| Wed 19 May 2004, 17:17 | | AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2004 |
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ILLOVO SUGAR LIMITED - AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2004
ILLOVO SUGAR LIMITED
(Incorporated in the Republic of South Africa)
Company registration number 1906/000622/06
Share Code: ILV
ISIN: ZAE000003547
("Illovo Sugar")
PROFIT AND DIVIDEND ANNOUNCEMENT
Audited results for the year ended 31 March 2004
Review
Group financial results were sharply down compared to the previous year. The
group achieved turnover of R6,5 billion, operating profit of R726,6 million and
headline earnings of R256,5 million. Compared to the previous year revenue
declined by 8% and operating profit by 31%. Operating profits were severely
impacted by the continuing strong rand in respect of both sugar and downstream
exports, and the translation of foreign profits. The rand strengthened by 36%
compared to the US dollar over the financial year. In addition, as a
consequence of the strong rand, local sugar prices in South Africa and Swaziland
had to be reduced. Headline earnings per share of 76,9 cents were 42% below
those achieved in the previous 12 months. Financing costs increased by R9,3
million to R256,4 million whilst the effective tax rate was 26% which was 6%
below last year. Cash generated from operations of R859,0 million was strong.
Net group borrowings declined by R410,9 million to R1 366,3 million, whilst
gearing of 80,3% shows a slight improvement compared to the previous year.
The contributions to operating profit were sugar manufacture 58%, cane growing
33% and downstream 9%. The contributions by country were South Africa 18%,
Malawi 34%, Zambia 26%, Swaziland 9%, Tanzania 15%, Mozambique (1%) and the
United States (1%).
Group sugar and cane production was slightly below last year"s record output
largely due to dry conditions in South Africa. Elsewhere in the group growing
conditions were favourable with cane and sucrose yields reflecting a further
improvement. In general the sugar and downstream plants performed very well
with high levels of mechanical and operational efficiency being achieved.
The group"s productive base continues to be strong with sugar production of
2,224 million tons and cane production of 5,641 million tons being only slightly
less than last year"s all time records. Record sugar production was achieved in
Swaziland, Tanzania and Mozambique whilst output in Malawi and Zambia fell only
marginally short of the previous year"s levels.
The downstream plants performed well with the Merebank distillery achieving a
record volume of ethyl alcohol. The commercialisation of furfural as an
agricultural chemical is progressing. Further registrations have been received
in South Africa, whilst international registrations in a variety of applications
are being pursued.
The group supplies sugar and downstream products to domestic, regional and world
markets. Sales to domestic markets in the countries in which the group operates
contributed 69% to total revenue whilst exports to 93 countries contributed the
balance. A strength of the group is that 69% of sugar production by volume and
77% by value was sold into stable domestic or premium priced export markets. In
the group"s African countries of operation outside South Africa, local sales
benefited from concerted drives to improve national distribution of sugar
through the implementation of more effective marketing arrangements. It is
pleasing that the governments in these countries have responded positively to
stem the flow of illegal imports. In Tanzania, the local refined sugar market
is currently supplied by imports, however the company"s operation at Kilombero
is constructing a refinery to meet this demand and is planning to be operative
by August 2004.
The world sugar price remains volatile. During the 2003 sugar year, production
expanded across the globe with consumption failing to keep pace. The season
started with prices just under US8.0 cents per pound (cents/lb.) which fell to a
low of US5.35 cents/lb. during the season. Futures prices have recently risen
to around US7.0 cents/lb. in the light of increasing evidence that last year"s
surplus could switch to a deficit due to significant production declines in some
of the major sugar producing areas. In recent times, the world sugar price has
been below the production costs for most sugar producing countries which has led
to rationalisation and contraction of many sugar operations. Deliberate
expansion for world market sales has only really taken place in Brazil which now
dominates the world market. Outside Brazil, producers" costs are much higher
largely as a result of the appreciation of their currencies against the US
dollar. The market is still uncertain but its physical structure may be
starting to improve.
World trade negotiations faltered at Cancun and many countries are now involved
in bi-lateral trade discussions. The access tonnages and prices earned for
sugar in the European Union and the United States are valuable to the group and
the many developing countries which receive this access. It is important that
the sugar producers from developing countries continue to have preferential
access into the EU and the US at reasonable prices. The EU is investigating
reform of its sugar regulations and the company is actively participating in the
process and providing technical input to the discussions.
As announced on 17 May 2004, and in line with Illovo"s objective that there
should be direct and meaningful Black Economic Empowerment (BEE) participation
in the South African sugar milling industry, the company has entered into an
agreement for the sale of the Gledhow sugar factory and cane growing estates on
the north coast of KwaZulu-Natal. The purchaser is a broad-based BEE company.
The purchase price of R335 million is to be settled in cash and Illovo will
continue to provide management support for a period of five years after
transfer. The agreement is subject to approval by the Competition Commission.
In addition, Illovo has entered into discussions with various parties, including
the Monitor Sugar Beet Growers" Association, which represents Monitor"s 600
growers, regarding the possibility of divesting of its interest in Monitor Sugar
Company in the USA. To this end, Illovo has compiled an information memorandum
and is making this and a data room available for interested parties under
confidentiality agreements. Shareholders will be advised of developments
regarding these discussions in due course.
During the year R158,9 million (2003: R173,8 million) was spent on the
replacement of plant and equipment to ensure that the group"s operating assets
are kept in sound condition, that strategic plant is adequately protected
against breakdown and that product quality is of the highest standard. In
addition, R39,6 million was invested in expansion projects and on product
registrations.
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 2004 Annual Report which is to be issued in the third
week of June 2004.
Outlook
The results of the forthcoming year will be considerably impacted by the level
of the rand compared to other currencies, particularly the US dollar. Excluding
the impact of the sale of the Gledhow operations, cane production and downstream
output for the group should be similar to that achieved last year, whilst sugar
output is expected to be marginally down due to the below average rainfall
experienced in South Africa during the past summer. World sugar prices have
recovered from previous low levels in recent months and the average price
achieved from world market sales should be around levels attained in the past
year.
Dividend
A final dividend of 28,0 cents (2003: 42,0 cents) has been declared which gives
a total distribution of 46,0 cents (2003: 68,0 cents) for the full year.
On behalf of the Board
R A Williams D G MacLeod Mount Edgecombe
Chairman Managing Director 19 May 2004
GROUP INCOME STATEMENTS
Year ended 31 March
2004 2003
Restated Change
Notes Rm Rm %
Revenue 6 488.2 7 025.0 (8)
Profit from operations 726.6 1 057.3 (31)
Net financing costs 1 256.4 247.1
Profit before abnormal items 470.2 810.2 (42)
Abnormal items 2 1.9 (2.3)
Profit before taxation 472.1 807.9 (42)
Taxation 122.5 254.9
Profit after taxation 349.6 553.0 (37)
Attributable to outside shareholders
in subsidiary companies 90.2 115.2
Net profit attributable to
shareholders in Illovo Sugar Limited 259.4 437.8 (41)
Determination of headline earnings:
Net profit attributable to
shareholders 259.4 437.8 (41)
Adjusted for:
Profit on disposal of property, plant
and equipment (3.0) (0.8)
Amortisation of goodwill (1.1) 1.7
Reorganisation of long term debt 1.2 -
Headline earnings 256.5 438.7 (42)
Number of shares in issue (millions) 333.8 332.9
Weighted average number of shares on
which headline earnings per share are
based (millions) 333.4 332.3
Headline earnings per share (cents) 76.9 132.0 (42)
Diluted headline earnings per share
(cents) 75.0 128.9
Dividend per share (cents) 46.0 68.0 (32)
The group adopted AC133 (Financial Instruments - Recognition and Measurement)
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 used in this report have been consistently applied and
conform with South African Statements of Generally Accepted Accounting Practice.
The results for the year ended 31 March 2004 have been audited by Deloitte &
Touche. Their unqualified audit opinion is available for inspection at the
registered office of the company.
NOTES TO THE INCOME STATEMENTS
1. Net financing costs
Interest paid 286.7 277.9
Interest received (27.7) (28.9)
Dividend income (2.6) (1.7)
Interest incurred prior to the
commencement of production and
capitalised as part of the cost of
property, plant and equipment - (0.2)
256.4 247.1
2. Abnormal items
Profit/(loss) on disposal of property 1.9 (2.3)
Abnormal profit/(loss) before taxation 1.9 (2.3)
Taxation (0.2) 0.9
Abnormal profit/(loss) attributable to
shareholders in Illovo Sugar Limited 1.7 (1.4)
3. Change in accounting policy
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 :
Profit from operations 15.1 (30.7)
Taxation 5.0 (9.0)
Attributable to outside shareholders
in subsidiary companies 0.4 (4.6)
Increase/(decrease) in net profit
attributable to shareholders 9.7 (17.1)
BUSINESS SEGMENTAL ANALYSIS
Year ended 31 March
2004 2003
Restated
Rm % Rm %
Revenue
Sugar production 4 892.1 75 5 217.7 74
Cane growing 1 040.7 16 1 126.9 16
Downstream 555.4 9 680.4 10
6 488.2 7 025.0
Profit from operations
Sugar production 424.7 58 645.0 61
Cane growing 236.8 33 258.8 24
Downstream 65.1 9 153.5 15
726.6 1 057.3
ABRIDGED GROUP BALANCE SHEETS
31 March
2004 2003
Restated
Rm Rm
ASSETS
Non-current assets 3 159.2 3 758.4
Property, plant and equipment 2 581.2 3 093.6
Cane roots 518.4 568.9
Investments 80.6 118.0
Goodwill (21.0) (22.1)
Current assets 1 802.1 2 180.9
Total assets 4 961.3 5 939.3
EQUITY AND LIABILITIES
Capital and reserves 1 292.1 1 616.2
Interest of outside shareholders in
subsidiaries 409.9 444.1
Deferred taxation 611.5 697.2
Net borrowings 1 366.3 1 777.2
Current liabilities 1 281.5 1 404.6
Total equity and liabilities 4 961.3 5 939.3
OTHER SALIENT FEATURES
Operating margin (%) 11.2 15.1
Gearing (%) 80.3 86.3
Interest cover (times) 2.8 4.3
Net asset value per share (cents) 387.1 485.5
Depreciation 236.2 214.8
Capital expenditure 198.5 216.5
- expansion 27.1 30.6
- product registration costs 12.5 12.1
- replacement 158.9 173.8
Capital commitments 242.1 435.4
- contracted 19.4 31.7
- approved but not contracted 222.7 403.7
Lease commitments 495.3 577.0
- land and buildings 429.7 498.0
- other 65.6 79.0
Contingent liabilities 16.0 16.1
ABRIDGED GROUP CASH FLOW STATEMENTS
Year ended 31 March
2004 2003
Restated
Rm Rm
Cash flows from operating and investing
activities
Cash operating profit 816.7 1 143.3
Working capital requirements 42.3 29.6
Cash flow from operations 859.0 1 172.9
Replacement capital (158.9) (173.8)
Finance costs, taxation and dividend (600.4) (669.7)
Investment in future operations (46.4) (254.2)
Other movements 41.7 18.2
Net cash inflow before financing activities 95.0 93.4
STATEMENT OF CHANGES IN EQUITY
Share capital and share premium
Balance at beginning of the period 259.9 254.6
Movements during the period 4.4 5.3
Balance at end of the period 264.3 259.9
Non-distributable reserves
Balance at beginning of the period 91.7 466.1
Effect of foreign currency translation (390.9) (636.8)
Effect of cash flow hedges 4.2 -
Transfer from retained surplus - FCTR 404.4 262.4
Balance at end of the period 109.4 91.7
Retained surplus
Balance at beginning of the period 1,264.6 1,065.6
Restatement of prior year in terms of AC137 - 237.3
Restatement of provision for post retirement
medical benefits - (24.3)
Reserve arising on implementation of AC133 (1.3) -
Dividends paid (199.9) (189.4)
Transfer to non-distributable reserves - FCTR (404.4) (262.4)
Net profit for the period 259.4 437.8
Balance at end of the period 918.4 1,264.6
Ordinary shareholders" equity 1 292.1 1 616.2
DECLARATION OF DIVIDEND NO. 25
Notice is hereby given that a final dividend of 28.0 cents per share has been
declared on the ordinary shares of the company in respect of the year ended 31
March 2004. This dividend, together with the interim dividend of 18.0 cents per
share which was declared on 12 November 2003, makes a total distribution in
respect of the year ended 31 March 2004 of 46.0 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, 2 July 2004
Shares commence trading ex-dividend Monday, 5 July 2004
Record date Friday, 9 July 2004
Payment of dividend Monday, 12 July 2004
Share certificates may not be dematerialised / rematerialised between Monday, 5
July 2004 and Friday, 9 July 2004, both days inclusive.
By order of the Board
G D Knox Mount Edgecombe
Company Secretary 19 May 2004
Directors:
R A Williams (Chairman)*, D G MacLeod (Managing Director), G J Clark
(Australian), B P Connellan*, R D Hamilton*, N M Hawley, M I Hlatshwayo (Swazi),
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: 19/05/2004 05:15:12 PM Produced by the JSE SENS Department
