Wrap Text
Audited Financial Results of the year ended 31 March 2014.
Tongaat Hulett Limited
Registration No: 1892/000610/06
JSE share code: TON
ISIN: ZAE000096541
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2014
- Revenue of R15,716 billion (2013: R14,373 billion) +9%
- Operating profit of R2,374 billion (2013: R2,131 billion) +11%
- Operating cash flow of R2,934 billion (2013: R2,182 billion) +34%
- Headline earnings of R1,106 billion (2013: R1,067 billion) +4%
- Annual Dividend of 360 cents per share (2013: 340 cents per share) +6%
COMMENTARY
The results for the year ended 31 March 2014 were achieved with
significantly increased momentum and value in land conversion and
development activities, together with a strong performance from
the starch operations, at the same time as the sugar operations’
profit being negatively affected by severe market dynamics impacting
revenue and cane valuations, partially off-set by substantial cost
reductions and volume growth.
The starch operation grew operating profit to R482 million
(2013: R388 million). Starch and glucose processing margins
benefitted from local maize that was competitive with international
prices, favourable exchange rates and good co-product realisations.
Total sales volumes grew by 4%, driven by increased exports and
growth in the coffee/creamer sectors which offset declines in
other local sectors.
Land conversion activities generated operating profit of
R1,080 billion from sales of 259 developable hectares, with a
further 8 200 developable hectares still available and earmarked
for development. In the past year, 63 developable hectares were
sold at an average profit of some R7,6 million per developable
hectare in the Umhlanga Ridgeside, Izinga/Kindlewood, Cornubia
Industrial and Business areas, as well as a site for a major
retail facility that links Cornubia to Umhlanga Ridge. The sale
of an entire precinct of 6 developable hectares to a single
developer in Umhlanga Ridge Town Centre was concluded that will
yield some 1 500 affordable rental homes over time and
represented profit of R24 million per developable hectare.
Tongaat Hulett continues to work together with Government and
related organisations 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 between Durban and Ballito.
The past year has seen two transactions for the sale of 190
developable hectares to Dube TradePort that, while not yet shovel
ready, adjoins the international airport and is of strategic
importance to the KZN Provincial Government’s medium term growth
plans.
Operating profit from the various sugar operations totalled
R908 million (2013: R1,4 billion). The world sugar price has been
at its lowest level in many years. In the regional markets,
substantial local market sales were lost to imports as a result
of inadequate protection during this period of world surplus,
leading to increased export volumes. Exports from Zimbabwe and
Mozambique to the EU averaged some 8 US cents per pound lower
than the levels in the last two years. Overall, revenue earned
and cane valuations were negatively impacted by some R1,5 billion
compared to last year, with the cane valuation charge in the income
statement being a non-cash item. The sugar operations’ total
operating profit before the impact of cane valuations was
R1,061 billion compared to R962 million in the prior year, as the
negative impact on revenue of pricing and the mix of local/export
sales was more than offset by the benefit of volume growth and
cost savings, together with favourable exchange rates.
Tongaat Hulett’s total sugar production grew by 170 000 tons to
1,424 million tons, compared to the low point of 1,006 million tons
in 2010/11. South Africa produced 634 000 tons (2013: 486 000 tons),
Mozambique 249 000 tons (2013: 235 000 tons), Swaziland 53 000 tons
of raw sugar equivalent (2013: 58 000 tons) and Zimbabwe produced
488 000 tons of sugar (2013: 475 000 tons).
The past year has seen considerable increases in wage rates,
particularly at the lower levels where the majority of man hours
are worked, as well as price increases for bought-in goods and
services. Notwithstanding this, significant success has been
achieved to reduce the cost of sugar production in respect of
goods, services, transport, marketing, salaries and wages. The
unit cost of production in South Africa reflected the benefit of
volume growth with limited cost increases.
In Zimbabwe, revenue in US dollars was 25% lower than the prior
year, as a result of lower local market sales (mainly due to
substantially increased imports in the market) with the resultant
additional lower priced exports. Cane valuations were impacted by
lower prices and the effect of curtailed root replanting as a
consequence of the water dynamics during the year – reflecting a
US$33 million negative change in the income statement compared to
last year. The dams have now recovered, following good rains, to
the extent that new root replanting has now resumed. The cost of
bought-in goods and services, salaries and wages was US$40 million
lower than the prior year. The operating profit from the Zimbabwe
sugar operations amounted to US$33 million (R330 million) compared
to the last year of US$74 million (R625 million).
Mozambique experienced the same dynamics, with an 11% reduction in
Metical (Mt) revenue mainly as a result of lower export prices.
There was also a negative cane valuation impact in the income
statement – amounting to a change of Mt676 million (equivalent
of R229 million) compared to last year. The cost of goods and
services, salaries and wages was lower than the prior year by an
amount of Mt267 million, which was the Rand equivalent of
R91 million. Taking all these factors into account, operating
profit from the Mozambique sugar operations reduced to R168 million
(2013: R421 million).
The South African sugar operations, including the agriculture,
milling, refining and various downstream activities recorded
operating profit of R340 million (2013: R308 million). The benefit
of substantial growth in sugar production was partially offset by
the pressure on revenue of lower local market volumes and net prices
as a result of import competition, lower export prices and the
reduced benefit of cane valuations compared to the prior year.
The 30% volume growth was achieved with the total increase in the
cost of goods, services, transport, marketing, salaries and wages
being limited to 10%.
The Swaziland sugar cane growing operations reported operating
profit of R70 million (2013: R76 million).
The centrally accounted and consolidation items together with
lower BEE IFRS 2 charges amounted to R97 million (2013: R53 million).
A pension fund recognition benefit in the prior year was not
repeated in the current year. Finance costs amounted to R609 million
(2013: R560 million) and were commensurate with the borrowing levels
earlier in the year.
Operating cash flow improved by R750 million to R2,93 billion
(2013: R2,18 billion) before working capital. Operating cash flow
exceeded operating profit as the latter includes the non-cash
reduction in the fair value of sugar cane. The higher working capital
cash absorption in the current period is particularly as a
consequence of higher sugar stock levels at year-end in Zimbabwe and
increased debtor levels in the South African developments operation
following the higher level of land sales. Net cash flow for the year,
after dividends, was a positive R300 million, a R480 million
improvement over last year. Net debt at the end of the year was
R4,32 billion which is lower than the last two years
(2013: R4,64 billion and 2012: R4,40 billion).
Total net profit before the deduction of minority interests was
R1,227 billion (2013: R1,179 billion) and headline earnings
attributable to Tongaat Hulett shareholders amounted to
R1,106 billion compared to R1,067 billion last year. A final
dividend of 210 cents per share has been declared, bringing the
annual dividend to 360 cents per share (2013: 340 cents per share).
OUTLOOK
Earnings are expected to increase in the full year ahead, driven
by continuing growth in operating profit and cash flow.
Sugar prices are expected to stabilise, at least. Better import
protection should lead to lower exports being necessary. The value
of standing cane has undergone a write-down in the 2013/14 year, to
reflect the current low sugar prices. As yields increase and the
hectares under cane grow, a cane valuation gain would be expected.
The sustainable cost reductions of the past year provide a good
base for the next steps in the ongoing cost reduction process and
unit costs of sugar production will also continue to benefit from
further growth in volumes and better yields, as milling costs and
many of the agricultural costs per hectare are mostly fixed.
Tongaat Hulett is in the fortunate position of having more than
700 000 tons per annum of existing unutilised sugar milling capacity
(a R13 billion replacement value) and increasingly good electricity
and ethanol prospects. The incremental / marginal profit from each
extra ton of sugar is attractive. Sugar production is expected to
increase from 1,424 million tons in the past year to more than
1,800 million tons over the next four years, with the focus on
increasing cane supplies continuing.
A period of unsustainably low international prices has been
experienced following two seasons of exceptionally good weather
conditions for sugar cane growing globally, high stock levels and
low Government controlled ethanol prices in Brazil. The changes
in the EU are ongoing, with some fundamentals remaining in place,
including duty free access for Mozambique, Zimbabwe and Swaziland.
At present, the EU market position seems to have stabilised at the
current lower levels, in anticipation of reform in 2017.
Recently instituted measures in Zimbabwe to protect the local market
against unfair import competition are expected to yield benefits.
South Africa will benefit from the recently increased reference
price used in the import duty calculation, particularly if the
exchange rate remains at current levels.
The starch operations are well positioned to continue to perform
strongly. The latest maize crop estimates are for a larger crop
and competitive maize costs are expected.
The current momentum in unlocking value from land conversion and
development is expected to continue. Over the next 5 years, sales
will come from 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. Sales of between 1 000 and 1 500 developable
hectares are expected to be achieved over the 5 year period, based
on current economic conditions. Good progress is being made with
the targeted sale of 42 developable hectares of some of the
remaining prime land in Umhlanga Ridgeside, the area where a net
cash profit of R34 million per developable hectare has been achieved.
The majority of the land conversion profits for 2014/15 are expected
to be reported in the second half of the year while cash flow in the
first half of the year will benefit from the land sales concluded
towards the end of 2013/14.
Tongaat Hulett’s positive socio-economic profile in the southern
African region continues to grow. In KwaZulu-Natal 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 last 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. The situation in Zimbabwe is in a constructive
phase, with Tongaat Hulett, the Government and local communities
working together on socio-economic initiatives in the south-eastern
Lowveld region of the country. This was again demonstrated by the
proactive response of the authorities to the recent illegal attempt
at land invasion. One of the key focus areas remains the orderly
development of sustainable private sugar cane farmers. At the end of
the 2013/14 season, some 813 active indigenous private farmers,
farming on some 14 000 hectares and employing more than 6 700 people,
supplied 1 017 000 tons of cane at a cane yield of 74 tons cane per
hectare harvested, generating US$58 million in annual revenue.
Current initiatives will increase this, by the 2017/18 season, to
some 1 022 private farmers supplying more than 1 800 000 tons of cane
at a cane yield above 100 tons cane per hectare harvested from
18 880 farmed hectares.
The business is in a good position to benefit from multiple actions
taken across a wide front, with its footprint in six SADC countries,
its ability to process both sugar cane and maize, renewable energy
opportunities and increased momentum in land conversion.
For and on behalf of the Board
J B Magwaza Peter Staude
Chairman Chief Executive Officer
Amanzimnyama
Tongaat, KwaZulu-Natal
22 May 2014
DIVIDEND DECLARATION
Notice is hereby given that the Board has declared a final gross
cash dividend (number 173) of 210 cents per share for the year ended
31 March 2014 to shareholders recorded in the register at the close
of business on Friday 20 June 2014.
The salient dates of the declaration and payment of this final
dividend are as follows:
Last date to trade ordinary shares
“CUM” dividend Thursday 12 June 2014
Ordinary shares trade “EX” dividend Friday 13 June 2014
Record date Friday 20 June 2014
Payment date Thursday 26 June 2014
Share certificates may not be dematerialised or re-materialised, nor
may transfers between registers take place between Thursday
12 June 2014 and Friday 20 June 2014, 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 Thursday 12 June 2014.
The dividend has been declared from income reserves. A net dividend
of 178,5 cents per share will apply to shareholders liable for the
local 15% dividend withholding tax and 210 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 22 May 2014 is 109 967 030 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
22 May 2014
SUMMARISED AUDITED CONSOLIDATED FINANCIAL STATEMENTS - PROVISIONAL
REPORT AS PER THE JSE LIMITED LISTINGS REQUIREMENTS
INCOME STATEMENT
Summarised consolidated Audited Audited
2014 2013
Rmillion (note 8)
Revenue 15 716 14 373
Operating profit 2 374 2 131
Net financing costs (note 1) (609) (560)
Profit before tax 1 765 1 571
Tax (note 2) (538) (392)
Net profit for the year 1 227 1 179
Profit attributable to:
Shareholders of Tongaat Hulett 1 155 1 079
Minority (non-controlling) interest 72 100
1 227 1 179
Headline earnings attributable to
Tongaat Hulett shareholders (note 3) 1 106 1 067
Earnings per share (cents)
Net profit per share
Basic 1 034,4 978,9
Diluted 1 022,3 961,0
Headline earnings per share
Basic 990,5 968,0
Diluted 978,9 950,3
Dividend per share (cents) 360,0 340,0
Currency conversion
Rand/US dollar closing 10,56 9,21
Rand/US dollar average 10,13 8,48
Rand/Metical average 0,34 0,30
Rand/Euro average 13,59 10,95
US dollar/Euro average 1,34 1,29
SEGMENTAL ANALYSIS
Summarised consolidated Audited Audited
2014 2013
Rmillion (note 8)
REVENUE
Sugar
Zimbabwe 2 896 3 222
Swaziland 211 207
Mozambique 1 704 1 688
South Africa 6 224 5 739
Sugar operations – total 11 035 10 856
Starch operations 3 210 2 859
Land Conversion and Developments 1 471 658
Consolidated total 15 716 14 373
OPERATING PROFIT
Sugar
Zimbabwe 330 625
Swaziland 70 76
Mozambique 168 421
South Africa 340 308
Sugar operations – total 908 1 430
Starch operations 482 388
Land Conversion and Developments 1 080 366
Centrally accounted and consolidation
Items (76) (9)
BEE IFRS 2 charge and transaction costs (21) (44)
Share of associate company's profit 1
Consolidated total 2 374 2 131
STATEMENT OF FINANCIAL POSITION
Summarised consolidated Audited Audited
2014 2013
Rmillion (note 8)
ASSETS
Non-current assets
Property, plant and equipment 11 279 10 287
Growing crops 5 005 4 583
Long-term receivable 485 455
Goodwill 338 300
Intangible assets 70 78
Investments 18 14
17 195 15 717
Current assets 6 781 5 584
Inventories 2 416 1 858
Trade and other receivables 2 850 2 301
Major plant overhaul costs 432 508
Derivative instruments 16
Cash and cash equivalents 1 067 917
TOTAL ASSETS 23 976 21 301
EQUITY AND LIABILITIES
Capital and reserves
Share capital 135 134
Share premium 1 543 1 539
BEE held consolidation shares (700) (747)
Retained income 7 412 6 541
Other reserves 2 172 865
Shareholders' interest 10 562 8 332
Minority interest in subsidiaries 1 628 1 373
Equity 12 190 9 705
Non-current liabilities 7 612 6 855
Deferred tax 2 131 1 930
Long-term borrowings 4 094 3 481
Non-recourse equity-settled BEE borrowings 691 722
Provisions 696 722
Current liabilities 4 174 4 741
Trade and other payables (note 4) 2 741 2 572
Short-term borrowings 1 293 2 078
Derivative instruments 1 16
Tax 139 75
TOTAL EQUITY AND LIABILITIES 23 976 21 301
Number of shares (000)
– in issue 109 967 108 648
– weighted average (basic) 111 655 110 225
– weighted average (diluted) 112 980 112 274
STATEMENT OF CHANGES IN EQUITY
Summarised consolidated Audited Audited
2014 2013
Rmillion (note 8)
Balance at beginning of year 8 332 6 678
Total comprehensive income for the year 2 397 1 996
Retained earnings 1 142 1 046
Movement in hedge reserve 4 (5)
Foreign currency translation 1 251 955
Dividends paid (240) (347)
Share capital issued – ordinary 5 5
BEE held consolidation shares 16 37
Share-based payment charge 67 57
Settlement of share-based payment awards (15) (94)
Shareholders' interest 10 562 8 332
Minority interest in subsidiaries 1 628 1 373
Balance at beginning of year 1 373 1 088
Total comprehensive income for the year 268 295
Retained earnings 73 101
Foreign currency translation 195 194
Dividends paid to minorities (13) (10)
Equity 12 190 9 705
STATEMENT OF OTHER COMPREHENSIVE INCOME
Summarised consolidated Audited Audited
2014 2013
Rmillion (note 8)
Net profit for the year 1 227 1 179
Other comprehensive income 1 438 1 112
Items that will not be reclassified
to profit or loss:
Foreign currency translation 1 446 1 149
Actuarial loss (17) (44)
Tax on actuarial loss 5 12
Items that may be reclassified
subsequently to profit or loss:
Hedge reserve 6 (6)
Tax on movement in hedge reserve (2) 1
Total comprehensive income for the year 2 665 2 291
Total comprehensive income
attributable to:
Shareholders of Tongaat Hulett 2 397 1 996
Minority (non-controlling) interest 268 295
2 665 2 291
STATEMENT OF CASH FLOWS
Summarised consolidated Audited Audited
2014 2013
Rmillion (note 8)
Operating profit 2 374 2 131
Profit on disposal of property, plant
and equipment (75) (24)
Depreciation 571 472
Growing crops and other non-cash items 64 (397)
Operating cash flow 2 934 2 182
Change in working capital (761) (56)
Cash flow from operations 2 173 2 126
Tax payments (452) (239)
Net financing costs (609) (560)
Cash flow from operating activities 1 112 1 327
Expenditure on property, plant and
equipment:
New (117) (447)
Replacement and plant overhaul (411) (570)
Expenditure on intangible assets (7) (15)
Capital expenditure on growing crops (118) (157)
Proceeds on disposal of property,
plant and equipment 96 40
Investments (2) (1)
Net cash flow before dividends and
financing activities 553 177
Dividends paid (253) (357)
Net cash flow before financing activities 300 (180)
Borrowings raised (258) 503
Non-recourse equity-settled BEE borrowings (31) (15)
Shares issued 5 5
Settlement of share-based payment awards (15) (94)
Net increase in cash and cash equivalents 1 219
Balance at beginning of year 917 592
Foreign exchange adjustment 149 106
Cash and cash equivalents at end of year 1 067 917
NOTES
Summarised consolidated Audited Audited
2014 2013
Rmillion (note 8)
1. Net financing costs
Interest paid (646) (596)
Interest received 37 36
(609) (560)
2. Tax
Normal (513) (294)
Deferred (29) (93)
Rate change adjustment – deferred 4 (5)
(538) (392)
3. Headline earnings
Profit attributable to shareholders 1 155 1 079
Adjusted for:
Capital profit on disposal of land
and buildings (66) (16)
Capital loss on other items 1
Profit on fixed assets and other
disposals (1)
Tax on the above items 18 3
1 106 1 067
4. Trade and other payables
Included in trade and other payables is the maize obligation
(interest bearing) of R334 million (2013: R216 million).
5. Capital expenditure commitments
Contracted 74 175
Approved 152 312
226 487
6. Operating lease commitments 128 104
7. Guarantees and contingent liabilities 116 38
8. Basis of preparation
The summarised consolidated financial information for the year
ended 31 March 2014 has been prepared in accordance with the
JSE Limited Listings Requirements for provisional reports, 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, including the audit thereof, in terms of the
Companies Act of South Africa. Except as described below, 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 2013 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 2013. The adoption of these
standards, in particular IFRS 7 Financial Instruments:
Disclosures and IFRS 13 Fair Value Measurement which require
additional disclosure that will be included in the integrated
annual report, had no recognition and measurement impact on the
financial results, other than for the adoption of the revised
IAS 19 Employee Benefits which requires that post-retirement
benefit accounting actuarial gains and losses be recognized
immediately in other comprehensive income and no longer be
amortised through profit or loss.
Comparative figures have been restated, with the effect of the
compulsory adoption of the revised IAS 19 on profit or loss for
the year ended 31 March 2013 being an increase in operating
profit of R12 million, a corresponding tax charge of R3 million
and an increase in net profit of R9 million. Other
comprehensive income decreased by R26 million after tax. The
effect on the statement of financial position at 31 March 2013
was an increase in provisions for retirement benefits of R68
million and decreases in equity and deferred tax of R47 million
and R21 million respectively.
9. Audited results
These summarised consolidated financial statements, which have
been derived from the audited annual financial statements and
with which they are consistent in all material respects, have
been audited by Deloitte & Touche. Their unmodified audit
opinions on the annual financial statements and on the
summarised financial statements (IAS 810) are available for
inspection at the registered office of the company. The
auditor’s report does not necessarily cover all of the
information contained in this announcement and any reference
to future financial performance included in this announcement
has not been reviewed or reported on. Shareholders are
therefore advised that in order to obtain a full understanding
of the nature of the auditor’s work they should obtain a copy
of the integrated annual report from the registered office of
Tongaat Hulett after it has been released prior to 30 June 2014.
CORPORATE INFORMATION
Directorate: J B Magwaza (Chairman), P H Staude (Chief Executive
Officer)*, F Jakoet, J John, R P Kupara^, AA Maleiane+,
T N Mgoduso, N Mjoli-Mncube, M H Munro*, S G Pretorius, C B Sibisi.
* Executive directors ^ Zimbabwean +Mozambican
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: Computershare Investor Services (Pty) Limited
Telephone: +27 11 370 7700
Sponsor: Investec Bank Limited Telephone: +27 11 286 7000
www.tongaat.com
e-mail: info@tongaat.com
Date: 26/05/2014 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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