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Trading statement for the year ended 31 March 2018
Tongaat Hulett Limited
Registration number 1892/000610/06
Share code: TON
ISIN ZAE000096541
TRADING STATEMENT FOR THE YEAR ENDED 31 MARCH 2018
The following detailed trading statement is issued for the year ended 31 March 2018, and
follows the trading statement issued on 26 April 2018, which referred to a reduction in
operating profit of at least 15% and in headline earnings of at least 30%.
Operating profit is expected to be approximately R1,958 billion compared to the
R2,333 billion earned for the year ended 31 March 2017. The sugar operations were
adversely affected by the dynamics of imports into the South African market, lower
international sugar prices and the impact of stronger local currencies on export
realisations. Sugar production reflected a partial recovery from the drought conditions of
the previous two seasons. Operating profit from the starch and glucose operation
recovered in the second half of the year, benefitting from a more competitive maize cost.
Land conversion and development activities led to a number of sales in new markets and
operating profit is expected to be in line with the previous year.
Operating profit for the various sugar operations is anticipated to be R837 million (2017:
R1,271 billion). Total sugar production increased to 1 171 000 tons (2017: 1 056 000
tons). The expected contributions to operating profit are: Zimbabwe R563 million (2017:
R504 million), South Africa R86 million (2017: R390 million), Mozambique
R159 million (2017: R308 million), and Swaziland R29 million (2017: R69 million).
The Zimbabwe sugar operations benefitted from continued growth in local demand and
an improvement in the sugarcane crop to be harvested, which is reflected through higher
standing cane valuations. The South African sugar operations experienced high volumes
of imported sugar in the local market when, over several months, upward revisions to the
duty were not implemented timeously, followed by a period during which zero duty was
erroneously applied. The displaced locally-produced sugar was exported in the latter part
of the year and was impacted by lower world prices and a stronger Rand. The South
African sugar industry has taken measures to regain its local market share by ensuring
local prices are more responsive to international markets and by applying for an increase
in the US dollar-based reference price used to calculate the tariff, as published in the
Government Gazette on 11 May 2018. Voermol performed well, with profit and margins
in line with the previous year. In Mozambique, the strengthening of the Metical against
the US dollar limited the ability of the industry to increase local prices and also
contributed, together with lower international prices, to reduced export realisations.
Operating profit from the starch and glucose operation is expected to be R572 million
(2017: R510 million). Higher sales volumes arose from the initiative to replace
customers’ imported volumes with local production, new business development and
growth in export markets. Margins benefitted from lower maize prices, that traded closer
to export parity levels after the record crop of 16,8 million tons, and were negatively
impacted by a stronger Rand.
Land conversion and development activities are expected to deliver operating profit of
R661 million (2017: R641 million) from the sale of 96 developable hectares (2017: 75
developable hectares). Interest in the newly opened high-end location at Tinley Manor on
the coastline north of Ballito realised a sale of 28 hectares, while 35 hectares were sold in
Umhlanga Hills and Marshall Dam in Cornubia for integrated affordable neighbourhoods,
which will yield over 2 500 well-located homes. Further investments were made during
the year into planning and infrastructure that underpins future sales in areas where sales
negotiations are underway or enquiries are being received.
Operating cash flow (after working capital) is expected to be R2,275 billion (2017:
R3,176 billion). In the land and development activities, cash outflows exceeded cash
inflows from previous land sales. Improved operating cash flows generated by the starch
and glucose operation provided some mitigation for the cash impact of lower profits from
the sugar operations. Capital expenditure totalled R2,168 billion (2017: R1,209 billion)
with the commencement of the refinery project in Mozambique and a considerable
investment in sugarcane root replanting, as minimal replanting had occurred during the
drought. Tongaat Hulett’s net debt increased to R6,463 billion (2017: R4,780 billion).
Taking the above into account, headline earnings for the year is expected to be
approximately R617 million (2017: R982 million). Headline earnings per share (“HEPS”)
is expected to be approximately 535 cents per share (2017: 853 cents per share), a
decrease of 37%, while earnings per share (“EPS”) is expected to be approximately
618 cents per share (2017: 854 cents per share), a decrease of 28%.
This trading statement is issued in accordance with paragraph 3.4(b) of the JSE Listings
Requirements. The above information has not been reviewed or reported on by Tongaat
Hulett’s auditors.
The audited results for the year ended 31 March 2018 are scheduled for release on
Monday, 28 May 2018.
Tongaat
17 May 2018
Sponsor
Investec Bank Limited
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