| Mon 23 Feb 2004, 8:25 | | Audited Results And Final Dividend Declaration |
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Tongaat-Hulett - Audited Results And Final Dividend Declaration
The Tongaat-Hulett Group Limited
Registration number 1892/000610/06
Share Code: TNT
Issuer Code: THGL
ISIN: ZAE000007449
("Tongaat-Hulett")
AUDITED RESULTS AND FINAL DIVIDEND DECLARATION
for the year ended 31 December 2003
Revenue up 7,5% to R6,6 billion
Negative valuation adjustments of R398 million
Headline loss of R93 million
Annual dividend of 120 cents per share
COMMENT ON RESULTS
Tongaat-Hulett experienced a year dominated by a number of external developments
that had a significant impact on earnings. A headline loss of R93 million (2002:
headline profit of R380 million) was incurred for the year.
The strengthening of the Rand affected export revenue adversely and led to a
decrease in domestic selling prices in the face of import threats. Current
reductions to the cost base in the business were not sufficient to compensate
for reduced margins. The sharp decline in the maize price in the first half of
the year led to a charge against income on the valuation of maize procurement
contracts. The movement in the exchange rate during the year resulted in
negative valuation adjustments in respect of foreign currency denominated
balance sheet items.
The low rainfall and the resultant reduced sugar production in South Africa, as
well as the low world sugar price further impacted underlying operating profit.
The dividend received from Triangle Sugar in Zimbabwe was lower than the
previous year.
The aforementioned factors offset the substantial progress that was achieved in
growing sales volumes, particularly at Hulett Aluminium, and increased earnings
by Moreland from the development of its prime land holdings.
Revenue grew by 7,5% to R6,6 billion and underlying operating profit amounted to
R452 million (2002: R818 million).
Valuation items charged to the income statement amounted to R398 million for the
year and included the mark-to-market adjustment of R211 million required on
maize procurement contracts.
A total net loss of R41 million (2002: total net earnings of R388 million) was
incurred for the year. The Board has declared a final dividend of 80 cents per
share, which follows the interim dividend of 40 cents per share.
The Group"s balance sheet at 31 December 2003 remains sound with net borrowings
as a percentage of equity at 13,4% (2002: zero).
OPERATIONAL PERFORMANCE
African Products" prime domestic volumes declined by 1,5% as a consequence of
increased competition from imports. Domestic prices had to be decreased
significantly in order to retain business. Export volumes grew by 3,5% in 2003,
with reduced contributions as a result of the strong Rand. Fixed costs were
maintained at levels below those of 2002. The impact of the stronger currency
combined with the cost of maize purchased in 2002 for the 2003/2004 season
resulted in a reduction in underlying operating profit to R114 million (2002:
R262 million).
The mark-to-market valuation adjustment required on maize contracts resulted in
a charge to the income statement of R211 million for the year. The decrease in
the maize price of some 40 to 45% in the first six months of the year gave rise
to a charge of R255 million at the half year. There was an increase in the maize
price towards the end of the year and this resulted in a gain of R44 million in
the second half of the year.
Tongaat-Hulett Sugar"s revenue grew by 13% as a result of increased sales
volumes in South Africa and Mozambique, while underlying operating profit for
the year declined to R263 million (2002: R391 million). The higher sales volumes
were offset by lower margins.
Sugar production from South African operations at 652 000 tons was 24% lower
than last year, resulting in an increase in the cost per ton of sugar produced.
In addition, the domestic price of sugar decreased by 7% in October 2003 and
export realisations declined due to the strength of the Rand.
In Mozambique, production at Xinavane and Mafambisse increased by 15% to 82 000
tons and progress has been made in securing the domestic market against imports,
with sales by domestic producers growing by 68%. The rehabilitation and growth
at Xinavane have not yet reached their potential and an operating loss combined
with a high interest cost and valuation adjustments on foreign loans resulted in
a loss being reported for this associate company.
Triangle Sugar in Zimbabwe continues to perform well in turbulent economic and
business conditions. The decrease in dividends to R19 million (2002: R71
million) is attributable to the difficulty in the remittance of dividends from
Zimbabwe.
Moreland reaped the benefit of the platform that it developed in past years and
capitalised on the strong property market, posting a 55% increase in revenue to
R226 million and a record operating profit of R92 million. This was achieved
whilst generating a strong positive cash flow. A highlight of the year was the
conclusion of the Zimbali joint venture agreement with Kuwaiti-based
International Financial Advisers. Record sales were achieved in the residential
portfolio, particularly in the Mount Edgecombe Country Club Estate and Ilala
Ridge. Development of the RiverHorse Valley Business Estate and the Durban Point
Waterfront, which are public private partnerships with the eThekweni
Municipality, progressed well and good sales were recorded.
Hulett Aluminium increased total sales volumes by 22%, with export volumes
growing by 37%. Sales of rolled products increased to 130 000 tons (2002: 105
000 tons). A record production level of over 150 000 tons annualised was
achieved in December 2003. The increase in total rolled products manufacturing
conversion costs has been limited to 2%, notwithstanding the significant
increase in sales volumes. These benefits have been offset by the effects of the
strength of the Rand, coupled with low international rolling margins and the
effect of a metal price lag on cost of sales. Underlying operating profit
accordingly declined and the Group"s 50% share amounted to R22 million (2002:
R179 million). An improvement in earnings in the second half was achieved in
spite of a stronger Rand and reflects the benefits flowing from the sustained
improvement in sales volumes and mix.
OUTLOOK
The developments impacting on Tongaat-Hulett"s results for the past year have
acted as a catalyst to accelerate management actions to improve profitability.
The Group"s results will continue to be affected by fluctuating exchange rates
and commodity prices and, in the first half of 2004, by restructuring costs as
well as by the size of last year"s sugar crop in South Africa. Group-wide
initiatives to reduce the cost base, increase sales volumes and optimise
capacity utilisation will provide benefits as the year progresses.
The Group expects to record a substantial headline earnings recovery in 2004.
Its asset and business base remains sound, with considerable opportunities for
sustained earnings growth.
For and on behalf of the board
C M L Savage P H Staude
Chairman Chief Executive Officer
Amanzimnyama, Tongaat, KwaZulu-Natal
20 February 2004
DIVIDEND DECLARATION
Notice is hereby given that the board has declared a final dividend (number 153)
of 80 cents per share for the year ended 31 December 2003 to shareholders
recorded in the register at the close of business on Friday 19 March 2004.
The salient dates of the declaration and payment of this final dividend are as
follows:
Last date to trade ordinary shares "CUM" dividend Friday 12 March 2004
Ordinary shares trade "EX" dividend Monday 15 March 2004
Record date Friday 19 March 2004
Payment date Thursday 25 March 2004
Share certificates may not be dematerialised or re-materialised, nor may
transfers between registers take place between Monday 15 March 2004 and Friday
19 March 2004, 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
Friday 12 March 2004.
For and on behalf of the board
M A Kennedy
Group Secretary
Amanzimnyama, Tongaat, KwaZulu-Natal
20 February 2004
INCOME STATEMENT
2003 2002
Rmillion Note Restated
Revenue 6 559 6 103
Earnings for the year
Underlying operating profit 452 818
Triangle dividend 19 71
Valuation adjustments on financial
instruments and other items 1 (398) (215)
Earnings before interest and tax 73 674
Net financing costs 2 (152) (134)
(Loss)/earnings before exceptional items (79) 540
Exceptional items 3 7 6
(Loss)/earnings before tax (72) 546
Tax 4 77 (122)
Earnings after tax 5 424
Share of associate company"s loss (45) (36)
Minority shareholders" share of loss (1)
Total net (loss)/earnings (41) 388
Headline (loss)/earnings (93) 380
(Loss)/earnings per share (cents)
Total net (loss)/earnings
Basic (40,4) 383,1
Diluted (40,3) 377,2
Headline (loss)/earnings
Basic (91,7) 375,2
Diluted (91,3) 369,4
Dividend per share (cents) 120,0 270,0
Interim 40,0 80,0
Final 80,0 190,0
Currency conversion
Rand/US dollar average 7,55 10,48
Rand/US dollar closing 6,67 8,58
Rand/GB pound closing 11,94 13,81
HEADLINE (LOSS)/EARNINGS
2003 2002
Rmillion Restated
Total net (loss)/earnings (41) 388
Less after tax effect of:
Realised gain on cash equivalent investment* (42)
Exceptional items (9) (8)
Surplus on disposal of plant and equipment (1)
Headline (loss)/earnings (93) 380
*Previously accounted for directly in equity
BALANCE SHEET
2003 2002
Rmillion Restated
Assets
Property, plant and equipment 4 199 4 144
Growing crops 179 168
Long-term receivable 210 210
Investments 5 29
Derivative instruments 11 51
Inventories 1 769 1 887
Accounts receivable 1 132 982
Cash resources 808 938
Total assets 8 313 8 409
Equity and liabilities
Shareholders" equity 4 193 4 551
Minority interests in subsidiaries 6 5
Deferred tax 866 1 006
Long-term borrowings 371 614
Provisions 260 245
Derivative instruments 53 186
Current liabilities (note 5) 2 564 1 802
Total equity and liabilities 8 313 8 409
Number of shares (000)
- in issue 101 467 101 352
- weighted average (basic) 101 418 101 269
- weighted average (diluted) 101 816 102 870
Net asset value per share (cents) 4 132 4 490
STATEMENT OF CHANGES IN EQUITY
2003 2002
Rmillion Restated
Balance at beginning of period 4 551 4 382
Effect of change in accounting policy (3)
Restated balance 4 551 4 379
Total net (loss)/earnings for the year (41) 388
Dividends paid (233) (292)
Share capital issued 2 8
Hedge reserve released to income statement (23) 41
(Losses)/gains from cash flow hedges (27) 16
Gain on cash equivalent investment 4 4
Realised gain on cash equivalent investment sold (note 2) (43)
Share of associate"s movement in
currency translation reserve 16 21
Currency exchange rate changes (13) (14)
Balance at end of period 4 193 4 551
CASH FLOW STATEMENT
2003 2002
Rmillion Restated
Earnings before interest and tax 73 674
Net financing costs (152) (134)
Non-cash items:
Depreciation 223 209
Adjustment for exchange rate translation loss 80 151
Provisions 15 20
Surplus on disposal of plant and equipment (2)
Other non-cash items (92) (17)
Tax payments (42) (39)
Change in working capital (3) (303)
Cash flow from operating activities 100 561
Expenditure on property, plant and equipment:
- New (206) (167)
- Replacement (106) (56)
- Major plant overhaul costs capitalised (39) (39)
Growing crops 21 (12)
Proceeds on disposal of property,
plant and equipment 43 36
Investments (19) (1)
Dividends paid (233) (292)
Net cash flow before financing activities (439) 30
Borrowings raised/(repaid) 553 (226)
Hedges of foreign loans (161) 159
Shares issued 2 8
Net decrease in cash resources (45) (29)
Cash resources at beginning of year 938 1 125
Exchange rate translation loss (80) (151)
Foreign exchange adjustment (9) (11)
Gain on cash equivalent investment 4 4
Cash resources at end of year 808 938
NOTES
2003 2002
Rmillion Restated
1. Valuation adjustments on financial
instruments and other items
Maize procurement contracts (211) (20)
Translation of foreign currency:
- foreign cash holdings (80) (151)
- other (57) (15)
Export receivables (33) (26)
Other financial instruments (17) (3)
(398) (215)
2. Net financing costs
Interest paid (438) (340)
Financial instrument income 174 149
Realised gain on cash equivalent investment* 43
Interest received 69 57
(152) (134)
Increased borrowings from R931 million at 31 December 2002 to R1 369
million at 31 December 2003 arose from the funding of operations and
expenditure on property, plant and equipment, resulting in the increase
in interest paid.
*Previously accounted for directly in equity
3. Exceptional items
Surplus on sale of property held as fixed assets 15 9
Goodwill amortisation (3) (2)
Impairment of assets (2)
Other (3) (1)
Exceptional items before tax 7 6
Tax 2 2
Exceptional items after tax 9 8
4. Tax
Includes the deferred tax reversal of R64 million relating to the
reserves of foreign subsidiaries which will no longer be taxable on
repatriation to South Africa as a result of amended tax legislation.
5. Current liabilities
Accounts payable 998 1 030
Maize obligation - interest bearing 553 446
Trade and other payables 1 551 1 476
Short-term borrowings 998 317
Tax 15 9
2 564 1 802
6. Capital expenditure commitments
Contracted 46 90
Approved but not contracted 85 221
131 311
7. Operating lease commitments 59 44
8. Guarantees and contingent liabilities 43 44
9. Effect of change in accounting policy
Balance Sheet
Equity prior to accounting policy change 4 219 4 567
Cumulative effect of change in accounting policy (26) (16)
Increase in maize inventory 517 424
Increase in current liability (553) (446)
Decrease in deferred tax 10 6
Adjusted equity at beginning of year 4 193 4 551
Income Statement
Total net (loss)/earnings prior to
accounting policy change (31) 401
Effect of change:
Increase in operating profit 42 16
Increase in interest cost (56) (34)
Decrease in deferred tax 4 5
Total net (loss)/earnings (41) 388
SEGMENTAL ANALYSIS
Revenue Underlying EBIT Total Assets
Operating Profit
R million
2003
African Products 1487 114 (104) 1984
Hulett Aluminium (50%) 1600 22 3 2590
Moreland 226 92 90 428
Tongaat-Hulett Sugar 3246 263 214 2407
Corporate (39) (69) 904
Triangle dividend 19
Exchange rate (80)
translation loss
Group total 6559 452 73 8313
2002 (Restated)
African Products 1470 262 236 2083
Hulett Aluminium (50%) 1623 179 136 2626
Moreland 146 20 20 405
Tongaat-Hulett Sugar 2864 391 420 2330
Corporate (34) (58) 965
Triangle dividend 71
Exchange rate (151)
translation loss
Group total 6103 818 674 8409
Total Capital Capital Depreciation
Liabilities Employed Expenditure
R million
2003
African Products 792 1296 81 69
Hulett Aluminium (50%) 700 2340 55 52
Moreland 180 248
Tongaat-Hulett Sugar 582 1989 212 101
Corporate 994 874 3 1
Triangle dividend
Exchange rate
translation loss
Group total 3248 6747 351 223
2002 (Restated)
African Products 900 1428 107 77
Hulett Aluminium (50%) 843 2402 31 34
Moreland 114 292
Tongaat-Hulett Sugar 628 1853 119 97
Corporate 362 949 5 1
Triangle dividend
Exchange rate
translation loss
Group total 2847 6924 262 209
BASIS OF PREPARATION OF THE RESULTS
The Group"s accounting policies conform with South African Statements of
Generally Accepted Accounting Practice. The results for the year ended 31
December 2003 have been prepared on a basis that is consistent with that of the
previous year, except for the change detailed below.
The Group has implemented an accounting policy for the recognition of maize
purchase commitments that are considered to be constructive obligations. Maize
that relates to such a constructive obligation is recognised as inventory, the
related liability is recognised as a current liability and to the extent that
the final purchase price includes a financing element, this is recognised as
interest over the period of the obligation. Comparative figures for the year
ended 31 December 2002 have been restated on a consistent basis.
AUDITED RESULTS
The results for the year ended 31 December 2003 have been audited by Deloitte &
Touche. Their unqualified audit opinion is available for inspection at the
registered office of the company.
CORPORATE INFORMATION
Executive directors: D G Aitken, B G Dunlop, A Fourie, G R Hibbert,
G P N Kruger, M H Munro, S J Saunders, M Serfontein,
P H Staude (Chief Executive Officer)
Non-executive directors: D D Barber, P M Baum, L Boyd, E le R Bradley,
M W King, J B Magwaza, M Mia, T H Nyasulu, C M L Savage (Chairman),
R H J Stevens, A M Thompson
Alternate directors: J 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 Limited,
70 Marshall Street, Johannesburg, 2001, P O Box 61051, Marshalltown, 2107
Telephone (011) 370 7700, Facsimile (011) 688 7709
Sponsor: HSBC Investment Services (Africa) (Pty) Ltd
HSBC Place, 6-9 Riviera Road, Houghton, 2198
Telephone (011) 481 4200, Facsimile (011) 646 8406
Date: 23/02/2004 07:04:02 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
