| Thu 18 Jun 2009, 15:15 | | TON - Tongaat Hulett Limited - Cautionary Announcement |
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TON - Tongaat Hulett Limited - Cautionary Announcement
Tongaat Hulett Limited
Registration number (1892/000610/06)
Share code: TON
ISIN: ZAE000096541
CAUTIONARY ANNOUNCEMENT
Tongaat Hulett intends to consolidate its Zimbabwe sugar operations in its
financial statements in 2009. Shareholders are advised that the impact on the
financial results of Tongaat Hulett is currently being finalised and is
expected to be sizeable. Accordingly, shareholders are advised to exercise
caution when dealing in the company`s securities until a further announcement
is made. The consolidation of the Zimbabwean operations would be included in
Tongaat Hulett`s interim results, for the half-year ended 30 June 2009.
This consolidation follows the macroeconomic changes that essentially occurred
when Zimbabwe moved to a US dollar and Rand based economy and, in so doing,
restored key relevant fundamentals to the economy. This removed many of the
distortions that existed in the Zimbabwean economy, which included unrealistic
local market sugar price realisations, not receiving the full benefit of
export proceeds, exchange rate uncertainty and foreign currency restrictions,
shortage of inputs and the effects of extreme hyperinflation.
Previously, in terms of the relevant international accounting standard (IAS 27
Consolidation and Separate Financial Statements), these operations were not
consolidated and were accounted for on a dividend received basis. As a result
of the changes at the beginning of 2009, Tongaat Hulett meets the requirement
for consolidating its Zimbabwean operations in terms of IAS 27, namely that it
obtains the benefits from the assets and activities in Zimbabwe, with the
requisite control over the operations. Triangle Sugar (100% owned by Tongaat
Hulett) and Hippo Valley Estates (50,3% owned) will thus be consolidated into
Tongaat Hulett`s financial results for 2009.
The carrying value of the Zimbabwe "investment" on the Tongaat Hulett balance
sheet at 31 December 2008 was R263 million, which arose when the 50,3% stake
in Hippo Valley Estates was acquired through Triangle Sugar under the
conditions prevailing at the end of 2006. The commencement of consolidation
will be accounted for in terms of IFRS 3 (revised 2008), the international
accounting standard on Business Combinations. The appropriate balance sheet
values for the Zimbabwe entities will be taken onto the Tongaat Hulett
consolidated balance sheet. The accounting treatment of the gain in respect of
the net increase in the Tongaat Hulett balance sheet values on consolidation
is currently being finalised. The ongoing revenue, operating profit, interest,
tax, minorities share of profits and cash flow from the effective date and
balance sheet at reporting dates will be reflected in the Tongaat Hulett
consolidated financial statements.
Tongaat
18 June 2009
Sponsor: Investec Bank Limited
Notes to Editors
Tongaat Hulett`s sugar operations in Zimbabwe are situated in the south-
eastern lowveld of the country, which is acknowledged as one of the world`s
lowest cost sugar producing areas. The operations comprise two large sugar
mills with a combined capacity to crush 4,8 million tons of cane in a 38-week
crushing season, to produce 600 000 tons of sugar. Sugar production in 2008
amounted to 298 000 tons compared to the 580 000 tons that were produced in
2002. Opportunities to expand the sugar production from 600 000 tons to 820
000 tons have been identified. Sugar production is sold into the Zimbabwean,
regional and preferential export markets. Zimbabwe has duty-free and, with
effect from 1 October 2009, quota-free access into the preferential markets of
the European Union. It also has a duty-free quota into the United States of
America.
The cane estates supplying the two sugar mills comprise 46 300 hectares of
fully irrigated cane land yielding in excess of 110 tons cane per hectare per
annum under normal operating conditions. In 2008, company estates delivered
86% of the cane crush with the balance delivered from estates farmed by
outgrowers. The cane estates are served by a number of river systems and large
dams, the largest of which is Lake Mutirikwi. Bulk water supply to the estates
is via a unique and extensive network of canals and water courses.
At full capacity the two sugar mills produce 160 000 tons of molasses with the
alcohol distillery at Triangle having the capacity to convert this molasses to
40 million litres of alcohol/ethanol. Both sugar mills operate white-end sugar
refineries with a combined capacity to produce 140 000 tons of white sugar per
annum. The operations will be in a position to resume the sale of co-generated
electricity at higher levels of cane-throughput. The Zimbabwe operations,
which run extensive livestock and game sections, have significant eco-tourism
potential.
Date: 18/06/2009 15:15:02 Produced by the JSE SENS Department.
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