ILLOVO SUGAR LIMITED - Preliminary report for the year ended 31 March 2016

Release Date: 03/06/2016 07:05
Code(s): ILV
 
Wrap Text
Preliminary report for the year ended 31 March 2016

ILLOVO SUGAR LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1906/000622/06)
Share Code: ILV
ISIN: ZAE000083846
("Illovo" or "the Company")

PRELIMINARY REPORT FOR THE YEAR ENDED 31 MARCH 2016

Salient Features
-   Low export sugar prices and weak domestic demand, particularly in Malawi
-   Group sugar production down 14% due to direct and indirect drought effects
-   Operating profit decreased by 14.8 % and headline earnings per share by 36.5%
-   Downstream diversification rationale, evidenced by 26% growth in downstream operating
    profit
-   Good progress in evolving sales mix away from the EU market
-   Record ethanol production and electricity co-generation
-   Pleasing cost efficiency gains through continuous improvement

Quote:

Gavin Dalgleish, Managing Director, commented:

"The 'perfect storm' of sustained low export sugar prices, reduced domestic demand in
Malawi, currency volatility and high interest rates in various jurisdictions, exacerbated by the
impact of the regional drought on sugar production, weighed heavily on business
performance. Nonetheless, the downstream business delivered a strong financial
performance, while the group continued to improve the sales mix away from the EU by
growing sales volumes in key regional markets. Cost-reductions, efficiency improvements
and the culture of doing more with less have become further embedded in the business.

Forecasts of the global sugar production deficit for 2015/16 continue to grow, which together
with a strengthening Brazilian Real has contributed to a recent recovery in world market
prices, off seven year lows. Good progress has been made in improving the sales mix,
developing regional and domestic markets and structural cost reduction programmes,
thereby mitigating some of the downside to these results."

Enquiries:

Illovo Sugar Limited                                                031 508 4300

Gavin Dalgleish, Managing Director,

Mohammed Abdool-Samad, Financial Director,

Chris Fitz-Gerald, Group Communications Manager

Instinctif                                                          011 447 3030

Morne Reinders                                                      082 325 1810

Overview

The Illovo group has endured a 'perfect storm' of macro challenges during the twelve months
to 31 March 2016. Direct and indirect drought impacts across all six countries of operation,
currency volatility and high interest rates in various jurisdictions, and reducing domestic
sales demand in Malawi, as well as on-going pressure on sugar export revenues, combined
to weigh heavily on the group's results.

Despite these difficult conditions, the downstream business delivered a strong financial
performance, while the group continued to grow regional sales volumes by expanding
access to key markets. Cost-reduction and efficiency improvement benefits were realised as
the culture of continuous improvement becomes further embedded in the business.

The tough sugar commercial environment saw total group revenues reduced by 0.7% to
R13 169.9 million which, in turn, resulted in the operating margin falling from 12.5% to
10.7%. Operating profit decreased by 14.8% to R1 410.2 million, while headline earnings per
share declined by 36.5% to 113.6 cents, well within the guidance range of 25% to 45%
HEPS decline year-on-year provided in the trading statements published on 25 May 2015
and 18 September 2015. The contribution to operating profit by country was: Zambia 35%
(2015: 35%), Malawi 32% (2015: 38%), Tanzania 16% (2015: 9%), Swaziland 10% (2015:
4%), South Africa 8% (2015: 13%) and Mozambique –1% (2015: 1%). By activity, the
contribution to operating profit was: sugar production 59% (2015: 71%), downstream 24%
(2015: 16%) and cane growing 17% (2015: 13%).

Review

Lower than normal rainfall persisted across the Southern African region, impacting river,
dam and lake levels in Swaziland, Zambia, Malawi and South Africa. These stressed
growing conditions not only reduced sugar cane yields but also increased vulnerability to
pests such as yellow aphids. These drought effects and the flood damage suffered in
Mozambique during January 2015 resulted in a sharp decline in end-of-season cane supply
across all countries of operation. Year-on-year sugar production decreased by 14% from
1.760 million tons to 1.512 million tons.

World sugar prices recovered from seven year lows during August 2015 to break the
15 USc/lb resistance level during March 2016, driven largely by an expected world
production deficit in 2016 and strengthening of the Brazilian Real. Whilst this price recovery
bodes well for the year ahead, the August 2015 low had the effect of depressing regional
export prices. Although the decline in EU market prices appeared to level off and firm slightly
during the period under review, the weaker Euro continued to impact on profitability.

Strong domestic and regional markets remain fundamental to the business. Good progress
has been made with initiatives to grow these markets, with regional sales reflecting steady
growth compared to the prior period.

Demand in Zambia continued to grow and Swaziland benefited from increased sales into the
SADC region. Market conditions in Tanzania continued to improve as stricter enforcement of
regulations reduced illegal sugar imports, whilst the announcement of a new import tariff
structure in Mozambique bodes well for future sales. The strong Malawian Kwacha had an
impact on informal regional trade flows, resulting in an inflow of sugar to compete against
local production which, combined with high interest rates, depressed domestic demand.

The contribution to operating profit from downstream activities continued to grow (from 16%
to 24%). The two alcohol production units in South Africa and the one in Tanzania performed
well, with new production records set at the distillery and lactulose plant at Merebank. Good
furfural production was achieved at the Sezela facility in South Africa. Relative to the prior
year, electrical co-generation at the Ubombo mill in Swaziland increased by 17%.

As reported in September 2015, a decision was made to close the furfural-based nematicide
business in the United States of America (US) following protracted difficulties in obtaining
registration with the US Environmental Protection Agency for application of the product on
food crops. A loss of R169 million was recorded on the closure and subsequent disposal of
the business.

While the conversion of operating profit to cash remains strong, the impact of reduced sales
volumes and lower demand has increased working capital requirements. The higher funding
requirements, compounded by considerable increases in interest rates and currency volatility
in Malawi and Zambia, increased financing costs by R101 million.

Outlook

The persistent dry weather conditions across the region and poor summer rainfall will further
delay the anticipated sugar production recovery during the 2016/17 season, with a
particularly adverse impact expected in Swaziland. Overall sugar production is expected to
be similar to the 2015/16 season.

Notwithstanding this extended drop in physical performance, firmer pricing, improved sales
mix, the flow through of cost savings initiatives and the commissioning of the Zambian
refinery and energy efficiency project in South Africa should impact positively on the financial
performance during 2016/17.

The recent recovery in world sugar market prices is encouraging. Increased import tariffs in
Mozambique and efforts to improve the sales mix and to develop regional markets will
benefit earnings in the year ahead. The recent weakening in the Malawian Kwacha should
stem the flow of illegal imports into that market and improve domestic sales.

The Zambian refinery expansion and product alignment projects remain within budget and
on schedule for commissioning during May and June 2016.

Structural cost reduction programmes and the group-wide continuous improvement
programme should bring meaningful benefits to the group in the short to medium-term.

Capital Distribution

As announced on the Securities Exchange News Service (SENS) on 8 April 2016 and
subsequently on 26 April 2016, Associated British Foods plc ("ABF"), through its wholly
owned subsidiary, AB Sugar Africa Limited, made an offer to acquire all of the issued
ordinary shares in Illovo (other than the 236 569 232 shares already owned by ABF
Overseas Limited ("AOL")) by way of a scheme of arrangement in terms of section 114(1)(c)
of the Companies Act, 2008, between Illovo and its shareholders (other than AOL) ("the
Scheme"); or if the Scheme fails and ABF so elects, by way of a general offer to those
shareholders ("General Offer"), for a cash consideration of R25,00 per share
("Consideration").

A circular setting out the terms and conditions of the Scheme and the General Offer
("Circular"), and incorporating notice of a general meeting of shareholders on 25 May 2016,
was distributed by registered post to shareholders on 26 April 2016, with a copy thereof
posted on Illovo's website, www.illovosugar.co.za. On 25 May 2016, the shareholders voted
in favour of the Scheme.

As set out in the Circular, the Consideration of R25,00 per share is calculated on the basis
that Illovo will not make any distribution to its shareholders between 8 April 2016 and the
settlement date of the Consideration. Accordingly, no distribution to shareholders for the
year ended 31 March 2016 is being declared.


On behalf of the Board
TS Munday                    GB Dalgleish
Chairman                     Managing Director
Mount Edgecombe
3 June 2016

CORPORATE INFORMATION
Directors:
TS Munday (Chairman)*; GB Dalgleish (Managing Director); MH Abdool-Samad; MI Carr#*;
J Cowper#*; G Gomwe^*; MJ Hankinson*; JP Hulley; S Kana*; D Konar*; PA Lister#*;
CW Molope*; AR Mpungwe (Tanzanian)*; L W Riddle.
# British
^Zimbabwean
* Non-executive

Registered office:
1 Nokwe Avenue
Ridgeside, Umhlanga
KwaZulu-Natal, South Africa
Postal address:
PO Box 194, Durban, 4000
Telephone:         +27 31 508 4300
Website:           www.illovosugar.co.za

Transfer Secretaries: Link Market Services South Africa Proprietary Limited
Rennie House, 13th Floor, 19 Ameshoff Street, Braamfontein, 2001
PO Box 4844, Johannesburg, 2000

Auditors:            Deloitte & Touche

Sponsor:             J.P. Morgan Equities South Africa Proprietary Limited.


SUMMARISED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
for the year ended 31 March 2016

                                                                    Audited      Audited
                                                                       2016         2015     Change
                                                        Notes            Rm           Rm          %
   
   
   
Revenue                                                            13 169.9     13 266.5      (0.7)
Cost of sales                                                     (8 160.8)    (8 206.1)
   
Gross profit                                                        5 009.1      5 060.4
Distribution expenses                                             (1 223.6)    (1 155.2)
Administrative expenses                                           (1 608.4)    (1 517.8)
Other operating expenses                                            (766.9)      (732.3)
   
Operating profit                                                    1 410.2      1 655.1     (14.8)
Dividend income                                                         1.0          2.8
Net financing costs                                         4       (457.0)      (355.8)
   
Profit before non-trading items                                       954.2      1 302.1
Share of profit from joint venture                                      5.5          4.6
Share of profit from associates                                        24.0         22.1
Material items                                              5          23.3          3.0
   
Profit before taxation                                              1 007.0      1 331.8     (24.4)
Taxation                                                    6       (334.5)      (388.0)
   
Profit for the year                                                  672.5         943.8
   
   
Attributable to:   
Shareholders of Illovo Sugar Limited                                  580.1        826.4     (29.8)
Non-controlling interest                                               92.4        117.4
    
                                                                      672.5        943.8
   
   
Other comprehensive income   
   
Items that will not be reclassified to profit or loss   
in subsequent years, net of tax:   

Re-measurement of defined benefit obligations                           9.9         29.8
   
Items that may be reclassified to profit or loss   
in subsequent years, net of tax:   

Cash flow hedges                                                       39.2       (11.4)
Hedge of net investment in foreign subsidiaries                     (646.4)       (14.4)
Foreign currency translation differences                            (708.9)      (408.9)
   
Total comprehensive (loss)/income for the year                      (633.7)        538.9
   
   
Attributable to:   
Shareholders of Illovo Sugar Limited                                (590.4)        431.1
Non-controlling interest                                             (43.3)        107.8
     
                                                                    (633.7)        538.9
   
   
   
Headline earnings per share (cents)                         7
  Basic                                                               113.6        179.0     (36.5)
  Diluted                                                             113.6        179.0
   
Earnings per share (cents)   
   Basic                                                              125.9        179.4     (29.8)
   Diluted                                                            125.9        179.4
   
Distribution per share (cents)                              8             -         90.0    (100.0)

SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 March 2016

                                                                               Audited      Audited
                                                                                  2016         2015
                                                                      Notes         Rm           Rm
        
        
        
ASSETS        
        
Non-current assets                                                             9 814.5      9 472.9
        
Property, plant and equipment                                                  7 574.8      7 043.3
Cane roots                                                                     1 800.8      1 776.4
Intangible assets                                                                117.4        311.9
Investment in joint venture                                                        3.5          0.7
Investment in associates                                                          68.8         73.5
Investments                                                                       76.5         74.7
Loans                                                                            142.2        163.9
Deferred taxation asset                                                           30.5         28.5
        
Current assets                                                                 5 817.0      5 353.6
        
Inventories                                                                      987.7      1 022.6
Growing cane                                                                   1 914.3      1 797.2
Trade and other receivables                                                    2 220.7      1 660.9
Factory overhaul costs                                                           327.3        372.0
Derivative financial instruments                                         14       29.2         24.4
Cash and cash equivalents                                                        337.8        476.5
        
Total assets                                                                  15 631.5     14 826.5
        
        
        
EQUITY AND LIABILITIES        
        
Equity attributable to shareholders of Illovo Sugar Limited                    5 613.3      6 472.4
        
Share capital and premium                                                      1 196.0      1 440.2
Share-based payment reserve                                                        3.8          7.2
Other reserves                                                                   (7.5)        (3.9)
Retained earnings                                                              4 421.0      5 028.9
        
Non-controlling interest                                                       1 152.9      1 203.3
        
Total equity                                                                   6 766.2      7 675.7
        
        
Non-current liabilities                                                        4 677.7      3 754.4
        
Long-term borrowings                                                           2 938.8      2 042.9
Deferred taxation liability                                                    1 449.5      1 412.6
Deferred income                                                                   91.8        101.8
Provisions                                                                       197.6        197.1
        
        
Current liabilities                                                            4 187.6      3 396.4
        
Short-term borrowings                                                          1 922.7      1 164.6
Trade and other payables                                                       2 151.5      2 042.5
Taxation                                                                          36.0         64.9
Provisions                                                                        36.4         43.3
Derivative financial instruments                                         14       41.0         81.1
        
Total liabilities                                                              8 865.3      7 150.8
        
Total equity and liabilities                                                  15 631.5     14 826.5

SALIENT FEATURES

                                                                                    31 March
                                                                              Audited       Audited
                                                                                 2016          2015
                                                                      Notes        Rm            Rm
                  
                  
Operating margin (%)                                                             10.7          12.5
                  
Interest cover (times)                                                    a       3.1           4.7
                  
Effective tax rate (%)                                                           33.2          29.1
                  
Net asset value per share (cents)                                             1 468.6       1 666.1
                  
Net debt: equity ratio                                                    b      66.9          35.6
                  
Gearing (%)                                                               c      40.1          26.2
                  
Net borrowings                                                                4 523.7       2 731.0
                  
Depreciation                                                                   343.7          336.8
                  
Capital expenditure                  
     Replacement of property, plant and equipment                               352.4         365.6
     Expansion of property, plant and equipment                               1 077.0         318.3
                   
   Property, plant and equipment                                              1 429.4         683.9
   Expansion of area under cane                                                  17.3           5.7
   Product registration costs                                                     4.4           9.9
                   
                                                                              1 451.1         699.5
                   
                  
Capital commitments                  
   Contracted                                                                   256.5         326.9
   Approved but not contracted                                                  608.4       1 541.5
                   
                                                                                864.9       1 868.4
                   
Lease commitments                                                               153.4         189.3
                   
Contingent liabilities                                                          169.3         155.9
 
NOTES

a.) Interest cover

    Operating profit divided by net financing costs.

b.) Net debt: equity ratio

    Interest-bearing liabilities (net of cash and cash equivalents) divided by total equity. A negative net debt: equity ratio
    indicates that the group is in a net cash position.

c.) Gearing

    Interest-bearing liabilities (net of cash and cash equivalents) expressed as a percentage of total equity and interest-
    bearing liabilities (net of cash and cash equivalents). A negative gearing ratio indicates that the group is in a net cash
    position.

SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2016


                                                                         Share-                                     Share-
                                                            Share         based                                 holders of           Non-
                                                      capital and      payments       Other      Retained     Illovo Sugar    controlling       Total
                                                          premium       reserve    reserves      earnings          Limited       interest      equity
                                                               Rm            Rm          Rm            Rm               Rm             Rm          Rm


Balance at 31 March 2014 (Audited)                        1 886.3          13.1         5.8       4 435.1          6 340.3        1 128.3     7 468.6
  
Total comprehensive income for the year                         -             -     (426.5)         857.6            431.1          107.8       538.9
 
   Profit for the year                                                                              826.4            826.4          117.4       943.8
   Re-measurement of defined benefit obligations                                                     31.2             31.2          (1.4)        29.8
   Cash flow hedges                                                                   (9.7)                          (9.7)          (1.7)      (11.4)
   Hedge of net investment in foreign subsidiaries                                   (11.9)                         (11.9)          (2.5)      (14.4)
   Foreign currency translation differences                                         (404.9)                        (404.9)          (4.0)     (408.9)
   
Issue of share capital                                        0.8                                                      0.8                        0.8

Distributions paid                                        (446.9)                                                  (446.9)        (129.0)     (575.9)
Gain on part-disposal of shareholding in subsidiary                                                  93.1             93.1           96.2       189.3
Gain on liquidation of subsidiary                                                                    59.9             59.9                       59.9
Purchase of shares (forfeitable share plan)                               (5.9)                                      (5.9)                      (5.9)
Transfer of foreign currency translation reserve                                      416.8       (416.8)                -                          -


Balance at 31 March 2015 (Audited)                        1 440.2           7.2       (3.9)       5 028.9          6 472.4        1 203.3     7 675.7
  
Total comprehensive income for the year                         -             -   (1 179.4)         589.0          (590.4)         (43.3)     (633.7)
   
   Profit for the year                                                                              580.1            580.1           92.4       672.5
   Re-measurement of defined benefit obligations                                                      8.9              8.9            1.0         9.9
   Cash flow hedges                                                                    33.5                           33.5            5.7        39.2
   Hedge of net investment in foreign subsidiaries                                  (627.4)                        (627.4)         (19.0)     (646.4)
   Foreign currency translation differences                                         (585.5)                        (585.5)        (123.4)     (708.9)
 
Transactions with non-controlling shareholders                                                     (21.1)           (21.1)           22.7         1.6
Distributions paid                                        (244.2)                                                  (244.2)         (29.8)     (274.0)
Purchase of shares (forfeitable share plan)                               (5.2)                                      (5.2)                      (5.2)
Share-based payments charge                                                 1.8                                        1.8                        1.8
Transfer of other reserves                                                           (37.1)          37.1                -                          -
Transfer of foreign currency translation reserve                                    1 212.9     (1 212.9)                -                          -
 

Balance at 31 March 2016 (Audited)                        1 196.0           3.8       (7.5)       4 421.0          5 613.3        1 152.9     6 766.2

SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2016



                                                                                                                                      31 March
                                                                                                                               Audited       Audited
                                                                                                                                  2016          2015
                                                                                                                     Notes          Rm            Rm
                                                           
                                                           
                                                           
Cash flows from operating activities                                                           
                                                           
Cash operating profit                                                                                                    9     1 097.4       1 663.7
Working capital movements                                                                                               10     (310.6)       (314.1)
                                                            
Cash generated from operations                                                                                                   786.8       1 349.6
Net financing costs                                                                                                            (457.0)       (355.8)
Taxation paid                                                                                                                  (137.7)       (252.7)
Dividend income                                                                                                                    1.0           2.8
Distributions paid                                                                                                             (274.0)       (575.9)
                                                            
Net cash (outflows)/inflows from operating activities                                                                           (80.9)         168.0
                                                            
                                                            
Cash flows from investing activities                                                            
                                                            
Replacement of property, plant and equipment                                                                                   (352.4)       (365.6)
Expansion of property, plant and equipment                                                                                   (1 077.0)       (318.3)
Expansion of area under cane                                                                                                    (17.3)         (5.7)
Capitalisation of product registration costs                                                                                     (4.4)         (9.9)
Proceeds on disposal of property                                                                                                   0.4           3.1
Proceeds on disposal of plant and equipment                                                                                       24.0           6.5
Movement on investments and loans                                                                                                 53.2          21.5
Acquisition of business                                                                                                 11       (2.2)             -
Disposal of business                                                                                                    12       (0.9)             -
                                                            
Net cash outflows from investing activities                                                                                  (1 376.6)       (668.4)
                                                              
Net cash outflows before financing activities                                                                                (1 457.5)       (500.4)
                                                            
Cash flows from financing activities                                                            
                                                            
Long-term borrowings raised/(repaid)                                                                                             636.3        (79.6)
Short-term borrowings raised                                                                                                     668.6         276.2
Issue of share capital                                                                                                               -           0.8
Purchase of shares in terms of forfeitable share plan                                                                            (5.2)         (5.9)
Proceeds on part-disposal of shareholding in subsidiary                                                                              -         189.3
                                                            
Net cash inflows from financing activities                                                                                    1 299.7          380.8
                                                            
Net decrease in cash and cash equivalents                                                                                      (157.8)       (119.6)
                                                              
Cash and cash equivalents at the beginning of the year                                                                           476.5         597.1
                                                            
Exchange rate translation                                                                                                         19.1         (1.0)
                                                           
Cash and cash equivalents at the end of the year                                                                                 337.8         476.5
                                                           
NOTES TO THE SUMMARISED CONSOLIDATED FINANCIAL STATEMENTS                                                           
                                                           

1.   BASIS OF PREPARATION

     The summarised consolidated financial statements have been prepared in accordance with the framework
     concepts and recognition and measurement criteria of International Financial Reporting Standards ("IFRS") and its
     interpretations adopted by the International Accounting Standards Board in issue and effective for the group at 
     31 March 2016 and the South African Institute of Chartered Accountants Financial Reporting Guides as issued by the
     Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting
     Standards Council. The results are presented in accordance with IAS 34: Interim Financial Reporting and comply
     with the Listings Requirements of the JSE Limited and the Companies Act of South Africa, 2008.


     The accounting policies applied in preparation of these summarised consolidated financial statements are in terms
     of IFRS and are consistent with those applied in the previous consolidated financial statements.

     The audited summarised consolidated financial statements have been prepared under the supervision of the group
     financial director, Mohammed Abdool-Samad CA(SA). The summarised consolidated financial statements were
     approved by the board of directors on 2 June 2016.

     The full consolidated annual financial statements from which these summarised consolidated financial statements
     were derived can be inspected at the company's registered office and will be electronically available on the group's
     website www.illovosugar.co.za

2.   AUDIT OPINION

     These summarised consolidated financial statements for the year ended 31 March 2016 have been audited by
     Deloitte & Touche, who expressed an unmodified opinion thereon. The auditor also expressed an unmodified
     opinion on the full consolidated financial statements for the year ended 31 March 2016, from which these
     summarised consolidated financial statements were derived. A copy of the auditor's report on the summarised
     consolidated financial statements and of the auditor's report on the full consolidated financial statements are
     available for inspection at the company's registered office, together with the financial statements identified in the
     respective auditor's reports.

     Deloitte & Touche has not audited future financial performance and expectations expressed by management
     included in the commentary in the summarised consolidated financial statements and accordingly do not express
     an opinion thereon. The auditor's report does not necessarily report on all of the information contained in the
     summarised consolidated financial statements. 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 auditor's report together
     with the accompanying financial information from the issuer's registered office.



3.   POST BALANCE SHEET EVENTS

     As announced on the Securities Exchange News Service (SENS) on 8 April 2016 and subsequently on 26 April
     2016, Associated British Foods plc, through its wholly owned subsidiary, AB Sugar Africa Limited, made an offer to
     acquire all of the issued ordinary shares in Illovo (other than the 236 569 232 shares already owned by ABF
     Overseas Limited ("AOL")) by way of a scheme of arrangement in terms of section 114(1)(c) of the Companies Act,
     2008, between Illovo and its shareholders (other than AOL) ("the Scheme"); or if the Scheme fails and ABF so
     elects, by way of a general offer to those shareholders ("General Offer") for a cash consideration of R25,00 per
     share ("Consideration").

     A circular setting out the terms and conditions of the Scheme and the General Offer ("Circular"), and incorporating
     notice of a general meeting of shareholders on 25 May 2016, was distributed by registered post to shareholders on
     26 April 2016, with a copy thereof posted on Illovo's website, www.illovosugar.co.za. On 25 May 2016, the
     shareholders voted in favour of the Scheme.




                                                                                       Year ended
                                                                                         31 March
                                                                                  Audited       Audited
                                                                                     2016          2015
                                                                                       Rm            Rm


4.   NET FINANCING COSTS

     Interest paid                                                                  514.8         362.9
     Less: capitalised to property, plant and equipment                            (92.8)         (4.0)

                                                                                    422.0         358.9
     Interest received                                                             (18.5)        (13.4)
     Foreign exchange losses                                                         53.5          10.3

                                                                                    457.0         355.8


5.   MATERIAL ITEMS

     Profit on disposal of property                                                 177.0           3.0
     Profit on disposal of plant and equipment - insurable event                     15.1             -
     Loss on closure and subsequent disposal of business                          (168.8)             -

                                                                                     23.3           3.0

6.   TAXATION

     Current taxation                                                                27.4         128.2
     Deferred taxation                                                              225.3         209.8
     Withholding taxation                                                            81.8          50.0
 
                                                                                    334.5         388.0

     The effective tax rate has been impacted by the non-deductible capital loss on the closure and subsequent disposal
     of the furfural-based nematicide business and higher levels of income which is subject to withholding taxation.



7.   DETERMINATION OF HEADLINE EARNINGS

     Profit attributable to shareholders                                            580.1         826.4

     Adjusted for:
        Profit on disposal of property                                            (177.0)         (3.0)
        Profit on disposal of plant and equipment - insurable event                (15.1)             -
        Loss on closure and subsequent disposal of business                         168.8             -

     Total gross effect of adjustments                                             (23.3)         (3.0)
     Total tax effect of adjustments                                                 30.1             -
     Total non-controlling interest effect of adjustments                          (63.4)           1.2

     Headline earnings                                                              523.5         824.6
 
 
     Number of shares (millions) 
       Issued                                                                       460.7         460.7
       Weighted average                                                             460.7         460.7
       Diluted weighted average                                                     460.7         460.7
 
     Headline earnings per share (cents) 
       Basic                                                                        113.6         179.0
       Diluted                                                                      113.6         179.0
 



                                                                                        Year ended
                                                                                          31 March
                                                                                  Audited       Audited
                                                                                     2016          2015
                                                                                       Rm            Rm


8.   DISTRIBUTION PER SHARE

     As set out in the circular, the consideration of R25,00 per share is calculated on the basis that the group will not
     make any distribution to its shareholders between 8 April 2016 and the settlement date of the Consideration.
     Accordingly, no distribution to shareholders for the year ended 31 March 2016 is being declared.



9.   CASH OPERATING PROFIT

     Operating profit                                                             1 410.2      1 655.1
     Material items                                                                  23.3          3.0

                                                                                  1 433.5      1 658.1
     Add back:
       Depreciation                                                                 343.7        336.8
       Amortisation of intangible assets                                             15.3          5.6
       Amortisation of deferred income                                             (10.0)       (10.0)
       Change in fair value of cane roots                                         (247.4)      (208.6)
       Change in fair value of growing cane                                       (416.2)      (111.6)
       Loss on closure and subsequent disposal of business                          168.8            -
       Profit on disposal of property                                             (177.0)        (3.0)
       Profit on disposal of plant and equipment - insurable event                 (15.1)            -
       Profit on disposal of plant and equipment                                        -        (3.6)
       Share-based payments charge                                                    1.8            -

                                                                                  1 097.4      1 663.7


10. WORKING CAPITAL MOVEMENTS

     Inventories                                                                   (58.7)       (14.9)
     Trade and other receivables                                                  (558.5)      (311.0)
     Factory overhaul costs                                                          10.4       (32.2)
     Trade and other payables                                                       296.2         44.0

                                                                                  (310.6)      (314.1)


11. ACQUISITION OF BUSINESS

     On 1 April 2015, the group acquired the business of Kilombero Sugar Distributors Limited ("KSD"), a company in
     which the group holds a 20% investment. KSD held the exclusive right to market and distribute the group's sugar
     production in Tanzania. The group acquired the business to allow it direct access to existing customers in Tanzania
     as well as to exert increased influence over the marketing and distribution decisions. KSD will be liquidated in due
     course. From the date of acquisition, the business acquired from KSD has contributed R10.6 million to net profit
     before taxation.

     The fair values of the identifiable assets of KSD as at the date of acquisition were:

     Intangible asset                                                                37.3           -

     Purchase consideration                                                          37.3           -
     less: Deferred consideration payable                                          (35.1) 
     Cash consideration paid                                                          2.2           -

     The deferred purchase consideration is payable over three years and bears interest at an effective interest rate of
     7% per annum.

                                                                                        Year ended
                                                                                          31 March
                                                                                  Audited     Audited
                                                                                     2016        2015
                                                                                       Rm          Rm


12. DISPOSAL OF BUSINESS

   On 17 September 2015, a decision was made to close the furfural-based nematicide business in the United States
   of America ("USA") following difficulties in obtaining registration with the USA Environmental Protection Agency for
   application on food crops. During March 2016, the closure of the business was finalised when the group disposed of
   its 70% shareholding in Agriguard LLC, the underlying operating entity, to the non-controlling shareholders and
   subsequently placed Illovo Sugar (USA) Company, its USA subsidiary and the holding company of Agriguard LLC,
   into voluntary liquidation.

   The carrying value of the assets and liabilities disposed of was:

   Intangible assets                                                                231.3           -
   Inventories                                                                        2.1           -
   Trade and other receivables                                                        2.6           -
   Cash and cash equivalents                                                          0.9           -
   Trade and other payables, net of closure costs                                   (3.7)           -

                                                                                    233.2           -
   Non-controlling interest                                                           1.6           -
   Recycling of foreign currency translation differences                           (66.0)           -
   Loss on closure and subsequent disposal of business                            (168.8)           -

   Proceeds on disposal of business                                                     -           -
   less: Cash and cash equivalents disposed of                                      (0.9)           -

   Disposal of business                                                             (0.9)           -

13. RELATED PARTIES

   The group has loans from Associated British Foods plc, its holding company, and Mountsfield Park Finance Limited,
   a fellow subsidiary. The loans are unsecured and bear interest at market-related interest rates. The interest paid on
   these loans is R71.9 million (2015: R58.3 million).

   Long-term borrowings - Mountsfield Park Finance Limited                        2 238.6     1 840.8
   Short-term borrowings - Associated British Foods plc                             369.5           -

                                                                                  2 608.1     1 840.8


14. FINANCIAL INSTRUMENTS

   The fair values of financial instruments are determined using inputs that are observable, either directly, (i.e. as
   prices) or indirectly (i.e. derived from prices), other than quoted prices in an active market and therefore fall into the
   level 2 fair value category. The fair values of non-financial assets are determined using inputs that are
   unobservable, using the best information available in the circumstances for using the assets and therefore fall into
   the level 3 fair value category. This report does not include the information required by paragraph 16A(j) of IAS 34:
   Interim Financial Reporting. This disclosure has been disclosed in the full set of annual financial statements which will
   be made available on the group's website www.illovosugar.co.za

                                                                                           31 March
                                                                            Audited                    Audited
                                                                               2016                       2015
                                                                                 Rm         %               Rm         %


15. SUMMARISED SEGMENT INFORMATION

   Business segments

   Revenue
   Sugar production                                                         9 332.0        71          9 242.3       70
   Cane growing                                                             2 547.1        19          2 848.3       21
   Downstream and co-generation                                             1 290.8        10          1 175.9        9

                                                                           13 169.9                   13 266.5


   Operating profit
   Sugar production                                                           835.0        59          1 179.8       71
   Cane growing                                                               236.9        17            207.4       13
   Downstream and co-generation                                               338.3        24            267.9       16

                                                                            1 410.2                    1 655.1


   Geographic segments

   Revenue
   Malawi                                                                   2 456.1        18          2 362.7       18
   Mozambique                                                                 473.0         4            593.3        4
   South Africa                                                             4 586.0        35          4 481.6       34
   Swaziland                                                                1 471.2        11          1 396.5       11
   Tanzania                                                                 1 299.4        10          1 247.4        9
   Zambia                                                                   2 884.2        22          3 185.0       24

                                                                           13 169.9                   13 266.5


   Operating profit
   Malawi                                                                     454.0        32            625.3        38
   Mozambique                                                                (15.5)       (1)             24.6         1
   South Africa                                                               119.5         8            215.2        13
   Swaziland                                                                  134.3        10             68.7         4
   Tanzania                                                                   230.0        16            145.0         9
   Zambia                                                                     487.9        35            576.3        35

                                                                            1 410.2                    1 655.1


   Total assets
   Malawi                                                                   2 658.6        18          2 878.7       20
   Mozambique                                                                 894.4         6            944.7        7
   South Africa                                                             3 423.7        22          2 857.6       20
   Swaziland                                                                2 014.6        13          2 033.2       14
   Tanzania                                                                 1 616.4        11          1 598.8       11
   Zambia                                                                   4 626.3        30          3 984.1       28

                                                                           15 234.0                   14 297.1


   Note:          Total assets exclude cash and cash equivalents, deferred taxation and derivative financial instruments.




Date: 03/06/2016 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Email this JSE Sens Item to a Friend.

Share This Story