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Audited Results for the year ended 31 March 2013
Tongaat Hulett Limited
Registration No: 1892/000610/06
JSE share code: TON
ISIN: ZAE000096541
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2013
- Revenue of R14,373 billion (2012: R12,081 billion) +19,0%
- Profit from operations of R2,145 billion (2012: R1,921 billion) +11,7%
- Cash flow from operations of R2,126 billion (2012: R1,363 billion) +56,0%
- Headline earnings of R1,058 billion (2012: R891 million) +18,7%
- Annual dividend of 340 cents per share (2012: 290 cents per share) +17,2%
COMMENTARY
Tongaat Huletts revenue grew by 19% to R14,373 billion for the 2012/13 year
and headline earnings increased by 18,7% to R1,058 billion. Total sugar
production increased by 104 000 tons (9%) to 1,254 million tons, after
increasing by 14% in the prior year. The cane supplied to all the sugar
mills grew to 10,3 million tons, with various on-going cane supply initiatives.
The advantage of higher overall sugar production volumes with the related
benefits in the unit costs of production were offset partially by continued
general margin pressure in the relationship of selling price movements versus
higher input costs. The starch operations benefitted from higher co-product
realisations and world competitive maize costs, particularly with the new
season maize in the second half of the year. An increasing number of hectares
of land are moving towards becoming active developments in the land conversion
activities. Overall, Tongaat Huletts profit from operations increased by 11,7%
to R2,145 billion (2012: R1,921 billion).
Operating profit from land conversion and development grew to R350 million
(2012: R215 million) with a further R16 million in capital profits
(2012: R3 million) being realised. In the past year, 65 developable hectares
were sold. Revenue was generated from sales in the Cornubia Industrial,
Umhlanga Ridge Town Centre, Ridgeside, 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 amounted to R308 million
(2012: R354 million). The agriculture, sugar milling and refining operations
recorded operating profit of R52 million (2012: R93 million) and the various
downstream sugar value added activities contributed R256 million
(2012: R261 million). The season concluded with sugar production of 486 000 tons
which was unchanged from the prior year. Local market sales were 3% below last
year and consequently lower value export sales increased accordingly. With
increased cost pressures, margins were under pressure. Production was
impacted by the national transport strike in South Africa followed by
unusually heavy rains in the last three months of the crushing season. There
has been an increased level of carry-over cane from the current season into
the next season. As expected, the unusually large gap between hectares under
cane and hectares milled continued to feature. This is as a result of
accelerated root replanting (with the time required from planting to
first harvesting) to improve cane age / crop positioning for optimal
harvesting, generate better yields and increase the crops ability to withstand
variable weather conditions. These actions are all aimed at increasing future
cane supplies. New cane plantings driven by Tongaat Hulett in its cane catchment
areas totalled 11 554 hectares, following the 8 687 hectares planted in the
previous year and the 9 696 hectares before that.
In Swaziland, the Tambankulu sugar estates operating profit increased to
R76 million (2012: R51 million). Higher sucrose prices arose from a recovery
in European Union realisations received by the Swaziland sugar industry.
A raw sugar production equivalent of 58 000 tons was achieved for the
year (2012: 59 000 tons).
The two Zimbabwean sugar operations generated operating profit of R630 million
(US$74 million) compared to R621 million (US$84 million) last year. Sugar
production increased by 28% to 475 000 tons (2012: 372 000 tons) as cane
deliveries from private and third party farmers grew substantially. A cost
increase of some 10% was experienced in the milling operations and in the
own estate agricultural activities. In addition, the quantum of increase in
cane values reported in 2011/12 was not repeated in 2012/13. Planting
activities were curtailed in the latter part of the season due to dry weather
conditions culminating in fewer hectares under cane at the end of the year.
The weaker Euro/US$ exchange rate impacted negatively on export proceeds
while the weaker average Rand/US$ impacted positively on the conversion
of US$ profits into Rands.
Operating profit in Mozambique was R421 million compared to R402 million
in 2012. Sugar production in Mozambique consolidated in the year under review,
following the record 42% increase in the prior year, and amounted to
235 000 tons (2012: 233 000 tons). Rainfall conditions in the irrigation
catchment area at Mafambisse led to a reduction in that harvest. The relative
strength of the Metical impacted negatively on Euro export realisations while
it had a favourable effect on converting Metical earnings into Rands.
Profit from the starch operations increased to R388 million for the
year (2012: R363 million). Starch and glucose processing margins were favourably
influenced by higher co-product realisations and local maize costs that were
close to international prices, over the course of the full year. Domestic
market volumes reflected depressed consumer demand and were similar to the
prior year. Manufacturing plant performance has continued to improve.
The centrally accounted and consolidation items component of the income
statement includes a gain of R68 million in respect of a pension fund
employer surplus account allocation in the conversion from a defined
benefit to a defined contribution arrangement in South Africa.
Finance costs increased to R560 million from R507 million in the
2011/12 year and are commensurate with the level of borrowings.
Cash flow from operations, before tax, increased to R2,1 billion
(2012: R1,4 billion) which is in line with the growth in operating profit.
The increase in operating cash flow follows the absorption of cash
totalling more than R6 billion in the numerous expansion and new sugar
cane establishment programs over the past 6 years. Tongaat Huletts net
debt at the end of March 2013 was R4,6 billion. The replacement of significant
portions of short term debt with appropriately structured long term debt has
been successfully concluded.
Total net profit before the deduction of minority interests was
R1,170 billion (2012: R1,021 billion). Headline earnings attributable to
Tongaat Hulett shareholders amounted to R1,058 billion compared to R891 million
in 2012.
A final dividend of 190 cents per share has been declared, bringing the annual
dividend to 340 cents per share (2012: 290 cents per share), a 17,2% increase.
OUTLOOK
Focus Areas
In the year ahead, Tongaat Hulett expects to make substantial progress in the
multiple focus areas that will further enhance its strategic position.
Tongaat Hulett is in the fortunate position, in a world of sugar consumption
growth of 2% per annum, new sugar milling capacity being costly, with good
electricity and ethanol prospects, to still have more than 850 000 tons per
annum of unutilised sugar milling capacity, after the growth of sugar production
of 14% and 9% in the past two years respectively. A major focus remains on how
to rapidly increase cane supplies to utilise the available milling capacity.
The on-going 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. Of significance, is the co-operation agreement recently concluded
with the Ingonyama Trust, which controls some 2,7 million hectares of land in
KwaZulu-Natal.
Tongaat Huletts two operations in Zimbabwe will continue to develop their
positive socio-economic impact on the country. These operations employ
18 000 people and are in an important recovery, growth and expansion phase,
which should create sustainable value for all stakeholders. A central part
of this recovery is the substantial development of indigenous private cane
farmers. As at the end of the 2012/13 season, at least 670 active indigenous
private farmers, farming some 11 200 hectares and employing more than
5 600 people, supply 850 000 tons of cane which generates US$56 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 from
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 more than US$140 million gross revenue per annum and
employ more than 12 000 people.
A fundamental review has been launched to re-examine all bought-in goods and
services, which currently total more than R4 billion per annum for
Tongaat Hulett excluding cane and maize purchases. The review is, inter alia,
examining the quantum, value add, in house or outsource and possible
longer term procurement arrangements. Unit costs of sugar production will
continue to benefit from higher volumes and yields, as milling costs and
many of the agricultural costs per hectare are mostly fixed.
The drive to optimise revenue earned from sugar cane is one of the most
important strategic positioning issues. The coming year should see the
compilation of a bid for the first 80MW power station following the
Ministerial Determination for 800MW issued in December 2012. Planning for
the project, including the environmental impact assessments and plant
construction contracting processes, is well advanced. The diversion of
world market export sugar to a regional ethanol regime remains a key focus
area with serious interest from the oil industry to use bio ethanol as
part of their options for Clean Fuels 2.
In South Africa, Tongaat Hulett is building on its good progress to
date to accelerate land conversion. It has targeted some 8 500 developable
hectares (13 500 gross hectares) for development. There are on-going
processes on most of the targeted 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, some
1 900 developable hectares are the subject of well advanced environmental
and planning processes.
Financial Results The Year Ahead
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 results will benefit from the projected growth in sugar production.
The early season forecast is for total sugar production to grow by
approximately 110 000 tons, with the increase coming from South Africa
in this year. With the low dam levels in Zimbabwe, irrigation levels have
been reduced and cane expansion and root replanting for both private
growers and own estates have been curtailed, to be resumed once the
dam levels recover.
The increased current focus and progress to date on reducing input costs
should, to some extent, counter cost pressures. Wage increase agreements
have been concluded at reasonable levels in both Mozambique and Zimbabwe.
Current dynamics point towards pressure on sugar prices in general. World
prices are currently at their lowest point in 3 years. Sugar prices that
will be achieved by Least Developed / African Caribbean Pacific Countries
(LDC/ACPs) into the European Union for the coming year are uncertain.
The market is currently over-supplied. The white sugar price is well
above the world price. Sugar is being released into the market from out
of quota EU beet sugar at reduced levies and from world market sugar at
reduced duties. For the first time since the introduction of the current
duty and quota free regime in 2009 for LDC/ACPs, the benefits of selling
into the EU are being eroded. In the regional markets, a period of pressure
on selling prices and pressure from imports could prevail if the world price
remains low and pricing into Europe remains under pressure.
The starch operations remain well positioned. The current South African
maize crop outlook is in line with the previous crop of 11,8 million tons.
Maize continues to be priced at levels close to international prices.
Starch and glucose volumes are expected to show modest growth with depressed
local market demand being offset by a growth in export volumes, with continued
improvements in manufacturing performance.
A number of new land developments are likely to become active and
shovel ready before the year end. These new developments,
together with existing active developments, are attracting
increasing market interest. Various sales strategies (bulk sale,
partnership or own development) continue to be reviewed for each
land holding and implemented as appropriate. The number of hectares
converted to development in a specific time period remains variable.
The next period looks promising for own development sales. There are
good prospects for substantial bulk sales, with an increase in both
land available and interest by prospective purchasers. Significant
bulk and semi-bulk land sale offers received in the last two years
have been turned down on the grounds that they did not represent
optimal value.
For and on behalf of the Board
J B Magwaza Peter Staude
Chairman Chief Executive Officer
Amanzimnyama
Tongaat, KwaZulu-Natal
23 May 2013
DIVIDEND DECLARATION
Notice is hereby given that the Board has declared a final gross cash
dividend (number 171) of 190 cents per share for the year ended
31 March 2013 to shareholders recorded in the register at the close
of business on Friday 12 July 2013.
The salient dates of the declaration and payment of this final dividend
are as follows:
Last date to trade ordinary shares
CUM dividend Friday 5 July 2013
Ordinary shares trade EX dividend Monday 8 July 2013
Record date Friday 12 July 2013
Payment date Thursday 18 July 2013
Share certificates may not be dematerialised or re-materialised, nor may
transfers between registers take place between Monday 8 July 2013 and
Friday 12 July 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 5 July 2013.
The dividend has been declared from income reserves. There are no STC
credits available for utilisation. A net dividend of 161,5 cents per share
will apply to shareholders liable for the local 15% dividend withholding
tax and 190 cents per share for shareholders exempt from paying the
dividend tax. The issued ordinary share capital as at 23 May 2013 is
108 647 700 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
23 May 2013
INCOME STATEMENT
Condensed consolidated 2013 2012
Rmillion
Revenue 14 373 12 081
Profit from operations 2 145 1 921
Bulk sales / capital profit on land 16 3
Other capital items (1)
BEE IFRS 2 charge and transaction costs (44) (48)
Valuation adjustments 3 2
Operating profit 2 119 1 878
Share of associate companys profit 1
Net financing costs (note 1) (560) (507)
Profit before tax 1 559 1 372
Tax (note 2) (389) (351)
Net profit for the year 1 170 1 021
Profit attributable to:
Shareholders of Tongaat Hulett 1 070 889
Minority (non-controlling) interest 100 132
1 170 1 021
Headline earnings attributable to
Tongaat Hulett shareholders (note 3) 1 058 891
Earnings per share (cents)
Net profit per share
Basic 970,7 837,0
Diluted 953,0 817,6
Headline earnings per share
Basic 959,9 838,9
Diluted 942,3 819,4
Dividend per share (cents) 340,0 290,0
Currency conversion
Rand/US dollar closing 9,21 7,67
Rand/US dollar average 8,48 7,44
Rand/Metical average 0,30 0,27
Rand/Euro average 10,95 10,24
US dollar/Euro average 1,29 1,38
SEGMENTAL ANALYSIS
Condensed consolidated 2013 2012
Rmillion
REVENUE
Starch operations 2 859 2 580
Land Conversion and Developments 658 366
Sugar
Zimbabwe operations 3 222 2 266
Swaziland operations 207 163
Mozambique operations 1 688 1 437
SA agriculture, milling and refining 3 920 3 465
Downstream value added activities 1 819 1 804
Consolidated total 14 373 12 081
PROFIT FROM OPERATIONS
Starch operations 388 363
Land Conversion and Developments 350 215
Sugar
Zimbabwe operations 630 621
Swaziland operations 76 51
Mozambique operations 421 402
SA agriculture, milling and refining 52 93
Downstream value added activities 256 261
Centrally accounted and consolidation items (28) (85)
Consolidated total 2 145 1 921
STATEMENT OF FINANCIAL POSITION
Condensed consolidated 2013 2012
Rmillion
ASSETS
Non-current assets
Property, plant and equipment 10 287 9 026
Growing crops 4 583 3 575
Long-term receivables, pension fund asset
and prepayments 455 409
Goodwill 300 260
Intangible assets 78 65
Investments 14 12
15 717 13 347
Current assets 5 584 4 435
Inventories 1 858 1 483
Trade and other receivables 2 301 1 976
Major plant overhaul costs 508 380
Derivative instruments 4
Cash and cash equivalents 917 592
TOTAL ASSETS 21 301 17 782
EQUITY AND LIABILITIES
Capital and reserves
Share capital 134 140
Share premium 1 539 1 528
BEE held consolidation shares (747) (799)
Retained income 6 596 5 888
Other reserves 859 (48)
Shareholders interest 8 381 6 709
Minority interest in subsidiaries 1 371 1 087
Equity 9 752 7 796
Non-current liabilities 6 808 4 706
Deferred tax 1 951 1 663
Long-term borrowings 3 481 1 732
Non-recourse equity-settled BEE borrowings 722 737
Provisions 654 574
Current liabilities 4 741 5 280
Trade and other payables (note 4) 2 572 1 997
Short-term borrowings 2 078 3 264
Derivative instruments 16 1
Tax 75 18
TOTAL EQUITY AND LIABILITIES 21 301 17 782
Number of shares (000)
in issue 108 648 105 143
weighted average (basic) 110 225 106 209
weighted average (diluted) 112 274 108 739
STATEMENT OF CHANGES IN EQUITY
Condensed consolidated 2013 2012
Rmillion
Balance at beginning of year 6 709 4 800
Total comprehensive income for the year 2 014 2 125
Retained earnings 1 070 889
Movement in hedge reserve (5) (2)
Foreign currency translation 949 1 238
Dividends paid (347) (279)
Share capital issued ordinary 5 4
BEE held consolidation shares 37 42
Share-based payment charge 57 47
Settlement of share-based payment awards (94) (30)
Shareholders interest 8 381 6 709
Minority interest in subsidiaries 1 371 1 087
Balance at beginning of year 1 087 840
Total comprehensive income for the year 294 256
Retained earnings 100 132
Foreign currency translation 194 124
Dividends paid to minorities (10) (9)
Equity 9 752 7 796
STATEMENT OF OTHER COMPREHENSIVE INCOME
Condensed consolidated 2013 2012
Rmillion
Net profit for the year 1 170 1 021
Other comprehensive income 1 138 1 360
Movement in non-distributable reserves:
Foreign currency translation 1 143 1 362
Hedge reserve (6) (3)
Tax on movement in hedge reserve 1 1
Total comprehensive income for the year 2 308 2 381
Total comprehensive income attributable to:
Shareholders of Tongaat Hulett 2 014 2 125
Minority (non-controlling) interest 294 256
2 308 2 381
STATEMENT OF CASH FLOWS
Condensed consolidated 2013 2012
Rmillion
Operating profit 2 119 1 878
Profit on disposal of property, plant
and equipment (24) (10)
Depreciation 472 366
Growing crops and other non-cash items (385) (352)
Operating cash flow 2 182 1 882
Change in working capital (56) (519)
Cash flow from operations 2 126 1 363
Tax payments (239) (125)
Net financing costs (560) (507)
Cash flow from operating activities 1 327 731
Expenditure on property, plant and equipment:
New (447) (329)
Replacement and plant overhaul (570) (345)
Expenditure on intangible assets (15) (20)
Capital expenditure on growing crops (157) (57)
Proceeds on disposal of property,
plant and equipment 40 19
Investments (1) (4)
Net cash flow before dividends and
financing activities 177 (5)
Dividends paid (357) (288)
Net cash flow before financing activities (180) (293)
Borrowings raised 503 516
Non-recourse equity-settled BEE borrowings (15) (24)
Shares issued 5 4
Settlement of share-based payment awards (94) (30)
Net increase in cash and cash equivalents 219 173
Balance at beginning of year 592 350
Foreign exchange adjustment 106 69
Cash and cash equivalents at end of year 917 592
NOTES
Condensed consolidated 2013 2012
Rmillion
1. Net financing costs
Interest paid (596) (528)
Interest capitalised 1
Interest received 36 20
(560) (507)
2. Tax
Normal (294) (112)
Deferred (90) (187)
Rate change adjustment deferred (5) 16)
Secondary tax on companies (36)
(389) (351)
3. Headline earnings
Profit attributable to shareholders 1 070 889
Adjusted for:
Capital profit on disposal of land (16) (3)
Capital loss on other items 1
Loss on fixed assets and other
disposals 2
Tax effect of the above items 3 3
1 058 891
4. Trade and other payables
Included in trade and other payables is the maize obligation
(interest bearing) of R216 million (2012: R161 million).
5. Capital expenditure commitments
Contracted 175 132
Approved 312 210
487 342
6. Operating lease commitments 104 95
7. Guarantees and contingent liabilities 38 24
8. Basis of preparation
The condensed financial information has 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, 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. 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 2012. These financial
statements were prepared under the supervision of the Chief Financial
Officer, M H Munro CA (SA).
9. Audited results
These condensed 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 opinion on the annual financial statements is available
for inspection at the registered office of the company. The auditors
report does not necessarily cover all of the information contained in
this announcement. Shareholders are therefore advised that in order to
obtain a full understanding of the nature of the auditors work they
should obtain a copy of the Integrated Annual Report after it has
been released on or before 30 June 2013.
CORPORATE INFORMATION
Directorate: J B Magwaza (Chairman), P H Staude (Chief Executive Officer)*,
B G Dunlop*, 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: 24/05/2013 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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