| Mon 2 Aug 2004, 9:21 | | INTERIM RESULTS |
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THE TONGAAT-HULETT GROUP LIMITED - INTERIM RESULTS FOR THE HALF-YEAR ENDED 30
JUNE 2004
THE TONGAAT-HULETT GROUP LIMITED
Registration No. 1892/000610/06
Share code TNT
Issuer code THGL
ISIN ZAE000007449
INTERIM RESULTS FOR THE HALF-YEAR ENDED 30 JUNE 2004
Revenue of R2,95 billion (2003: R3,0 billion)
Headline earnings of R56 million (2003: loss of R199 million)
Interim dividend of 50 cents per share (2003: 40 cents per share)
COMMENTARY
The Group recorded headline earnings of R56 million, generated off revenue for
the half-year of R2,95 billion (2003: R3,0 billion). These earnings show an
improvement of R255 million from the headline loss in the same period last year.
Management actions taken throughout the Group to improve profitability have not
yet fully impacted on Tongaat-Hulett`s results. The benefits of these and
further actions will flow into the second half of 2004 and beyond. Results for
the first half of 2004 are detailed below.
African Products` underlying operating profit for the first half of 2004 reduced
to R7 million (2003: R67 million). The high priced maize procured during the
previous cycle, under the previous business model, and the strengthening Rand`s
effect on domestic selling prices and export margins were the main influencing
factors. Domestic volumes of starch and glucose declined by 6%, compared to the
first half of 2003, due to imported glucose in the spray drying industry and
increased imports of final products such as confectionery. Export volumes
reduced by 21% due to the strengthening currency. Initiatives to maintain key
export markets and combat imports in the local market are ongoing with
significant success in terms of volumes recovered for the second half of 2004
and for 2005. Fixed cash costs have been held at levels below those of the
comparable periods in 2002 and 2003. The ongoing efficiency programmes yielded
savings in variable costs.
All unhedged maize futures contracts have been eliminated and the substantially
revised approach to maize procurement will have a positive impact towards the
end of 2004. Based on current consumption, the higher priced maize will all have
been used by October 2004.
Hulett Aluminium`s underlying operating profit increased to R78 million, with
the Group`s share being 50% thereof. Rolled products sales volumes grew to 142
000 tons annualised, a 19% increase over the same period last year. This was
achieved despite an interruption on the Camps Drift hot mill that affected
output for approximately two weeks. Local sales increased by 5% and exports by
26%. The mix improved, with sales of clad products and exports of closure sheet
being three times those of the first half of last year while exports of can end
stock and painted products continued to show strong growth. Total rolled
products manufacturing costs, excluding metal, have been limited to an increase
of 4% despite the growth in volumes, resulting in a 13% reduction in conversion
costs per ton. The stronger Rand offset much of these gains.
Moreland continued to capitalise on the solid platform of its leading property
developments and the prime land previously under sugar cane, increasing revenue
for the first six months by 318% to R272 million. A milestone underlying
operating profit of R118 million (2003: R20 million) was achieved. The buoyant
property market, especially on the KwaZulu-Natal North Coast, is contributing to
Moreland unlocking extensive value from its Zimbali, La Lucia Ridge and Umhlanga
Ridge developments. Outstanding performances were achieved in the residential
and resort portfolios due to the strong demand for new phases and developments
launched during the period. Sales also increased in both the commercial and
industrial portfolios.
Tongaat-Hulett Sugar`s revenue of R1,2 billion for the half-year was 15% below
the comparable period last year, with underlying operating profit reducing to
R38 million from R183 million. Sales volumes in South Africa were 211 767 tons
and raw sugar export volumes at 120 345 tons were affected by lower carry-in
stocks. The particularly small crop harvested in 2003 resulted in an increase in
the production cost per ton of sugar that was carried forward and sold in the
first half of 2004. This, together with the decrease in the South African
domestic sugar price in October 2003 and the strengthening Rand`s effect on
export realisations, depressed margins in the first six months of the year. In
Mozambique, domestic market sales grew by 24% in the drive to increase market
share. Triangle continues to operate profitably in the difficult Zimbabwean
economic and business environment. Dividends of R21 million were received from
Triangle and brought to account.
Year on year, consolidated sugar production for the 2004 year is expected to
grow by 5,8% to 1,113 million tons. Sugar production from South African
operations is estimated to increase by 9% to 712 000 tons while that of
Mozambique is expected to rise to 99 000 tons (2003: 82 000 tons). In Swaziland,
Tambankulu is estimated to produce the raw sugar equivalent of 52 000 tons.
Triangle Sugar in Zimbabwe is expected to produce 250 000 tons this year.
Tongaat-Hulett Sugar`s actions completed in the first six months included the
closure of the Entumeni sugar mill with the diversion of cane to the Amatikulu
mill, the closure of the sugar head office, downsizing of centralised services
and the reorganisation of the South African milling operations from five mill
structures to two regional business units. The benefits of these and the further
substantial actions being taken will flow in future periods. Restructuring costs
of R22 million have been incurred in the current period.
The Group`s underlying operating profit decreased by R80 million and the
valuation adjustments charged against income improved by R354 million, compared
to the 2003 interim results. This led to the total operating profit improving to
R159 million from the 2003 first half loss of R115 million.
The valuation adjustments charged against income amounted to R21 million,
compared with the charge of R375 million for the first half of 2003. These items
relate mainly to the valuation of certain contracts and balance sheet items
based on the exchange rate and maize price at the end of the period. The open
maize futures position reported in previous periods has been eliminated and a
valuation gain of R18 million has been realised, compared to the R255 million
charge in the same period last year.
The Group`s balance sheet remains sound with net borrowings as a percentage of
equity at 15,7% (2003: 14,9%).
The board declared an interim dividend for the half-year of 50 cents per share
(2003: 40 cents per share).
OUTLOOK
All the operating companies have programmes in place, which span the next two
years, to grow earnings through internal actions. Benefits will increase as the
solid progress made in the first half of 2004 is combined with the additional
actions being taken.
Hulett Aluminium and Tongaat-Hulett Sugar will benefit from sales that are being
booked for late 2004 and into 2005 at higher US dollar prices than those of
earlier in 2004.
The Group expects headline earnings for the second six months of 2004 to be
considerably above those for the first half, on the basis of similar exchange
rates, with underlying operating profit having a sensitivity of approximately
R10 million for every 10 South African cents move against one US dollar.
For and on behalf of the board
C M L Savage P H Staude
Chairman Chief Executive Officer
Amanzimnyama, Tongaat, KwaZulu-Natal
30 July 2004
DIVIDEND DECLARATION
Notice is hereby given that the board has declared an interim dividend (number
154) of 50 cents per share for the half-year ended 30 June 2004 to shareholders
recorded in the register at the close of business on Friday 27 August 2004.
The salient dates of the declaration and payment of this interim dividend are as
follows:
Last date to trade ordinary shares `CUM` dividend Friday 20 August 2004
Ordinary shares trade `EX` dividend Monday 23 August 2004
Record date Friday 27 August 2004
Payment date Thursday 2 September 2004
Share certificates may not be dematerialised or re-materialised, nor may
transfers between registers take place between Monday 23 August 2004 and Friday
27 August 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 20 August 2004.
For and on behalf of the board
M A Kennedy
Group Secretary
Amanzimnyama, Tongaat, KwaZulu-Natal
30 July 2004
CORPORATE INFORMATION
Executive directors: 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, I Botha, L Boyd, E le R Bradley,
B E Davison, 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 Road, Tongaat, KwaZulu-Natal
Postal Address: P O Box 3, Tongaat 4400
Telephone: (032) 439 4019
Facsimile: (032) 945 3333
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Limited
Telephone: (011) 370 7700
Sponsor: HSBC Investment Services (Africa)(Pty) Limited
Telephone: (011) 481 4200
E-mail: info@tongaat.co.za
www.tongaat.co.za
INCOME STATEMENT
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2004 2003 2003
Rmillion Note Restated
Revenue 2 950 3 021 6 559
Underlying operating profit 180 260 452
Triangle dividend 21 19
Restructure costs (22)
Valuation adjustments on financial
instruments and other items 1 (21) (375) (398)
Exceptional items 1 7
Operating profit 9 159 (115) 80
Net financing costs 2 (70) (102) (152)
Earnings/(loss) before tax 89 (217) (72)
Tax 3 (14) 33 77
Earnings/(loss) after tax 75 (184) 5
Share of associate company`s loss (12) (15) (45)
Minority shareholders` share of earnings (6) (1)
Total net earnings/(loss) 57 (199) (41)
Earnings/(loss) per share (cents)
Total net earnings/(loss)
Basic 56,2 (196,3) (40,4)
Diluted 55,8 (195,3) (40,3)
Headline earnings/(loss)
Basic 55,2 (196,3) (91,7)
Diluted 54,8 (195,3) (91,3)
Dividend per share (cents) 50,0 40,0 120,0
Currency conversion
Rand/US dollar average 6,67 8,03 7,55
Rand/US dollar closing 6,23 7,48 6,67
Rand/GB pound closing 11,29 12,37 11,94
HEADLINE EARNINGS
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2004 2003 2003
Rmillion Restated
Total net earnings/(loss) 57 (199) (41)
Less after tax effect of:
Realised gain on cash equivalent
investment (42)
Surplus on sale of property held
as fixed assets (2) (15)
Goodwill amortisation 1 1 3
Impairment of assets 2
Surplus on disposal of plant and equipment (1) (1)
Other 1
Headline earnings/(loss) 56 (199) (93)
BALANCE SHEET
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2004 2003 2003
Rmillion Restated
Assets
Non-current assets
Property, plant and equipment 4 130 4 198 4 162
Growing crops 205 219 179
Long-term receivable 210 210 210
Goodwill 36 39 37
Investments 7 14 5
Derivative instruments 20 36 11
4 608 4 716 4 604
Current assets 3 558 3 455 3 709
Inventories 1 307 1 518 1 769
Trade and other receivables 1 454 1 095 1 132
Cash resources 797 842 808
Total assets 8 166 8 171 8 313
Equity and liabilities
Capital and reserves
Share capital 101 101 101
Share premium 734 730 730
Non-distributable reserves 55 88 29
Retained income 3 309 3 216 3 333
Equity 4 199 4 135 4 193
Minority interests in subsidiaries 12 5 6
Deferred tax 867 943 866
Long-term borrowings 324 814 371
Provisions 264 244 260
Derivative instruments 41 156 53
Current liabilities 2 459 1 874 2 564
Trade and other payables (note 7) 1 305 1 222 1 551
Short-term borrowings 1 136 643 998
Tax 18 9 15
Total equity and liabilities 8 166 8 171 8 313
Number of shares (000)
- in issue 101 590 101 461 101 467
- weighted average (basic) 101 499 101 370 101 418
- weighted average (diluted) 102 197 101 883 101 816
Net asset value per share (cents) 4 133 4 075 4 132
Debt to equity 34,7% 35,2% 32,6%
Net debt to equity 15,7% 14,9% 13,4%
STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2004 2003 2003
Rmillion Restated
Balance at beginning of period 4 193 4 567 4 567
Effect of change in accounting policy (16) (16)
Restated balance 4 193 4 551 4 551
Total net earnings/(loss) for the period 57 (199) (41)
Dividends paid (81) (193) (233)
Share capital issued 4 2 2
Hedge reserve released to income statement 17 (23) (23)
Gains/(losses) from cash flow hedges 6 (8) (27)
(Loss)/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 5 6 16
Currency exchange rate changes (2) 3 (13)
Balance at end of period 4 199 4 135 4 193
CASH FLOW STATEMENT
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2004 2003 2003
Rmillion Restated
Operating profit 159 (115) 80
Net financing costs (70) (102) (152)
Non-cash items:
Depreciation 109 108 223
Adjustment for exchange rate
translation loss 28 61 80
Provisions 4 (1) 15
Surplus on disposal of plant and equipment (2)
Other non-cash items (53) 26 (99)
Tax payments (16) (31) (42)
Change in working capital (93) (17) (3)
Cash flow from operating activities 68 (71) 100
Expenditure on property, plant and equipment:
New (23) (136) (206)
Replacement (46) (57) (106)
Major plant overhaul costs capitalised (34) (43) (39)
Growing crops 21 (78) 21
Proceeds on disposal of property,
plant and equipment 16 40 43
Investments (9) 1 (19)
Net cash flow before dividends and
financing activities (7) (344) (206)
Dividends paid (81) (193) (233)
Net cash flow before financing activities (88) (537) (439)
Borrowings raised 112 590 553
Hedges of foreign loans (11) (86) (161)
Shares issued 4 2 2
Net increase/(decrease) in cash resources 17 (31) (45)
Cash resources at beginning of period 808 938 938
Exchange rate translation loss (28) (61) (80)
Foreign exchange adjustment (9)
(Loss)/gain on cash equivalent investment (4) 4
Cash resources at end of period 797 842 808
NOTES
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2004 2003 2003
Rmillion Restated
1. Valuation adjustments on
financial instruments and other items
Maize procurement contracts 18 (255) (211)
Translation of foreign currency:
Foreign cash (28) (61) (80)
Other (9) (25) (57)
Export receivables (3) (22) (33)
Other financial instruments 1 (12) (17)
(21) (375) (398)
2. Net financing costs
Interest paid (189) (210) (438)
Financial instrument income 98 83 174
Realised gain on cash equivalent investment 43
Interest received 21 25 69
(70) (102) (152)
3. Tax
Normal (34) (7) (24)
Deferred 25 64 130
Secondary tax on companies (5) (24) (29)
(14) 33 77
4. Capital expenditure commitments
Contracted 73 95 46
Approved but not contracted 62 107 85
135 202 131
5. Operating lease commitments 34 37 59
6. Guarantees and contingent liabilities 47 55 43
7. Trade and other payables
Included in trade and other payables is the maize obligation (interest bearing)
of R203 million (30 June 2003: R384 million and 31 December 2003: R553 million).
8. Changes to comparatives - 30 June 2003
In preparing its financial statements for the year ended 31 December 2003, the
Group implemented an accounting policy for the recognition of maize purchase
commitments that are considered to be constructive obligations. Maize that
relates to such 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 half-year ended 30
June 2003 have been restated to recognise the financing element, resulting in
underlying operating profit increasing by R27 million, finance costs increasing
by R40 million and the loss after tax for the half-year ended 30 June 2003
increasing by R9 million. The cumulative effect on the balance sheet resulted in
equity reducing by R25 million, deferred tax by R10 million and inventories by
R35 million. Inventories and current liabilities of R384 million had been
recognised in this regard at 30 June 2003.
9. Operating profit
Operating profit includes underlying operating profit, Triangle dividend,
restructure costs, valuation adjustments and exceptional items. It replaces the
line in the Income Statement previously referred to as earnings before interest
and tax. This presentation is as required by AC101: Presentation of Financial
Statements.
10. Basis of preparation of the results
The unaudited results of the Group for the half-year ended 30 June 2004 have
been prepared on a basis consistent with the audited annual financial statements
at 31 December 2003. The accounting policies of the Group conform with South
African Statements of Generally Accepted Accounting Practice. The interim report
has been prepared in accordance with AC127: Interim Financial Reporting.
SEGMENTAL ANALYSIS
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2004 2003 2003
Rmillion Restated
REVENUE
African Products 650 756 1 487
Hulett Aluminium (50%) 819 773 1 600
Moreland 272 65 226
Tongaat-Hulett Sugar 1 209 1 427 3 246
Group total 2 950 3 021 6 559
UNDERLYING OPERATING PROFIT
African Products 7 67 114
Hulett Aluminium (50%) 39 0 22
Moreland 118 20 92
Tongaat-Hulett Sugar 38 183 263
Corporate (22) (10) (39)
Group total 180 260 452
OPERATING PROFIT (note 9)
African Products 26 (191) (104)
Hulett Aluminium (50%) 45 (18) 3
Moreland 117 20 90
Tongaat-Hulett Sugar 28 159 233
Corporate (30) (24) (69)
Exchange rate translation loss (28) (61) (80)
Exceptional items 1 7
Group total 159 (115) 80
