Wrap Text
Audited Results for the year ended 31 March 2015
Tongaat Hulett Limited
Registration No: 1892/000610/06
JSE share code: TON
ISIN: ZAE000096541
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2015
- Revenue of R16,155 billion (2014: R15,716 billion) +2,8%
- Operating profit of R2,089 billion (2014: R2,374 billion) -12,0%
- Cash flow from operations of R2,533 billion (2014: R2,173 billion) +16,6%
- Headline earnings of R945 million (2014: R1,106 billion) -14,6%
- Annual dividend of 380 cents per share (2014: 360 cps) +5,6
COMMENTARY
The results for the year ended 31 March 2015 were attained in
difficult conditions in the sugar industry and with a number of
positive achievements by Tongaat Hulett in terms of cost
reductions, securing local markets and future cane supplies.
The starch operations again delivered a strong performance. Land
conversion and development activities continue to unlock
substantial value, albeit with operating profit recognised in
the year being below that reported last year. Overall, with
revenue of more than R16 billion, operating profit of
R2,089 billion was earned, reflecting a 12% reduction compared
to the previous best of R2,374 billion earned last year.
Operating profit from the various sugar operations totalled
R806 million (2014: R908 million). The benefit of cost reductions
over the past two years, increased local market sales in Zimbabwe,
together with the negative cane valuation effect recorded in the
income statement last year not being repeated this year, were
offset by a reduction in sugar production volumes and lower
prices. Sales volumes included the sale of sugar from previous
season stocks in Zimbabwe. Revenue in Mozambique and Zimbabwe
was impacted by a further substantial reduction in prices
(4,7 US cents per pound, with a total impact of some R390 million)
for exports into the EU. World sugar prices declined further,
with global stock levels having increased following favourable
weather conditions in many sugar production regions of the world.
The overall cane valuation impact in the income statement was a
positive R96 million this year (driven mainly by the increased
areas under cane and new/replanting of roots), compared to a
negative R153 million last year (when there was a large negative
impact of sugar price reductions). Tongaat Hulett’s sugar
production for the year totalled 1,314 million tons compared
to 1,424 million tons in the prior year.
The South African sugar operations, including the agriculture,
milling, refining and various downstream activities recorded
operating profit of R261 million (2014: R340 million). These
operations, which previously increased sugar production
substantially to 634 000 tons, saw sugar production this
season reduce to 541 000 tons due to low rainfall in KwaZulu-Natal
(KZN). The impact of the dry conditions has been partially
mitigated by 11 554 hectares of new cane developments that were
harvested for the first time this year. Local sales were below
prior years, with various pressures in the market. Cost reduction
actions have limited the cost of goods, services, transport,
marketing, salaries and wages to an increase of 4% this year.
The Zimbabwe sugar operations’ operating profit for the year
amounted to R386 million (US$35 million) compared to the
R330 million (US$33 million) last year. Local market sales
volumes recovered significantly, with improved local market
protection (tariffs and import licences) implemented earlier in
the year and progress being made with distribution and marketing
initiatives. The local market remains suppressed by the
macro-economic conditions. Sugar production for the year was
445 000 tons (2014: 488 000 tons) as a consequence of no cane
being diverted from the independent ethanol plant at Chisumbanje
(39 000 tons sugar equivalent in the prior year) and after
experiencing the impact of low dam levels for irrigation at the
end of 2013, which only recovered in early 2014. The conversion
of US dollar profits into Rands on consolidation was positively
impacted by exchange rate movements. The cost of bought-in goods
and services, salaries and wages was US$11 million lower than the
prior year and US$51 million lower than two years ago, after
absorbing input price, salary and wage increases.
The Mozambique sugar operations recorded operating profit of
R130 million (2014: R168 million). Sugar production for the year
increased to 271 000 tons (2014: 249 000 tons). The local market
was significantly impacted by additional imports and this necessitated
increased exports by local producers at lower prices, with a
negative R77 million profit impact on Tongaat Hulett. The cost
of goods and services, salaries and wages was lower than two years
ago by an amount of Mt165 million, which was the Rand equivalent
of some R58 million, after absorbing price increases and
substantial salary and wage increases. Sugar production has grown
by 15% over the same period.
The Swaziland sugar operations reported operating profit of
R29 million (2014: R70 million) as a result of the lower sucrose
price as a consequence of a reduction in export prices into the EU.
The Swaziland estates produced the raw sugar equivalent of
57 000 tons (2014: 53 000 tons).
The starch operation increased operating profit to R561 million
(2014: R482 million), with improvements in the sales mix,
co-product recoveries, capacity utilisation and plant efficiencies.
Domestic sales volumes grew by 4%, with increases in the
coffee/creamer, confectionary and paper making sectors. Working
together with customers, success has been achieved in increasing
sales of products where demand is growing (locally and exporting
into the rest of Africa) and recovering local market from imports.
Starch and glucose processing margins were in line with the
prior year.
Land conversion and development activities generated profit of
R829 million from the sale of 108 developable hectares
(2014: profit of R1 080 million from sales of 259 developable
hectares). Sales came largely from Cornubia (industrial, business
and retail) with an average profit of R8,2 million per developable
hectare and Izinga/Kindlewood with average profit of R6,3 million
per developable hectare. Profit in Umhlanga Ridge Town Centre
exceeded R25 million per developable hectare. The momentum on
larger land sales has continued, with a single sale of
19 developable hectares in Izinga and a sale of 27 developable
hectares in a new area of Cornubia. The sale of 42 developable
hectares of highly valued land in Umhlanga Ridgeside,
precincts 1 and 2, which was previously expected to be finalised
by the end of March 2015, was not concluded in this financial year.
Negotiations with four parties are at various stages, aimed towards
reaching an imminent conclusion. The development proposals received
for Ridgeside are confirming the value that has previously been
attributed to the land.
Cash flow from operations generated R2,533 billion
(2014: R2,173 billion), an improvement of some R360 million,
with a reduced cash absorption in working capital. Net debt at
the end of the year reduced to R3,992 billion with a R419 million
positive cash flow after dividend payments.
Total net profit before the deduction of minority interests was
R1,047 billion (2014: R1,227 billion) and headline earnings
attributable to Tongaat Hulett shareholders amounted to
R945 million compared to R1,106 billion last year. A final
dividend of 210 cents per share has been declared, bringing
the annual dividend to 380 cents per share (2014: 360 cents
per share).
LOOKING AHEAD
Tongaat Hulett has substantially enhanced its strategic
positioning over the past few years and expects to continue
to do so, focusing on multiple strategic thrusts, all with a
positive impact on earnings and cash flow.
More Favourable Sugar Markets in Coming Years
The sustainability of farmers in the sugar industry throughout
many parts of the world is under significant pressure at the low
current world price and taking into account the substantial input
cost increases over the past decade. This, together with possible
variable weather conditions, is likely to exert downward pressure
on global sugar production levels. Global sugar consumption is
predicted to continue to grow at a rate of some 2% per annum, with
most of this growth coming from low per capita consumption
developing countries. There are predictions for sugar demand
growth in southern and eastern Africa of some 30% over the next
six years. The current surplus global stock levels have also been
putting pressure on local and regional prices, as well as the
EU market, amplified by the EU market reforms. Tongaat Hulett is
steadily shifting export sales from the EU to regional deficit
markets. Attention is focused on capturing and growing local market
sales. In South Africa, the reference price used to calculate
import duty levels does not yet fully provide adequate and
appropriate protection for this socio-economically important rural
industry. In Mozambique, the imminent substantial increase in the
reference price should provide such assistance.
Further Cost Reductions
The sustainable cost reductions achieved over the past two years,
while having to absorb input price increases, provide a good base
for the next steps in the concerted cost reduction process in the
sugar operations. Unit costs of sugar production will benefit
substantially from growth in volumes and better yields, as milling
costs and many of the agricultural costs per hectare are mostly
fixed. The marginal cost of additional sugar production from
existing hectares under cane is typically 4 to 6 US cents per pound.
Growing Sugar Production
The crop size in the coming season in South Africa is uncertain
and is likely to be at the lowest level for many years, while
Zimbabwe and Mozambique are likely to show modest growth in sugar
production.
Good progress continues to be made in growing the number of
hectares under cane and it is expected that by 2018/19 an
additional 22 800 hectares will be harvested, of which
9 074 hectares have already been planted. Agricultural improvement
programs aimed at improving yields and sucrose content are
proceeding well. Tongaat Hulett has more than 2,1 million tons of
sugar milling capacity. Sugar production is targeted to grow from
the 1,314 million tons in 2014/15 to some 1,821 million tons
in 2018/19, under normal weather conditions. Of this growth,
37% is expected to come from a return to normal weather
conditions, 30% from additional hectares under cane and 33%
from yield and sugar extraction improvements.
Creating Value For All Stakeholders
Tongaat Hulett continues to focus on value creation for all
stakeholders through an all-inclusive approach to growth and
development. In KZN there are established collaborations with
Provincial and Local authorities in the inextricably linked areas
of sugar and cane activities, the development of urban areas
(including Cornubia) and maximising the future benefit of
renewable energy. The planting of 28 687 hectares in the past
four years has created some 7 175 direct jobs in rural areas
and the 12 000 hectare project currently underway for cane
development and job creation in rural KZN includes a Jobs
Fund grant for R150 million allocated over some three years,
with the first R50 million already received. In Zimbabwe,
Tongaat Hulett, the Government and Local communities are working
together on socio-economic initiatives in the south-eastern
Lowveld region of the country. One of the key focus areas remains
the on-going orderly development of sustainable private sugar
cane farmers and at the end of the 2014/15 season, some 857 active
indigenous private farmers, farming some 15 880 hectares, employing
more than 7 300 people, generated US$70 million in annual revenue.
Current initiatives should increase this, by the 2017/18 season,
to some 1 023 private farmers supplying more than 1 900 000 tons
of cane harvested from 19 270 farmed hectares, with further job
creation in rural communities. In Mozambique, 415 000 tons of cane
were delivered from 4 370 hectares in the 2014/15 season,
supporting 2 018 indigenous private farmers.
Growing Starch and Glucose
The starch and glucose operation, which is the only wet-miller in
Sub-Saharan Africa, is well positioned strategically, focused on
growing its sales volume, with an enhanced product mix and customer
growth prospects into Africa. This is underpinned by improving use
of its available capacity and the efficiency of its operations.
Dry weather conditions in the new season have resulted in maize
prices trading above international levels and the starch operations
current exposure to these higher prices comprises approximately
15% of the coming year’s maize requirements.
Momentum in Land Development
The momentum in unlocking value and cash flow from land
conversion and development continues, with a portfolio of
8 091 developable hectares in KZN ultimately earmarked for
development. The value achieved per hectare of land sold is
increasingly reflecting the steadily improving land conversion
platform and varies based on usage and location. A progressively
larger area is benefitting from planning activities and
infrastructural investment at key points. Tongaat Hulett
continues to work together with Government, related organisations
and key stakeholders in the property industry to capture the
synergy of each other’s unique capabilities and to maximise value
for all stakeholders. This has a positive impact on economic
development, ranging from industrial and commercial to tourism
and all levels of residential development and the affordable
housing backlog, in the Durban/Northern KZN area and complements
the simultaneous rural development taking place around new
agricultural cane developments. Over the next 5 years, sales
are expected to come primarily out of 3 801 developable hectares
in key focus areas comprising the urban expansion north of
Durban in the Umhlanga and Cornubia areas, coastal lifestyle
areas of Zimbali and Sibaya, business and residential development
around the airport, coastal development north of Ballito in Tinley
Manor and in the Ntshongweni area west of Durban. Further detail
on the land portfolio (including prospective usage, market
momentum, development themes, possible timing and values) is
available on the www.tongaat.com website.
Financial Prospects for the Year Ahead
The financial results for the year ahead will be influenced by a
number of varying dynamics, the magnitude and impact of which are
difficult to predict at this stage. It is likely that the sugar
operations will remain under pressure, particularly in South
Africa. Land development could have a record year. Starch volumes,
mix, cost and exchange rate dynamics are likely to counter maize
prices being closer to import parity.
The business is in a good position to benefit from multiple
actions across all of its well-grounded strategic thrusts, with
its footprint in six SADC countries, its ability to process
both sugar cane and maize, electricity generation and ethanol
opportunities and increased momentum in land conversion.
For and on behalf of the Board
C B Sibisi Peter Staude
Chairman Chief Executive Officer
Amanzimnyama
Tongaat, KwaZulu-Natal
21 May 2015
DIVIDEND DECLARATION
Notice is hereby given that the Board has declared a final gross
cash dividend (number 175) of 210 cents per share for the year ended
31 March 2015 to shareholders recorded in the register at the
close of business on Friday 19 June 2015.
The salient dates of the declaration and payment of this final
dividend are as follows:
Last date to trade ordinary shares
“CUM” dividend Thursday 11 June 2015
Ordinary shares trade “EX” dividend Friday 12 June 2015
Record date Friday 19 June 2015
Payment date Thursday 25 June 2015
Share certificates may not be dematerialised or re-materialised, nor
may transfers between registers take place, between Friday
12 June 2015 and Friday 19 June 2015, 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 Thursday 11 June 2015.
The dividend has been declared from income reserves. A net dividend
of 178,5 cents per share will apply to shareholders liable for the local
15% dividend withholding tax and 210 cents per share to shareholders
exempt from paying the dividend tax. The issued ordinary share
capital as at 21 May 2015 is 135 112 506 shares. The company’s 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
21 May 2015
SUMMARISED AUDITED CONSOLIDATED FINANCIAL STATEMENTS - PROVISIONAL
REPORT AS PER THE JSE LIMITED LISTINGS REQUIREMENTS
INCOME STATEMENT
Summarised consolidated
Rmillion 2015 2014
Revenue 16 155 15 716
Operating profit 2 089 2 374
Net financing costs (note 1) (617) (609)
Profit before tax 1 472 1 765
Tax (note 2) (425) (538)
Net profit for the year 1 047 1 227
Profit attributable to:
Shareholders of Tongaat Hulett 989 1 155
Minority (non-controlling) interest 58 72
1 047 1 227
Headline earnings attributable to
Tongaat Hulett shareholders (note 3) 945 1 106
Earnings per share (cents)
Net profit per share
Basic 864,6 1 034,4
Diluted 864,6 1 022,3
Headline earnings per share
Basic 826,1 990,5
Diluted 826,1 978,9
Dividend per share (cents) 380,0 360,0
Currency conversion
Rand/US dollar closing 12,17 10,56
Rand/US dollar average 11,05 10,13
Rand/Metical average 0,35 0,34
Rand/Euro average 13,96 13,59
US dollar/Euro average 1,26 1,34
SEGMENTAL ANALYSIS
Summarised consolidated
Rmillion 2015 2014
REVENUE
Sugar
Zimbabwe 3 471 2 896
Swaziland 203 211
Mozambique 1 804 1 704
South Africa 6 143 6 224
Sugar operations – total 11 621 11 035
Starch operations 3 447 3 210
Land Conversion and Developments 1 087 1 471
Consolidated total 16 155 15 716
OPERATING PROFIT
Sugar
Zimbabwe 386 330
Swaziland 29 70
Mozambique 130 168
South Africa 261 340
Sugar operations – total 806 908
Starch operations 561 482
Land Conversion and Developments 829 1 080
Centrally accounted and consolidation items (86) (75)
BEE IFRS 2 charge and transaction costs (21) (21)
Consolidated total 2 089 2 374
FURTHER ANALYSIS OF SUGAR OPERATING PROFIT
Sugar operations - before cane valuations 710 1 061
Zimbabwe 320 571
Swaziland 40 56
Mozambique 215 272
South Africa 135 162
Cane valuations - income statement effect 96 (153)
Zimbabwe 66 (241)
Swaziland (11) 14
Mozambique (85) (104)
South Africa 126 178
Sugar operations - after cane valuations 806 908
Zimbabwe 386 330
Swaziland 29 70
Mozambique 130 168
South Africa 261 340
STATEMENT OF FINANCIAL POSITION
Summarised consolidated
Rmillion 2015 2014
ASSETS
Non-current assets
Property, plant and equipment 12 059 11 279
Growing crops 5 473 5 005
Long-term receivable 518 485
Goodwill 376 338
Intangible assets 64 70
Investments 27 18
18 517 17 195
Current assets 8 026 6 781
Inventories 2 472 2 416
Trade and other receivables 3 291 2 866
Major plant overhaul costs 595 432
Cash and cash equivalents 1 668 1 067
TOTAL ASSETS 26 543 23 976
EQUITY AND LIABILITIES
Capital and reserves
Share capital 135 135
Share premium 1 544 1 543
BEE held consolidation shares (673) (700)
Retained income 7 959 7 412
Other reserves 2 924 2 172
Shareholders' interest 11 889 10 562
Minority interest in subsidiaries 1 887 1 628
Equity 13 776 12 190
Non-current liabilities 7 944 7 612
Deferred tax 2 491 2 131
Long-term borrowings 4 056 4 094
Non-recourse equity-settled BEE borrowings 654 691
Provisions 743 696
Current liabilities 4 823 4 174
Trade and other payables (note 4) 3 173 2 742
Short-term borrowings 1 604 1 293
Tax 46 139
TOTAL EQUITY AND LIABILITIES 26 543 23 976
Number of shares (000)
– in issue 135 113 109 967
– weighted average (basic) 114 388 111 655
– weighted average (diluted) 114 388 112 980
STATEMENT OF CHANGES IN EQUITY
Summarised consolidated
Rmillion 2015 2014
Balance at beginning of year 10 562 8 332
Total comprehensive income for the year 1 815 2 397
Retained earnings 973 1 142
Movement in hedge reserve (2) 4
Foreign currency translation 844 1 251
Dividends paid (417) (240)
Share capital issued – ordinary 1 5
BEE held consolidation shares 18 16
Share-based payment charge 85 67
Settlement of share-based payment awards (175) (15)
Shareholders' interest 11 889 10 562
Minority interest in subsidiaries 1 887 1 628
Balance at beginning of year 1 628 1 373
Total comprehensive income for the year 271 268
Retained earnings 58 73
Foreign currency translation 213 195
Dividends paid to minorities (12) (13)
Equity 13 776 12 190
STATEMENT OF OTHER COMPREHENSIVE INCOME
Summarised consolidated
Rmillion 2015 2014
Net profit for the year 1 047 1 227
Other comprehensive income 1 039 1 438
Items that will not be reclassified to
profit or loss:
Foreign currency translation 1 057 1 446
Actuarial loss (23) (17)
Tax on actuarial loss 7 5
Items that may be reclassified
subsequently to profit or loss:
Hedge reserve (3) 6
Tax on movement in hedge reserve 1 (2)
Total comprehensive income for the year 2 086 2 665
Total comprehensive income attributable to:
Shareholders of Tongaat Hulett 1 815 2 397
Minority (non-controlling) interest 271 268
2 086 2 665
STATEMENT OF CASH FLOWS
Summarised consolidated
Rmillion 2015 2014
Operating profit 2 089 2 374
Surplus on disposal of property,
plant and equipment (77) (75)
Depreciation 564 571
Growing crops and other non-cash items 1 64
Operating cash flow 2 577 2 934
Change in working capital (44) (761)
Cash flow from operations 2 533 2 173
Tax payments (353) (452)
Net financing costs (617) (609)
Cash flow from operating activities 1 563 1 112
Expenditure on property, plant and equipment:
New (203) (117)
Replacement and plant overhaul (529) (411)
Capital expenditure on growing crops (76) (118)
Other capital items 93 87
Net cash flow before dividends and
financing activities 848 553
Dividends paid (429) (253)
Net cash flow before financing activities 419 300
Borrowings raised / (repaid) 218 (258)
Non-recourse equity-settled BEE borrowings (37) (31)
Shares issued 1 5
Settlement of share-based payment awards (175) (15)
Net increase in cash and cash equivalents 426 1
Balance at beginning of year 1 067 917
Foreign currency translation 175 149
Cash and cash equivalents at end of year 1 668 1 067
NOTES
Summarised consolidated
Rmillion 2015 2014
1. Net financing costs
Interest paid (685) (646)
Interest capitalised 1
Interest received 67 37
(617) (609)
2. Tax
Normal (261) (513)
Deferred (164) (29)
Rate change adjustment – deferred 4
(425) (538)
3. Headline earnings
Profit attributable to shareholders 989 1 155
Adjusted for:
Capital profit on disposal of land
and buildings (48) (66)
Loss/(surplus) on other capital items 2 (1)
Tax on the above items 2 18
945 1 106
4. Trade and other payables
Included in trade and other payables is the maize obligation
(interest bearing) of R246 million (2014: R334 million).
5. Capital expenditure commitments
Contracted 163 74
Approved 478 152
641 226
6. Operating lease commitments 82 128
7. Guarantees and contingent liabilities 33 116
8. Basis of preparation
The summarised consolidated financial information for the year
ended 31 March 2015 has been prepared in accordance with the JSE
Limited Listings Requirements for provisional reports, 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, Financial Reporting
Pronouncements as issued by the Financial Reporting Standards
Council, contains 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 additional disclosure required
in terms of IFRS 7 Financial Instruments: Disclosures and IFRS 13
Fair Value Measurement, will be included in the integrated annual
report. 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 2014 and
which were prepared under the supervision of the Chief Financial
Officer, M H Munro CA (SA).
Tongaat Hulett has adopted all the new or revised accounting
pronouncements as issued by the IASB, which were effective for
Tongaat Hulett from 1 January 2014. The adoption of these
standards had no recognition and measurement impact on the
financial results.
9. Audited results
These summarised consolidated financial statements, which have
been derived from the audited consolidated annual financial
statements for the year ended 31 March 2015, and with which they
are consistent in all material respects, have been audited by
Deloitte & Touche. Their unmodified audit opinions on the
consolidated annual financial statements and on the summarized
financial statements are available for inspection at the
registered office of the company. The auditor’s report does not
necessarily report on all of the information contained in this
announcement and any reference to future financial performance
included in this announcement has not been audited or reported on.
Shareholders are therefore advised that, in order to obtain a
full understanding of the nature of the auditor’s engagement,
they should obtain a copy of the integrated annual report from
the registered office of Tongaat Hulett after it has been
released prior to 30 June 2015.
CORPORATE INFORMATION
Directorate: C B Sibisi (Chairman), P H Staude (Chief Executive
Officer)*, S M Beesley, F Jakoet, J John, R P Kupara^, T N Mgoduso,
N Mjoli-Mncube, M H Munro*, S G Pretorius.
* Executive directors ^ Zimbabwean
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: 25/05/2015 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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