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Illovo Sugar Limited - Financial results for the year ended 31 March 2002
Company Registration no. 1906/000622/06
Share code ILV
ISIN no. ZAE000003547
PROFIT AND DIVIDEND ANNOUNCEMENT
Audited results for the year ended 31 March 2002
Company Registration No. 1906/000622/06
Strong growth in earnings and Good cash generation
dividends
Record production levels Reduction in gearing
Review
During the past year the group achieved excellent results with headline
earnings increasing by 53% and record production of sugar, cane and most
downstream products being attained. Factory operational performance
improved and further progress was made in enhancing the company`s position
as a leading global, low-cost sugar and downstream products producer.
Zambia Sugar, acquired in April 2001, was successfully integrated into the
group during the year and performed well and ahead of expectations.
In the financial year ended 31 March 2002, the group achieved turnover of
R5.9 billion, operating profit of R755.9 million and headline earnings of
R340.3 million. Compared to the previous year turnover increased by 25% and
operating profit by 30%. Headline earnings per share of 102.8 cents were
52% higher than those achieved in the previous 12 months. Increased sugar
production together with a strong performance from downstream operations,
improved world prices and the weaker rand, contributed to these results.
The effective tax rate (excluding abnormal items) was 23.0% which was
marginally below last year. Financing costs increased by R44.4 million to
R228.5 million. Cash generation was good with net cash inflow of R371.3
million. Net group borrowings declined by R17.0 million to R1
465.9 million. The level of borrowings and financing costs were negatively
impacted by the weaker rand in respect of local currency loans in the United
States, Malawi and Zambia subsidiaries. Gearing has improved from 85.7% to
69.1%.
The contributions to operating profits by sugar manufacture were 64%, cane
growing 22% and downstream 14%. The contributions to profit by country,
excluding Tanzania and Mozambique which are currently not consolidated, were
South Africa 42%, Zambia 21%, Malawi 20%, Swaziland 10% and the United
States 7%.
In Mozambique, as a direct consequence of the devastating floods of February
2000, and because the funds expected to be received pursuant to the Rome
Convention proposals for the restoration of identified agricultural
operations affected by the floods have not been forthcoming, it has become
necessary for the group to invest additional capital of its own into the
Maragra sugar project. It has been deemed prudent to provide an amount of
R186.7 million, as an extraordinary item, for the impairment of this
investment.
The group`s productive base continued to expand with record sugar production
of 1.953 million tons being achieved in the 2001/02 season. The increase
was achieved despite largely unfavourable weather conditions being
experienced in many of the countries of operation. Group cane production
also rose to a record of 4.872 million tons. Further good progress was made
with the rehabilitation and re-development programme at Kilombero in
Tanzania, and the operation achieved its best-ever sugar output. At
Maragra, substantial progress was made in the rehabilitation of both the
company`s and growers` agricultural estates, following the floods, and sugar
production re-commenced in a shortened milling season.
The furfural and derivatives plants at Sezela in South Africa performed
extremely well. Production of both diacetyl and acetoin rose significantly.
A further expansion of the flavourants side of the business is planned
during the coming year. In addition good progress was made towards the
commercialisation of a furfural based agricultural chemical. Approval has
been received from the South African Department of Agriculture for the
product to be used in the control of nematodes in groundnuts and tomatoes.
The registration programme for extending its use to other crops and other
countries is making good headway. The Merebank and Glendale distilleries
had a good year with production records being achieved, whilst lactulose
production increased as a result of an improved share of the international
market.
In South Africa and Swaziland, 26 cane farms were sold to Black farmers
under the group`s medium-scale farm development programme. This brings the
total number of farms sold to growers over the past five years to 68 in
South Africa and 15 in Swaziland.
The group supplies sugar and downstream products to a considerable range of
domestic, regional and export markets. Sales to domestic markets
contributed 66% to total revenue whilst exports to 91 countries contributed
34%. A strength of the group is that 64% of sugar production by volume and
81% by value was sold into stable domestic or premium priced export markets.
Illegal sugar imports into some of the countries in Southern Africa where
the group has operations have been of concern but it is pleasing that during
the past year the governments in the affected countries have responded
positively to stem the flow of these illegal imports.
Good progress has been made with the European Union proposal to allow all
imports, other than armaments, from the world`s 48 Least Developed Countries
into the EU duty free, with the sugar implementing regulation being
published in October 2001. The regulation provides for the introduction of
a global sugar quota which will be increased annually until full
liberalisation is achieved in 2009. In addition during the year the
renewals of both the EU Sugar Regime and the EU Special Preferential quota
arrangement were concluded. A new United States Farm Bill has been
approved, and the regulations in respect of sugar are similar to those in
effect currently with the exception of a provision for marketing allocations
to be applied to local producers relative to historical production
performance. The group benefits from all these premium priced markets.
Prices attained in the past season were higher than in the previous year.
However, world sugar prices have recently declined materially as a result of
concerns of a world over-supply following forecast high production levels in
Brazil and Thailand.
During the year R312.4 million (2001 : R303.5 million) was spent on capital
projects with the purpose of ensuring that operations are kept in a sound
condition and that product quality is of the highest standard.
Prospects
Good growing conditions have boosted cane and sucrose production estimates
for the 2002/03 season. Recently it has been drier than usual in some of
the group`s cane growing areas, but, provided normal rains are achieved in
the non-irrigated areas, group sugar production is expected to increase by
around 10% to approximately 2.15 million tons. Downstream production levels
are expected to be similar to those achieved last season.
World prices are anticipated to remain at their present low levels for the
remainder of the year. The impact of these low prices, however, will be
partly ameliorated by hedging activities already in place and regional
premiums. An increase in earnings in real terms is expected, provided there
are no material adverse movements for the group in currency values from
present levels.
Dividend
The final dividend has been increased to 31.0 cents per share [2001 : 19.0
cents] which gives a total distribution of 51.0 cents per share [2001 : 34.0
cents] for the full year.
On behalf of the Board
R A Williams D G MacLeod Durban
Chairman Managing Director 21 May 2002
GROUP INCOME STATEMENTS
Year
ended
31 March
2002 2001 Change
Note Rm Rm %
s
Revenue 5 926.1 4 735.1 25
Profit before financing costs 755.9 580.5 30
and taxation
Net financing costs 1 228.5 184.1
Profit before abnormal items 527.4 396.4 33
Abnormal items 2 20.1 27.9
Profit before taxation 547.5 424.3 29
Taxation 121.3 96.0
Profit after taxation 426.2 328.3 30
Attributable to outside
shareholders in
subsidiary companies 64.8 81.8
Net profit from ordinary 361.4 246.5 47
activities
Extraordinary item 3 186.7 -
Net profit attributable to
shareholders
in Illovo Sugar Limited 174.7 246.5
Determination of headline
earnings :
Net profit from ordinary 361.4 246.5 47
activities
Adjusted for :
(Loss)/profit on disposal of
property, plant and
equipment ( 2.8) 23.6
Profit on disposal of 23.3 -
subsidiary companies
Amortisation of goodwill 0.6 -
Headline earnings 340.3 222.9 53
Number of shares in issue 331.7 330.2
(millions)
Weighted average number of
shares on which
headline earnings per share 330.9 330.0
are based (millions)
Headline earnings per share 102.8 67.5 52
(cents)
Dividend per share (cents) 51.0 34.0 50
BUSINESS SEGMENTAL ANALYSIS
Year ended
31 March
2002 2001
Rm % Rm %
Revenue
Sugar production 4 561.0 77 3,423.9 72
Cane growing 816.1 14 754.7 16
Downstream 549.0 9 482.5 10
Hotels and other - - 74.0 2
5 926.1 4 735.1
Profit before financing costs and
taxation
Sugar production 481.8 64 339.1 58
Cane growing 165.8 22 132.1 23
Downstream 108.3 14 84.5 15
Hotels and other - - 24.8 4
755.9 580.5
NOTES TO THE INCOME STATEMENTS
1.
Net financing costs
Interest paid 288.7 261.3
Interest received ( 58.1) ( 72.0)
Dividend income ( 1.7) ( 8.5)
Preference dividend paid - 5.1
Interest incurred prior to the
commencement
of production and capitalised as part
of the
cost of property, plant and equipment ( 0.4) ( 1.8)
228.5 184.1
2.
Abnormal items
(Loss)/profit on disposal of property ( 3.2) 27.9
Profit on disposal of subsidiary 23.3 -
companies
Abnormal profit before taxation 20.1 27.9
Taxation - -
Minority share of abnormal items - ( 3.8)
after taxation
Abnormal profit attributable to
shareholders
in Illovo Sugar Limited 20.1 24.1
3.
Extraordinary item
Write down of investment in Maragra
Acucar
arising out of flood damage 186.7 -
ABRIDGED GROUP BALANCE SHEETS
31 March
2002 2001
Rm Rm
ASSETS
Non-current assets 3 134.8 2 907.0
Property, plant and 2 859.5 2,653.3
equipment
Investments 286.8 253.7
Goodwill ( 11.5) -
Current assets 2 371.6 1 996.4
Total assets 5 506.4 4 903.4
EQUITY AND
LIABILITIES
Capital and reserves 1 786.3 1 333.6
Interest of outside 334.9 397.3
shareholders in
subsidiaries
Deferred taxation 574.5 456.1
Net borrowings 1 465.9 1,482.9
Current liabilities 1 344.8 1 233.5
Total equity and 5 506.4 4 903.4
liabilities
OTHER SALIENT
FEATURES
Operating margin (%) 12.8 12.2
Gearing (%) 69.1 85.7
Depreciation 328.0 268.0
Capital expenditure 312.4 303.5
- expansion 41.8 52.3
- replacement 270.6 251.2
Capital commitments 393.4 270.3
- contracted 27.9 20.4
- approved but not 365.5 249.9
contracted
Lease commitments 618.2 628.5
- land and buildings 513.9 530.9
- other 104.3 97.6
Contingent 469.5 262.8
liabilities
ABRIDGED GROUP CASH FLOW STATEMENTS
Year ended
31 March
2002 2001
Rm Rm
Cash flows from operating and investing
activities
Cash operating profit 1 091.1 860.6
Working capital requirements ( 229.6) (203.0)
Replacement capital ( 270.6) (251.2)
Interest, taxation and dividend ( 440.9) (360.6)
Proceeds on disposal of Mauritius 389.7 -
operations
Investment in future operations ( 249.9) (69.4)
Other movements 81.5 44.7
Net cash inflow before financing activities 371.3 21.1
STATEMENT OF CHANGES IN
EQUITY
Share capital and share
premium
Balance at beginning of 247.8 247.1
the period
Movements during the 6.8 0.7
period
Balance at end of the period 254.6 247.8
Non-distributable reserves
Balance at beginning of the period 417.9 404.5
Net movements during the period 48.2 13.4
Balance at end of the period 466.1 417.9
Retained surplus
Balance at beginning of the period 667.9 533.1
Dividends paid ( 129.0) (108.9)
Net movements during the period 526.7 243.7
Balance at end of the period 1,065.6 667.9
Ordinary shareholders` equity 1 786.3 1 333.6
The principal accounting policies used in this report are in all material
respects consistently applied, and conform with South African Statements of
Generally Accepted Accounting Practice
DECLARATION OF DIVIDEND NO. 21
Notice is hereby given that a final dividend of 31.0 cents per share has
been declared on the ordinary shares of the company in respect of the year
ended 31 March 2002. This dividend, together with the interim dividend of
20.0 cents per share which was declared on 14 November 2001, makes a total
distribution in respect of the year ended 31 March 2002 of 51.0 cents per
share.
In compliance with the requirements of STRATE, the electronic settlement and
custody system used by the JSE Securities Exchange South Africa, the company
has determined the following salient dates for the payment of the dividend :
Last day to trade cum-dividend Friday, 5 July 2002
Shares commence trading ex-dividend Monday, 8 July 2002
Record date Friday, 12 July 2002
Payment of dividend Monday, 15 July 2002
Share certificates may not be dematerialised / rematerialised between
Monday, 1 July 2002 and Friday, 12 July 2002, both days inclusive.
By order of the Board
G D Knox Durban
Secretary 21 May 2002
Directors :
R A Williams (Chairman)*, D G MacLeod (Managing Director), W M A Buchanan, G
J Clark (Australian), B P Connellan*, R D Hamilton*, N M Hawley, R L
Hetzler (USA), G D Knox (British), D Konar*, A R Mpungwe (Tanzanian)*, R A
Norton*, A B Ravn, J T Russell, M J Shaw*, B M Stuart
* Non-executive
Registered office :
Illovo Sugar Park, 1 Montgomery Drive, Mount Edgecombe, KwaZulu-Natal, South
Africa
Postal address :
P O Box 194, Durban, 4000
Website : www.illovosugar.com
Transfer Secretaries :
Computershare Investor Services Limited, 11 Diagonal Street, Johannesburg,
2001
Date: 21/05/2002 05:01:00 PM Produced by the SENS Department
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