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TON - Tongaat Hulett Limited - Interim results for the six months ended
30 September 2011
Tongaat Hulett Limited
Registration No: 1892/000610/06
JSE share code: TON
ISIN: ZAE000096541
Interim Results for the six months ended 30 September 2011
- Revenue of R6,027 billion (2010: R4,724 billion) +27,6%
- Profit from operations of R1,047 billion (2010: R963 million) +8,7%
- Total net profit of R597 million (2010: R552 million) +8,2%
- Headline earnings of R501 million (2010: R507 million) -1,2%
- Interim dividend of 120 cents per share (2010: 110 cps) + 9,1%
COMMENTARY
Tongaat Hulett`s total sugar production for the 2011/12 year is
expected to increase by some 14% to 1,150 million tons. More than 80%
of the season`s cane had been milled by the end of October 2011. Sugar
production for the year in Mozambique is expected to be approximately
45% above last year, production in Zimbabwe should rise by 10% and in
South Africa it should increase by some 8% over that of last year. Good
progress is being made in these countries related to increasing cane
supply, with the area under cane increasing and the positioning of the
crop improving. In the present economic conditions few hectares are
generally being sold for land and property development. The starch
business has benefitted from improved co-product recoveries and world
competitive maize costs.
Revenue for the six months to 30 September 2011 of R6,027 billion was
27,6% above the R4,724 billion for the corresponding period in 2010.
Profit from operations grew to R1,047 billion (2010: R963 million).
Excluding the R130 million gain in the prior period in respect of the
pension fund employer surplus account allocation, the increase in
profit from operations is 25,7%.
Profit from the Mozambique sugar operations grew to R267 million for
the half-year (2010: R163 million), with substantially increased sugar
production and sales at higher domestic and export prices. The cane and
its increased value reported at the end of the 2010/11 year is now
being converted to sugar and sold, with the operating cash flow having
increased by R427 million over the previous half-year. Crop positioning
for optimal harvesting is improving, with increasing yields and sucrose
content. Sugar production in Mozambique for the year is expected to
increase to approximately 240 000 tons, an increase of some 45% over
last year.
The Zimbabwe sugar operations generated profit of R364 million (US$52
million) compared to the previous half-year of R303 million (US$41
million). Sugar production and sales, particularly in the export
market, increased in the first half of the year. The positioning of the
crop is improving. Given the extent of the harvesting and production to
date, there is less of a standing cane value than last year and there
has been an improvement in operating cash flow of R224 million. Total
sugar production in Zimbabwe for the year is expected to be
approximately 365 000 tons, an increase of 10% over last year, with the
increase coming from Hippo Valley.
Operating profit in the South African agriculture, sugar milling and
refining operations for the half-year was R54 million (2010: R47
million). The gap between the hectares under cane and the hectares
milled is unusually large as a result of the substantial cane root
planting following last year`s drought and the approximate 15 months
required to first harvest. The lower tonnage being available for export
from the industry has meant that revenue was driven mainly from the
local market where price increases were in line with cost increases.
Tongaat Hulett`s share of industry production this year is expected to
increase from 23% to approximately 26%. Annual raw sugar production is
projected to increase by about 8% to approximately 490 000 tons in the
current season.
The various downstream sugar value added activities recorded profit of
R142 million (2010: R136 million). The Voermol animal feeds operation
experienced lower sales volumes and pressure on margins as a result of
raw material availability constraints, high winter rainfall leading to
a reduced requirement by farmers for feed and reduced on-farm feeding
with higher maize prices.
In Swaziland, the Tambankulu sugar estate produced operating profit of
R30 million (2010: R19 million), with improved pricing and higher cane
yields being achieved.
In the land conversion and development activities, the appropriate
sales strategies (bulk sale, partnership or own development) are
constantly reviewed for each land holding and implemented as
appropriate. Opportunistic offers for some semi-bulk land sales were
received and turned down as they did not meet Tongaat Hulett`s value
criteria. Revenue for the six months to September 2011 was generated
mainly from 13 developable hectares (15 gross hectares) that were sold
in the Umhlanga Ridge Town Centre, Zimbali and Izinga areas. Operating
profit amounted to R62 million (2010: R97 million) with a further R3
million in capital profits (2010: R4 million) being realised.
Profit from the starch operations increased to R167 million, compared
to R125 million in the same period last year. Improved co-product
recoveries and local maize costs that were contracted below Chicago
(CBOT) prices resulted in an improvement in starch and glucose
processing margins. Sales volumes in the local market were 0,5% above
last year.
Finance costs increased to R249 million from R231 million in the first
half of the 2010/11 year and are commensurate with the level of
borrowings.
Operating cash flow, before working capital, improved by R626 million
to R1,555 billion for the half-year, mainly as a result of the higher
sugar production and sales in the half-year to September 2011. This
follows the previous absorption of cash in the various expansion and
sugar cane establishment programs. The September half-year coincides
with a high working capital absorption point in the year, particularly
in the South African sugar industry, with large cane payments having
been made and sugar stock levels having increased. There was a net cash
outflow for the period, after dividends, of R253 million. Tongaat
Hulett`s net debt at the end of September 2011 was R4,278 billion. A
process to replace a portion of the short-term debt with long-term debt
is close to being concluded.
Total net profit was R597 million (2010: R552 million). Headline
earnings were R501 million for the half-year ended 30 September 2011,
compared to the R507 million earned in the six months to 30 September
2010, after taking into account the minority shareholders` interests in
respect of increased profits at the sugar milling operations in
Mozambique and at Hippo Valley in Zimbabwe.
The Board has declared an interim dividend of 120 cents per share
(2010: 110 cents per share).
OUTLOOK
One of Tongaat Hulett`s key objectives is to facilitate increased cane
supply (including hectares under cane, yields and cane quality) to its
mills so as to fully utilise its existing installed milling capacity of
some 2 million tons of sugar with a simultaneous reduction in unit
costs. This would lead to a 75% increase in sugar production over the
1,150 million tons expected in the 2011/12 season.
Sugar production in Mozambique is expected to grow by a further 30%
over the next three years to above 310 000 tons per annum together with
a reduction in unit costs.
In Zimbabwe, co-operation between Government, the eastern lowveld
communities and Tongaat Hulett is focused on the "Successful Rural
Sugar Cane Farming Community" project. Some 15 900 hectares have been
allocated to approximately 870 indigenous farmers. In this season,
these farmers are expected to deliver approximately 488 000 tons of
cane (equivalent to 61 000 tons of sugar) from some 9 100 hectares. The
target is to uplift this to over 1,4 million tons of cane (equivalent
to 180 000 tons of sugar) from the available hectares. The pace of
planting new roots is targeted at some 4 000 hectares per annum, with 3
176 hectares having been planted by the end of October 2011. This,
together with Tongaat Hulett`s improvement of its own agricultural
yields, is key to achieving the target of increasing sugar production
in Zimbabwe to full milling capacity of 600 000 tons per annum.
The strategy to increase cane supply in South Africa is focused on
commercial farmers, small scale farmers and increasing Tongaat Hulett`s
influence in cane development through leasing additional land and
collaborating with Government to rehabilitate cane supply on its land
and land reform farms that have gone out of cane. It is expected that
the hectares available for milling in 2012/13 will increase by some 12
000 hectares as a result of the 9 696 hectares planted over the
previous two years and a reduction in the gap between hectares under
cane and hectares milled. An additional 8 000 hectares are targeted for
planting this season in the catchment areas of Tongaat Hulett`s South
African mills. Simultaneously, accelerated root replanting is underway
and is expected to span some three years, with its seed cane
requirement and the new cane not being harvested for an initial season.
This will improve root age and generate better yields. The gap between
hectares under cane and hectares milled will remain a feature of this
period, albeit reducing.
The future revenue stream would benefit significantly from electricity
and ethanol developments. Tongaat Hulett continues to interface with
Government towards establishing an appropriate regulatory framework for
both electricity generation and ethanol production from sugar cane.
Tongaat Hulett owns a total of some 8 600 developable hectares (13 639
gross hectares) for development in South Africa. A net cash inflow in
excess of some R2,2 billion is expected to come in due course from the
348 developable hectares available for sale from eight active land
developments, from which some 360 hectares have previously been sold.
There are on-going processes on all of the developable land to enhance
its usage and value to stakeholders. Industrial land in
Durban/eThekwini remains in short supply and competition is intense for
the industrial, retail and business park land that will become
available in the Cornubia South development. Tongaat Hulett continues
to explore a number of significant bulk land sale opportunities within
its land holdings.
The outlook for the 2011/12 year remains in line with that previously
communicated. Tongaat Hulett`s financial results remain sensitive to
movements in exchange rates, which impact particularly on export
realisations and the conversion of profits from Zimbabwe and Mozambique
into Rands. Both regional sugar prices and export prices into the
European Union have remained firm despite the recent reduction in the
world sugar price. It has become evident, with all the planting of new
roots and in order to improve cane positioning for the future, that
more hectares than originally anticipated will not be harvested this
season in South Africa. The exact timing of land sales, including bulk
sales, remains variable in the current economic climate. Local sales
volumes of starch and glucose are expected to reflect little growth
over the prior year. The R288 million defined benefit pension fund
asset that was recognised in the second half of last year, with its
impact on headline earnings, will not arise again this year. The
minorities` share of profits is expected to remain considerably above
that of last year.
For and on behalf of the Board
J B Magwaza Peter Staude
Chairman Chief Executive Officer
Amanzimnyama
Tongaat, KwaZulu-Natal
10 November 2011
DIVIDEND DECLARATION
Notice is hereby given that the Board has declared an interim dividend
(number 168) of 120 cents per share for the half-year ended 30
September 2011 to shareholders recorded in the register at the close of
business on Friday 20 January 2012.
The salient dates of the declaration and payment of this interim
dividend are as follows:
Last date to trade ordinary shares
"CUM" dividend Friday 13 January 2012
Ordinary shares trade "EX" dividend Monday 16 January 2012
Record date Friday 20 January 2012
Payment date Thursday 26 January 2012
Share certificates may not be dematerialised or re-materialised, nor
may transfers between registers take place between Monday 16 January
2012 and Friday 20 January 2012, 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 13 January 2012.
For and on behalf of the Board
M A C Mahlari
Company Secretary
Amanzimnyama
Tongaat, KwaZulu-Natal
10 November 2011
INCOME STATEMENT
Condensed consolidated Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 Sept. 30 Sept. 31 March
Rmillion 2011 2010 2011
Revenue 6 027 4 724 9 681
Profit from operations 1 047 963 1 338
Bulk sales/capital profit
on land 3 4 23
Capital profit on other items 4
BEE IFRS 2 charge and transaction
costs (24) (18) (46)
Valuation adjustments:
Defined benefit pension fund
asset recognition 288
Other valuation adjustments 3 (1)
Operating profit 1 029 949 1 606
Share of associate company`s loss (2)
Net financing costs (note 1) (249) (231) (472)
Profit before tax 780 718 1 132
Tax (note 2) (183) (166) (261)
Net profit for the period 597 552 871
Profit attributable to:
Shareholders of Tongaat Hulett 505 511 833
Minority (non-controlling)
interest 92 41 38
597 552 871
Headline earnings attributable
to Tongaat Hulett shareholders
(note 3) 501 507 806
Earnings per share (cents)
Net profit per share
Basic 477,4 485,5 786,0
Diluted 466,3 472,6 764,3
Headline earnings per share
Basic 473,6 481,7 760,5
Diluted 462,6 468,9 739,6
Dividend per share (cents) 120,0 110,0 250,0
Currency conversion
Rand/US dollar closing 8,06 6,99 6,80
Rand/US dollar average 6,95 7,39 7,19
Rand/Metical average 0,24 0,22 0,21
Rand/Euro average 9,91 9,58 9,49
US dollar/Euro average 1,43 1,30 1,32
SEGMENTAL ANALYSIS
Condensed consolidated Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 Sept. 30 Sept. 31 March
Rmillion 2011 2010 2011
REVENUE
Starch operations 1 210 1 185 2 357
Land Conversion and Developments 92 99 207
Sugar
Zimbabwe operations 1 179 734 1 646
Swaziland operations 117 108 126
Mozambique operations 1 082 489 715
SA agriculture, milling and
refining 1 353 1 267 2 991
Downstream value added
activities 994 842 1 639
Consolidated total 6 027 4 724 9 681
PROFIT FROM OPERATIONS
Starch operations 167 125 303
Land Conversion and Developments 62 97 166
Sugar
Zimbabwe operations 364 303 454
Swaziland operations 30 19 17
Mozambique operations 267 163 135
SA agriculture, milling and
refining 54 47 (7)
Downstream value added
activities 142 136 241
Centrally accounted and
consolidation items (39) 73 29
Consolidated total 1 047 963 1 338
STATEMENT OF FINANCIAL POSITION
Condensed consolidated Unaudited Unaudited Audited
30 Sept. 30 Sept. 31 March
Rmillion 2011 2010 2011
ASSETS
Non-current assets
Property, plant and equipment 9 144 7 230 7 665
Growing crops 2 897 2 019 2 608
Defined benefit pension
fund asset 295 294
Long-term receivable 135 135 135
Goodwill 272 223 230
Intangible assets 67 13 32
Investments 8 4 7
12 818 9 624 10 971
Current assets 5 908 4 972 3 520
Inventories 2 556 2 426 1 365
Trade and other receivables 2 529 1 966 1 788
Derivative instruments 2 18 11
Tax 6
Cash and cash equivalents 821 562 350
TOTAL ASSETS 18 726 14 596 14 491
EQUITY AND LIABILITIES
Capital and reserves
Share capital 140 139 140
Share premium 1 524 1 521 1 524
BEE held consolidation shares (833) (907) (868)
Retained income 5 645 5 116 5 305
Other reserves 512 (1 616) (1 301)
Shareholders` interest 6 988 4 253 4 800
Minority interest in subsidiaries 1 069 838 840
Equity 8 057 5 091 5 640
Non-current liabilities 4 143 3 509 3 981
Deferred tax 1 541 1 296 1 365
Long-term borrowings 1 295 942 1 345
Non-recourse equity-settled
BEE borrowings 748 774 761
Provisions 559 497 510
Current liabilities 6 526 5 996 4 870
Trade and other payables (note 4) 2 583 2 574 1 938
Short-term borrowings 3 804 3 361 2 930
Derivative instruments 20 2
Tax 119 61
TOTAL EQUITY AND LIABILITIES 18 726 14 596 14 491
Number of shares (000)
- in issue 105 014 104 812 105 014
- weighted average (basic) 105 785 105 246 105 986
- weighted average (diluted) 108 298 108 131 108 984
STATEMENT OF CHANGES IN EQUITY
Condensed consolidated Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 Sept. 30 Sept. 31 March
Rmillion 2011 2010 2011
Balance at beginning of period 4 800 4 573 4 573
Total comprehensive income for
the period 2 293 (272) 358
Retained earnings 505 511 833
Movement in hedge reserve (16) 5 (3)
Foreign currency translation 1 804 (788) (472)
Dividends paid (150) (73) (191)
Share capital issued - ordinary 3 6
BEE held consolidation shares 22 15 42
Share-based payment charge 27 25 42
Settlement of share-based payment
awards (4) (18) (27)
Allocation of BEE amount (3)
Shareholders` interest 6 988 4 253 4 800
Minority interest in
subsidiaries 1 069 838 840
Balance at beginning of period 840 870 870
Total comprehensive income for
the period 235 (23) (29)
Retained earnings 92 41 38
Foreign currency translation 143 (64) (67)
Dividends paid to minorities (6) (10) (7)
Consolidation of subsidiaries 1 1
Loan account movement 2
Allocation of BEE amount 3
Equity 8 057 5 091 5 640
STATEMENT OF OTHER COMPREHENSIVE INCOME
Condensed consolidated Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 Sept. 30 Sept. 31 March
Rmillion 2011 2010 2011
Net profit for the period 597 552 871
Other comprehensive income 1 931 (847) (542)
Movement in non-distributable
reserves:
Foreign currency translation 1 947 (852) (539)
Hedge reserve (18) 7 (4)
Tax on movement in hedge reserve 2 (2) 1
Total comprehensive income for
the period 2 528 (295) 329
Total comprehensive income
attributable to:
Shareholders of Tongaat Hulett 2 293 (272) 358
Minority (non-controlling)
interest 235 (23) (29)
2 528 (295) 329
STATEMENT OF CASH FLOWS
Condensed consolidated Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 Sept. 30 Sept. 31 March
Rmillion 2011 2010 2011
Operating profit 1 029 949 1 606
Profit on disposal of property,
plant and equipment (4) (7) (35)
Depreciation 232 225 344
Defined benefit pension fund
asset recognition (288)
Growing crops and other non-cash
items 327 (196) (622)
Tax payments (29) (42) (111)
Operating cash flow 1 555 929 894
Change in working capital (1 044) (956) (212)
Cash flow from operations 511 (27) 682
Net financing costs (249) (231) (472)
Cash flow from operating
activities 262 (258) 210
Expenditure on property, plant
and equipment:
New (89) (138) (396)
Replacement (156) (109) (323)
Major plant overhaul costs (74) (131) (87)
Other capital items (40) (5) (33)
Net cash flow before dividends
and financing activities (97) (641) (629)
Dividends paid (156) (83) (198)
Net cash flow before financing
activities (253) (724) (827)
Borrowings raised 579 1 175 1 103
Non-recourse equity-settled
BEE borrowings (13) (13) (26)
Shares issued 3 6
Settlement of share-based
payment awards (4) (18) (27)
Net increase in cash and
cash equivalents 309 423 229
Balance at beginning of period 350 140 140
Foreign exchange adjustment 162 (1) (18)
Exchange rate translation loss (1)
Cash and cash equivalents
at end of period 821 562 350
NOTES
Condensed consolidated Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 Sept. 30 Sept. 31 March
Rmillion 2011 2010 2011
1. Net financing costs
Interest paid (256) (237) (491)
Interest capitalized 1 1 7
Interest received 6 5 12
(249) (231) (472)
2. Tax
Normal (129) (88) (72)
Deferred (34) (66) (160)
Secondary tax on companies (20) (12) (29)
(183) (166) (261)
3. Headline earnings
Profit attributable to
shareholders 505 511 833
Less after tax effect of:
Capital profit on disposal
of land (3) (4) (23)
Capital profit on other
capital items (4)
Fixed assets and other
disposals (1)
501 507 806
4. Trade and other payables
Included in trade and other payables is the maize obligation
(interest bearing) of R293 million (30 September 2010: R354
million and 31 March 2011: R173 million).
5. Capital expenditure commitments
Contracted 178 101 134
Approved 87 65 51
265 166 185
6. Operating lease commitments 38 43 42
7. Guarantees and contingent
Liabilities 30 145 35
8. Basis of preparation
The condensed consolidated unaudited results for the half-year
ended 30 September 2011 have been prepared in accordance with
International Accounting Standard 34 Interim Financial
Reporting, the AC 500 standards as issued by the Accounting
Practices Board and the JSE Limited Listings Requirements. The
accounting policies are consistent with those used for the
audited 2011 annual financial statements which fully comply
with International Financial Reporting Standards. These
financial statements were prepared under the supervision of the
Chief Financial Officer, M H Munro CA (SA).
CORPORATE INFORMATION
Directorate: J B Magwaza (Chairman), P H Staude (Chief Executive
Officer)*, B G Dunlop*, F Jakoet, J John, R P Kupara, A A Maleiane+, T
N Mgoduso, M Mia, 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: 14/11/2011 07:05:05 Supplied by www.sharenet.co.za
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