the date on which control ceases. The purchase method of accounting isused to account for the acquisition of subsidiaries by the group. The cost of an acquisition ismeasured as the fair value of the assets given, equity instruments issued and liabilities incurred orassumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiableassets acquired and liabilities and contingent liabilities assumed in a business combination aremeasured initially at their fair values at the acquisition date, irrespective of the extent of anyminority interest. The excess of the cost of acquisition over the fair value of the groups share ofthe identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than thefair value of the groups share of the net assets of the subsidiary acquired, the difference isrecognised directly in the income statement. Inter-company transactions, balances and unrealisedgains on transactions between group companies are eliminated. Unrealised losses are alsoeliminated but considered an impairment indicator of the asset transferred.

    Subsidiaries accounting policies have been changed where necessary to ensure consistency withthe policies adopted by the group.

    Jointly controlled entitiesThe groups interests in jointly controlled entities are accounted for by proportionate consolidation.

    The group combines its share of the jointly controlled entities individual income and expenses,assets and liabilities and cash flows on a line-by-line basis with similar items in the groupsfinancial statements.

    The group recognises the portion of gains or losses on the sale of assets by the group to the jointlycontrolled entities that is attributable to the other ventures. The group does not recognise its shareof profits or losses from the jointly controlled entities that result from the groups purchase ofassets from these entities until it resells the assets to an independent party. A loss on thetransaction is recognised immediately if it provides evidence of a reduction in the net realisablevalue of current assets, or an impairment loss. Jointly controlled entities accounting policies havebeen changed where necessary to ensure consistency with the policies adopted by the group.

    Accounting policies (co