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Illovo Sugar Limited - Audited results for the year ended 31 March 2003
Illovo Sugar Limited
Company registration number 1906/000622/06
Share Code: ILV
ISIN: ZAE000003547
PROFIT AND DIVIDEND ANNOUNCEMENT
Audited results for the year ended 31 March 2003
Record production levels
Operating profit exceeds R1 billion
Strong cash generation
33% increase in headline earnings per share
Review
During the past year the group achieved very good results with headline earnings
increasing by 34% and record production of cane, sugar and most downstream
products being attained. Overall the season was characterised by favourable
weather conditions which assisted in the achievement of improved cane and
sucrose yields. Factory performance continued to improve with high levels of
mechanical and operational efficiency. These factors enabled the company to
further consolidate its position as a leading, global, low-cost sugar and
downstream products producer.
In the financial year ended 31 March 2003, the group achieved turnover of R7.0
billion, operating profit of R1.086 billion and headline earnings of R454.6
million. Compared to the previous year revenue increased by 17% and operating
profit by 42%. Headline earnings per share of 136.8 cents were 33% higher than
those achieved in the previous 12 months. A substantial increase in cane and
sugar production, strong performance from downstream operations, improved
domestic market sales and a weaker rand contributed to these results. Financing
costs increased by R19.1 million to R247.1 million. Cash generated from
operations of R1 172.9 million was strong. Following the completion of the
rehabilitation and re-development programmes at Kilombero in Tanzania and
Maragra in Mozambique both operations have been consolidated into the group with
effect from 31 March 2003. At the end of March 2003, the group increased its
shareholding in Sucoma (Malawi) to 76% whilst it raised its stake in Zambia
Sugar to 90% during the year. Both these investments should contribute towards
future headline earnings. Gearing increased from 68.0% to 94.4% largely as a
result of the consolidation of Kilombero and Maragra. However, group borrowings
of R1 777.2 million, taking into account the borrowings of these entities at
both the beginning and end of the financial year under review, reflected a
decrease of R594.8 million.
The contributions to operating profit were sugar manufacture 59%, cane growing
27% and downstream 14%. The contributions to profit by country, were South
Africa 39%, Malawi 24%, Zambia 22%, Swaziland 13% and the United States 2%.
The group"s productive base continued to expand with new sugar production
records being achieved in each country of operation, except for the United
States. Group sugar output increased to 2.308 million tons, which exceeded last
season"s record by 355 000 tons, whilst cane production increased by almost one
million tons to a new record of 5.781 million tons.
The downstream plants performed particularly well. New weekly production records
were established at the furfural plant whilst there was a significant increase
in the production of acetoin and a small increase in diacetyl. Record volumes
of ethyl alcohol were produced at the Merebank and Glendale plants. Lactulose
output was also a record.
The group supplies sugar and downstream products to a number of domestic,
regional and world markets. Sales to domestic markets contributed 50% to total
revenue whilst exports to 94 countries contributed the balance. A strength of
the group is that 61% of sugar production by volume and 77% by value was sold
into stable domestic or premium priced export markets.
Illegal sugar imports into some of the countries in Africa where the group has
operations have been of concern, but it is pleasing that the government in each
of the affected countries has responded positively to stem the flow of these
illegal imports.
World trade negotiations continue and the group is monitoring the impact of
these on its markets, as access tonnages and prices earned in the European Union
and the United States are valuable to the group and the many developing
countries which receive this access. The group is supportive of international
sugar trade reform as it could be the catalyst for production expansion in its
area of operation, but it is imperative that any new trade agreements take
cognisance of the special differential needs of the developing countries which
benefit from the current African, Caribbean & Pacific (ACP) and proposed
additional Least Developed Countries (LDC) preferential access into these
markets.
World sugar prices experienced a welcome return to higher levels during the
year, with futures prices rising from below US5.0 cents/lb in June 2002 to a
high of US9.0 cents/lb in February 2003. The average white premium was
favourable for refined exports. Illovo benefited from the higher prices
received from raw sugar sales on the world market as well as from the premiums
achieved for regional sugar sales, refined exports and speciality sugar exports.
During the year R173.8 million (2002: R140.2 million) was spent on the
replacement of plant and equipment to ensure that operating assets are
maintained in sound condition and that product quality is of the highest
standard. In addition, R42.7 million was invested in expansion projects in the
flavourants side of the business in South Africa, and the sugar operations in
Swaziland, and on product registrations. Steady progress was made towards the
commercialisation of furfural as an agricultural chemical.
Details of the company"s compliance with the Code of Corporate Practices and
Conduct as contained in the King Report on Corporate Governance for South Africa
2002, are disclosed in the 2003 Annual Report which is to be issued in the third
week of June 2003.
Prospects
The results in the forthcoming year will be impacted by disappointing rainfall
in South Africa this past summer. The first official cane estimate released in
early April was approximately 12.5% below last year"s final production figure.
In addition to reduced sugar production, the lower cane estimate will also
impact on furfural production at the Sezela downstream plant. In the irrigated
areas in the rest of the group"s African operations the cane is looking
excellent, however sugar production remains dependent on weather conditions
experienced during the rest of the season. Illovo is a major exporter of sugar
and downstream products and earnings are affected by both world prices and
exchange rates. In addition, profits from foreign operations are impacted by the
currency translation effect. The rand is considerably stronger at present
compared with the same period last year and there will be a significant negative
effect on earnings should the rand continue to trade at current levels for the
remainder of the 2003/04 financial year.
Dividend
The final dividend has been increased to 42.0 cents per share (2002: 31.0 cents)
which gives a total distribution of 68.0 cents per share (2002: 51.0 cents) for
the full year.
On behalf of the Board
R A Williams D G MacLeod
Chairman Managing Director
Durban
20 May 2003
GROUP INCOME STATEMENTS
Year ended
31 March
2003 2002 Change
Notes Rm Rm %
Revenue 7 025.0 6 001.0 17
Profit from operations 1 086.4 763.5 42
Net financing costs 1 247.1 228.0
Profit before abnormal 839.3 535.5 57
items
Abnormal items 2 (2.3) 20.1
Profit before taxation 837.0 555.6 51
Taxation 263.5 122.0
Profit after taxation 573.5 433.6 32
Attributable to outside
shareholders in
subsidiary companies 119.8 72.2
Net profit from ordinary 453.7 361.4 26
activities
Extraordinary item 3 - 186.7
Net profit attributable
to shareholders
in Illovo Sugar Limited 453.7 174.7
Determination of headline
earnings :
Net profit from ordinary 453.7 361.4 26
activities
Adjusted for :
Profit/(loss) on disposal
of property, plant
and equipment 0.8 (2.8)
Profit on disposal of - 23.3
subsidiary companies
Amortisation of goodwill (1.7) 0.6
Headline earnings 454.6 340.3 34
Number of shares in issue 332.9 331.7
(millions)
Weighted average number
of shares on which
headline earnings per 332.3 330.9
share are based
(millions)
Headline earnings per 136.8 102.8 33
share (cents)
Diluted headline earnings 133.5 100.1
per share (cents)
Dividend per share 68.0 51.0 33
(cents)
BUSINESS SEGMENTAL ANALYSIS
Year ended
31 March
2003 2002
Rm % Rm %
Revenue
Sugar 5 217.7 74 4 561.0 76
production
Cane growing 1 126.9 16 816.1 14
Downstream 680.4 10 623.9 10
7 025.0 6 001.0
Profit from
operations
Sugar 642.7 59 481.8 63
production
Cane growing 290.2 27 165.8 22
Downstream 153.5 14 115.8 15
1 086.4 763.4
NOTES TO THE INCOME
STATEMENTS
1. Net
financing
costs
Interest 277.9 288.7
paid
Interest (28.9) (58.6)
received
Dividend (1.7) (1.7)
income
Interest incurred prior to
the commencement
of production and
capitalised as part of the
cost of property, plant (0.2) (0.4)
and equipment
247.1 228.0
2. Abnormal
items
Loss on disposal of ( 2.3) ( 3.2)
property
Profit on disposal of - 23.3
subsidiary companies
Abnormal (loss)/profit ( 2.3) 20.1
before taxation
Taxation 0.9 -
Minority share of abnormal - -
items after taxation
Abnormal (loss)/profit
attributable to
shareholders in Illovo ( 1.4) 20.1
Sugar Limited
3. Extraordin
ary item
Write down of investment
in Maragra Acucar
arising out of flood - 186.7
damage
ABRIDGED GROUP BALANCE SHEETS
31 March
2003 2002
Rm Rm
ASSETS
Non-current assets 3 187.7 2 982.6
Property, plant and 3 093.6 2 730.3
equipment
Investments 118.0 263.8
Goodwill ( 23.9) ( 11.5)
Current assets 2 477.3 2 558.0
Total assets 5 665.0 5 540.6
EQUITY AND LIABILITIES
Capital and reserves 1 469.4 1 786.3
Interest of outside shareholders 412.3 359.3
in subsidiaries
Deferred taxation 634.6 575.1
Net borrowings 1 777.2 1 459.5
Current liabilities 1 371.5 1 360.4
Total equity and 5 665.0 5 540.6
liabilities
OTHER SALIENT FEATURES
Operating margin (%) 15.5 12.7
Gearing (%) 94.4 68.0
Depreciation 214.8 215.6
Capital expenditure 216.5 181.6
- expansion 30.6 37.4
- product registration 12.1 4.0
costs
- replacement 173.8 140.2
Capital commitments 435.4 393.4
- contracted 31.7 27.9
- approved but not 403.7 365.5
contracted
Lease commitments 577.0 618.2
- land and buildings 498.0 513.9
- other 79.0 104.3
Contingent liabilities 16.1 469.5
ABRIDGED GROUP CASH FLOW STATEMENTS
Year ended
31 March
2003 2002
Rm Rm
Cash flows from operating and investing
activities
Cash 1 317.9 993.6
operating
profit
Working capital ( 145.0) ( 250.2)
requirements
Cash generated from 1 172.9 743.4
operations
Replacement ( 173.8) ( 140.2)
capital
Interest, taxation and ( 669.7) ( 447.9)
dividend
Proceeds on disposal of - 389.7
Mauritius operations
Investment in future ( 254.2) ( 249.9)
operations
Other 18.2 81.5
movements
Net cash inflow before 93.4 376.6
financing activities
STATEMENT OF CHANGES IN
EQUITY
Share capital and share
premium
Balance at beginning of 254.6 247.8
the period
Movements during the 5.3 6.8
period
Balance at end of the 259.9 254.6
period
Non-
distributable
reserves
Balance at beginning of 466.1 417.9
the period
Effect of foreign (586.5) 400.2
currency translation
Transfer from/(to) 212.1 ( 352.0)
retained surplus
Balance at end of the 91.7 466.1
period
Retained
surplus
Balance at beginning of 1,065.6 667.9
the period
Dividends ( 189.4) ( 129.0)
paid
Transfer (to)/from non- ( 212.1) 352.0
distributable reserves
Net profit 453.7 174.7
for the
period
Balance at end of the 1,117.8 1,065.6
period
Ordinary shareholders" 1 469.4 1 786.3
equity
The principal accounting policies used in this report are in all material
respects consistently applied, and conform with South African Statements of
Generally Accepted Accounting Practice.
Comparative figures for the prior year have been adjusted for joint ventures
which were previously equity accounted and which are now consolidated.
The results for the year ended 31 March 2003 have been audited by Deloitte &
Touche. Their unqualified audit opinion is available for inspection at the
registered office of the company.
DECLARATION OF DIVIDEND NO. 23
Notice is hereby given that a final dividend of 42.0 cents per share has been
declared on the ordinary shares of the company in respect of the year ended 31
March 2003. This dividend, together with the interim dividend of 26.0 cents per
share which was declared on 13 November 2002, makes a total distribution in
respect of the year ended 31 March 2003 of 68.0 cents per share.
In accordance with the settlement procedures of STRATE, the company has
determined the following salient dates for the payment of the dividend:
Last day to trade cum-dividend : Friday, 4 July 2003
Shares commence trading ex-dividend : Monday, 7 July 2003
Record date : Friday, 11 July 2003
Payment of dividend : Monday, 14 July 2003
Share certificates may not be dematerialised / rematerialised between Monday, 7
July 2003 and Friday, 11 July 2003, both days inclusive.
By order of the Board
G D Knox Durban
Secretary
20 May 2003
Directors:
R A Williams (Chairman)*, D G MacLeod (Managing Director), W M A Buchanan, G J
Clark (Australian), B P Connellan*, R D Hamilton*, N M Hawley, R L Hetzler
(USA), M I Hlatshwayo (Swazi), G D Knox (British), D Konar*, P M Madi*, A R
Mpungwe (Tanzanian)*, R A Norton*, J T Russell, M J Shaw*, B M Stuart
* Non-executive
Registered office:
Illovo Sugar Park, 1 Montgomery Drive, Mount Edgecombe, KwaZulu-Natal, South
Africa
Postal address:
P O Box 194, Durban, 4000
Website: www.illovosugar.com
Transfer Secretaries:
Computershare Investor Services Limited, 70 Marshall Street, Johannesburg, 2001
Auditors:
Deloitte & Touche
Sponsor:
Cazenove South Africa (Proprietary) Limited
Date: 20/05/2003 05:15:13 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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