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Trading Statement for the year ended 31 March 2017
Tongaat Hulett Limited
Registration number 1892/000610/06
Share code: TON
ISIN ZAE000096541
TRADING STATEMENT FOR THE YEAR ENDED 31 MARCH 2017
The following trading statement is issued for the year ended 31 March 2017.
Tongaat Hulett’s operating profit for the year is expected to increase by 40% to
approximately R2,333 billion (2016: R1,669 billion). Headline earnings are expected
to be approximately R982 million, compared to the R679 million earned in the
previous year, an increase of some 45%. The results include an improvement in sugar
revenue and operating profit. The starch operations were negatively impacted by
maize costs that traded at import parity levels as a result of the past season’s drought.
Sales concluded in land conversion and developments in these twelve months were
lower than the prior year. Operating cash flow, after working capital movements, has
increased by R1,3 billion to approximately R3,176 billion.
The various sugar operations generated operating profit of R1,271 billion (2016: loss
of R15 million). This is reflective of improved local market prices, more effective
import protection dynamics in the countries where Tongaat Hulett produces sugar and
higher prices realised for exports, especially into regional African markets and the
EU. Sugar production totaled 1 056 000 tons (2016: 1 023 000 tons), with volumes
impacted by low cane yields due to the drought experienced in KwaZulu-Natal and
poor growing conditions with low rainfall and restricted irrigation levels in
Mozambique and Zimbabwe as a result of low dam levels. The recovery from these
poor growing conditions, with two years of regular growing conditions, is expected to
result in sugar production exceeding 1 500 000 tons. The dam levels in Zimbabwe and
Mozambique have already recovered. The nature of sugar milling and cane growing is
such that there is a high proportion of fixed costs. The drive to reduce costs continues
across all operations.
The starch and glucose operation recorded an operating profit of R510 million (2016:
R658 million). Margins were negatively impacted by maize costs which traded at
import parity levels following the drought of the past season and lower co-product
revenues in the latter part of the year. An improved sales mix was achieved during
the period due to the successful replacement of imported volumes with local
production and ongoing market development for modified starches and powdered
glucose. This was offset by lower volumes as the prevailing economic climate led to
lower consumer demand.
Land conversion and development activities recorded operating profit of R641 million
(2016: R1,115 billion). The major contributors were Sibaya (high-end residential,
retirement and school – 57 developable hectares sold), the industrial area of Cornubia
(6 hectares), high intensity mixed use areas of Umhlanga Ridgeside (2 hectares) and
Umhlanga Ridge Town Centre (1 hectare), integrated affordable residential at Bridge
City (3 hectares) and further high end residential at Izinga (4 hectares) and
Kindlewood (2 hectares), totaling 75 developable hectares compared to 121
developable hectares sold in the prior year. Negotiations on a further 233 developable
hectares are currently underway. Revenue, costs and profit recorded per developable
hectare vary, reflective of the degree of enhancement through urban planning, land
use integration and density, location and the intensity of infrastructure investment and
are in line with the value ranges communicated previously. During the year, the
remaining Zimbali properties (Zimbali Lakes) were disposed of to IFA for a cash
component and in exchange for their joint venture share of the Westbrook/Zimbali
South Banks land, resulting in some R24 million being recognised in operating profit.
Taking all of the aforementioned into account together with the centrally accounted
items, Tongaat Hulett’s operating profit for the year is expected to total R2,333 billion
(2016: R1,669 billion).
Operating cash flow (after working capital movements) was approximately R3,176
billion which is a R1,3 billion increase over the R1,863 billion of last year. Sugar cash
flows improved as a result of the higher revenue and operating profits. The land
conversion and development activities generated a stronger operating cash flow, with
significant proceeds being received and after development expenditure related
payments being made. In total, after taking into account capex and root planting costs
which totaled R1,2 billion (2016: R1,9 billion), there was a net cash inflow (after
dividend payments) of R544 million, compared to a net cash outflow of R1,278
billion last year. Tongaat Hulett’s net debt at 31 March 2017 was R4,780 billion,
compared to R5,101 billion at March 2016.
Total net profit per share is expected to be approximately 853 cents per share (2016:
620 cents per share), being a 38% increase, while headline earnings per share for the
year are expected to be approximately 852 cents per share (2016: 588 cents per share),
which is an increase of approximately 45%.
This trading statement is issued in accordance with the JSE Listings Requirements.
The above information has not been reported on by the auditors.
The results for the year ended 31 March 2017 are scheduled for release on Monday,
29 May 2017.
Tongaat
19 May 2017
Sponsor
Investec Bank Limited
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