Wrap Text
Unaudited Interim Results for the six months ended 30 September 2012
Tongaat Hulett Limited
Registration No: 1892/000610/06
JSE share code: TON
ISIN: ZAE000096541
Interim Results for the six months ended 30 September 2012
- Revenue of R7,398 billion (2011: R6,027 billion) +22,7%
- Profit from operations of R1,313 billion (2011: R1,047 billion) +25,4%
- Headline earnings of R654 million (2011: R501 million) +30,5%
- Interim dividend of 150 cents per share (2011: 120 cps) +25,0%
COMMENTARY
Tongaat Huletts headline earnings for the half-year ended 30 September
2012 increased by 30,5% to R654 million (2011: R501 million), benefitting
from growth in sugar and industrial land sales.
Revenue for the six months grew by 23% to R7,4 billion (2011: R6,0 billion).
Total sugar sales volumes in the first six months of the 2012/13 year were
9% above the first half of last year, with higher sugar production levels,
a larger crop and a drive to end the milling season earlier this year.
Significant sales were concluded in the land conversion activities, mainly
in the Cornubia Industrial and Umhlanga Ridge areas.
Profit from operations grew by 25% to R1,313 billion from R1,047 billion
in the same period last year. Tongaat Hulett is benefitting from higher
sugar production volumes with the related reduction in the unit cost of
production, against the background of general margin pressure in the
relationship of selling price movements versus higher input costs.
Operating profit from land conversion and development for the six months
to September 2012 amounted to R244 million (prior period: R62 million)
with a further R2 million in capital profits (prior period: R3 million)
being realised. In the present economic conditions few hectares are being
converted to development. In the first half of the 2012/13 year, 40
developable hectares (46 gross hectares) were sold. Revenue was generated
mainly from sales in the Cornubia Industrial, Umhlanga Ridge Town Centre,
La Lucia Ridge Office Estate, Izinga, Kindlewood, Mount Moriah and Zimbali
areas.
Operating profit from the South African sugar operations including the
downstream sugar value added activities increased by 13% to R221 million.
The agriculture, sugar milling and refining operations continued to recover,
with operating profit amounting to R99 million (2011: R54 million). The
various downstream sugar value added activities recorded profit of
R122 million (2011: R142 million). Export and local market sales volumes
totalled 271 000 tons in the six months (2011: 253 000 tons).
Operating profit in Mozambique was R270 million compared to R267 million
in 2011. Sugar production in Mozambique is consolidating this year
following the record 42% increase last year. Rainfall conditions in the
irrigation catchment area at Mafambisse have led to a reduction in that
harvest. Costs of production reflect the impact of the last wage increase
of 11%. The strength of the Metical (Euro weakness) impacted negatively on
export realisations while it had a positive effect on converting Metical
earnings into Rands.
The Zimbabwean sugar operations generated operating profit of R437 million
(US$53 million) compared to R364 million (US$52 million) last year. Margin
pressure is being experienced in the nexus of selling price movements and
input cost increases, following the last 18% wage increase. Hippo Valley
experienced an increase in agricultural expenditure and cane supply costs,
as the operations invest in increasing future cane supplies. The weaker
Euro/US$ exchange rate impacted negatively on export proceeds while the
weaker average Rand/US$ impacted positively on the conversion of US$
profits into Rands. As at 30 September 2012, the year to date sugar
production was 341 000 tons compared to 265 000 tons in the same period
in 2011, a 29% increase.
In Swaziland, the Tambankulu sugar estates operating profit increased
to R41 million (2011: R30 million), as a result of higher sucrose prices.
Profit from the starch operations decreased by 12% to R147 million
(2011: R167 million). Starch and glucose processing margins came under
pressure as a result of higher local maize prices, which were above the
Chicago (CBOT) price following a dry summer and expectations of a reduced
crop. Domestic market volumes reflected a growth of 3,8% despite a poor
first quarter and the impact of the national transport strike.
Manufacturing plant performance has continued to improve.
Operating cash flow, before working capital, increased to R1,7 billion
which was in line with the growth in operating profit. The R1,4 billion
absorption of cash in working capital during the six months to September
is consistent with this being a high point in the sugar season. This
particularly applies to South Africa, with large cane payments having
been made and sugar stock levels having increased, in advance of them
reducing again towards the end of the season. The increase in operating
cash flow follows the previous absorption of cash in the numerous
expansion and new sugar cane establishment programs. Tongaat Huletts
net debt at the end of September was R5,088 billion. The replacement
of significant portions of short term debt with appropriately structured
long term debt has been successfully concluded.
Total net profit was R734 million for the half-year to 30 September 2012
(2011: R597 million).
The interim dividend declaration has increased by 25% to 150 cents per
share (2011: 120 cents per share).
OUTLOOK
Building on its current increasing momentum as it increases sugar
cane supplies, Tongaat Hulett is now examining how much above 2 million
tons per annum it could grow its sugar production from its existing mills.
This would include maximising production rates and up-times in the mills,
extending the length of the milling season and debottlenecking at a
moderate cost. Unit costs will benefit substantially from increasing
volumes and yields, as milling costs and many of the agricultural costs
per hectare are mostly fixed.
Sugar production for the full 2012/13 year is expected to grow between
8% and 15%, following last years 14% increase to 1,150 million tons.
The season is well advanced and the major variable is excessive rainfall,
which could hamper harvesting and lead to cane being carried over to the
next season.
Good progress is being made with the many initiatives underway to improve
root age, farming practices and crop positioning that are aimed at improving
cane yields and sucrose content. The low dam levels in the Triangle, Hippo
Valley and Mafambisse areas have already impacted root planting and yields
respectively and it is important to have good rainfall this season in the
catchment areas. New sugar cane root plantings across the various cane
growing areas in the current year are targeted to reach 11 600 hectares,
which follows last years actions that increased the area under cane by
some 13 520 hectares.
Tongaat Huletts operations in Zimbabwe, employing 18 000 people, are in
an important recovery, growth and expansion phase, which should create
sustainable value for all stakeholders. Sugar production has already
increased from 259 000 tons in 2009/10 to an expected 460 000 to 490 000
tons this year, with substantial reinvestment in the business by Tongaat
Hulett. A central part of this recovery has been the re-establishment of
cane growing by improving agricultural yields on Tongaat Hulett estates
and substantially developing indigenous private cane farmers. As at
October 2012, at least 670 active indigenous private farmers, farming
some 11 100 hectares and employing more than 5 550 people, supply
772 000 tons of cane which generates US$50 million in annual revenue
for them.
Zimbabwe, with Tongaat Hulett as a partner, has the potential to
further develop indigenous private cane farmers substantially. This
potential is linked to how much annual production can be achieved in
the existing sugar mills. Based on Tongaat Huletts view of its
existing mills, a further 600 farmers on 12 700 hectares could supply
an additional 1,4 million tons of cane per annum. In total, all
these indigenous private cane farmer developments could earn
US$150 million gross revenue per annum and employ more than
12 000 people. Dialogue is maintained with key stakeholders including
the appropriate authorities at the highest levels to ensure a full
understanding of all the relevant dynamics and issues.
The current focus in Mozambique is to maximise sugar production from
the existing mills to well above 310 000 tons per annum, reduce costs
of production and to investigate brownfield expansion opportunities
at Mafambisse.
The strategy to increase cane supply in South Africa is focused on
commercial farmers, small-scale farmers and increasing Tongaat Huletts
influence in cane development through leasing additional land and
collaborating with Government to rehabilitate cane supply on land
reform farms that have gone out of cane. The gap between hectares
under cane and hectares milled will remain a feature of the next
few years as a result of accelerated root replanting (with the time
required from planting to first harvesting) to improve cane age,
generate better yields and increase the crops ability to withstand
variable weather conditions and as the business makes progress improving
the cane age / crop positioning for optimal harvesting to increase
future cane supplies. This year, this dynamic has been further
affected by the national transport strike in South Africa followed
by unusually heavy rains. The increased level of carry-over cane from
the current season into next season could lead to the mills opening
earlier than usual in 2013 to accommodate the increased level of sugar
production.
Severe drought conditions in the United States have led to increases
in international prices as global grain stocks have come under pressure.
The higher prices are expected to encourage an increase in the new
season plantings for the South African maize crop. This, combined
with final estimates of the prior season crop being above initial
forecasts, has led to local maize prices trading below Chicago (CBOT)
prices which will support margins in the second half of the year.
Approximately 86% of the maize requirements for the remainder of the
current year have been priced with starch customers or hedged at
levels close to or below the Chicago price.
Tongaat Hulett has targeted some 8 560 developable hectares
(13 561 gross hectares) for development in South Africa. There are
on-going processes on most of the developable land to enhance its
usage and value to all stakeholders. The extent and pace of planning,
in collaboration with Government, has increased substantially. At
present, 2 049 developable hectares are the subject of environmental
and planning processes. An increasing number of hectares of land are
moving towards becoming active developments, including the Cornubia
New Town Centre where the environmental impact assessment is well
underway. Various sales strategies (bulk sale, partnership or own
development) continue to be reviewed for each land holding and
implemented as appropriate. The exact timing of land sales,
including bulk sales, remains variable in the current economic climate.
Tongaat Huletts 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.
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.
For and on behalf of the Board
J B Magwaza Peter Staude
Chairman Chief Executive Officer
Amanzimnyama
Tongaat, KwaZulu-Natal
8 November 2012
DIVIDEND DECLARATION
Notice is hereby given that the Board has declared an interim gross
dividend (number 170) of 150 cents per share for the half-year ended
30 September 2012 to shareholders recorded in the register at the
close of business on Friday 18 January 2013.
The salient dates of the declaration and payment of this interim
dividend are as follows:
Last date to trade ordinary shares
CUM dividend Friday 11 January 2013
Ordinary shares trade EX dividend Monday 14 January 2013
Record date Friday 18 January 2013
Payment date Thursday 24 January 2013
Share certificates may not be dematerialised or re-materialised,
nor may transfers between registers take place between Monday
14 January 2013 and Friday 18 January 2013, 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 11 January 2013.
The dividend has been declared from income reserves. There are no
STC credits available for utilisation. A net dividend of 127,5 cents
per share will apply to shareholders liable for the local 15%
dividend withholding tax and 150 cents per share for shareholders
exempt from paying the dividend tax. The issued ordinary share
capital as at 8 November 2012 is 108 500 806 shares. The companys
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
8 November 2012
INCOME STATEMENT
Condensed consolidated Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 Sept. 30 Sept. 31 March
Rmillion 2012 2011 2012
Revenue 7 398 6 027 12 081
Profit from operations 1 313 1 047 1 921
Bulk sales/capital profit
on land 2 3 3
Other capital items (1)
BEE IFRS 2 charge and
transaction costs (28) (24) (48)
Valuation adjustments 2 3 2
Operating profit 1 288 1 029 1 878
Share of associate companys
profit 1
Net financing costs (note 1) (281) (249) (507)
Profit before tax 1 007 780 1 372
Tax (note 2) (273) (183) (351)
Net profit for the period 734 597 1 021
Profit attributable to:
Shareholders of Tongaat Hulett 655 505 889
Minority (non-controlling)
interest 79 92 132
734 597 1 021
Headline earnings attributable
to Tongaat Hulett shareholders
(note 3) 654 501 891
Earnings per share (cents)
Net profit per share
Basic 605,2 477,4 837,0
Diluted 594,0 466,3 817,6
Headline earnings per share
Basic 604,3 473,6 838,9
Diluted 593,1 462,6 819,4
Dividend per share (cents) 150,0 120,0 290,0
Currency conversion
Rand/US dollar closing 8,27 8,06 7,67
Rand/US dollar average 8,18 6,95 7,44
Rand/Metical average 0,30 0,24 0,27
Rand/Euro average 10,40 9,91 10,24
US dollar/Euro average 1,27 1,43 1,38
SEGMENTAL ANALYSIS
Condensed consolidated Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 Sept. 30 Sept. 31 March
Rmillion 2012 2011 2012
REVENUE
Starch operations 1 401 1 210 2 580
Land Conversion and Developments 430 92 366
Sugar
Zimbabwe operations 1 633 1 179 2 266
Swaziland operations 135 117 163
Mozambique operations 1 286 1 082 1 437
SA agriculture, milling
and refining 1 509 1 353 3 465
Downstream value added
activities 1 004 994 1 804
Consolidated total 7 398 6 027 12 081
PROFIT FROM OPERATIONS
Starch operations 147 167 363
Land Conversion and Developments 244 62 215
Sugar
Zimbabwe operations 437 364 621
Swaziland operations 41 30 51
Mozambique operations 270 267 402
SA agriculture, milling and
refining 99 54 93
Downstream value added
activities 122 142 261
Profit from the operating areas 1 360 1 086 2 006
Centrally accounted and
consolidation items (47) (39) (85)
Consolidated total 1 313 1 047 1 921
STATEMENT OF FINANCIAL POSITION
Condensed consolidated Unaudited Unaudited Audited
30 Sept. 30 Sept. 31 March
Rmillion 2012 2011 2012
ASSETS
Non-current assets
Property, plant and equipment 9 559 9 144 9 026
Growing crops 3 540 2 897 3 575
Defined benefit pension
fund asset 294 295 294
Long-term receivable 85 135 115
Goodwill 276 272 260
Intangible assets 69 67 65
Investments 10 8 12
13 833 12 818 13 347
Current assets 7 502 5 908 4 435
Inventories 3 255 2 556 1 483
Trade and other receivables 3 147 2 529 2 356
Derivative instruments 1 2 4
Cash and cash equivalents 1 099 821 592
TOTAL ASSETS 21 335 18 726 17 782
EQUITY AND LIABILITIES
Capital and reserves
Share capital 134 140 140
Share premium 1 535 1 524 1 528
BEE held consolidation shares (775) (833) (799)
Retained income 6 357 5 645 5 888
Other reserves 351 512 (48)
Shareholders interest 7 602 6 988 6 709
Minority interest in
subsidiaries 1 234 1 069 1 087
Equity 8 836 8 057 7 796
Non-current liabilities 6 630 4 143 4 706
Deferred tax 1 758 1 541 1 663
Long-term borrowings 3 534 1 295 1 732
Non-recourse equity-settled
BEE borrowings 737 748 737
Provisions 601 559 574
Current liabilities 5 869 6 526 5 280
Trade and other payables
(note 4) 2 984 2 583 1 997
Short-term borrowings 2 653 3 804 3 264
Derivative instruments 8 20 1
Tax 224 119 18
TOTAL EQUITY AND LIABILITIES 21 335 18 726 17 782
Number of shares (000)
in issue 108 501 105 014 105 143
weighted average (basic) 108 220 105 785 106 209
weighted average (diluted) 110 274 108 298 108 739
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 2012 2011 2012
Balance at beginning of period 6 709 4 800 4 800
Total comprehensive income for
the period 1 070 2 293 2 125
Retained earnings 655 505 889
Movement in hedge reserve (16) (2)
Foreign currency translation 415 1 804 1 238
Dividends paid (184) (150) (279)
Share capital issued ordinary 4
BEE held consolidation shares 24 22 42
Share-based payment charge 26 27 47
Settlement of share-based payment
awards (43) (4) (30)
Shareholders interest 7 602 6 988 6 709
Minority interest in
Subsidiaries 1 234 1 069 1 087
Balance at beginning of period 1 087 840 840
Total comprehensive income
for the period 155 235 256
Retained earnings 79 92 132
Foreign currency translation 76 143 124
Dividends paid to minorities (8) (6) (9)
Equity 8 836 8 057 7 796
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 2012 2011 2012
Net profit for the period 734 597 1 021
Other comprehensive income 491 1 931 1 360
Movement in non-distributable
reserves:
Foreign currency translation 491 1 947 1 362
Hedge reserve (18) (3)
Tax on movement in hedge reserve 2 1
Total comprehensive income for
the period 1 225 2 528 2 381
Total comprehensive income
attributable to:
Shareholders of Tongaat Hulett 1 070 2 293 2 125
Minority (non-controlling)
interest 155 235 256
1 225 2 528 2 381
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 2012 2011 2012
Operating profit 1 288 1 029 1 878
Profit on disposal of property,
plant and equipment (5) (4) (10)
Depreciation 231 232 366
Growing crops and other
non-cash items 280 327 (352)
Tax payments (47) (29) (125)
Operating cash flow 1 747 1 555 1 757
Change in working capital (1 390) (1 044) (519)
Cash flow from operations 357 511 1 238
Net financing costs (281) (249) (507)
Cash flow from operating
activities 76 262 731
Expenditure on property, plant
and equipment:
New (61) (89) (329)
Replacement (338) (156) (336)
Major plant overhaul costs (97) (74) (9)
Other capital items (35) (40) (62)
Net cash flow before dividends
and financing activities (455) (97) (5)
Dividends paid (192) (156) (288)
Net cash flow before financing
activities (647) (253) (293)
Borrowings raised 1 160 579 516
Non-recourse equity-settled
BEE borrowings (13) (24)
Shares issued 4
Settlement of share-based
payment awards (43) (4) (30)
Net increase in cash and cash
equivalents 470 309 173
Balance at beginning of period 592 350 350
Foreign exchange adjustment 37 162 69
Cash and cash equivalents at
end of period 1 099 821 592
NOTES
Condensed consolidated Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 Sept. 30 Sept. 31 March
Rmillion 2012 2011 2012
1. Net financing costs
Interest paid (295) (256) (528)
Interest capitalised 1 1
Interest received 14 6 20
(281) (249) (507)
2. Tax
Normal (251) (129) (112)
Deferred (17) (34) (187)
Rate change adjustment
deferred (5) (16)
Secondary tax on companies (20) (36)
(273) (183) (351)
3. Headline earnings
Profit attributable to
shareholders 655 505 889
Less after tax effect of:
Capital profit on disposal
of land (2) (3)
Fixed assets and other
disposals 1 (1) 2
654 501 891
4. Trade and other payables
Included in trade and other payables is the maize obligation
(interest bearing) of R407 million (30 September 2011:
R293 million and 31 March 2012: R161 million).
5. Capital expenditure commitments
Contracted 127 178 132
Approved 162 87 210
289 265 342
6. Operating lease commitments 81 38 95
7. Guarantees and contingent
liabilities 30 30 24
8. Basis of preparation
The condensed consolidated unaudited results for the half-year ended
30 September 2012 have been prepared in accordance with the
framework concepts and the measurement and recognition requirements
of International Financial Reporting Standards (IFRS), the AC 500
standards as issued by the Accounting Practices Board, 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 audited financial statements for the year ended
31 March 2012. 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, 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: 12/11/2012 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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