RNS No 8144h
PACIFIC DUNLOP LIMITED
12th September 1997
1996/1997 Pacific Dunlop Results In Brief
* Sales from continuing businesses were $5.8 billion.
* Profit after tax and abnormals of $178 million compared with
the previous years's loss of $133 million.
* Profit after tax before abnormals up 8.7% to $176 million.
* Earnings per share before abnormals up 9.6% to 17.2 cents.
* Gearing reduced by 12 percentage points to 56%.
* Final dividend of 7.0 cents making 14.0 cents for the year
(previous year 14.0 cents).
Pacific Dunlop 1996/1997 Results Summary
Pacific Dunlop today announced a profit attributable to shareholders before
abnormals of $175.7 million for the year ended 30 June 1997. This is an
increase of 8.7% over the previous year's $161.7 million.
Abnormal profit attributable to shareholders of $2.2 million was due primarily
to a gain on sale of Loscam net of restructuring expenses incurred during the
year.
Sales by continuing businesses were $5.8 billion, a decrease of 3.6%.
Operating margins increased from 6.2% to 6.4%, with strong improvement in the
second half.
Directors have declared a final dividend of 7.0 cents a share, franked to 60%
at the prevailing Australian tax rate of 36%. This maintains a dividend of 14.0
cents for the full year, franked to 60% which is unchanged from the previous
year. The dividend will be payable on 14 November 1997 to shareholders
registered at the close of business on 13 October 1997.
In 1996/97 a number of businesses were sold, as part of the Company's
continuing rationalisation program. The sale of these non-core assets has
enabled Pacific Dunlop to restructure its businesses within six core operating
divisions.
During the year, the Company purchased Golden Needles Knitting as a strategic
investment to support the growth of one of its core businesses, Ansell
International.
Chairman's Comment
The Chairman of Pacific Dunlop, Mr John Ralph, said the improved result
reflected the Company's objective set a year ago of having the mainstream
businesses performing at better levels by year end. He added:
"This result is the outcome of a stronger, more focused business base as the
work of bringing each business up to or near optimum performance continues. A
continuing objective of the board and management is to deliver profitable growth
to the Company by identifying those businesses capable of achieving top quartile
shareholder performance, and the strategies and growth paths that will drive
them.
"The past 12 months has seen extensive rationalisation, which has included the
losure, relocation and downsizing of factories in Pacific Brands and Cables,
and the closure, relocation and refurbishment of outlets by Pacific
Distribution. This process was accompanied by the investment of $190 million
across all businesses in new equipment and systems, and improved safety and
environmental practices.
"Trading conditions in nearly all markets continued to be difficult, holding
back sales and margin growth. This was felt particularly in the
automotive-related markets of South Pacific Tyres and GNB Technologies, and to
some extent by Pacific Distribution.
"Apart from GNB Technologies' disappointing first half performance and an
increase in interest cost charged against operating profit associated with
Telectronics, the result was encouraging. Proceeds received during the year
from the sale of non- core businesses of $303 million contributed to a further
reduction in gearing and improved interest cover.
"In looking ahead, the rationalisation and re-focusing of businesses over the
past year is now beginning to yield positive results. All businesses are
anticipating further improvement this year based on current market conditions.
In order for the Company to achieve a significant increase in profits, however,
substantial progress has to be made in overcoming the current problems in GNB
Technologies."
Balance Sheet
The improvement in the balance sheet provides a solid platform for future
growth. Interest bearing debt (including trade bills) to shareholders' equity
decreased from 66% at the end of 1995/96 to 56%, and net liabilities
(liabilities less cash) to equity reduced from 158% last year to 138%.
Cash from operations was $289 million compared with $232 million in the previous
year. Improvements in working capital from continuing operations contributed
$101 million to cash flow for the year. Net interest bearing debt (borrowings
less cash) decreased by $188 million. This result reflects the receipt of
proceeds from the sale of the Telectronics business ($192 million), the sale of
Loscam ($44 million), and the sale of a number of smaller businesses ($14
million).
Cash payments during the year included $88 million for acquisitions,
incorporating partial payment for Golden Needles Knitting; funding of other
capital expenditure of $190 million; Telectronics' losses to the date of sale;
and reimbursement of expenses and ancillary costs, including patient
monitoring, for Telectronics and the Accufix Research Institute.
Litigation
In April 1997, the US District Court in Cincinatti, Ohio (having previously
decertified a class in the litigation involving the Telectronics' Accufix Atrial
"J" lead) recertified a class encompassing all patients in the US implanted with
the lead. This, and the other State based litigation in the United States,
against the Accufix Research Institute (the former Telectronics) and others,
together with litigation in Canada, France, Germany, Turkey and Australia, is
being vigorously defended.
The US based litigation involving Ansell and a number of other defendants
arising from the claims of individuals who are exposed to natural rubber latex
products continues through its procedural phases. Members of the Pacific Dunlop
Group remain co-defendants with other major glove companies in approximately
37% of the cases. No case in which Pacific Dunlop Group members are
defendants, involves an application for class certifications. The claims
continue to be vigorously defended, and already Ansell subsidiaries have been
released from some law suits.
Operations
The Managing Director. Mr Rod Chadwick, made the following comments on
operations:
"Sales of continuing businesses were slightly lower at $5.8 billion after
taking into account the divestment during the year of several non-core
businesses including Loscam, Dunlop Industrial Footwear and some Household
Products divisions.
"Real progress will only be achieved as we continue to accelerate the process
of change. Management is focused on building a world class manufacturing,
marketing and distribution company. This will be based on operational
excellence and the expanded capabilities of our people, leading to financial
performance equal to or better than our industry peers.
"Most parts of the Company responded well to the challenging two-year stretch
targets set at the start of the year. Results during the year show that many of
the operating divisions have in fact made commendable progress.
"Cables has already achieved the margin target, and Ansell International,
Pacific Brands and Pacific Distribution are showing improvement. GNB
Technologies and South Pacific Tyres are meanwhile dealing with specific issues
as well as reduced automotive industry demand. GNB also continues to be
hampered by its under- performing Columbus lead smelter and factory performance
issues in the United States.
"Good progress is being made on inventory management in all divisions. All
groups are forecasting further improvement in the coming year, reducing
inventory levels whilst maintaining or enhancing customer service levels.
"All businesses except GNB finished the year with return on investment ahead of
the Company's weighted average cost of capital. The importance of cash in the
creation of real value for shareholders has been reinforced by the introduction
internally of the Cash Value Added (CVA) measure.
Business Groups
Ansell International continued to perform strongly in all markets with improved
profit levels. Ansell's position as a global leader in barrier protective
products was strengthened by the acquisition of Golden Needles Knitting Inc
(GNK) for $114 million. GNK, based in North Carolina USA, has annual sales of
$120 million and lifts Ansell's share of the US high specification cut resistant
glove markets to 40%. GNK has developed a reputation as a market leader by
marrying proprietary glove knitting technology with high performance products.
Another important driver of growth in industrial gloves has been in the area of
product protection, particularly in the food services industry and in
pharmaceutical and critical environment applications. Excellent sales of the new
thin nitrile glove were achieved out of the newly commissioned plant in Troy,
Alabama.
Market share in branded condoms continued to grow on a global basis with the
formation in December of a 50-50 joint venture in India with Raymond Ltd. The
Indian business has 25% of its domestic market and a manufacturing plant at
Aurangabad, 400 km north-east of Bombay. Together with recent upgrades in the
condom plant in Dothan, Alabama, the new venture will enable Ansell to target
growth in several new emerging markets.
Ansell's position in the medical glove markets was further boosted by new
product releases of surgical and examination gloves, based on low allergenic,
powder-free technology. This segment is the fastest growing medical glove
category worldwide and has been supported by a $40 million capital expenditure
program which will improve productivity and ensure adequate capacity to meet the
growing demand. Sales received additional impetus with a $120 million contract
over five years to supply surgical and examination gloves to Premier Inc, the
largest alliance of hospitals and health systems in the US.
Ansell recently moved its world headquarters to New Jersey in the United States
in order to be closer to its major markets. The move reinforces the
international nature of Ansell's operations.
GBN TECHNOLOGIES
GNB Technologies had a difficult year with continued competitive pressures in
its automotive battery business and lower than anticipated recycled lead
production at the Columbus lead smelter.
Sales of GNB's Industrial Battery Group increased by 12.5%, helped by strong
growth in the global telecommunications industry. Plant capacity for
production of medium-sealed industrial batteries has been doubled ahead of the
further growth anticipated in the next two years.
Product lines were expanded with the introduction in March of the new Marathon
and Sprinter batteries for the telecommunications and uninterrupted power supply
segments. The flagship Absolyte(r) product line was also extended with the
introduction of the Absolyte XL(r) for telecommunications central office
switching applications.
Increased demand for Champion(r) sealed, maintenance-free batteries for the
forklift truck industry led to increased sales despite soft market conditions.
Work also began on extending the Champion(r) industrial product line to serve
the European market this year.
Lead production from the Columbus smelter remains substantially below its rated
annual capacity. Modifications have raised the production level, but this still
remains well below full capacity. Design changes and process improvements will
continue this year with the immediate target of a further lift in throughput
closer to the rated capacity. The higher cost of purchased lead, particularly
in the first half, had a severe impact on profits.
Automotive battery market share in North America increased marginally as the
company secured a sole source supply agreement with Sam's Club (a division of
Wal-Mart Inc.). The company also shipped the first batteries to the new Mercedes
Benz plant (Vance, Alabama), as the sole source for the new ML320 sports utility
vehicle.
In Australia, the Automotive and Industrial businesses maintained sales levels
even though under heavy margin pressure. The New Zealand operation continued
to perform well and maintained its significant market share in all product
categories.
Results include a fixed asset write-off in the first half of $12 million
related to obsolete equipment.
SOUTH PACIFIC TYRES (100%)
Results were down on the previous record year in a very competitive market. For
the first time in many years, the domestic tyre replacement market declined in
each of the key radial tyre categories of passenger and truck. The light truck
radial market grew marginally, at a much more subdued rate than in recent years.
The softer demand was part of an overall automotive industry picture in which
growth was limited, vehicle imports were higher, and the prevalence of low-cost
Asian tyre suppliers increased.
South Pacific Tyres was nevertheless able to hold its replacement market share
position. This was achieved through a combination of improved supply and stock
availability, stronger marketing, and a greater focus on new product
introduction. Competition however, placed considerable pressure on pricing.
The original equipment market was also difficult due to aggressive local and
increasingly global competition, a rise in Korean car imports, and the move
offshore of a number of truck original equipment manufacturers.
The softer demand resulted in lower factory utilisation and a consequentially
slower rate of productivity improvements. However, waste and work in progress
levels were further reduced from last year's record lows. Working capital was
kept under tight control.
Export sales increased by a further 5% on the previous year and are now
approaching $80 million annually. New export business included a contract with
Dunlop Tire Corporation of the US to supply some 300,000 tyres annually.
Increased offtake by Goodyear's Asian operations and South Pacific Tyres
customers in the UK will significantly underpin manufacturing volume in
1997/1998.
The program of strategic retail store acquisitions and selective store licensing
continued strongly throughout the year with the total number of outlets
increasing. Both profitability and market coverage in the retail chains improved
during the year.
A record number of new products were introduced during the year, servicing both
the domestic and export markets. In passenger tyres, new releases included
ranges of Goodyear Regatta, Olympic Sprinter, additional Centaur Supreme sizes
for Kwk-Fit in the UX, and new sizes for Dunlop Tire Corporation.
CABLES & ENGINEERING PRODUCTS
The Cables Group had a much improved year due to benefits derived from the
rationalisation and factory improvement program begun last year. A full year's
operation of both Vision Cables and the Indonesian business also contributed to
the division's profit increase. The group maintained its strong share of the
low and medium voltage commercial and industrial market, despite intense
competition.
The Energy Division had a successful year, winning a number of new contracts for
cable supply to electricity supply authorities. It was also involved in the
supply of extra high voltage cables to the Sydney Olympic 2000 site at Homebush
in Sydney and to Power Link in Cairns in northern Queensland. The division's
New Zealand business completed a pleasing year, supported by exports to
Australia and increased utilities business.
This was the first full year of the Pay TV coaxial cable manufacturing joint
venture, Vision Cables (51% owned). Vision Cables supplied Telstra and Optus'
hard line cable requirements in an accelerated Pay-TV cable rollout program
around Australia and also won supply contracts to New Zealand, Malaysia,
Singapore and Indonesia. With most of the immediate network in Australia now in
place, production has been suspended with the ongoing emphasis being transferred
to meeting customer maintenance requirements.
The Burton division continued its restructuring. A re-launch of the Click
branded range of electrical accessories is being well received.
The plants in China improved manufacturing performance but faced depressed
domestic prices for telephone cable. In Indonesia, the new metallic telephone
cable facility began the year well with strong demand from Indonesian Telecom
and the second carrier franchisees, although orders slowed in the second half
because of rollout delays. The Kelani Cables operation in Sri Lanka was
restructured in readiness for a planned expansion to service the South Asian
region.
The Engineered Products division experienced generally difficult trading
conditions. Market development of Dunlop Duratray suspended dump truck
bodies continued with orders from Indonesia, US and Australia. Rubber mixing
and compounding facilities were upgraded.
PACIFIC BRANDS
The Pacific Brands Group overcame generally flat retail demand and lower sales
in nearly all of its product areas to generate an improved earnings performance.
The improvement was marked by extensive rationalisation and restructuring which
progressively increased manufacturing and sourcing efficiency. Substantial
improvements in working capital management were achieved.
The subdued Australian clothing market placed considerable pressure on pricing
throughout the Clothing Group. Profit, however, increased with more focused
product ranging and working capital control.
The Bonds result improved as the year progressed. Holeproof successfully
launched the "Me" brand to department and speciality stores. Berlei strengthened
its market leadership position with a new range of sports bras. Jockey/Red
Robin performed well. Boydex successfully re-launched the Amco jeans brand, and
all clothing businesses improved their market positions in New Zealand.
In New South Wales, Bonds Wear consolidated its South Coast manufacturing on
to a single site at Unanderra and its North Coast manufacturing to a single
site at Cessnock.
Jockey closed its manufacturing facility at Maryborough in Victoria and
relocated to Melbourne.
The Sporting Goods Group again performed well with excellent results from the
Fitness and Leisure divisions and an improved result from Dunlop Slazenger. The
Fitness and Leisure Group also benefited from its significant restructuring in
previous years.
The Footwear Group continued to maintain market leadership across most market
segments. Grosby completed a very successful year with strong performance from
Grosby Australia and increased manufacturing efficiencies within the China
factory.
The focus of the Household Products Group was on restructuring to take
advantage of the anticipated upturn in the Australian building and construction
sector during 1997/98, and to increase customer responsiveness.
PACIFIC DISTRIBUTION
Sales Revenue from continuing operations decreased by 1.2%. Operating Profit
derived from these businesses was in line with last year. The pallet hire
business, Loscam, was sold in the second half for $44 million.
Greater pricing disciplines enabled trading margins to partially offset the
flat sales performance. In addition considerable work on working capital
management produced a better rate of return for the division.
In New Zealand, the leadership and central support functions for the Electrical
business have now been integrated with those of the Automotive business
involving some one-off costs in 1996/97. Considerable synergies are starting
to emerge which will more favourably affect 1997/98.
In the Australian Electrical business, extensive work has been done on property
strategy. During the year a number of branches were relocated or converted to
the new open sell format, and this program will continue through 1998. This is
producing improvements in sales, operating margins, and working capital in
comparison to traditional branches.
By comparison, a number of Australian branches have been closed in a selective
program of branch rationalisation. As part of this program, selected areas
served by two or more undersized branches have been replaced by larger better-
designed stores with superior service and stock levels. This has been met by a
favourable response from customers.
A program of rationalising and upgrading Electrical Distribution facilities is
also delivering cost savings and a greatly enhanced service potential. In
Automotive, considerable advance was made in appealing to the Do-lt-Yourself
segment of the market.
The establishment of Repco's new format stores which are designed to be more
accessible to the Do-It-Yourself customer has had strong early success. Ten new
branches and seven conversions in this format are now operating. In 1998 this
program will be accelerated, subject to availability of appropriate property
sites.
For further information contact:
Mr Rod Chadwick Mr John Hine
Phone: (61-3) 9270 7270 Phone: (61-3) 9270 7140
Mobile: 0412-254 952
Appendix 4B
Preliminary Final report
Consolidated profit and loss account
(The figures are not equity accounted)
Current period- $A'OOO Previous corresponding
period - $A'000
1.1 Sales (or equivalent
operating) revenue 5,782,906 6,470,796
1.2 Other revenue 364,584 577,182
1.3 Total revenue 6,147,490 7,047,978
1.4 Operating profit (loss)
before abnormal items and tax 265,836 263,652
1.5 Abnormal items before tax
(detail in item 2.4) 593 (284,553)
1.6 Operating profit (loss) before
tax (items 1.4 + 1.5) 266,429 (20,901)
1.7 Less tax 81,501 105,617
1.8 Operating profit (loss)
after tax but before outside
equity interests 184,928 (126,518)
1.9 Less outside equity interests 7,077 6,219
1.10 Operating profit (loss)
after tax attributable to members 177,851 (132,737)
1.11 Extraordinary items after tax
(detail in item 2.6) - -
1.12 Less outside equity interests - -
1.13 Extraordinary items after tax
attributable to members - -
1.14 Total operating profit (loss) and
extraordinary items after tax
(items 1.8 + 1.11) 184,928 (126,518)
1.15 Operating profit (loss) and
extraordinary items after tax
attributable to outside equity
interests (items 1.9 + 1.12) 7,077 6,219
1.16 Operating profit (loss) and
extraordinary items after tax
attributaMe to members
(items 1.10 + 1.13) 177,851 (132,737)
1.17 Retained profits (accumulated
losses) at beginning of financial
period (257,622) 11,842
1.18 If change in accounting policy
as set out in clause 11 of AASB
1018 Profit and Loss Accounts,
adjustments as required by that
clause (include brief description) - -
1.19 Aggregate of amounts transferred
from reserves 339,690 2,087
1.20 Total available for appropriation
(carried forward) 259,919 (118,808)
1.21 Dividends provided for or paid 143,798 138,814
1.22 Aggregate of amounts transferred
to reserves - -
1.23 Retained profits (accumulated losses)
at end of financial period 116,121 (267,622)
Profit restated to exclude Ammortisation of Goodwill
Current period- $A'OOO Previous corresponding
period - $A'000
1.24 Operating profit (loss)
after tax before outside
equity interests (items 1 .8)
and amortisation of goodwill 217,442 (91,421)
1.25 Less(plus) outside equity
interests 7,077 6,219
1.26 Operating profit (loss) after tax
before amortisation of goodwill)
attributable to members 210,365 (97,640)
Consolidated balance sheet
At end of current As shown in last As in last half
period $A'000 annual report yearly report
$A'000 $A'000
Current Assets
4.1 Cash 1,191,816 1,327,477 1,260,607
4.2 Receivables 952,383 1,030,891 1,008,533
4.3 Investments - 166,000 -
4.4 Inventories 954,003 1,014,988 986,408
4.5 Other
(prepayments) 68,110 62,412 74,158
4.6 Total current
assets 3,166,312 3,601,768 3,329,706
Non-current assets
4.7 Receivables 77,931 87,303 68,289
4.8 Investments 188,676 183,682 195,583
4.9 Inventories - - -
4.10 Exploration and evaluation
expenditure capitalised (see para.71
of AASB 1022) - - -
4.11 Development
properties
(mining entities) - - -
4.12 Other property,
plant and
equipment (net) 1,242,490 1,238,334 1,216,686
4.13 Intangibles (net) 639,996 576,759 558,225
4.14 Other
(Future Income
Tax Benefit) 277,474 256,994 215,686
4.15 Total non-current
assets 2,426,567 2,343,072 2,254,469
4.16 Total assets 5,592,879 5,944,840 5,584,175
Current liabilities
4.17 Accounts payable 777,677 858,645 556,163
4.18 Borrowings 1,382,427 1,458,049 1,439,292
4.19 Provisions 452,579 497,578 411,387
4.20 Other (provide
details if material) 17,469 11,038 189,738
4.21 Total current
liabillitlies 2,630,152 2,825,310 2,596,580
Non-current liabilities
4.22 Accounts payable 6,261 59,232 378
4.23 Borrowings 825,333 992,892 942,216
4.24 Provisions 249,523 251,894 203,865
4.25 Other (provide details
it material) 34,811 22,950 31,700
4.26 Total non-current
liabilities 1,115,928 1,326,968 1,178,159
4.27 Total
Liabilities 3,746,080 4,152,278 3,774,739
4.28 Net assets 1,846,799 1,792,562 1,809,436
Equity
4.29 Capital 513,573 511,027 512,972
4.30 Reserves 1,181,823 1,501,355 1,160,679
4.31 Retained profits
(accumulated
losses) 116,121 (257,622) 95,202
4.32 Equity attributable
to members of the
parent entity 1,811,517 1,754,760 1,768,853
4.33 Outside equity
interests in
controlled
entitles 35,282 37,802 40,583
4.34 Total equity 1,846,799 1,792,562 1,809,436
4.35 Preference capital and
related premium
included as part of 4.32 - - -
END
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