| Mon 23 May 2005, 8:37 | | Illovo Sugar Limited - Audited results for the yea |
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Illovo Sugar Limited - Audited results for the year ended 31 March 2005
Illovo Sugar Limited
(Incorporated in the Republic of South Africa)
Company registration number 1906/000622/06
Share Code: ILV
ISIN: ZAE000003547
Audited results for the year ended 31 March 2005
Group operating profit down 44% to R405.6 million
Financing costs significantly down to R153.5 million
Headline earnings per share down 40% to 42.6 cents
Total dividend per share 25.5 cents; dividend 60% of e.p.s.
Operating profits severely impacted by continuing strong rand and strength of
other local currencies in the group`s countries of operation compared to the US$
Lower sugar and cane production following the sale of Gledhow and Monitor and
partly due to the dry conditions experienced in South Africa
Good agricultural and manufacturing operational performances
Balance Sheet strengthened - net borrowings decreased by R571.6 million compared
to last year
70% of sugar production by volume and 85% by value was sold into stable domestic
or premium priced export markets
Don MacLeod, Managing Director, commented:
`These are clearly disappointing results though not unforeseen. The decline is
largely due to the strength of the Rand on our export realisations in South
Africa and the translation of our foreign earnings, together with the impact of
local currency strength compared with the US dollar in the other countries of
operation. Notwithstanding, we have reduced interest costs significantly, taken
actions during the year which will result in future meaningful cost savings to
the group and reduced our balance sheet gearing substantially. We have also
achieved enhanced agricultural and manufacturing operational efficiencies in
many parts of the group.
`We remain susceptible to the future level of the Rand and world sugar prices
but expect an improved operational performance once again next year. `
23 May 2005
Enquiries:
Illovo Sugar 031 508 4300
Don MacLeod, Managing Director
John Russell, Financial Director
Chris Fitz-Gerald, Corporate Communications
College Hill 011 447 3030
Johannes van Niekerk 082 921 9110
Nicholas Williams 083 607 0761
PROFIT AND DIVIDEND ANNOUNCEMENT
Reduction in borrowings and gearing
2 major BEE transactions
Disposal of Monitor Sugar
Review
During the past year the group experienced disappointing financial results
despite good operational performances by the agricultural estates and the
factories. The group achieved turnover of R5.1 billion, operating profit of
R405.6 million and headline earnings of R142.8 million. Compared to the
previous year revenue declined by 21% and operating profit by 44%. Headline
earnings per share of 42.6 cents were 40% below those achieved in the previous
year. 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 strength of the local currencies compared to the US dollar in the
operations outside South Africa also reduced profits in those local currencies.
In addition lower sugar production and related downstream production in South
Africa had a negative effect.
Financing costs decreased significantly from R256.4 million to R153.5 million,
whilst the effective tax rate excluding abnormal items was 23%. Cash generation
was strong with group borrowings of R794.7 million reflecting a material
decrease of R571.6 million, whilst gearing of 49.4% shows a significant
improvement.
The contributions to operating profit by sugar production were 68%, cane growing
16% and downstream 16%, and by country were South Africa 13%, Malawi 34%, Zambia
38%, Swaziland 5%, Tanzania 17%, Mozambique (1)% and the United States (6)%.
Group sugar and cane production of 1.78 million tons and 5.3 million tons
respectively was much lower than that of last year partly as a result of the
sale of the Gledhow sugar mill and cane estates and the sale of the Monitor
sugar factory, and partly due to the adverse weather conditions experienced in
South Africa. At the other cane estates of the group growing conditions were
reasonable with good cane and sucrose yields resulting in sugar production being
similar to that achieved in the 2003/04 season. On the production side the
sugar and downstream plants performed well and numerous performance related
records were attained. In addition the ethyl alcohol operation achieved record
output.
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 67% to total revenue, whilst exports to 93 countries contributed the
balance. A strength of the group is that 70% of sugar production by volume and
85% by value was sold into stable domestic or premium priced export markets. It
is pleasing that domestic sales of sugar have shown an improvement across the
group due to various marketing and distribution initiatives. Governments in
most countries where the group operates have responded positively to stem the
flow of illegal imports. This is vitally important to both the group and the
rural economies of the region. However, it is disappointing that in Tanzania
the protection granted by government to domestic producers of refined sugar
remains at a level that results in industrial users continuing to import world
market sugar.
The world sugar price continues to be volatile. The past season saw a welcome
upward adjustment with the nearby futures price rising from just over US7.0
cents/lb in March 2004 to over US9.0 cents/lb in March 2005. The world sugar
production deficit for 2004/05 is currently estimated to be 3.5 million tons.
The most significant factors causing the deficit after a long period of
surpluses have been the change by India from being a net exporter to a net
importer and material decreases in production in Thailand and Cuba.
World trade negotiations continue and the group is monitoring the impact of
these on its sugar markets. In particular the access tonnages and prices earned
for sugar in the European Union are valuable to the group. Increased access for
Least Developed Countries (LDC`s) at remunerative prices would improve expansion
opportunities for many of the group`s operations and local growers. However,
the EU investigations to reform its sugar regulations have been protracted and
the recent ruling by the World Trade Organisation that several million tons of
European subsidised sugar exports are illegal could impact negatively on price
proposals and future increased access to developing countries. The company is
actively participating in the process and providing technical input to the
countries concerned. It is anticipated that legislative proposals will be
tabled during June 2005 with finalisation expected by the end of November 2005.
Both the Gledhow sugar factory and cane growing estates and the Umfolozi sugar
factory were sold to Black Economic Empowerment (BEE) companies. In addition
the Monitor Sugar operation in the United States was sold prior to the beginning
of the new sugar campaign. A further BEE farm sale was made during the year.
The proceeds from the disposal of these assets were utilised to reduce debt.
Within the South African operations a number of actions were undertaken in the
year under review to improve long term profitability. The factory and field
operations together with centralised services were restructured. The company`s
outbound distribution operations were outsourced to Barloworld Logistics and
following the sale of the Gledhow and Umfolozi operations, the refining and
packing operations of the company have been consolidated at two mills. These
actions will result in meaningful cost savings to the group.
R134.1 million was spent on the replacement of plant and equipment to ensure
that the group`s operating assets are kept in a sound condition, that strategic
plant is adequately protected against breakdown and that product quality is of
the highest standard. In addition R25.8 million was invested in expansion
projects and on product registrations. The company also acquired the operating
leases in respect of various buildings amounting to R172.2 million.
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 2005 Annual Report which is to be issued in the third
week of June 2005.
Directorate
Messrs P M Madi and A R Mpungwe have been appointed as members of the
Remuneration/ Nomination Committee and the Risk Management Committee
respectively.
Outlook
The results for the forthcoming year will be considerably impacted by the level
of the rand compared to other currencies, particularly the US dollar. Cane and
downstream production is anticipated to exceed the levels achieved in the
previous year, whilst sugar production is expected to be slightly higher than
last year, despite the sale of Umfolozi. World sugar prices have recovered
from previous low levels and notwithstanding the decline in prices from their
recent highs, world and regional market sales should earn better prices on
average than those attained in the past year. Real growth in earnings is
anticipated at current exchange rates.
Dividend
A final dividend of 13.5 cents (2004 :28.0 cents) has been declared which gives
a total distribution of 25.5 cents (2004 : 46.0 cents) for the full year.
On behalf of the Board
R A Williams D G MacLeod
Chairman Managing Director
Mount Edgecombe
20 May 2005
GROUP INCOME STATEMENTS
Year ended 31 March
2005 2004
Restated Change
Notes Rm Rm %
Revenue 5 143.0 6 488.2 (21)
Profit from operations 405.6 726.6 (44)
Net financing costs 1 153.5 256.4
Profit before abnormal items 252.1 470.2 (46)
Abnormal items 2 (79.2) 1.9
Profit before taxation 172.9 472.1 (63)
Taxation 82.9 141.4
Profit after taxation 90.0 330.7 (73)
Attributable to outside shareholders in
subsidiary companies 49.3 90.2
Net profit attributable to shareholders
in Illovo Sugar Limited 40.7 240.5 (83)
Determination of headline earnings :
Net profit attributable to shareholders 40.7 240.5 (83)
Adjusted for :
Net loss on sale of businesses 97.0 -
Loss/(profit) on disposal of property,
plant
and equipment 5.1
(3.0)
Amortisation of goodwill - (1.1)
Reorganisation of long term debt - 1.2
Headline earnings 142.8 237.6 (40)
Number of shares in issue (millions) 337.2 333.8
Weighted average number of shares on
which
headline earnings per share are based 335.0 333.4
(millions)
Headline earnings per share (cents) 42.6 71.3 (40)
Diluted headline earnings per share 42.2 69.7
(cents)
Dividend per share (cents) 25.5 46.0 (45)
The group adopted AC501 (Accounting for Secondary Tax on Companies (STC)) with
effect from 1 April 2004. As required by AC501, it has been retrospectively
applied, with the comparative figures from the previous year being restated
accordingly. The effect of this application on headline earnings in the current
year is an increase of R9.7 million and a reduction of R18.9 million for the
year ended 31 March 2004.
In addition, the group has adopted AC140 (Business Combinations). In terms of
this statement, previously recognised negative goodwill has been derecognised at
the beginning of the period with a corresponding adjustment to opening retained
income.
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 2005 have been audited by Deloitte &
Touche, and their unqualified audit opinion is available for inspection at the
registered office of the company.
NOTES TO THE INCOME STATEMENTS
Year ended 31 March
2005 2004
Restated
Rm Rm
1. Net financing costs
Interest paid 188.3 286.7
Interest received (32.2) (27.7)
Dividend income (2.6) (2.6)
153.5 256.4
2. Abnormal items
Net loss on sale of businesses (72.7) -
(Loss)/profit on disposal of property (6.5) 1.9
Abnormal (loss)/profit before taxation (79.2) 1.9
Taxation (24.3) (0.2)
Abnormal (loss)/profit attributable to
shareholders in Illovo Sugar Limited
(103.5) 1.7
3. Discontinuance of United States operation
Effective 30 September 2004, the group disposed of its investment in
Monitor Sugar company. The consideration net of costs represented a net
loss of R242.5 million. In addition to the proceeds received, the
borrowings in Monitor Sugar were taken over by the purchaser. At 31
March 2004 these amounted to US$48.7 million.
The results of the operations of Monitor Sugar Company were as follows:
Six months Year ended
ended
30 31 March
September 2004
2004 Rm
Rm
Revenue 334.5 727.3
Loss from operations (22.8) (10.06)
Net financing costs (2.9) (7.3)
Loss before taxation (25.7) (17.9)
Taxation (7.7) (6.1)
Loss after taxation (18.0) (11.8)
The net cash flow attributable to Monitor Sugar company was as
follows:
Cash flow from operating activities 152.3 25.8
Cash flow from investing activities 1.7 8.2
Net cash flow before financing activities 154.0 34.0
Cash flow from financing activities (156.3) (42.6)
Net movement in cash (2.3) (8.6)
ABRIDGED GROUP BALANCE SHEETS
31 March
2005 2004
Restated
Rm Rm
Assets
Non-current assets 2484.2 3159.2
Property, plant and equipment 1853.6 2581.2
Cane roots 543.7 518.4
Investments 86.9 80.6
Goodwill - (21.0)
Current assets 1540.2 1802.1
Total assets 4024.4 4961.3
Equity and liabilities
Capital and reserves 1200.3 1295.0
Interest of outside shareholders in subsidiaries 408.4 409.9
Deferred Taxation 494.2 608.5
Net borrowings 794.7 1366.3
Current liabilities 1126.8 1281.6
Total equity and liabilities 4024.4 4961.3
Other Salient Features
Operating margin (%) 7.9 11.2
Gearing (%) 49.4 80.1
Interest cover (times) 2.6 2.8
Net asset value per share (cents) 356.0 387.1
Depreciation 180.2 236.2
Capital expenditure 332.1 198.5
* expansion 18.5 27.1
* product registration costs 7.3 12.5
* operating leases 172.2 -
* replacement 134.1 158.9
Capital commitments 245.4 242.1
* contracted 11.6 19.4
* approved but not contracted 233.8 222.7
Lease commitments 182.1 495.3
* land and buildings 115.2 429.7
* other 66.9 65.6
Contingent liabilities 14.4 16.0
ABRIDGED GROUP CASH FLOW STATEMENTS
Year ended 31 March
2005 2004
Restated
Rm Rm
Cash flows from operating and investing
activities
Cash operating profit 531.1 816.7
Working capital requirements 137.5 42.3
Cash flow from operations 668.6 859.0
Replacement capital (306.3) (158.9)
Finance costs, taxation and dividend
(389.6) (600.4)
Net investment in future operations
(35.9) (46.4)
Cash flow from businesses sold 429.9 -
Other movements 19.3 41.7
Net cash inflow before financing activities 386.0 95.0
STATEMENT OF CHANGES IN EQUITY
Share capital and share premium
Balance at beginning of the period 264.3 259.9
Issue of new shares 18.2 4.4
Balance at end of the period 282.5 264.3
Non-distributable reserves
Balance at beginning of the period 109.4 91.7
Effect of foreign currency translation (32.8) (390.9)
Effect of cash flow hedges (9.7) 4.2
Transfer from retained surplus - FCTR 31.3 404.4
Balance at end of the period 98.2 109.4
Retained surplus
Balance at beginning of the period 921.3 1 264.6
Realised profit on disposal of land 1.5 -
Restatement of prior year in terms of AC501 - 21.8
Reserve arising out of AC133 0.2 (1.3)
Derecognition of negative goodwill 21.0 -
Dividends paid (133.8) (199.9)
Transfer to non-distributable reserves - FCTR (31.3) (404.4)
Net profit for the period 40.7 240.5
Balance at end of the period 819.6 921.3
Ordinary shareholders` equity 1 200.3 1 295.0
BUSINESS SEGMENTAL ANALYSIS
Year ended 31 March
2005 2004
Restated
Rm % Rm %
Revenue
Sugar production 3 740.3 73 4 892.1 75
Cane growing 893.6 17 1 040.7 16
Downstream 509.1 10 555.4 9
5 143.0 6 488.2
Profit from operations
Sugar production 274.8 68 424.7 58
Cane growing 63.8 16 236.8 33
Downstream 67.0 16 65.1 9
405.6 726.6
Total assets
Sugar production 2 159.4 54 3 030.4 61
Cane growing 1 606.3 40 1 676.4 34
Downstream 258.7 6 254.5 5
4 024.4 4 961.3
DECLARATION OF DIVIDEND NO. 27
Notice is hereby given that a final dividend of 13.5 cents per share has been
declared on the ordinary shares of the company in respect of the year ended 31
March 2005. This dividend, together with the interim dividend of 12.0 cents per
share which was declared on 17 November 2004, makes a total distribution in
respect of the year ended 31 March 2005 of 25.5 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, 1 July 2005
Shares commence trading ex-dividend Monday, 4 July 2005
Record date Friday, 8 July 2005
Payment of dividend Monday, 11 July 2005
Share certificates may not be dematerialised / rematerialised between Monday, 4
July 2005 and Friday, 8 July 2005, both days inclusive.
By order of the Board
G D Knox
Company Secretary
Mount Edgecombe
20 May 2005
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 :
Ultra Registrars (Proprietary) Limited 11 Diagonal Street, Johannesburg, 2001
P O Box 4844, Johannesburg, 2000
Auditors :
Deloitte & Touche
Sponsor :
JP Morgan Equities Limited
Date: 23/05/2005 07:37:36 AM
Produced by the JSE SENS Department
