TIDMTHL
RNS Number : 5587W
Tongaat Hulett Limited
10 November 2014
Tongaat Hulett Limited
Registration No: 1892/000610/06
JSE share code: TON
ISIN: ZAE000096541
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2014
-- Revenue of R8,073 billion (2013: R7,854 billion) +2,8%
-- Operating profit of R1,510 billion (2013: R1,381 billion)
+9,3%
-- Operating cash flow of R2,413 billion (2013: R2,402 billion)
+0,5%
-- Headline earnings of R773 million (2013: R663 million)
+16,6%
-- Interim dividend of 170 cents per share (2013: 150 cents per
share) +13,3%
COMMENTARY
The encouraging results for the half-year ended 30 September
2014 were achieved with various improvements in the sugar
operations at a time when revenue is being negatively affected by
lower international sugar prices. The starch operations delivered a
strong performance. Land conversion and development activities
continue to unlock substantial value, albeit with operating profit
recognised in this half-year being below that reported in the same
period last year. Overall, revenue increased by 3% to more than R8
billion and operating profit reflected a 9% increase to exceed R1,5
billion.
The starch operation increased operating profit to R264 million
(2013: R232 million). Domestic sales volumes grew 5%, with
increases in the coffee/creamer, confectionary and paper making
sectors. Starch and glucose processing margins were in line with
the prior year as the operation continued to benefit from
competitive local maize costs and good co-product recoveries.
Improved operational efficiencies and a focus on costs have
remained key drivers.
Operating profit from the various sugar operations totalled R864
million (2013: R684 million). As expected, there has been less of
an impact of lower cane valuations at this half-year compared to
last year. Operating profit before cane valuations was at a similar
level to that of the same period last year. Total sugar revenue
increased by 3%, while sugar production is below last year - a year
in which there was a substantial increase. Sugar producers
worldwide that are exposed to the current low world price are under
pressure when one considers the substantial input cost increases
over the past decade. The various protection measures implemented
in each country of operation to improve local market sales volumes
are starting to produce some benefits. The business experienced the
impact on revenue of lower international prices, particularly for
exports into the European Union (EU). At the same time, there has
been a continued drive to reduce the costs of sugar production
across all the operations, retaining the substantial reductions
achieved in the 2013/14 year, including off-crop expenditure, while
having to absorb input price increases.
The South African sugar operations, including the agriculture,
milling, refining and various downstream activities recorded
operating profit of R259 million (2013: R248 million). These
operations, which grew sugar production substantially last year to
634 000 tons, are expecting sugar production this season to be
between 525 000 tons and 595 000 tons due to low rainfall in
KwaZulu-Natal (KZN). Production for the season is still expected to
be well above the level of two seasons prior. The impact of the dry
conditions has been partially mitigated by 11 554 hectares of new
cane developments that are being harvested for the first time this
year. The overall increase in the reference price used in the
import duty calculation, to protect the local market against unfair
import competition, has had a limited impact over the last six
months. Local market sales were depressed by an estimated 120 000
tons of sugar that were imported before the adjustment to the
reference price in April 2014. The two week industry-wide strike
impacted on export sales volumes in the first half of the year. All
the available cane is expected to be milled by the end of the
season.
The Zimbabwe sugar operations' operating profit for the
half-year amounted to R344 million (US$32 million) compared to the
R232 million (US$23 million) in the same period last year. This
period has seen higher sales volumes, mainly due to improved local
market protection (tariffs and import licences) implemented in
April 2014. Export prices into the EU are lower than those earned
last year. The negative effect of cane valuations at the half-year
was lower than that experienced last year. The movement in the
Rand/US dollar exchange rate impacted positively on the conversion
of US dollar profits into Rands on consolidation. The Zimbabwe
sugar operations are expecting a decrease in sugar production to
between 440 000 tons and 475 000 tons for the full year (prior
year: 488 000 tons) mainly as a consequence of no cane being
diverted from the independent ethanol plant at Chisumbanje (39 000
tons sugar equivalent in the prior year) and after experiencing the
impact of low dam levels for irrigation at the end of 2013, which
only recovered in early 2014.
The Mozambique sugar operations grew operating profit to R226
million (2013: R151 million). An increase in sugar production is
expected for the full year to between 265 000 tons and 280 000 tons
(prior year: 249 000 tons). In the half-year, sales volumes
increased by 5% while average selling prices have remained constant
year on year, with improved local market prices and reductions in
export prices to the EU. The movement in the Rand/Metical exchange
rate had a positive impact on the consolidation of the Mozambique
profits into Rands. The negative effect of cane valuations at the
half-year was lower than that experienced last year.
The Swaziland sugar operations reported operating profit of R35
million (2013: R53 million) as a result of the lower sucrose price
as a consequence of a reduction in export prices into the EU.
Land conversion and development activities generated operating
profit of R435 million (2013: R512 million) from the sale of 49
developable hectares. Sales came largely from Cornubia (industrial,
business and retail) with an average profit of R9,0 million per
developable hectare. Sales in Izinga/Kindlewood averaged profit of
R6,7 million per developable hectare and Umhlanga Ridge Town Centre
averaged R29,4 million per developable hectare.
The centrally accounted and consolidation items amounted to R42
million (2013: R37 million). Finance costs amounted to R297 million
(2013: R298 million) and were commensurate with the lower borrowing
levels and higher interest rates.
Operating cash flow generated was R2,4 billion for the six
months. Cash flow from operations after working capital was R576
million, an improvement of some R250 million compared to the same
period last year. The cash absorbed in working capital was some
R1,8 billion (2013: R2,1 billion) at the half-year, being the
middle of the sugar season when sugar stocks and debtor levels are
usually higher than at the end of the year. Net debt at the end of
September has reduced to R4,9 billion (2013: R5,4 billion).
Headline earnings for the half-year grew by 17% to R773 million
(2013: R663 million). An interim dividend of 170 cents per share
has been declared (2013: 150 cents per share).
OUTLOOK
The momentum in unlocking value from land conversion and
development continues, with 8 150 developable hectares ultimately
earmarked for development. Over the next 5 years, sales are
expected to come primarily out of 3 661 developable hectares
prioritised in key focus areas comprising the urban expansion north
of Durban in the Umhlanga and Cornubia areas, coastal lifestyle
areas of Zimbali and Sibaya, business and residential development
around the airport, coastal development north of Ballito in Tinley
Manor and in the Ntshongweni area west of Durban. An increasingly
larger area is benefitting from planning activities and
infrastructural investment at key points. Tongaat Hulett continues
to work together with Government, related organisations and key
stakeholders in the property industry to capture the synergy of
each other's unique capabilities and to maximise the value for all
stakeholders that can be derived from the region. Global markets
will be further assessed through the international launch of Sibaya
during the second half of the 2014/15 year. The development of
urban residential areas for lower income earners is being
accelerated. The potential sale of 42 developable hectares of the
prime land in Ridgeside is progressing well. Further sales in the
second half of the 2014/15 year are likely to come from Cornubia,
Izinga/Kindlewood, Umhlanga Ridge Town Centre and possibly from
Sibaya, Compensation and land adjacent to the airport.
The starch operations are well positioned to continue to perform
strongly, with sales volume growth underpinned by improved capacity
utilisation, enhanced product mix and customer growth prospects
into Africa. The business will benefit from the recent large maize
crop harvested in South Africa.
Sugar prices remain under pressure with the current low world
price. In South Africa, Zimbabwe and Mozambique there is an
increasing understanding, up to senior Government levels, of the
importance to better protect local markets (especially to secure
rural jobs) against imports from other surplus sugar producing
countries, confirmed by the upcoming reforms to the EU sugar
market. Better import protection would lead to lower exports.
The likely dynamics in the EU market beyond the October 2017
reforms remain uncertain. The average sugar prices earned by the
business in 2014/15 for exports into the EU market are expected to
be some Euro 25 per ton below those earned in 2013/14, during which
year there was a reduction of Euro 155 per ton in the prices
achieved.
Tongaat Hulett's sugar production is targeted to grow by some
400 000 tons over the next 4 years. Agricultural improvement
programs are now well entrenched and these programs, together with
better weather conditions, should lead to higher cane yields and
higher sucrose content in the cane, with the marginal cost of this
sugar production being some 30% of the current low world sugar
price. In South Africa, a 12 000 hectare project for cane
development and job creation in rural KZN is an integral part of
the growth and development of cane farming in Tongaat Hulett's cane
supply areas. The financing of this project includes a Jobs Fund
grant for R150 million allocated over some three years, with the
first R40 million already received.
Encouraging progress is being made towards establishing
regulatory frameworks to turn a portion of South Africa's export
sugar into ethanol and to generate more electricity from the fibre
component of sugar cane.
Further substantial reductions in the cost of sugar production
are targeted for 2015/16, after the consolidation in the current
season, which follows the reductions in cost per ton achieved in
2013/14 of 14% in Mozambique, 16% in South Africa and 23% in
Zimbabwe.
Tongaat Hulett continues to focus on value creation for all
stakeholders through an all-inclusive approach to growth and
development. In KZN there are established collaborations with
Provincial and Local authorities in the inextricably linked areas
of sugar and cane activities (the planting of 24 979 hectares in
the previous three years has created some 6 250 direct jobs in
rural areas), the development of urban areas (including Cornubia)
and maximising the future benefit of renewable energy. In Zimbabwe,
Tongaat Hulett, the Government and Local communities are working
together on socio-economic initiatives in the south-eastern Lowveld
region of the country. One of the key focus areas remains the
on-going orderly development of sustainable private sugar cane
farmers and at the end of the 2013/14 season, some 813 active
indigenous private farmers, farming some 14 000 hectares, employing
more than 6 700 people, generated US$58 million in annual revenue.
In Mozambique, an estimated 381 000 tons of cane will be delivered
from 4 170 hectares in the 2014/15 season, supporting 1 898
indigenous private farmers.
The business is in a good position to benefit from multiple
actions across all of its well-grounded strategic thrusts, with its
footprint in six SADC countries, its ability to process both sugar
cane and maize, electricity generation and ethanol opportunities
and increased momentum in land conversion.
Profits and cash flows for the full year are expected to reflect
further growth over the 2013/14 year.
For and on behalf of the Board
Bahle Sibisi Peter Staude
Chairman Chief Executive Officer
Amanzimnyama,Tongaat, KwaZulu-Natal
6 November 2014
DIVIDEND DECLARATION
Notice is hereby given that the Board has declared an interim
gross cash dividend (number 174) of 170 cents per share for the
half-year ended 30 September 2014 to shareholders recorded in the
register at the close of business on Friday 30 January 2015.
The salient dates of the declaration and payment of this interim
dividend are as follows:
Last date to trade ordinary shares
"CUM" dividend Friday 23 January 2015
Ordinary shares trade "EX" dividend Monday 26 January 2015
Record date Friday 30 January 2015
Payment date Thursday 5 February 2015
Share certificates may not be dematerialised or re-materialised,
nor may transfers between registers take place between Monday 26
January 2015 and Friday 30 January 2015, both days inclusive.
The dividend is declared in the currency of the Republic of
South Africa. Dividends paid by the United Kingdom transfer
secretaries will be paid in British currency at the rate of
exchange ruling at the close of business on Friday 23 January
2015.
The dividend has been declared from income reserves. A net
dividend of 144,5 cents per share will apply to shareholders liable
for the local 15% dividend withholding tax and 170 cents per share
to shareholders exempt from paying the dividend tax. There are no
STC credits available for utilisation. The issued ordinary share
capital as at 6 November 2014 is 135 112 506 shares. The company's
income tax reference number is 9306/101/20/6.
For and on behalf of the Board
M A C Mahlari
Company Secretary
Amanzimnyama
Tongaat, KwaZulu-Natal
6 November 2014
Income Statement
Condensed consolidated Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 September 30 September 31 March
Rmillion 2014 2013 2014
------------------------------ ------------- ------------- ----------
Revenue 8 073 7 854 15 716
------------- ------------- ----------
Operating profit 1 510 1 381 2 374
Net financing costs
(note 1) (297) (298) (609)
Profit before tax 1 213 1 083 1 765
Tax (note 2) (336) (319) (538)
Net profit for the
period 877 764 1 227
------------- ------------- ----------
Profit attributable
to:
Shareholders of
Tongaat Hulett 800 708 1 155
Minority (non-controlling)
interest 77 56 72
877 764 1 227
------------- ------------- ----------
Headline earnings
attributable to
Tongaat Hulett shareholders
(note 3) 773 663 1 106
------------- ------------- ----------
Earnings per share
(cents)
Net profit per share
Basic 700.9 632.3 1 034.4
Diluted 700.9 625.9 1 022.3
Headline earnings
per share
Basic 677.2 592.1 990.5
Diluted 677.2 586.2 978.9
Dividend per share
(cents) 170.0 150.0 360.0
Currency conversion
Rand/US dollar closing 11.26 10.08 10.56
Rand/US dollar average 10.64 9.78 10.13
Rand/Metical average 0.35 0.33 0.34
Rand/Euro average 14.35 12.87 13.59
US dollar/Euro average 1.35 1.32 1.34
Segmental Analysis
Condensed consolidated Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 September 30 September 31 March
Rmillion 2014 2013 2014
-------------------------- ------------- ------------- ----------
REVENUE
Sugar
Zimbabwe 1 824 1 324 2 896
Swaziland 146 173 211
Mozambique 1 482 1 402 1 704
South Africa 2 365 2 740 6 224
------------- ------------- ----------
Sugar operations -
total 5 817 5 639 11 035
Starch operations 1 740 1 594 3 210
Land Conversion and
Developments 516 621 1 471
Consolidated total 8 073 7 854 15 716
------------- ------------- ----------
OPERATING PROFIT
Sugar
Zimbabwe 344 232 330
Swaziland 35 53 70
Mozambique 226 151 168
South Africa 259 248 340
------------- ------------- ----------
Sugar operations -
total 864 684 908
Starch operations 264 232 482
Land Conversion and
Developments 435 512 1 080
Centrally accounted
and consolidation items (42) (37) (75)
BEE IFRS 2 charge and
transaction costs (11) (10) (21)
Consolidated total 1 510 1 381 2 374
------------- ------------- ----------
FURTHER ANALYSIS OF
SUGAR OPERATING PROFIT
Sugar operations -
before cane valuations 1 454 1 458 1 061
Zimbabwe 609 642 572
Swaziland 64 86 56
Mozambique 556 528 272
South Africa 225 202 161
------------- ------------- ----------
Cane valuations - income
statement effect (590) (774) (153)
Zimbabwe (265) (410) (242)
Swaziland (29) (33) 14
Mozambique (330) (377) (104)
South Africa 34 46 179
------------- ------------- ----------
Sugar operations -
after cane valuations 864 684 908
Zimbabwe 344 232 330
Swaziland 35 53 70
Mozambique 226 151 168
South Africa 259 248 340
------------- ------------- ----------
Statement of Financial Position
Condensed consolidated Unaudited Unaudited Audited
31
30 September 30 September March
Rmillion 2014 2013 2014
------------------------------ ------------- ------------- --------
ASSETS
Non-current assets
Property, plant and 11
equipment 11 737 11 173 279
Growing crops (note
4) 4 623 4 191 5 005
Long-term receivable 502 475 485
Goodwill 358 326 338
Intangible assets 65 73 70
Investments 20 17 18
------------- ------------- --------
17
17 305 16 255 195
Current assets 10 176 8 781 6 781
Inventories 4 503 4 345 2 416
Trade and other receivables 3 935 3 347 3 298
Cash and cash equivalents 1 738 1 089 1 067
------------- ------------- --------
23
TOTAL ASSETS 27 481 25 036 976
------------- ------------- --------
EQUITY AND LIABILITIES
Capital and reserves
Share capital 135 134 135
Share premium 1 544 1 539 1 543
BEE held consolidation
shares (695) (724) (700)
Retained income 7 983 7 026 7 412
Other reserves 2 764 1 889 2 172
------------- ------------- --------
10
Shareholders' interest 11 731 9 864 562
Minority interest in
subsidiaries 1 808 1 555 1 628
------------- ------------- --------
12
Equity 13 539 11 419 190
Non-current liabilities 7 098 6 988 7 612
Deferred tax 2 289 2 086 2 131
Long-term borrowings 3 449 3 489 4 094
Non-recourse equity-settled
BEE borrowings 667 707 691
Provisions 693 706 696
------------- ------------- --------
Current liabilities 6 844 6 629 4 174
Trade and other payables
(note 5) 3 454 3 403 2 742
Short-term borrowings 3 193 3 006 1 293
Tax 197 220 139
------------- ------------- --------
23
TOTAL EQUITY AND LIABILITIES 27 481 25 036 976
------------- ------------- --------
Number of shares (000)
109
- in issue 135 113 108 648 967
111
- weighted average (basic) 114 139 111 966 655
112
- weighted average (diluted) 114 139 113 110 980
Statement of Changes in Equity
Condensed consolidated Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 September 30 September 31 March
Rmillion 2014 2013 2014
--------------------------------- ------------- ------------- ----------
Balance at beginning
of period 10 562 8 332 8 332
Total comprehensive
income for the period 1 492 1 704 2 397
Retained earnings 800 708 1 142
Movement in hedge
reserve (9) 1 4
Foreign currency translation 701 995 1 251
------------- ------------- ----------
Dividends paid (231) (206) (240)
Share capital issued
- ordinary 1 5
BEE held consolidation
shares 8 8 16
Share-based payment
charge 48 34 67
Settlement of share-based
payment awards (149) (8) (15)
Shareholders' interest 11 731 9 864 10 562
Minority interest in
subsidiaries 1 808 1 555 1 628
Balance at beginning
of period 1 628 1 373 1 373
Total comprehensive
income for the period 186 190 268
Retained earnings 77 56 73
Foreign currency translation 109 134 195
============= ============= ==========
Dividends paid to
minorities (6) (8) (13)
------------- ------------- ----------
Equity 13 539 11 419 12 190
------------- ------------- ----------
Statement of Other Comprehensive Income
Condensed consolidated Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 September 30 September 31 March
Rmillion 2014 2013 2014
---------------------------------- ------------- ------------- ----------
Net profit for the period 877 764 1 227
Other comprehensive
income 801 1 130 1 438
Items that will not
be reclassified to profit
or loss:
Foreign currency translation 810 1 129 1 446
Actuarial loss (17)
Tax on actuarial loss 5
Items that may be reclassified
subsequently to profit
or loss:
Hedge reserve (13) 2 6
Tax on movement in
hedge reserve 4 (1) (2)
Total comprehensive
income for the period 1 678 1 894 2 665
------------- ------------- ----------
Total comprehensive
income attributable
to:
Shareholders of Tongaat
Hulett 1 492 1 704 2 397
Minority (non-controlling)
interest 186 190 268
1 678 1 894 2 665
------------- ------------- ----------
Statement of Cash Flows
Condensed consolidated Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 September 30 September 31 March
Rmillion 2014 2013 2014
------------------------------ ------------- ------------- ----------
Operating profit 1 510 1 381 2 374
Profit on disposal of
property, plant and
equipment (29) (49) (75)
Depreciation 309 283 571
Growing crops and other
non-cash items 623 787 64
Operating cash flow 2 413 2 402 2 934
Change in working capital (1 837) (2 075) (761)
Cash flow from operations 576 327 2 173
Tax payments (214) (141) (452)
Net financing costs (297) (298) (609)
Cash flow from operating
activities 65 (112) 1 112
Expenditure on property,
plant and equipment:
New (75) (86) (117)
Replacement (143) (270) (429)
Major plant overhaul
cost changes (38) (7) 18
Capital expenditure
on growing crops (10) (39) (118)
Other capital items 30 64 87
Net cash flow before
dividends and financing
activities (171) (450) 553
Dividends paid (237) (214) (253)
Net cash flow before
financing activities (408) (664) 300
Borrowings raised /
(repaid) 1 210 865 (258)
Non-recourse equity-settled
BEE borrowings (24) (15) (31)
Shares issued 1 5
Settlement of share-based
payment awards (149) (8) (15)
Net increase in cash
and cash equivalents 630 178 1
Balance at beginning
of period 1 067 917 917
Foreign currency translation 41 (6) 149
Cash and cash equivalents
at end of period 1 738 1 089 1 067
------------- ------------- ----------
Notes
Condensed consolidated Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30 September 30 September 31 March
Rmillion 2014 2013 2014
------------------------------ ------------- ------------- ----------
1. Net financing costs
Interest paid (331) (317) (646)
Interest received 34 19 37
(297) (298) (609)
------------- ------------- ----------
2. Tax
Normal (267) (282) (513)
Deferred (69) (37) (29)
Rate change adjustment
- deferred 4
(336) (319) (538)
------------- ------------- ----------
3. Headline earnings
Profit attributable
to shareholders 800 708 1 155
Adjusted for:
Capital profit on
disposal of land and
buildings (21) (46) (66)
Capital profit on
other items (2)
Profit on disposal
of plant and equipment (6) (2) (1)
Tax on the above
items 2 3 18
773 663 1 106
------------- ------------- ----------
4. Growing crops
Growing crops, comprising roots and standing
cane, are measured at fair value which
is determined using an estimate of cane
yields and prices. Changes in fair value
are recognised in profit or loss. A change
in yield of 1 ton per hectare on the estimated
yield of 86 tons cane per hectare would
result in a R22 million change in fair
value while a change of one percent in
the cane price would result in a R20 million
change in fair value.
5. Trade and other
payables
Included in trade and other payables is
the maize obligation (interest bearing)
of R494 million (30 September 2013: R493
million and 31 March 2014: R334 million).
6. Capital expenditure
commitments
Contracted 192 83 74
Approved 238 77 152
430 160 226
------------- ------------- ----------
7. Operating lease
commitments 88 106 128
------------- ------------- ----------
8. Guarantees and
contingent liabilities 42 48 116
------------- ------------- ----------
9. Basis of preparation
and accounting policies
The condensed consolidated unaudited results
for the half-year ended 30 September 2014
have been prepared in accordance with the
framework concepts and the measurement
and recognition requirements of International
Financial Reporting Standards (IFRS), the
SAICA Financial Reporting Guides as issued
by the Accounting Practices Committee,
Financial Reporting Pronouncements as issued
by the Financial Reporting Standards Council,
the information as required by International
Accounting Standard 34 Interim Financial
Reporting and the requirements of the Companies
Act of South Africa. The report has been
prepared using accounting policies that
comply with IFRS which are consistent with
those applied in the financial statements
for the year ended 31 March 2014 and were
prepared under the supervision of the Chief
Financial Officer, M H Munro CA (SA).
Tongaat Hulett has adopted all the new
or revised accounting pronouncements as
issued by the IASB which were effective
for Tongaat Hulett from 1 January 2014.
The adoption of these standards had no
recognition and measurement impact on the
financial results.
CORPORATE INFORMATION
Directorate: C B Sibisi (Chairman), P H Staude (Chief Executive
Officer)*,
S M Beesley, F Jakoet, J John, R P Kupara^, A A Maleiane+, T N
Mgoduso,
N Mjoli-Mncube, M H Munro*, S G Pretorius
* Executive directors ^ Zimbabwean + Mozambican
Company Secretary: M A C Mahlari
Registered office: Amanzimnyama Hill Road, Tongaat,
KwaZulu-Natal
P O Box 3, Tongaat 4400
Telephone: +27 32 439 4019
Facsimile: +27 31 570 1055
Transfer secretaries:
South Africa: Computershare Investor Services (Pty) Limited
Telephone: +27 11 370 7700
United Kingdom: Capita Registrars
Telephone: +44 20 8639 2406
Sponsor: Investec Bank Limited
Telephone: +27 11 286 7000
www.tongaat.com
e-mail: info@tongaat.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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