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ILV: ILLOVO SUGAR LIMITED - INTERIM REPORT FOR ...
ILLOVO SUGAR LIMITED - INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 203
Illovo Sugar Limited
Company registration number 1906/000622/06
Share Code: ILV
ISIN: ZAE000003547
INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2003
This report incorporates alternative financial statements which reflect both
actual results based on South African Statements of Generally Accepted
Accounting Practice and those determined on a sugar season basis which in the
directors opinion is necessary to achieve fair presentation.
The accounting policies used for the actual results in all respects conform to
South African Statements of Generally Accepted Accounting Practice.
The group has adopted AC133 (Financial Instruments) and AC137 (Agriculture) with
effect from 1 April 2003. As required by the statements, AC133 has been
prospectively applied, whereas AC137 has been retrospectively applied with the
comparative figures for the previous year having been restated accordingly.
In all other material respects the principal accounting policies have been
consistently applied.
The sugar industry is a seasonal agriculturally based business and the payment
processes are such that cash flows throughout the season, which runs from 1
April to 31 March, are derived from the expected tonnages and prices that will
be achieved for the season as a whole. The effect of this is that product sales
tonnages and prices received, and raw material prices paid are provisional in
nature until the conclusion of the season. For this reason it is considered
that profit figures based on actual cash flows may not represent a fair
presentation of the performance and the results for the period. In respect of
the sugar season basis results, operational profits from cane growing and sugar
production comprise the companys view of the position at 30 September 2003 as
it relates to the season as a whole. All other results are based on actual
performance. The amounts disclosed in respect of cane growing and sugar
production operations are based on a profit forecast for the year ending 31
March 2004 which has been examined by our auditors, Deloitte & Touche. Their
unqualified accountants report is available for inspection at the companys
registered office.
Review
On a sugar season basis the group experienced very disappointing results for the
half year with headline earnings of R104.6 million reflecting a 47.8% decline
over the same period in the previous year. Headline earnings per share of 31.4
cents represents a 47.9% decrease. Actual profits, headline earnings and
earnings per share reflect a similar disappointing performance.
Group operating profits, which decreased by 26.0%, were severely impacted by the
continuing strong rand in respect of both sugar and downstream exports and the
translation of foreign profits, reduced cane and sugar production in South
Africa, and more recently a reduction in South African local sugar prices. Net
financing costs have increased by R20.3 million due to slower local and export
market sugar sales in South Africa and delayed regional exports by Malawi. This
has also impacted on the level of borrowings compared to forecast. Borrowings
for the comparative period last year did not include those of the operations in
Tanzania and Mozambique. The lower effective tax rate of 26% is due to the
higher proportion of profits from Zambia and Tanzania.
The contributions to operating profit by sugar production were 60%, cane growing
32% and downstream 8%. The contributions to profit by country were South Africa
20%, Malawi 29%, Zambia 29%, Swaziland 13%, Tanzania 12%, Mozambique (1%) and
the United States (2%).
In both South Africa and the United States the season to date has been
characterised by dry conditions. Elsewhere in the group, growing conditions have
been favourable. In general, the sugar factories have performed very well.
Assuming normal growing and operating conditions for the remainder of the season
group sugar production is expected to be 2.2 million tons, whilst company cane
production is anticipated to be 5.65 million tons. Both these production
estimates are slightly less than last years record outputs.
Whilst export revenues have been severely affected by the strong rand,
downstream production performance at the furfural, furfuryl alcohol, diacetyl,
acetoin, ethyl alcohol and lactulose plants has been good. Downstream
production levels, with the exception of furfural which is impacted by the
reduced cane supplies due to the dry conditions in South Africa, are expected to
be better than those achieved last season. The commercialisation of furfural as
an agricultural chemical continues to make progress with further registrations
having been obtained in South Africa.
The world sugar price has been volatile and although it has declined recently,
earlier hedging of sugar sales has resulted in a better average export sugar
price being achieved compared to last year. Furfural and furfuryl alcohol
prices have improved in US$ terms in recent months.
Dividend
An interim dividend of 18.0 cents per share (2002 : 26.0 cents) has been
declared.
Prospects
Operations in the current year are progressing well and good production levels
are anticipated. However the very much stronger rand compared to last year
together with the recent local market price decrease, are expected to result in
headline earnings for the financial year being substantially lower than those
achieved last year. The percentage declines in profit for both the second half
and the full year are expected to be similar to those achieved for the first six
months on a sugar season basis. These profit forecasts have been examined by our
auditors, Deloitte & Touche, and their unqualified accountants report is
available for inspection at the companys registered office. Borrowings at the
year end are anticipated to be materially less than at the end of the previous
year.
On behalf of the Board
R A Williams D G MacLeod Durban
Chairman Managing Director 12 November 2003
GROUP INCOME STATEMENTS
Actual
Unaudited Sugar season basis
Unaudited Actual
Audited
Six months ended Six months ended Year ended
30 September 30 September 31 March
2003 2002 2003 2002 2003
Restated Restated Change Restated
Notes Rm Rm Rm Rm % Rm
Revenue 2 761.0 4 191.6 3 319.7 3 535.4 (6.1) 7 025.0
Profit from
operations 273.3 411.8 332.0 448.7 (26.0) 1 051.1
Net financing
costs 1 132.3 112.0 132.3 112.0 247.1
Profit before
abnormal items 141.0 299.8 199.7 336.7 (40.7) 804.0
Abnormal items 2 2.8 0.2 2.8 0.2 ( 2.3)
Profit before
taxation 143.8 300.0 202.5 336.9 (39.9) 801.7
Taxation 32.4 84.3 52.6 94.4 253.1
Profit after
taxation 111.4 215.7 149.9 242.5 (38.2) 548.6
Attributable to
outside
shareholders in
subsidiary
companies 44.7 49.6 40.3 40.6 114.6
Net profit
attributable to
shareholders
in Illovo
Sugar Limited 3 66.7 166.1 109.6 201.9 (45.7) 434.0
Determination of headline earnings:
Net profit
attributable
to shareholders 66.7 166.1 109.6 201.9 (45.7) 434.0
Adjusted for:
Profit on disposal
of property,
plant and
equipment 4.4 1.4 4.4 1.4 0.8
Amortisation
of goodwill 0.6 0.3 0.6 0.3 (1.7)
Headline earnings 61.7 164.4 104.6 200.2 (47.8) 434.9
Number of shares
in issue (millions) 333.3 332.1 333.3 332.1 332.9
Weighted average
number of shares
on which headline
earnings per
share are
based
(millions) 333.1 331.9 333.1 331.9 332.3
Headline
earnings per
share (cents) 18.5 49.5 31.4 60.3 (47.9) 130.9
Diluted headline
earnings per
share (cents) 17.4 48.2 30.3 59.5 127.6
Dividend per
share (cents) 18.0 26.0 18.0 26.0 (30.8) 68.0
BUSINESS SEGMENTAL ANALYSIS
Actual Sugar season basis Actual
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 September 30 September 31 March
2003 2002 2003 2002 2003
Restated Restated Restated
Rm Rm Rm % Rm % Rm
Revenue
Sugar 1,770.5 3,197.2 2,542.1 77 2,710.4 77 5 217.7
production
Cane growing 740.3 706.6 527.4 16 537.2 15 1,126.9
Downstream 250.2 287.8 250.2 7 287.8 8 680.4
2 761.0 4 191.6 3 319.7 3 535.4 7 025.0
Profit from operations
Sugar 166.4 346.1 198.8 60 293.5 65 642.7
production
Cane growing 79.0 (15.3) 105.3 32 74.2 17 254.9
Downstream 27.9 81.0 27.9 8 81.0 18 153.5
273.3 411.8 332.0 448.7 1 051.1
NOTES TO THE FINANCIAL STATEMENTS
Unaudited Audited
Six months ended Year ended
30 September 31 March
2003 2002 2003
Rm Rm Rm
1. Net financing
costs
Interest paid 143.3 131.4 277.9
Interest ( 9.9) ( 19.4) (28.9)
received
Dividend income ( 1.1) - (1.7)
Interest incurred prior to the
commencement of production and
capitalised as part of the cost
of property, plant and equipment - - (0.2)
132.3 112.0 247.1
2. Abnormal items
Profit / (loss) on disposal of 2.8 0.2 (2.3)
property
Abnormal profit / (loss) before 2.8 0.2 (2.3)
taxation
Taxation - - 0.9
Minority share of abnormal items after - - -
taxation
Abnormal profit / (loss) attributable to 2.8 0.2 (1.4)
shareholders in Illovo Sugar Limited
3. Change in accounting policy - AC137
All comparative figures in this report have been restated
for
the change in policy as a result of adopting
AC137 (Agriculture), and the impact on net profit
attributable
to shareholders is as follows:
Actual Sugar season basis Actual
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 September 30 September 31 March
2003 2002 2003 2002 2003
Rm Rm Rm Rm Rm
Profit from operations (26.9) (141.0) 2.3 (17.7) (35.3)
Taxation (6.3) (39.5) 0.8 (5.2) (10.4)
Attributable to
outside shareholders
in subsidiary
companies (5.3) (16.7) 3.2 (2.6) (5.2)
Decrease in net
profit attributable
to shareholders (15.3) (84.8) (1.7) (9.9) (19.7)
ABRIDGED GROUP
BALANCE SHEETS
Actual Sugar season Actual
basis
Unaudited Unaudited Audited
30 September 30 September 31 March
2003 2002 2003 2002 2003
Restated Restated Restated
Rm Rm Rm Rm Rm
ASSETS
Non-current assets 3 349.0 3 486.3 3 349.0 3 486.3 3 753.2
Property, plant and
equipment 2 781.3 2,583.6 2 781.3 2,583.6 3 093.6
Cane roots 460.8 483.0 460.8 483.0 565.5
Investments 129.6 430.9 129.6 430.9 118.0
Goodwill ( 22.7) ( 11.2) ( 22.7) ( 11.2) ( 23.9)
Current assets 2 685.2 2 693.3 2 685.2 2 693.3 2 178.6
Total assets 6 034.2 6 179.6 6 034.2 6 179.6 5 931.8
EQUITY AND LIABILITIES
Capital and reserves 1 297.2 1 943.2 1 340.1 1 979.0 1 635.1
Interest of outside
shareholders in
subsidiaries 358.5 408.4 354.1 399.4 442.5
Deferred taxation 568.9 641.6 589.4 651.7 705.5
Net profit
attributable to 2 285.2 1,531.3 2 285.2 1,531.3 1 777.2
shareholders
Current liabilities 1 524.4 1 655.1 1 465.4 1 618.2 1 371.5
Total equity and
liabilities 6 034.2 6 179.6 6 034.2 6 179.6 5 931.8
OTHER SALIENT FEATURES
Operating margin (%) 9.9 9.8 10.0 15.0
12.7
Gearing (%) 138.0 65.1 134.9 85.5
64.4
Interest cover
(times) 2.1 3.7 2.5 4.0 4.3
Net asset value per 585.1
share (cents) 389.2 402.1 595.9 491.2
Depreciation 117.5 116.8 117.5 116.8 214.8
Capital expenditure 97.1 126.2 97.1 126.2 216.5
- expansion 7.7 11.2 7.7 11.2 30.6
- product
registration costs 3.2 7.5 3.2 7.5 12.1
- replacement 86.2 107.5 86.2 107.5 173.8
Capital commitments 222.7 156.9 222.7 156.9 435.4
- contracted 29.8 44.7 29.8 44.7 31.7
- approved but not
contracted 192.9 112.2 192.9 112.2 403.7
Lease commitments 584.6 621.5 584.6 577.0
621.5
- land and buildings 518.4 530.8 518.4 530.8 498.0
- other 66.2 90.7 66.2 90.7 79.0
Contingent 8.3 397.9 8.3 397.9 16.1
liabilities
ABRIDGED GROUP CASH FLOW STATEMENTS
Actual Sugar season Actual
basis
Unaudited Unaudited Audited
Six months ended Six months ended Year
ended
30 September 30 September 31 March
2003 2002 2003 2002 2003
Restated Restated Restated
Rm Rm Rm Rm Rm
Cash flows from operating
and investing activities
Cash operating
profit 523.4 662.4 582.9 575.9 1,141.8
Working
capital
requirements (810.8) (179.9) (870.3) (93.4) 31.1
Cash generated from
operations (287.4) 482.5 (287.4) 482.5 1,172.9
Replacement
capital (86.2) (107.5) (86.2) (107.5) (173.8)
Interest,
taxation and
dividend (321.5) (332.9) (321.5) (332.9) (669.7)
Investment in
future
operations (21.1) (208.8) (21.1) (208.8) (254.2)
Other
movements 8.6 7.7 8.6 7.7 18.2
Net cash (outflow) /
inflow before financing
activities (707.6) (159.0) (707.6) (159.0) 93.4
STATEMENTS OF CHANGES IN EQUITY
Net profit attributable
to shareholders
Balance at beginning of
the period 259.9 254.6 259.9 254.6 254.6
Movements
during the
period 2.6 1.5 2.6 1.5 5.3
Balance at end
of the period 262.5 256.1 262.5 256.1 259.9
Non-
distributable
reserves
Balance at beginning of
the period 91.7 466.1 91.7 466.1 466.1
Effect of foreign
currency translation (283.6) (142.4) (283.6) (142.4) (635.7)
Transfer from / (to)
retained surplus 286.4 - 286.4 - 261.3
Balance at end
of the period 94.5 323.7 94.5 323.7 91.7
Retained surplus
Balance at beginning of
the period 1,283.5 1,065.6 1,283.5 1,065.6 1,065.6
Restatement of prior year
in terms of AC137 234.6 234.6 234.6
Reserve arising on
implementation of AC133 16.3 16.3
Dividends paid (139.9) (102.9) (139.9) (102.9) (189.4)
Transfer (to) / from non-
distributable reserves (286.4) - (286.4) - (261.3)
Net profit for
the period 66.7 166.1 109.6 201.9 434.0
Balance at end of the
period 940.2 1,363.4 983.1 1,399.2 1,283.5
Ordinary shareholders 1 297.2 1 943.2 1 340.1 1 979.0 1 635.1
equity
DECLARATION OF DIVIDEND NO. 24
Notice is hereby given that an interim dividend of 18.0 cents per share has been
declared on the ordinary shares of the company in respect of the six months
ended 30 September 2003.
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, 2 January 2004
Shares commence trading ex-dividend Monday, 5 January 2004
Record date Friday, 9 January 2004
Payment of dividend Monday, 12 January 2004
Share certificates may not be dematerialised/rematerialised between Monday, 5
January 2004 and Friday, 9 January 2004, both days inclusive.
By order of the Board
G D Knox Durban
Secretary 12 November 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 Limited, 70 Marshall Street, Johannesburg, 2001
Auditors:
Deloitte & Touche
Sponsor:
Cazenove South Africa (Proprietary) Limited
Date: 12/11/2003 05:15:12 PM Produced by the JSE SENS Department
12/11/2003 Source: JSE NEWS SERVICE
