Download Annual Report 2006 - Foskor

CHAIRMAN’S REVIEWOur focus is ongrowth – not onlygrowth of agriculturalproducts, but alsogrowth for ourselvesand our country.The year under review can only be described asa turbulent one, characterised by a mixture ofhighs and lows, opportunities and challenges.The Board however has to recognise that theGroup has had a major turnaround towardsprofitability with the breakeven exchange ratebeing improved from circa R8,90 in 2003 tocirca R6 to the US dollar.The Board and Management deeply regretthe death of Mr Xulu, a contractor at ourRichards Bay operation, who suffered a fatalaccident when he fell approximately 25 metresthrough the roof of the rock store to his death.Condolences were passed on to his employer,family and loved ones.It is also unfortunate that the efforts towardsproving that Foskor is a responsible corporatecitizen with regard to safety, health and theenvironment are not bearing fruit and nottranslating into results. The Richards BayPlant, had eight disabling incidents concerningown employees. A fire destroyed the mainsulphur feed conveyor and two reportableenvironmental incidents occurred at the plantin Richards Bay. Environmental gas emissionpermit requirements have been met 99,93% ofthe time, which is the best performance for theGroup in recent history.The Phalaborwa operation again excelled inthe safety, health and environmental arena withonly five disabling injuries for the period and adisabling injury frequency rate of 0,23 which isworld class. The Phalaborwa operations wereawarded OSHAS 18000 on their first attemptand retained their ISO 9001 and ISO 14001certification.Safety and environmental compliance will receiveincreased focus in order for the Group to achievethe targets set in the mission statement.During the year, the shareholder, the IndustrialDevelopment Corporation (IDC), diluted itsshareholding by selling 2,5% to CoromandelFertilisers Limited (CFL), an Indian company.Further, Foskor and CFL entered into a BusinessAssistance Agreement (BAA) with the objectiveof transferring technical, operational and otherskills and know-how to Foskor and improving theprofitability. Through this, CFL could – over threeyears, of which the first year is the year underreview – increase its shareholding to circa 16%.The first year of the involvement of CFL, theStrategic Equity Partner, has come to an end. Theinvolvement of CFL has resulted in the RichardsBay operation achieving record production levelsof 625 532 tons compared to a previous recordof 575 000 tons of P 2O 5in 2004.The Foskor strategic intent, direction andperformance against strategic targets have beenreviewed by the Board. The vision and missionwas confirmed and new strategic initiatives havebeen identified for executive management toachieve for the new year and in the medium term.The Board is confident that by achieving theseobjectives, the Foskor Group would realise itsvision of becoming a financially viable business,delivering superior financial and social returnsto all stakeholders.FINANCIAL PERFORMANCEGroup revenue increased by 43% (annualised)to R2.6bn in 2006.The Group achieved a major turnaround inprofitability of R552m, from a net loss aftertax of R477m in 2005 to a net profit after taxof R75m for the current year.The Group had a positive free cash flowamounting to R95m. This was the first positivefree cash flow in at least ten years. This,combined with a positive bank balance in excessof R400m and unutilised banking facilities inexcess of R300m, puts the Group in a soundfinancial position.Due to continuously declining feed gradesas a result of the depletion of above groundreserves, the Phalaborwa division marginallyproduced less phosphate rock than budget.A strategic project was initiated in order tofind a cost effective replacement for this feedconstituting about 40% of the productioncapacity. The Pyroxenite Expansion Project(PEP) will investigate alternative options ofexploiting the South Pyroxenite reserve in orderto maintain or even increase production levels ofphosphate rock at Phalaborwa for the next 50years. The Extension Eight plant performanceimproved towards the latter half of the year.The bottleneck hampering performance tocapacity is still the dry mill. A project has beenlaunched to eliminate this constraint, ensuringmaximal benefits from the flotation capacity inthe plant. Production costs are under control,4