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TONGAAT HULETT LIMITED - AGM - Update by the CEO of Tongaat Hulett

Release Date: 31/07/2013 10:05
Code(s): TON     PDF:  
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AGM - Update by the CEO of Tongaat Hulett

Tongaat Hulett Limited
Registration number (1892/000610/06)
Share code: TON
ISIN ZAE000096541


Annual General Meeting - Update by the CEO of Tongaat Hulett

Update on the operations and trading conditions provided by
Tongaat Hulett’s Chief Executive Officer, Peter Staude, at
today’s Annual General Meeting:

“A   detailed  Outlook   was  provided   with  the    Results
Announcement published in May 2013 and in the 2013
Integrated Annual Report. The details of those statements
remain relevant and applicable. The update provided today
should be taken in conjunction with those statements.

Tongaat Hulett is continuing to make substantial progress
in the multiple focus areas that will further enhance its
strategic position.

All the sugar mills started-up well in April and May, as
planned for the current season. The cane quantity and
quality and the mill performances thus far have further
substantiated the early season forecast of an increase in
sugar production of some 114 000 tons to 1 368 000 tons,
with the increase this year coming from South Africa.

Downward pressure on sugar prices continues. In real terms,
the world price is currently at its lowest in many years.
In the regional markets, a period of pressure on selling
prices and from imports is being experienced as a result of
the current    low  world   price.  In  South   Africa,  an
application to increase import duties has been lodged by
the industry. The South African sugar industry export
pricing to date shows a reduction of some 5 US cents per
pound compared to last year. With the changing dynamics in
the European Union, the price levels that the business is
achieving from Mozambique and Zimbabwe into the EU, this
season, from its multiple commercial arrangements and
channels are averaging some 6 US cents per pound lower than
the levels in the last two years. The business is currently
focusing a great deal of attention in multiple areas on
achieving the best possible outcome in terms of sugar
prices, combatting import competition and the mix of sugar
flow destinations.
Year to date, the prevailing exchange rates have been
beneficial as Tongaat Hulett’s financial results remain
sensitive to movements in exchange rates, which impact on
export realisations and the conversion of profits from
Zimbabwe and Mozambique into Rands.

The fundamental review to re-examine all bought-in goods
and services, of some R5 billion per annum excluding cane
and maize purchases, is gathering substantial momentum.
Initially, action is being taken to eliminate, reduce or
postpone costs, wherever possible, with immediate benefits.
The full review is examining the “quantum”, “value add”,
“in   house  or   outsource”  and   possible  longer   term
procurement arrangements, in detail, for all goods and
services.

Expenditure on cane planting in South Africa and Mozambique
is being reviewed and, where appropriate, delayed while
development funding is being sought for private growers. In
Zimbabwe, with the low dam levels and the corresponding
mitigating actions related to irrigation, cane expansion
and root replanting for both private growers and own
estates have been curtailed, to be resumed once the dam
levels recover.

The first quarter of this financial year has confirmed that
the starch operation is currently well positioned. The
latest South African maize crop estimate has remained at
11,4 million tons and should result in another surplus
year. 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.

The next two years are likely to be rewarding as to
unlocking value from Tongaat Hulett’s land holdings in
South Africa. The number of interesting prospects is
increasing significantly, particularly with more land
becoming “shovel ready” in the second half of the year. The
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 next period looks
promising for own development sales, together with good
prospects for substantial bulk sales, with an increase in
both land available and interest by prospective purchasers.

The drive to optimise revenue earned from sugar cane is one
of the most important strategic positioning issues. It is
pleasing that a “Request for Information and Registration
(RFIR)”, issued by the Department of Energy, was completed
and submitted in June 2013 to register Tongaat Hulett’s
position relating to new electricity generation. The
current financial 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.

Tongaat Hulett is in the fortunate position (in a world
where sugar consumption is forecast to continue to grow at
some 2% per annum and more and more sugar cane worldwide is
being diverted into ethanol) to still have more than 850
000 tons per annum of unutilised sugar milling capacity.
Unit costs of sugar production will 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
31 July 2013

Sponsor: Investec Bank limited

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