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The Tongaat-Hulett Group - Audited Results and Final Dividend Declaration
THE TONGAAT-HULETT GROUP LIMITED
Registration No. 1892/000610/06
Share code TNT
ISIN ZAE000007449
Audited Results and Final Dividend Declaration
for the year ended 31 December 2002
* Revenue up 22% to R6,1 billion
*Operating earnings up 24% to R738 million
Unrealised translation loss of R151 million
* Headline earnings per share down 36% to 388,1 cents
* Headline earnings per share excluding translation adjustment up 30% to
523,4 cents
* Unchanged annual dividend of 270 cents per share
Income Statement
2002 2001
Rmillion Restated
Revenue - continuing operations 6,103 4,993
Continuing operations
Operating earnings 738 596
Triangle dividend 71 76
Net interest paid (100) (75)
Earnings from continuing operations 709 597
Exchange rate translation (loss)/gain (151) 255
Discontinued operations (11)
Earnings before exceptional items 558 841
Exceptional items 6 (5)
Earnings before tax 564 836
Tax (127) (199)
Earnings before exceptional items (129) (209)
Exceptional items 2 10
Earnings after tax 437 637
Share of associate company`s loss (36) (20)
Minority shareholders` share of loss 1
Total net earnings 401 618
Headline earnings 393 608
Earnings per share (cents)
Total net earnings
Basic 396.0 612.3
Diluted 389.8 606.2
Headline earnings
Basic 388.1 602.4
Diluted 382.0 596.4
Headline earnings excluding
translation loss/gain
Basic 523.4 401.3
Diluted 515.2 397.3
Dividends per share (cents) 270.0 270.0
Interim 80.0 62.0
Final 190.0 208.0
Balance Sheet 2002 2001
Rmillion Restated
Assets
Property, plant and equipment 4,144 4,191
Growing crops 168 165
Long-term receivable 210 210
Investments 29 56
Derivative instruments 51 308
Inventories 1,463 1,330
Accounts receivable 982 855
Cash resources 938 1,125
Total assets 7,985 8,240
Equity and liabilities
Shareholders` equity 4,567 4,382
Minority interests in subsidiaries 5 5
Deferred tax 1,012 912
Borrowings - long and short-term 931 1,502
Provisions 245 225
Derivative instruments 186 122
Accounts payable 1,039 1,092
Total equity and liabilities 7,985 8,240
Number of shares (000)
in issue 101,352 101,125
weighted average - basic 101,269 100,934
weighted average - diluted 102,870 101,945
Net asset value per share (cents) 4,506 4,333
Cash Flow Statement
2002 2001
Rmillion Restated
Operating earnings from
continuing operations 738 596
Dividends received
from subsidiaries 71 76
Net interest (100) (75)
Earnings from discontinued operations (11)
Non-cash items
Depreciation 170 159
Provisions 20 40
Other non-cash items 131 (86)
Tax payments (39) (19)
Change in working capital (321) 113
Cash flow from operating activities 670 793
Property, plant and equipment:
New project expenditure (167) (232)
Replacement expenditure (56) (46)
Growing crops (12) (26)
Net proceeds on disposal of
property, plant and equipment 36 33
Investments (1) (60)
Disposal of subsidiaries 111
Dividends paid (292) (214)
Net cash flow 178 359
Borrowings repaid (226) (242)
Shares issued 8 9
Net movement in cash resources (40) 126
Cash resources at beginning of year 1,125 699
Exchange rate
translation (loss)/gain (151) 255
AC 133 adjustment 4 45
Cash resources at end of year 938 1,125
Statement of Changes in Equity
2002 2001
Rmillion Restated
Balance at beginning of period 4,382 4,038
Effect of changes in
accounting policies (18)
Restated balance 4,382 4,020
Total net earnings for the year 401 618
Dividends paid (292) (214)
Share capital issued 8 9
Hedge reserve released to
income statement 41
Gains/(losses) from cash flow hedges 16 (41)
Gains on available for sale assets 4 13
Share of movement in associate`s
currency translation reserve 21 (7)
Currency exchange rate changes (14) (14)
AC 133 adjustment (2)
Balance at end of period 4,567 4,382
Headline Earnings
2002 2001
Rmillion Restated
Total net earnings 401 618
Less after tax effect of:
Exceptional items (8) (5)
Surplus on disposal of plant
and equipment (5)
Headline earnings 393 608
Effect of Changes in Accounting Policies
2002 2001
Rmillion
Operating earnings prior to
accounting policy changes 726 584
Effect of changes:
African Products (20) 51
Tongaat-Hulett Sugar 32 (39)
Operating earnings
per Income Statement 738 596
Other Salient Features
2002 2001
Rmillion Restated
Included in operating income
Foreign exchange (loss)/gain (38) 84
Changes in fair value of
financial instruments (51) 80
Depreciaton 170 159
Net interest paid (100) (82)*
Interest paid (306) (304)
Financial instrument income 149 127
Interest capitalised 27
Interest received 57 68
* Includes R7 million relating to discontinued operations
Exceptional items
Surplus on sale of property
held as fixed assets 9 9
Goodwill amortised (2) (3)
Surplus on disposal of subsidiaries 7
Loss on disposal of operations (8)
Impairment of assets (8)
Other (1) (2)
Exceptional items before tax 6 (5)
Tax 2 10
Exceptional items after tax 8 5
Capital commitments 311 142
Contracted 90 75
Approved but not contracted 221 67
Operating lease commitments 44 40
Guarantees and contingent liabilities 44 12
Applicable exchange rates
R/GB pound average 15,8 12,4
R/US dollar average 10,5 8,6
R/GB pound closing 13,8 17,4
R/US dollar closing 8,6 12,0
SEGMENTAL ANALYSIS2,002
Revenue EBIT Total Total Capital Capital Depre
Rmillion Assets Liabilities Employed Expendi
ciation
ture
African Products 1,470 220 1,659 454 1,450 107 77
Hulett
Aluminium (50%) 1,623 136 2,626 843 2,402 31 34
Moreland 146 20 405 114 292
Tongaat-Hulett
Sugar 2,864 420 2,330 628 1,853 80 58
Corporate (58) 965 362 949 5 1
Continuing
operations 6,103 738 7,985 2,401 6,946 223 170
Triangle dividend 71
Exchange rate
translation loss (151)
Group total 6,103 658 7,985 2,401 6,946 223 170
Revenue EBIT Total Total Capital Capital
Depre
Rmillion Assets Liabilities Employed Expendi
ciation
ture
2001 (restated)
African Products 1,085 199 1,551 535 1,293 52 65
Hulett
Aluminium (50%) 1,270 134 2,890 1,128 2,605 107 28
Moreland 135 28 456 110 351 1
Tongaat-Hulett
Sugar 2,503 281 2,192 781 1,794 116 56
Corporate (46) 1,151 387 1,105 2 1
Continuing
operations 4,993 596 8,240 2,941 7,148 278 150
Triangle dividend 76
Exchange rate
translation gain 255
Discontinued
operations 472 (4) 9
Group total 5,465 923 8,240 2,941 7,148 278 159
COMMENTS
The Group has delivered strong growth in volumes, revenue and operating earnings
for the year to 31 December 2002, assisted by the weak Rand which prevailed
generally throughout the year but which had strengthened significantly by year
end.
Revenue from continuing operations rose by 22 percent to R6,1 billion and
operating earnings were 24 percent higher at R738 million. The year-end
valuation of underlying reserves of GBP 42 million pertaining to offshore cash
resources resulted in an unrealised translation loss of R151 million, compared
with a corresponding gain of R255 million last year. This has resulted in
headline earnings per share declining by 36 percent. Excluding the translation
adjustment, headline earnings per share increased by 30 percent to 523,4 cents.
At 31 December 2002, the Group was in a net cash positive position for the first
time since the commencement of the major investments in African Products and
Hulett Aluminium. Over the past two years, the Group has approved some R550
million for investment in projects all focussed on unlocking more value from
existing businesses.
The board has declared a final dividend of 190 cents per share, which, together
with the interim dividend of 80 cents per share, amounts to an unchanged total
dividend for the year of 270 cents per share.
OPERATIONAL PERFORMANCE
African Products delivered a strong performance in 2002. Overall volumes grew
from 578 000 tons in 2001 to 616 000 tons driven by the ten percent growth in
domestic sales. A drop in export volumes from 71 000 tons in 2001 to 64 000
tons, precipitated by the high maize price and a strong Rand was offset by
improved product mix that realized higher margins. Operating earnings for the
year before interest but after AC133 (Financial Instruments: Recognition and
Measurement) adjustments were R220 million (2001- R199 million). During the year
African Products changed its accounting policy for maize procurement contracts
and in compliance with AC133 now marks to market derivative instruments. As a
consequence operating earnings for 2002 have reduced by R20 million and those
for 2001 have increased by R51 million.
In a year in which the international market has seen depressed demand and
pressure on margins, Hulett Aluminium increased revenue by 28 percent to R3,2
billion, showing a 35 percent compound annual growth rate over the last three
years. Growth in sales volumes was achieved in both the local and export
markets, including increased sales of more profitable products. Rolled
Products sales volumes in the last quarter improved significantly and were 23
percent ahead of the average sales in the first nine months of the year. The
financial benefits of the improved sales during the last quarter were offset by
pressure on international rolling margins and by the sharp movement in the value
of the Rand. Operating earnings before interest grew by two percent to R272
million, the Group`s 50 percent share of which amounted to R136 million (2001 -
R134 million).
Moreland achieved a strong cash flow performance in 2002 and increased revenue
by eight percent to R146 million in spite of the four interest rate hikes and
high property rates on vacant land in Durban.
Increased cane and sugar production, improved export realizations as well as
higher returns and restructuring in Swaziland and Mozambique enabled Tongaat-
Hulett Sugar to increase operating earnings by 49 percent to R420 million for
2002 (2001- R281 million). The results incorporate the adoption of AC 137
(Agriculture) and the move away from seasonal accounting. Overall this had the
effect of reducing operating earnings in 2001 by R39 million and increasing 2002
by R32 million.
Triangle Sugar, in Zimbabwe, which is accounted for to the extent that dividends
are received, continues to operate resiliently in a demanding environment. In
2002 dividends received from Triangle totalled R71 million (2001- R76 million)
net of withholding tax, representing a seven percent reduction on last year.
Difficult trading conditions are likely to persist in 2003. Concerns exist over
the future remitability of dividends from Zimbabwe.
ACCOUNTING POLICIES
The accounting policies of the Group conform with South African Statements of
Generally Accepted Accounting Practice and are consistent with those applied in
the previous year, except for the changes detailed below,
The Group has adopted AC 137 (Agriculture) and as a consequence no longer
accounts for its sugar operations on a seasonal basis. In addition maize futures
and option contracts are accounted for as derivatives or cash flow hedges where
the requirements for hedge accounting have been met. Comparative figures have
been restated for these accounting policy changes, where applicable. This has
had a R9 million favourable effect on the prior year`s earnings after tax and
resulted in equity reducing by R18 million, property, plant and equipment by R84
million, working capital by R89 million and deferred tax by R14 million with
increases in growing crops of R132 million and derivative assets of R9 million.
Current year earnings after tax have increased by R9 million as a result of the
change in accounting policies.
AUDITED RESULTS
The results for the year ended 31 December 2002 have been audited by Deloitte &
Touche. Their unqualified audit opinion is available for inspection at the
registered office of the company.
OUTLOOK
The Group`s results are increasingly impacted by changes in the value of the
Rand, particularly when substantial moves away from inflation differentials
occur. Changes to international accounting standards and their application, a
more volatile Rand, a maize price with a stronger dollar correlation, and
increased exports all add to the impact on results.
The Group is focussing on all controllables and has the ability and the capacity
to increase revenues during the coming year and will continue efforts to reduce
its cost base
In the near term, the business climate for all operations, mainly as a result of
the strengthening of the Rand, is challenging. Should the Rand remain at
current levels, earnings for 2003 will be lower than those for 2002.
For and on behalf of the board
C M L Savage P H Staude
Chairman Chief Executive
DIVIDEND DECLARATION
Notice is hereby given that the board has declared a final dividend (number 151)
of 190 cents per share for the financial year ended 31 December 2002 to
shareholders recorded in the register at the close of business on Friday 28
March 2003.
The salient dates of the declaration and payment of this final dividend are as
follows:
Last date to trade
ordinary shares "CUM" dividend Thursday 20 March 2003
Ordinary shares trade
"EX" dividend Monday 24 March 2003
Record date Friday 28 March 2003
Payment date Thursday 3 April 2003
Share certificates may not be dematerialised or rematerialised, nor may
transfers between registers take place between Monday 24 March 2003 and Friday
28 March 2003, 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
Thursday 20 March 2003.
For and on behalf of the board
M A Kennedy
Group Secretary
19 February 2003
CORPORATE INFORMATION
Executive directors: D G Aitken, B G Dunlop,
A Fourie, G R Hibbert, G P N Kruger,
J B Magwaza, S J Saunders, M Serfontein,
P H Staude (Chief Executive)
Non-executive directors: D D Barber, L Boyd,
E le R Bradley, E K Diack, M W King, M Mia,
T H Nyasulu, C M L Savage (Chairman),
R H J Stevens, A M Thompson
Alternate directors: J A Thomas, G F Young
REGISTERED OFFICE: Amanzimnyama Hill, Tongaat, KwaZulu-Natal, P O Box 3, Tongaat
4400
Telephone (032) 439 4000,
Facsimile (032) 945 3333
TRANSFER SECRETARIES: Computershare Investor Services Limited, 70 Marshall
Street, Johannesburg, 2001, P O Box 61051,
Marshalltown, 2107
Telephone (011) 370 7700,
Facsimile (011) 688 7709
Date: 19/02/2003 05:16:53 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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