Update on the impact of valuation items on the half-year results

At the Annual General Meeting held on 11 April 2003, it was announced that earnings for the half-year to 30 June 2003 were likely to show a major reduction over the comparative period last year. 

The strength of the Rand and the reduction in commodity prices, especially maize, together with the consistent application of accounting statements AC133 and AC112 will lead to a substantial charge to the income statement for the six month period to 30 June 2003. The impact of the valuation adjustments, which relate to the recognition and valuation of certain contracts and balance sheet items, can now be determined and an update on the significant issues is included below.

Maize has been secured to meet customers' requirements through to late 2004 and the mark-to-market valuation adjustments required on these contracts, due to the decrease in the maize price of some 40 to 45 percent in the last six months will result in a charge to the income statement of R255 million. 

Cash continues to be held offshore for growth opportunities and the application of the exchange rate at 30 June 2003 will result in a reversal of R61 million of previous unrealized translation gains.

There are also ongoing and less significant impacts arising, inter alia, from the valuation of export debtors, inventories, foreign loan hedges and financial instruments. 

The magnitude of all period end valuation adjustments is such that it will exceed core underlying operating earnings for the half-year. This will result in a loss at the headline earnings level for the six months to 30 June 2003. 

Operating margins remain under pressure and each of the Group's businesses is implementing actions to improve profitability.

The unaudited results for the half-year ended 30 June 2003 will be released on 4 August 2003.