| Mon 4 Aug 2008, 7:05 | | TON - Tongaat Hulett Limited - Interim Results for the half-year ended 30 June |
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TON
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TON - Tongaat Hulett Limited - Interim Results for the half-year ended 30 June
2008
Tongaat Hulett Limited
(formerly The Tongaat-Hulett Group Limited)
Registration No: 1892/000610/06
JSE share code: TON
ISIN: ZAE000096541
Interim Results for the half-year ended 30 June 2008
- Revenue of R3,1 billion (2007: R2,4 billion)
- Profit from Tongaat Hulett operations of R443 million (2007:
R308 million)
- Headline earnings of R252 million (2007: loss of R155 million -
affected by corporate structuring transactions)
- Interim dividend of 160 cents per share (2007: 150 cents per
share)
COMMENTARY
Revenue increased by 28% to R3,1 billion in the first half of 2008. Tongaat
Hulett`s profit from operations grew by 44% to R443 million (2007: R308
million). Benefits arose from a more competitive maize price, improved margins
and volume growth in the starch operations. Higher contributions were earned
from products supplied into the animal feeds and edible oil market sectors from
both starch and sugar operations in South Africa. Increased profit contributions
came from the sugar operations in Mozambique, Zimbabwe and Swaziland.
Profit from the starch operations increased to R103 million (2007: R37 million)
as market conditions for starch and glucose improved. The rise in international
maize prices encouraged increased plantings by South African maize farmers and
this, coupled with good weather conditions, has led to an increase in the South
African maize crop to 11,6 million tons. This has resulted in local maize prices
trading close to world prices. Starch and glucose selling prices have improved
as demand for agricultural commodities across all sectors in international
markets continues to increase due to changing dietary requirements and demand
from biofuels. Sales volumes in the domestic market grew by 2,4% with the
successful recovery of volumes in the coffee creamer sector previously supplied
by imported product and with good growth in the paper-converting sector, offset
by declines in the alcoholic beverage sector. A shortage internationally of
protein for animal feeds and edible oils has resulted in significant
improvements in co-product prices.
Profit from the sugar operations grew to R253 million (2007: R167 million). This
includes the Zimbabwean operations being accounted for on a dividend received
basis. The 5 major operations in Mozambique, Zimbabwe and Swaziland contributed
R141 million (2007: R67 million) to operating profit.
In Mozambique, the planting of an additional 3 509 hectares has been completed
and this cane is growing well. An additional 5 000 hectares are planned to be
planted by the end of 2008 and the related land preparation has been
substantially completed. Sugar production in 2008 at Xinavane is expected to
increase to 75 000 tons (2007: 67 000 tons) and at Mafambisse to 59 000 tons
(2007: 41 000 tons).
Dividends of R35 million (2007: Nil) were received from Triangle Sugar in
Zimbabwe, which was a declaration from prior year profits. This coincided with
the acquisition, for a similar amount, of a shareholding in Botswana Sugar
Industries, previously held by Triangle and now held from South Africa. The
Botswana and Namibia packing and distribution operations delivered a
consistently good performance. Tambankulu Estates in Swaziland is expected to
produce a raw sugar equivalent of 56 000 tons in 2008 (2007: 58 000 tons) and
has benefited from higher realisations within the Swaziland sugar industry.
Voermol, the South African downstream animal feeds operation performed well,
with higher margins and volumes increasing.
The below average 2007 South African sugar crop resulted in lower export sales
volumes in the first half of 2008 and an increased cost per ton of sugar
produced. Raw sugar export volumes from South Africa reduced to 66 000 tons
(2007: 84 000 tons) and were sold at an effective world sugar price of 10,8 US
c/lb (2007: 14,4 US c/lb) at an average R7,50/US$ (2007: R6,70/US$). South
African domestic sales in the first half of the year increased to 230 000 tons
(2007: 210 000 tons). Sugar production in 2008 is estimated to be 722 000 tons
(2007: 604 000 tons). On 9 May 2008 a fire at the refinery`s raw sugar storage
facility destroyed buildings, conveyer equipment and approximately 5 000 tons of
raw sugar. Production at the refinery resumed on 28 May 2008. Comprehensive
insurance cover is in place and a R32 million insurance claim has been accrued
for lost production up to the end of June 2008.
Operating profit from land developments was R115 million (2007: R127 million).
In addition, capital profit of R15 million (2007: R5 million) was realised. The
residential property market is being affected by the prevailing difficult
economic climate. Sales into the industrial and commercial markets are being
constrained by a shortage of saleable stock and the lack of final unconditional
development approvals, despite continuing demand for property in certain areas
of these sectors. In this market, a number of transactions were concluded from
the limited available stock, reflecting the benefit of the well established
property development platform. In the first half of 2008, fifteen hectares of
developable land were sold. Major contributions to profit came from the mixed-
use developments in Umhlanga Ridge Town Centre and Ridgeside. Zimbali
experienced continued market interest and is nearing sell-out of the existing
development. Bulk infrastructure timing is limiting saleable stock in Ridgeside.
Residential sales in Kindlewood were muted. Bridge City is in its early stages
of development and is attracting market interest.
Tongaat Hulett`s net debt has increased to R1,8 billion from R991 million at the
end of 2007. Finance costs have increased with the higher interest rates and the
increased borrowings in the business. This period has seen higher working
capital levels as well as significant capital expenditure, mainly on the
Mozambique expansion.
The 2007 financial results included the main effects of the completed corporate
structuring transactions - the listing and unbundling of Hulamin, a share buy-
back and the 25% BEE equity participation transactions. The 2008 results include
the ongoing amortisation of the employee BEE equity transactions` IFRS2 charge
to the income statement and the consolidation of the BEE special purpose
vehicles, as required by International Financial Reporting Standards (IFRS). The
balance sheet thus reflects the consolidation of the debt in the BEE equity
participation entities. This BEE debt does not have recourse to Tongaat Hulett
and will effectively be equity settled.
Headline earnings for the first half of 2008 grew to R252 million (2007:
headline loss of R155 million which included the once-off corporate structuring
and BEE equity transaction costs and excluded the Hulamin fair valuation gain
prior to listing and unbundling).
The Board has declared an interim dividend for the half-year of 160 cents per
share (2007: 150 cents per share).
OUTLOOK
The starch operations should continue to benefit from the recovery in margins,
mainly as a result of competitive maize prices.
At the beginning of July 2008, the stock of unconditional saleable land has
reduced to 69 hectares. Progress is being made to increase available land, with
final unconditional development approvals, from Tongaat Hulett`s 14 500 gross
hectares of agricultural land with development potential. In the prevailing
market, the focus has shifted to specific opportunities such as retirement
villages, hotel sites, logistics facilities around the new international airport
at La Mercy, Tongaat and the industrial and affordable housing sectors.
In Zimbabwe, the current unsustainable macroeconomic conditions, including
hyperinflation, foreign currency shortages, non-availability of key inputs and
local price controls, are challenging the profitability of the Zimbabwean
operations. Attention is currently on ensuring that the infrastructure and
skills base are maintained. Tongaat Hulett`s operations are positioned for a
rapid turnaround once the macroeconomic conditions in Zimbabwe are restored.
In Mozambique, the R1,3 billion agricultural and milling expansion projects at
Xinavane and Mafambisse are progressing well towards substantially increased
production in the 2009 season and to benefit from greater preferential access to
the European Union, with institutional prices well above the world price. The
2008 sugar production at Xinavane is increasingly being impacted by the
modification and upgrading of the existing mill, in order to increase production
in 2009 by 140% over 2008.
Tongaat Hulett is fast tracking the planning of renewable power generation at
four of its eight sugar mills in the region, against the background of
predictions that electricity demand in South Africa will exceed generating
capacity for a five to seven year period.
Overall, the growth in profit from operations for the full 2008 year is expected
to be at a lower rate than that of the first six months.
For and on behalf of the Board
C M L Savage P H Staude
Chairman Chief Executive Officer
Amanzimnyama
Tongaat, KwaZulu-Natal
31 July 2008
DIVIDEND DECLARATION
Notice is hereby given that the Board has declared an interim dividend (number
162) of 160 cents per share for the half-year ended 30 June 2008 to shareholders
recorded in the register at the close of business on Friday, 29 August 2008.
The salient dates of the declaration and payment of this interim dividend are as
follows:
Last date to trade ordinary shares
"CUM" dividend Friday 22 August 2008
Ordinary shares trade
"EX" dividend Monday 25 August 2008
Record date Friday 29 August 2008
Payment date Thursday 4 September 2008
Share certificates may not be dematerialised or re-materialised, nor may
transfers between registers take place between Monday 25 August and Friday 29
August 2008, 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
Friday, 22 August 2008.
For and behalf of the Board
M M L Mokoka
Company Secretary
Amanzimnyama
Tongaat, KwaZulu-Natal
31 July 2008
INCOME STATEMENT
Condensed consolidated Unaudited Unaudited Audited
Rmillion half-year half-year year ended
30 June 30 June 31 December
Note 2008 2007 2007
Revenue - continuing
operations 3 109 2 434 6 395
Profit from Tongaat Hulett
operations 443 308 838
Capital profit on land 15 5 48
BEE IFRS 2 charge and
transaction costs (17) (354) (383)
Valuation adjustments 1 6 3 (1)
Fair value adjustment of
investment in Hulamin 3 348 3 348
Operating profit after
corporate transactions 447 3 310 3 850
Net financing costs 2 (85) (37) (119)
Profit before tax 362 3 273 3 731
Tax 3 (84) (106) (288)
Net profit after tax 278 3 167 3 443
Discontinued operation
Hulamin unbundling 42 42
Net profit for the period 278 3 209 3 485
Attributable to:
Shareholders 266 3 198 3 457
Minority interest 12 11 28
278 3 209 3 485
Headline earnings/(loss)
attributable to
shareholders 4 252 (155) 61
Earnings per share (cents)
Net profit per share
Basic 258,1 2 993,9 3 292,8
Diluted 251,6 2 935,0 3 220,7
Headline earnings/(loss)
per share
Basic 244,6 (145,1) 58,1
Diluted 238,3 (142,3) 56,8
Dividend per share (cents) 160,0 150,0 310,0
Currency conversion
Rand/US dollar average 7,66 7,16 7,05
Rand/US dollar closing 7,83 7,05 6,84
Rand/GB pound closing 15,58 14,14 13,61
SEGMENTAL ANALYSIS
Condensed consolidated Unaudited Unaudited Audited
Rmillion half-year half-year year ended
30 June 30 June 31 December
2008 2007 2007
REVENUE
Starch 982 751 1 679
Land and Property Developments 322 205 892
Sugar 1 805 1 478 3 824
Consolidated total 3 109 2 434 6 395
PROFIT FROM TONGAAT HULETT OPERATIONS
Starch 103 37 105
Land and Property Developments 115 127 428
Sugar 218 167 307
Triangle dividend 35 53
Centrally accounted costs (28) (23) (55)
Consolidated total 443 308 838
BALANCE SHEET
Condensed consolidated Unaudited Unaudited Audited
Rmillion half-year half-year year ended
30 June 30 June 31 December
2008 2007 2007
ASSETS
Non-current assets
Property, plant and equipment 3 855 2 847 3 210
Growing crops 575 380 353
Long-term receivable 196 203 203
Goodwill 86 42 42
Intangible assets 5 2 6
Investments 267 267 267
4 984 3 741 4 081
Current assets 3 920 2 787 3 546
Inventories 1 207 972 1 331
Trade and other receivables 2 310 1 575 1 742
Derivative instruments 21 8 12
Tax 65 65
Cash and cash equivalents 317 232 396
TOTAL ASSETS 8 904 6 528 7 627
EQUITY AND LIABILITIES
Capital and reserves
Share capital 138 108 138
Share premium 1 503 978 1 517
BEE held consolidation shares (1 038) (1 053)
Retained income 1 884 1 654 1 796
Other reserves 384 315 337
Shareholders` interest 2 871 3 055 2 735
Minority interest in
subsidiaries 247 187 223
Equity 3 118 3 242 2 958
Non-current liabilities 2 564 967 2 156
Deferred tax 688 606 673
Long-term borrowings 806 109 410
Non-recourse equity-settled
BEE borrowings 803 812
Provisions 267 252 261
Current liabilities 3 222 2 319 2 513
Trade and other payables
(note 8) 1 862 1 150 1 494
Short-term borrowings 1 350 1 118 977
Derivative instruments 7 2
Tax 10 44 40
TOTAL EQUITY AND LIABILITIES 8 904 6 528 7 627
Number of shares (000)
- in issue 103 078 107 789 103 005
- weighted average (basic) 103 043 106 816 104 987
- weighted average (diluted) 105 734 108 962 107 337
STATEMENT OF CHANGES IN EQUITY
Condensed consolidated Unaudited Unaudited Audited
Rmillion half-year half-year year ended
30 June 30 June 31 December
2008 2007 2007
Balance at beginning of period 2 735 4 957 4 957
Net profit 266 3 198 3 457
Dividends paid (168) (373) (531)
Reallocation of minority interest (11) (7)
Share capital issued - ordinary 5 48 49
Share capital issued
- B ordinary shares 227
Share capital issued
- A preferred ordinary shares 839
Repurchase of ordinary shares (450)
BEE held consolidation shares 15 (1 053)
Share-based payment charge 13 364 374
Settlement of share-based
payment awards (13) (87) (81)
Share issue expenses (9) (9)
Movement in hedge reserve (3) (1)
Foreign currency translation
reserve 32 2 19
Distribution in specie on
unbundling of Hulamin (5 044) (5 056)
Shareholders` interest 2 871 3 055 2 735
Minority interest in subsidiaries 247 187 223
Balance at beginning of period 223 76 76
Share of profit 12 11 28
Dividends paid to minorities (7) (16) (20)
Reallocation of minority interest 11 7
Consolidation of subsidiaries (12) 132 129
Equity contribution by
BEE minorities 18
Hulamin unbundling (19) (19)
Foreign currency translation
reserve 20 3 4
Equity 3 118 3 242 2 958
CASH FLOW STATEMENT
Condensed consolidated Unaudited Unaudited Audited
Rmillion half-year half-year year ended
30 June 30 June 31 December
2008 2007 2007
Operating profit 447 3 310 3 850
Profit on disposal of property,
plant and equipment (15) (6) (48)
Non-cash items:
Depreciation 120 106 222
BEE equity and corporate
structuring transactions 15 (3 011) (2 998)
Other non-cash items (208) (73) (56)
Tax payments (99) (108) (293)
Change in working capital (73) 39 (175)
Cash flow from operations 187 257 502
Net financing costs (84) (37) (119)
Cash flow from operating activities 103 220 383
Expenditure on property,
plant and equipment:
New (437) (134) (516)
Replacement (163) (141) (193)
Major plant overhaul
costs capitalised (38) (40) (46)
Expenditure on intangible assets (4)
Expenditure on growing crops (26) (14)
Proceeds on disposal of property,
plant and equipment 16 6 58
Investments (54) (9) (2)
Net cash flow before dividends and
and financing activities (599) (98) (334)
Dividends paid (175) (389) (551)
Net cash flow before financing
activities (774) (487) (885)
Borrowings raised 668 602 712
Non-recourse equity-settled
BEE borrowings (9) 812
Shares issued 5 48 49
Settlement of share-based
payment awards (9) (87) (73)
Share issue expenses (9) (9)
Share repurchase (450)
Equity contribution by
BEE minorities 18
Net (decrease)/increase in cash
and cash equivalents (119) 67 174
Balance at beginning of period 396 509 509
Foreign exchange adjustment 27 15
Exchange rate translation
gain/(loss) 13 3 (1)
Subsidiaries consolidated 46
Hulamin unbundling (347) (347)
Cash and cash equivalents at
end of period 317 232 396
NOTES
Condensed consolidated Unaudited Unaudited Audited
Rmillion half-year half-year year ended
30 June 30 June 31 December
2008 2007 2007
1. Valuation adjustments
Exchange rate translation
gain/(loss) 13 3 (1)
Fair value adjustment on
long-term receivable (7)
6 3 (1)
2. Net financing costs
Interest paid (155) (90) (208)
Interest capitalised 42 15
Interest received 28 53 74
(85) (37) (119)
3. Tax
Normal (46) (63) (98)
Deferred (38) 4 (63)
Rate change adjustment
(deferred) 22
Secondary tax on companies (22) (47) (127)
(84) (106) (288)
4. Headline earnings
Profit attributable to
shareholders 266 3 198 3 457
Less after tax effect of surplus
on sale of fixed assets (14) (5) (48)
Reversal of fair value
adjustment of Hulamin (3 348) (3 348)
252 (155) 61
5. Capital expenditure commitment
Contracted 143 196 539
Approved 611 1 298 796
754 1 494 1 335
6. Operating lease commitments 15 20 23
7. Guarantees and contingent
liabilities 86 27 35
8. Trade and other payables
Included in trade and other payables is the maize obligation
(interest bearing) of R209 million (30 June 2007: R160 million
and 31 December 2007: R163 million).
9. Basis of preparation
The condensed consolidated unaudited results for the half-year
ended 30 June 2008 have been prepared in accordance with
International Accounting Standard 34 Interim Financial Reporting.
The accounting policies are consistent with those used for
the audited 2007 annual financial statements which fully comply
with International Financial Reporting Standards. Tongaat Hulett
continues to account for its Zimbabwean operations on a dividend
received basis.
CORPORATE INFORMATION
Directorate: C M L Savage (Chairman), P H Staude (Chief Executive
Officer)*, P M Baum, E le R Bradley, B G Dunlop*, J John,
J B Magwaza, M Mia, M H Munro*, T H Nyasulu, C B Sibisi,
R H J Stevens, J G Williams
* Executive directors
Registered office: Amanzimnyama Hill Road, Tongaat, KwaZulu-Natal
P O Box 3, Tongaat 4400
Telephone: +27 32 439 4019, Facsimile: +27 32 945 3333
Transfer secretaries: Computershare Investor Services (Pty) Limited
Telephone: +27 11 370 7700
www.tongaat.co.za e-mail: info@tongaat.co.za
4 August 2008
Sponsor: Investec Bank Limited
Telephone: +27 11 286 7000
Date: 04/08/2008 07:05:04 Produced by the JSE SENS Department.
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