| Mon 1 Mar 2010, 7:05 | | TON - Tongaat Hulett Limited - Reviewed Interim Results for the twelve months |
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TON
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TON - Tongaat Hulett Limited - Reviewed Interim Results for the twelve months
ended 31 December 2009
Tongaat Hulett Limited
Registration No: 1892/000610/06
JSE share code: TON
ISIN: ZAE000096541
Reviewed Interim Results for the twelve months ended 31 December 2009
- Revenue of R9,1 billion (2008: R7,1 billion)
- Profit from operations of R1,555 billion (2008: R1,132 billion)
- Headline earnings of R839 million (2008: R583 million)
- Recovery of Zimbabwe operations underway
- Financial year-end changed to 31 March 2010
COMMENTARY
Tongaat Hulett has overcome a number of challenges in 2009 and is well on its
way to fully utilise its newly installed sugar production capacity in
Mozambique and to re-establish cane supply and milling capacity utilisation in
Zimbabwe. The recovery of the Zimbabwe sugar operations has commenced,
coinciding with the US dollarisation of the Zimbabwe economy in 2009 and the
return to more normal economic fundamentals relevant to the sugar business,
including the restoration of domestic sales prices to regional levels. Both
Mozambique and Zimbabwe have preferential access to the attractive European
Union markets.
The significantly improved global sugar dynamics are beginning to be reflected
in the financial results of the various sugar operations. At the same time,
market conditions for the sale of development land across most sectors
remained depressed.
Tongaat Hulett`s profit from operations grew by 37% to R1,555 billion in 2009
and headline earnings increased by 44% to R839 million.
Profit from the starch operations was R256 million (2008: R240 million).
Starch and glucose sales volumes in the local market declined by 5,5%. Lower
demand was experienced in the alcoholic beverage, paper and coffee creamer
sectors, with the contraction in consumer spending. The negative effect of the
lower demand was offset by improved starch and glucose margins. A second
consecutive year of favourable agricultural conditions in South Africa yielded
a large maize crop of 12,05 million tons (2007/08: 12,7 million tons) and
resulted in local maize prices trading closer to world prices for most of the
year. Co-product revenues decreased as a result of lower prices for edible
oils and animal feeds.
Land and property development activity is currently focused on the growth
corridor north of Durban that commences inland of Umhlanga/Umdloti, extends
around the new international airport at La Mercy and includes the greater
Tongaat region. In the present economic conditions, few hectares are being
converted to development in the higher value, prime locations on the coastline
and to the west of eThekwini. Good progress is being made, working with all
spheres of Government, in planning for optimal land usage and accelerated
socio economic development. Tongaat Hulett owns 13 895 gross hectares for
development in South Africa. Operating profit from land conversion and
development in 2009 amounted to R148 million (2008: R263 million) with a
further R57 million in capital profits (2008: R22 million) being realised.
During the year, 150 developable hectares (247 gross hectares) were sold
comprising 144 hectares in the eThekwini growth corridor, including new
airport related activities, and 6 hectares in the prime coastal corridor.
The South African sugar milling, refining and agriculture operations
contributed R159 million to profit (2008: R73 million). Raw sugar export
volumes from South Africa increased to 232 000 tons (2008: 210 000 tons) and
were sold at an effective world sugar price of 15,0 US c/lb (2008: 12,1 US
c/lb) at an average exchange rate of R8,19/US$ (2008: R8,05/US$). South
African domestic sugar sales increased by 17% to 545 000 tons (2008: 466 000
tons). Sugar production decreased to 564 000 tons compared to the 644 000 tons
produced in 2008. There has been a reduction in stock levels at the end of the
year. The current dynamics of a higher world sugar price are encouraging for
the South African sugar industry as improved returns from sugar cane farming
will stimulate an improvement in farming practices and an increase in hectares
under cane, leading to improved milling capacity utilisation.
The downstream sugar value added activities contributed R209 million to profit
(2008: R204 million). This includes Voermol animal feeds, South African
refined exports, regional marketing, sales, packing and distribution
activities.
In Swaziland, Tambankulu Estates produced a raw sugar equivalent of 54 000
tons (2008: 56 000 tons). Operating profit was R43 million, compared to last
year`s R44 million.
Sugar production in Mozambique increased to 134 000 tons from 108 000 tons in
2008. The start-up problems experienced during Xinavane`s 2009 milling season,
that limited sugar production, have now been resolved, including having to
replace the diffuser chain following numerous chain link failures. This
resulted in a large portion of the crop on the substantially expanded cane
growing estates being carried over, for harvesting at the start of the 2010/11
season. Production of sugar at Xinavane to the end of December 2009 was 83 000
tons, with a further 6 000 tons produced in January 2010 in an extended
crushing season (2008: 63 000 tons). Mafambisse`s sugar production of 45 000
tons (2008: 45 000 tons) was adversely affected by a number of factors,
including the harvesting of young cane in the newly established cane areas and
overcoming irrigation bottlenecks. The Mozambique operation`s raw sugar export
volumes to the European Union totaled 49 000 tons (2008: 39 000 tons) and
sales to the domestic market increased to 85 000 tons (2008: 69 000 tons). The
currency gains of R122 million realised in 2008, when financial structures
were finalised, were not repeated in 2009. The Mozambique profit from
operations amounted to R185 million (2008: R250 million). Over the next two
seasons, the Mozambique operations are targeting to increase sugar production
from the 134 000 tons in 2009/10 to the newly installed milling capacity of
300 000 tons per annum, with the cane supply already well established.
The profit from sugar operations in Zimbabwe was R548 million in 2009, as
relevant economic fundamentals were reintroduced into the local economy and
the business. Sales to the domestic market of 153 000 tons were undertaken in
US dollars at levels in line with regional pricing and 146 000 tons were
exported to the European Union. Sugar production in Zimbabwe in 2009 amounted
to 259 000 tons (2008: 298 000 tons). The situation that prevailed in Zimbabwe
in 2008 had a negative impact on the 2009 harvest and sugar production levels.
A recovery programme is currently underway, focused on improving cane yields
and the re-establishment of outgrower cane lands, so as to restore sugar
production to the existing installed capacity of 600 000 tons per annum.
As reported in the interim results to 30 June 2009, the Zimbabwe operations
are now consolidated in Tongaat Hulett`s financial results. The accounting
treatment, in terms of International Financial Reporting Standards, on the
commencement of consolidation of these operations gave rise to a balance sheet
take-on gain of R1,969 billion, which is recognised in the income statement.
This gain is excluded from the profit from operations and excluded from
headline earnings.
The centrally accounted and consolidation items include a R82 million gain
(2008: R86 million) on the recognition of an unconditional entitlement in 2009
to an employer surplus account allocation in the Tongaat Hulett pension fund.
The tax charge in the income statement includes the benefit of a release from
the deferred tax provision following the reduction of the Zimbabwe tax rate
from 30% to 25% at the end of 2009 and the advantage of an attractive
Mozambique tax rate for agricultural operations.
Finance costs increased to R343 million (2008: R280 million), commensurate
with the borrowings in the business.
Cash inflow from operations, before tax payments, was R1,390 billion (2008:
R1,128 billion). Tongaat Hulett`s net debt at the end of December was R3,370
billion (compared to R3,064 billion at June 2009 and R2,356 billion at the end
of 2008) with significant capital expenditure, mainly on the Mozambique
expansion, cash absorption in sugar cane growing crops and replanting of sugar
cane in Zimbabwe.
Outlook
Tongaat Hulett`s financial year-end has changed to 31 March, with effect from
the current financial year. A March year-end corresponds with the sugar season
in all the countries in which Tongaat Hulett operates. This is increasingly
significant with the growth in the agriculture and agri-processing components
of the business. Audited results will be published for the 15 months ending 31
March 2010. The final dividend declaration will coincide with the financial
year-end of 31 March 2010.
The financial results for the 15 months to 31 March 2010 will include the
revenue from a single sugar production season while the costs will be for a 15
month period, including those costs incurred from January to March in the off-
crop period that are required to be expensed in the income statement.
A focal point for the business is the drive to increase sugar production from
the 957 000 tons milled in the 2009/10 season to the installed sugar milling
capacity of 1,9 million tons per annum, with a simultaneous reduction in the
unit cost of production.
Tongaat Hulett, with its established and growing operations in agriculture,
agri-processing and land conversion, remains well positioned for the emerging
global dynamics of increasing demand for agricultural products, food,
renewable energy and land usage.
For and on behalf of the Board
J B Magwaza Peter Staude
Chairman Chief Executive Officer
Amanzimnyama
Tongaat, KwaZulu-Natal
25 February 2010
INCOME STATEMENT
Condensed consolidated Reviewed Audited
Rmillion Note 2009 2008
Revenue 9 110 7 106
Profit from operations 1 555 1 132
Capital profit on land 57 22
Capital profit on insurance claim 11 49
BEE IFRS 2 charge and transaction costs (31) (33)
Zimbabwe consolidation take-on gain 1 969
Valuation adjustments (3) 2
Operating profit 3 558 1 172
Share of associate company`s profit 1
Net financing costs 1 (343) (280)
Profit before tax 3 216 892
Tax 2 (234) (212)
Net profit for the period 2 982 680
Profit attributable to:
Shareholders of Tongaat Hulett 2 868 649
Minority (non-controlling) interest 114 31
2 982 680
Headline earnings attributable to
Tongaat Hulett shareholders 3 839 583
Earnings per share (cents)
Net profit per share
Basic 2 775,9 629,7
Diluted 2 719,4 616,8
Headline earnings per share
Basic 812,1 565,6
Diluted 795,5 554,1
Currency conversion
Rand/US dollar average 8,41 8,27
Rand/US dollar closing 7,43 9,30
Rand/GB pound closing 11,98 13,45
SEGMENTAL ANALYSIS
Condensed consolidated Reviewed Audited
Rmillion 2009 2008
REVENUE
Starch operations 2 231 2 150
Land Conversion and Development 197 412
Sugar
Zimbabwe operations 1 457
Swaziland operations 137 137
Mozambique operations 629 527
SA agriculture, milling and refining 3 138 2 424
Downstream value added activities 1 321 1 456
Consolidated total 9 110 7 106
PROFIT FROM OPERATIONS
Starch operations 256 240
Land Conversion and Development 148 263
Sugar
Zimbabwe operations (2008: dividends) 548 35
Swaziland operations 43 44
Mozambique operations 185 250
SA agriculture, milling and refining 159 73
Downstream value added activities 209 204
Centrally accounted items 7 23
Consolidated total 1 555 1 132
STATEMENT OF FINANCIAL POSITION
Condensed consolidated Reviewed Audited
Rmillion 2009 2008
ASSETS
Non-current assets
Property, plant and equipment 7 815 4 659
Growing crops 1 530 742
Long-term receivable 196 196
Goodwill 260 99
Intangible assets 9 6
Investments 7 268
9 817 5 970
Current assets 4 264 3 587
Inventories 2 168 1 709
Trade and other receivables 1 734 1 647
Derivative instruments 23 2
Cash and cash equivalents 339 229
TOTAL ASSETS 14 081 9 557
EQUITY AND LIABILITIES
Capital and reserves
Share capital 138 138
Share premium 1 515 1 506
BEE held consolidation shares (998) (1 023)
Retained income 4 667 2 087
Other reserves (697) 351
Shareholders` interest 4 625 3 059
Minority interest in subsidiaries 919 276
Equity 5 544 3 335
Non-current liabilities 3 786 2 865
Deferred tax 1 405 582
Long-term borrowings 1 105 1 212
Non-recourse equity-settled BEE borrowings 768 792
Provisions 508 279
Current liabilities 4 751 3 357
Trade and other payables (note 4) 2 033 1 849
Short-term borrowings 2 604 1 373
Derivative instruments 2 23
Tax 112 112
TOTAL EQUITY AND LIABILITIES 14 081 9 557
Number of shares (000)
- in issue 103 432 103 247
- weighted average (basic) 103 318 103 070
- weighted average (diluted) 105 466 105 225
STATEMENT OF CASH FLOWS
Condensed consolidated Reviewed Audited
Rmillion 2009 2008
Operating profit 3 558 1 172
Profit on disposal of property, plant
and equipment (66) (74)
Non-cash items:
Depreciation 420 244
Other non-cash items (2 226) (297)
Tax payments (227) (163)
Change in working capital (296) 83
Cash flow from operations 1 163 965
Net financing costs (343) (280)
Cash flow from operating activities 820 685
Expenditure on property, plant and equipment:
New (1 355) (1 317)
Replacement (221) (221)
Major plant overhaul costs capitalised (34) (38)
Expenditure on intangible assets (6) (2)
Expenditure on growing crops (49) (167)
Proceeds on disposal of property, plant
and equipment 84 96
Investments 5 (55)
Long-term receivable 7
Net cash flow before dividends and
financing activities (756) (1 012)
Dividends paid (279) (355)
Net cash flow before financing activities (1 035) (1 367)
Borrowings raised 1 180 1 160
Non-recourse equity-settled BEE borrowings (24) (20)
Shares issued 9 7
Settlement of share-based payment awards (16) (11)
Net increase / (decrease) in cash and
cash equivalents 114 (231)
Balance at beginning of period 229 396
Foreign exchange adjustment (70) 55
Exchange rate translation (loss)/gain (3) 9
Subsidiaries consolidated 69
Cash and cash equivalents at end of period 339 229
STATEMENT OF CHANGES IN EQUITY
Condensed consolidated Reviewed Audited
Rmillion 2009 2008
Balance at beginning of period 3 059 2 735
Total comprehensive income for the period 1 804 633
Retained earnings 2 868 649
Movement in hedge reserve 19 (15)
Foreign currency translation (1 083) (1)
Dividends paid (264) (336)
Reallocation of minority interest (24) (22)
Share capital issued - ordinary 9 7
BEE held consolidation shares 25 30
Share-based payment charge 32 27
Settlement of share-based payment awards (16) (15)
Shareholders` interest 4 625 3 059
Minority interest in subsidiaries 919 276
Balance at beginning of period 276 223
Total comprehensive income for the period (108) 58
Retained earnings 114 31
Foreign currency translation (222) 27
Dividends paid to minorities (15) (19)
Reallocation of minority interest 24 22
Change of holding in subsidiary (8)
Consolidation of subsidiaries 742
Equity 5 544 3 335
STATEMENT OF OTHER COMPREHENSIVE INCOME
Condensed consolidated Reviewed Audited
Rmillion 2009 2008
Profit for the period 2 982 680
Other comprehensive income (1 286) 11
Movement in non-distributable reserves:
Foreign currency translation (1 305) 26
Hedge reserve 25 (21)
Tax on movement in hedge reserve (6) 6
Total comprehensive income for the period 1 696 691
Total comprehensive income attributable to:
Shareholders of Tongaat Hulett 1 804 633
Minority (non-controlling) interest (108) 58
1 696 691
NOTES
Condensed consolidated Reviewed Audited
Rmillion 2009 2008
1. Net financing costs
Interest paid (460) (428)
Interest capitalised 90 103
Interest received 27 45
(343) (280)
2. Tax
Normal (197) (256)
Deferred (132) 66
Rate change adjustment (deferred) 132 22
Secondary tax on companies (37) (44)
(234) (212)
3. Headline earnings
Profit attributable to shareholders 2 868 649
Less Zimbabwe consolidation take-on gain (1 969)
Less after tax effect of:
Profit on disposal of land (51) (22)
Profit on insurance claim (10) (46)
Loss on disposal of other fixed assets 1 2
839 583
4. Trade and other payables
Included in trade and other payables is the maize obligation
(interest bearing) of R417 million (2008: R373 million).
5. Capital expenditure commitments
Contracted 242 587
Approved 108 114
350 701
6. Operating lease commitments 30 28
7. Guarantees and contingent liabilities 133 122
8. Basis of preparation
The condensed consolidated reviewed results for the twelve
months ended 31 December 2009 have been prepared in accordance
with International Accounting Standard 34 Interim Financial
Reporting. The accounting policies are consistent with those
used for the audited 2008 annual financial statements which
fully comply with International Financial Reporting Standards,
the Companies Act, as amended and the JSE Limited Listing
Requirements. Tongaat Hulett`s Zimbabwean operations, which were
previously accounted for on a dividend received basis, have been
consolidated in 2009, giving rise to a balance sheet take-on
gain of R1,969 billion, as determined provisionally within the
measurement period in accordance with IFRS 3 (revised 2008).
This standard has been early adopted and has been applied
prospectively with no restatement of comparatives. In addition,
IAS 1 Presentation of Financial Statements (revised), IFRS 7
Financial Instruments: Disclosures and IFRS 8 Operating Segments
were adopted during the current financial period. The adoption
of these new standards has resulted in certain disclosure
reclassifications but has not resulted in any changes in
accounting policy.
9. External auditor`s review opinion
The external auditors have issued an unmodified review opinion.
A copy of their report is available for inspection at the
registered office of the company.
CORPORATE INFORMATION
Directorate: J B Magwaza (Chairman), P H Staude (Chief Executive
Officer)*, B G Dunlop*, F Jakoet, J John, R P Kupara, AA Maleiane#,
T V Maphai, M Mia, N Mjoli-Mncube, M H Munro*, T H Nyasulu,
C B Sibisi, R H J Stevens.
* Executive directors
Zimbabwean
# Mozambican
Company Secretary: M A C Mahlari
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
Sponsor: Investec Bank Limited Telephone: +27 11 286 7000
Additional information about Tongaat Hulett is available at our website:
www.tongaat.co.za
e-mail: info@tongaat.co.za
1 March 2010
Sponsor: Investec Bank Limited
Date: 01/03/2010 07:05:08 Produced by the JSE SENS Department.
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