| Mon 21 Feb 2005, 8:40 | | Results for the year ended 31 December 2004 |
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Tongaat-Hulett - Audited results and final dividend declaration
THE TONGAAT-HULETT GROUP LIMITED
Registration No. 1892/000610/06
Share code TNT
ISIN ZAE000007449
Issuer code THGL
AUDITED RESULTS AND FINAL DIVIDEND DECLARATION
for the year ended 31 December 2004
Revenue of R6,3 billion (2003: R6,6 billion)
Headline earnings of R214 million (2003: loss of R93 million)
Annual dividend of 170 cents per share (2003: 120 cents per share)
COMMENT ON RESULTS
Management actions continue throughout the Group to improve profitability. Early
benefits of these actions are reflected in the 2004 results. The proactive
optimisation of capacity utilisation, enhancement of sales mix, improvement of
raw material procurement, growth of volumes and reduction of costs will realise
further considerable value from the Group`s strong asset and business base.
The Group recorded headline earnings of R214 million, generated off revenue of
R6,3 billion (2003: R6,6 billion) in a year when the Rand strengthened against
the US dollar by 15%. These earnings show an improvement of R307 million from
the headline loss in 2003. This is in line with the ongoing Tongaat-Hulett
strategy of unlocking the earnings improvement opportunities that exist in the
balanced group of four sizeable, strategically positioned and focused operating
companies.
African Products experienced a year of transition, with a move to a new maize
procurement and product pricing model, and the commencement of a profit
recovery. Operating profit improved to R63 million (2003: loss of R104 million)
despite the pressure of the exchange rate on local pricing and export
contributions, together with the high priced maize procured under the previous
business model. Domestic sales volumes of prime products were 2% below those of
2003 as a result of the pressure from imports of starch and glucose in African
Products` markets and imports of finished products in its customers` markets. A
large proportion of the volumes lost to direct imports were regained during the
last quarter of 2004. The maize priced under the previous procurement approach
was utilised by the end of October. The maize for all sales thereafter was
priced when the product prices and volumes were agreed with customers. Using
this approach, more than 35% of the maize required for 2005 has been priced
against product prices with margins that will contribute to a return to an
acceptable level of profitability for African Products. Fixed cash costs were
again held below the 2002 levels, with ongoing focus on procurement practices
and manning structures.
Hulett Aluminium improved its operating profit to R150 million (2003: R5
million), with the Group`s share being 50% thereof. The focus remains on
increasing volumes, improving product mix and reducing unit costs. These factors
have together generated financial benefits approaching R450 million in the past
two years, and have largely offset the effects of the strengthening Rand. Hulett
Aluminium started benefiting late in 2004 from rising US dollar rolling margins,
especially in North America and Asia. As one of the few independent rolled
products producers that are able to manufacture high quality, higher margin and
technically demanding niche products, the business continues to experience
strong demand. Total sales volumes of rolled products grew by 10% to 144 000
tons. Local market sales grew by 11%, particularly in the transport, automotive
and packaging sectors. Export sales growth was limited to 10% by the increased
local demand and the available production output. Production was hampered by a
fire on the Camps Drift hot mill in May 2004 and a four week strike in the
second half of the year. The average output of rolled products in the last
quarter increased to 160 000 tons annualised. The rolled products target for
2005 is 175 000 tons, moving towards 200 000 tons in the years thereafter.
Conversion costs per ton decreased by 5% in 2004 as a result of the volume
growth and cost savings, particularly in metal recycling. The aluminium
extrusion operation grew local market sales by 13% and increased profitability,
as did the commercial products businesses.
Moreland`s platform of prime property developments established over the past
decade has enabled it to capitalise on the favourable resorts and residential
property market and post a record operating profit of R182 million (2003: R90
million). New projects were launched during the year, with outstanding
performances achieved in the Zimbali resort and the Ilala and Izinga Ridge
residential projects in La Lucia and Umhlanga respectively. Increased sales have
been achieved in the Umhlanga Ridge New Town Centre including sites for
apartments and offices. Several large transactions were concluded at RiverHorse
Valley Business Estate, a partnership with the eThekweni Municipality (Durban),
and Briardene Industrial Park. The three new major road developments in areas
where Moreland operates are opening-up new development nodes for substantial
future growth. A number of environmental impact studies and planning programmes
are due to be completed in 2005 to maintain Moreland`s current momentum.
Tongaat-Hulett Sugar`s profit from operations, before interest, totalled R184
million (2003: R202 million). This includes dividends from Triangle, the equity
accounted share of operating profit at Xinavane in Mozambique and is before
restructuring costs. The relatively low sugar crop for the second year in a row,
together with the decrease in the South African domestic sugar price late in
2003 and the strengthening Rand`s effect on export realisations, depressed
margins in 2004. Sales volumes in South Africa were 464 365 tons with raw sugar
export volumes at 291 922 tons. The recent increase in the international sugar
price has not yet impacted the financial results.
Sugar production for the 2004 year grew by 2,8% to 1,081 million tons.
Production from the South African operations increased by 11% to 724 000 tons
while that of Mozambique rose to 85 000 tons. In Swaziland, Tambankulu produced
the raw sugar equivalent of 50 000 tons. Triangle Sugar in Zimbabwe produced 222
000 tons.
Actions completed this year by Tongaat-Hulett Sugar include the closure of the
Entumeni 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. Restructuring costs of R29 million were incurred in
2004. The Mozambique operations achieved a turnaround with a positive
contribution to earnings. Triangle Sugar continues to operate profitably in the
difficult Zimbabwean economic and business environment.
Management`s profit improvement actions across the Group, which have started
taking effect, largely offset the effects of factors such as the strengthening
Rand, high priced maize and the small sugar crops harvested in 2003 and 2004.
This limited the decrease in underlying operating profit to R65 million. The
valuation adjustments charged against income were R347 million less than the
prior year. These valuation items relate mainly to the valuation of certain
contracts and balance sheet items at the end of the period. The maize futures
position reported in the previous year, which was required to be marked to
market through the income statement, was eliminated in 2004 and a close-out
valuation gain of R18 million realised, compared to the R211 million charge in
the previous year. The Group`s total operating profit improved to R364 million
from R80 million in 2003.
The Group`s balance sheet remains sound with net borrowings as a percentage of
equity at 13,2% (2003: 13,4%).
The Board has declared a final dividend of 120 cents per share, which brings the
total annual dividend to 170 cents per share (2003: 120 cents per share).
A POSITIVE OUTLOOK
Tongaat-Hulett is well placed to increase the returns in its businesses and
there are signs of improving economic conditions in the areas where it operates.
The benefits of the actions being taken across the Group to grow earnings will
increasingly be reflected in future financial results. Considerable earnings
growth is expected in the year ahead.
For and on behalf of the board
C M L Savage P H Staude
Chairman Chief Executive Officer
Amanzimnyama, Tongaat, KwaZulu-Natal
18 February 2005
DIVIDEND DECLARATION
Notice is hereby given that the board has declared a final dividend (number 155)
of 120 cents per share for the year ended 31 December 2004 to shareholders
recorded in the register at the close of business on Friday 18 March 2005.
The salient dates of the declaration and payment of this final dividend are as
follows:
Last date to trade ordinary shares
`CUM` dividend Friday 11 March 2005
Ordinary shares trade
`EX` dividend Monday 14 March 2005
Record date Friday 18 March 2005
Payment date Thursday 24 March 2005
Share certificates may not be dematerialised or re-materialised, nor may
transfers between registers take place between Monday 14 March 2005 and Friday
18 March 2005, 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 11 March 2005.
For and on behalf of the board
S Davidson
Group Secretary
Amanzimnyama, Tongaat, KwaZulu-Natal
18 February 2005
CORPORATE INFORMATION
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
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)
Alternate directors: J Thomas, G F Young
Registered office: Amanzimnyama Hill Road, Tongaat, KwaZulu-Natal,
P O Box 3, Tongaat 4400, Telephone (032) 439 4019,
Facsimile (032) 945 3333, Email: info@tongaat.co.za
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited,
Telephone (011) 370 7700
Sponsor: Investec Bank Limited, Telephone (011) 286 7326
Additional information about the Group is available at our website:
www.tongaat.co.za
INCOME STATEMENT
Rmillion Note 2004 2003
Revenue 6 298 6 559
Underlying operating profit 387 452
Triangle dividend 51 19
Restructure costs (29)
Valuation adjustments on financial instruments
and other items 1 (51) (398)
Exceptional items 2 6 7
Operating profit 9 364 80
Net financing costs 3 (93) (152)
Earnings/(loss) before tax 271 (72)
Tax 4 (41) 77
Earnings after tax 230 5
Share of associate company`s earnings/(loss) 6 (45)
Minority shareholders` share of earnings (10) (1)
Total net earnings/(loss) 226 (41)
Headline earnings/(loss) 214 (93)
Earnings/(loss) per share (cents)
Total net earnings/(loss)
Basic 222,2 (40,4)
Diluted 219,9 (40,3)
Headline earnings/(loss)
Basic 210,4 (91,7)
Diluted 208,2 (91,3)
Dividend per share (cents) 170,0 120,0
Currency conversion
Rand/US dollar average 6,44 7,55
Rand/US dollar closing 5,65 6,67
Rand/GB pound closing 10,84 11,94
HEADLINE EARNINGS
Rmillion 2004 2003
Total net earnings/(loss) 226 (41)
Less after tax effect of:
Exceptional items (note 2) (9) (9)
Surplus on disposal of fixed assets (3) (1)
Realised gain on cash equivalent investment (42)
Headline earnings/(loss) 214 (93)
BALANCE SHEET
Rmillion 2004 2003
Assets
Non-current assets
Property, plant and equipment 4 115 4 162
Growing crops 185 179
Long-term receivable 210 210
Goodwill 35 37
Investments 23 5
Derivative instruments 36 11
4 604 4 604
Current assets 3 558 3 709
Inventories 1 649 1 769
Trade and other receivables 1 106 1 132
Cash and cash equivalents 803 808
Total assets 8 162 8 313
Equity and liabilities
Capital and reserves
Share capital 102 101
Share premium 759 730
Non-distributable reserves 69 29
Retained income 3 427 3 333
Equity 4 357 4 193
Minority interests in subsidiaries 71 6
Deferred tax 854 866
Long-term borrowings 255 371
Provisions 271 260
Derivative instruments 52 53
Current liabilities 2 302 2 564
Trade and other payables (note 8) 1 171 1 551
Short-term borrowings 1 125 998
Tax 6 15
Total equity and liabilities 8 162 8 313
Number of shares (000)
- in issue 102 248 101 467
- weighted average (basic) 101 718 101 418
- weighted average (diluted) 102 791 101 816
Net asset value per share (cents) 4 261 4 132
Debt to equity 31,7% 32,6%
Net debt to equity 13,2% 13,4%
STATEMENT OF CHANGES IN EQUITY
Rmillion 2004 2003
Balance at beginning of year 4 193 4 567
Effect of change in accounting policy (16)
Restated balance 4 193 4 551
Total net earnings/(loss) for the year 226 (41)
Dividends paid (132) (233)
Share capital issued 30 2
Hedge reserve released to income statement 27 (23)
Gains/(losses) from cash flow hedges 9 (27)
Share of associate`s movement in currency
translation reserve (4) 16
Currency exchange rate changes 8 (13)
Gain on cash equivalent investment 4
Realised gain on cash equivalent investment sold (43)
Balance at end of year 4 357 4 193
CASH FLOW STATEMENT
Rmillion 2004 2003
Operating profit 364 80
Net financing costs (93) (152)
Non-cash items:
- Depreciation 231 223
- Other non-cash items 11 (6)
Tax payments (71) (42)
Change in working capital (203) (3)
Cash flow from operating activities 239 100
Expenditure on property, plant and equipment:
- New (81) (206)
- Replacement (78) (106)
- Major plant overhaul costs capitalised (32) (39)
Growing crops 20 21
Proceeds on disposal of property,
plant and equipment 44 43
Investments (19) (19)
Net cash flow before dividends and
financing activities 93 (206)
Dividends paid (132) (233)
Net cash flow before financing activities (39) (439)
Borrowings raised 32 553
Shares of a subsidiary issued to the minority 54
Hedges of foreign loans (35) (161)
Shares issued 30 2
Net increase/(decrease) in cash and
cash equivalents 42 (45)
Balance at beginning of year 808 938
Exchange rate translation loss (47) (80)
Foreign exchange adjustment (9)
Gain on cash equivalent investment 4
Cash and cash equivalents at end of year 803 808
SEGMENTAL ANALYSIS
Revenue Underlying Operating Total
Operating Profit Assets
Profit
Rmillion
2004
African Products 1 344 42 63 1 666
Hulett Aluminium (50%) 1 671 74 75 2 665
Moreland 420 185 182 453
Tongaat-Hulett Sugar 2 863 120 136 2 466
Corporate (34) (51) 912
Exchange rate (47)
translation loss
Exceptional items 6
Group total 6 298 387 364 8 162
2003
African Products 1 487 114 (104) 1 984
Hulett Aluminium (50%) 1 600 22 3 2 590
Moreland 226 92 90 428
Tongaat-Hulett Sugar 3 246 263 233 2 407
Corporate (39) (69) 904
Exchange rate (80)
translation loss
Exceptional items 7
Group total 6 559 452 80 8 313
Total Capital Capital Depreciation
Liabilities Employed Expenditure
Rmillion
2004
African Products 381 1 287 40 82
Hulett Aluminium (50%) 621 2 410 38 57
Moreland 228 256
Tongaat-Hulett Sugar 391 2 149 112 91
Corporate 1 259 883 1 1
Exchange rate
translation loss
Exceptional items
Group total 2 880 6 985 191 231
2003
African Products 792 1 296 81 69
Hulett Aluminium (50%) 700 2 340 55 52
Moreland 180 248
Tongaat-Hulett Sugar 582 1 989 212 101
Corporate 994 874 3 1
Exchange rate
translation loss
Exceptional items
Group total 3 248 6 747 351 223
NOTES
Rmillion 2004 2003
1. Valuation adjustments on
financial instruments and other items
Maize procurement contracts 18 (211)
Translation of foreign currency:
- foreign cash (47) (80)
- other (22) (57)
Export receivables 3 (33)
Other financial instruments (3) (17)
(51) (398)
2. Exceptional items
Surplus on sale of property 18 15
Estate closure costs (10) (3)
Goodwill amortised (2) (3)
Impairment of assets (2)
Exceptional items before tax 6 7
Tax 3 2
Exceptional items after tax 9 9
3. Net financing costs
Interest paid (275) (438)
Financial instrument income 112 174
Interest received 70 69
Realised gain on cash equivalent investment 43
(93) (152)
4. Tax
Normal (51) (24)
Deferred 22 130
Secondary tax on companies (12) (29)
(41) 77
5. Capital expenditure commitments
Contracted 52 46
Approved but not contracted 86 85
138 131
6. Operating lease commitments 57 59
7. Guarantees and contingent liabilities 34 43
8. Trade and other payables
Included in trade and other payables is a constructive maize obligation
(interest bearing) in respect of maize of R218 million
(2003: R553 million).
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 Group`s accounting policies conform with South African Statements of
Generally Accepted Accounting Practice. The results for the year ended
31 December 2004 have been prepared on a basis that is consistent with
that of the previous year.
11. Audited results
The results for the year ended 31 December 2004 have been audited by
Deloitte & Touche. Their unqualified audit opinion is available for
inspection at the registered office of the company.
Date: 21/02/2005 07:00:09 AM
Produced by the JSE SENS Department
