| Mon 1 Aug 2005, 8:31 | | Results for the half-year ended 30 June 2005 |
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The Tongaat-Hulett Group Limited - Interim Results
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 2005
Revenue of R3,1 billion (2004: R3,0 billion)
Operating profit of R319 million (2004: R157 million)
Headline earnings of R208 million (2004: R53 million)
Interim dividend of 120 cents per share (2004: 50 cents per share)
COMMENTARY
Headline earnings improved to R208 million compared to R53 million in the first
half of 2004. Earnings momentum is building as the strategy of growing earnings
from the Group`s four strategically placed and focused operations is being
executed. Operating profit increased to R319 million from R157 million in 2004.
Hulett Aluminium increased operating profit to R180 million in the first half of
2005 (2004: R88 million), with the Group`s share being 50% thereof. Rolled
Products production increased to 168 000 tons annualised and sales volumes grew
by 20% to 172 000 tons annualised. There was encouraging growth of value added
exports by customers in the local market. Export sales volumes increased by 19%
and sales opportunities well exceed the company`s available capacity. There has
been sustained growth in higher value, more demanding export products, as sales
of can end stock increased by 37%, closure sheet by 25% and heat treated plate
by 15%. The benefit of improved international rolling margins in the first half
of 2005 was reduced by the 7% stronger average Rand/US dollar exchange rate.
Conversion costs per ton reduced by 15% as a result of greater output and the
increase in total rolled products conversion costs being limited to less than
3%. The Rolled Products operation is well on track to further increase volumes
in the second half of 2005, towards the full capacity which exceeds 200 000 tons
per annum. The extrusion business achieved a sound operating profit performance.
African Products has converted to the new maize procurement and product pricing
model, and earnings volatility from maize valuations has been eliminated.
Operating profit of R32 million is comparable to R7 million in 2004. Sales for
the first four months were priced when maize was at import parity and this,
together with low co-product prices, placed the business under pressure. The
maize price moving towards export parity, as a result of the maize surplus in
South Africa, started benefiting the business significantly from May 2005.
African Products` profit recovery is progressing. Sales of prime domestic
products increased by 3,6% to 183 500 tons, with success in regaining volumes
lost to imports. Actions are underway to reduce maize carrying costs, lower
fixed costs, increase operating efficiencies and develop new business
opportunities.
Tongaat-Hulett Sugar`s operating profit increased to R83 million (2004: R29
million) before Triangle dividends and restructure costs. Sales volumes in South
Africa at 215 430 tons (2004: 211 767 tons) and raw sugar export volumes at 172
680 tons (2004: 120 345 tons) have increased due to growth in the domestic
market and the sale of higher export stocks carried into 2005 from 2004
production. The small, drought-affected South African crop harvested in 2004 was
nevertheless larger than the 2003 crop. The increased production volume resulted
in a decrease in the cost per ton of sugar carried forward and sold in the first
half of 2005. This, together with the improved sales tonnages and export
realisations, has increased margins. The benefits of actions taken to enhance
earnings are beginning to be realised. These include rationalisation of milling
capacity, reduction in milling costs, cane procurement projects, head office
closure, leveraging of the Huletts brand and other refining value chain
initiatives. A dividend equivalent to US dollar 2,9 million was declared by
Triangle Sugar Zimbabwe, of which the first US dollar 1,8 million was remitted
in July and consequently no dividends have been brought to account in the first
six months(2004: R21 million). Second half earnings are expected to improve with
the higher 2005 sugar production and increasing benefits from the earnings
enhancing initiatives. A Rand/US dollar exchange rate at R6,60 and a world sugar
price above 9 US c/lb will improve export realisations per ton by approximately
11% in the second half of 2005.
Tongaat-Hulett`s sugar production for the 2005 year is expected to grow by 12%
to 1,2 million tons. Production from South African operations is estimated to
increase by 11% to 802 000 tons sugar (2004: 723 000 tons) while that of
Mozambique is expected to rise by 28% to 109 000 tons (2004: 85 000 tons). In
Swaziland, Tambankulu is expected to produce the raw sugar equivalent of 52 000
tons (2004: 50 000 tons). Triangle is expected to produce 250 000 tons of sugar
(2004: 222 000 tons).
Moreland`s operating profit for the half-year was R77 million (2004: R117
million). The industrial and commercial portfolios delivered strong
performances. The resorts portfolio started benefiting in June from replenished
stocks. The residential portfolio`s performance was lower mainly due to the
delay in obtaining development approvals for the La Lucia Ridge Executive
Village site, which are expected to occur in the second half of the year. The
strength of the KwaZulu-Natal property market is expected to continue, with
relatively low interest rates and the continual broadening of the market boding
well for good performances across all portfolios. Progress has been made in
securing environmental impact, zoning and development approvals for a number of
major projects to ensure that sufficient serviced stocks are available to
capitalise on demand. New phases of current projects and new niche projects are
scheduled to be launched within the next six months. Negotiations are already
underway on a few large sites at Mdloti South, Sibaya and Umhlanga Triangle.
The Group has reduced its exposure to valuation gains and losses on financial
instruments, which are included in operating profit. The majority of the
valuation adjustments comprised of a foreign cash translation gain of R39
million (2004: loss of R28 million). Net financing costs have decreased mainly
as a result of lower interest rates, reduced maize finance costs and changes in
the funding of the Mozambique sugar business. The tax charge includes the
benefit of the 1% reduction in the South African company tax rate and the
consequent R28 million release from the deferred tax provision.
The board has declared an interim dividend for the half-year of 120 cents per
share (2004: 50 cents per share).
A POSITIVE OUTLOOK
Tongaat-Hulett is growing earnings, benefiting from management actions both
completed and underway across the Group and capitalising on the improved
economic conditions in the areas where it operates. Actions include proactive
optimisation of capacity utilisation, enhancement of sales mix, improvement of
raw material procurement, growth of volumes, reduction of costs and capitalising
on the Group`s property development platform. The benefits will increasingly be
reflected in future financial results. Considerable earnings growth is expected
to be reported for the full year.
For and on behalf of the board
C M L Savage P H Staude
Chairman Chief Executive Officer
Amanzimnyama, Tongaat, KwaZulu-Natal 29 July 2005
DIVIDEND DECLARATION
Notice is hereby given that the board has declared an interim dividend (number
156) of 120 cents per share for the half-year ended 30 June 2005 to shareholders
recorded in the register at the close of business on Friday 26 August 2005.
The salient dates of the declaration and payment of this interim dividend are as
follows:
Last date to trade ordinary shares `CUM` dividend Friday 19 August 2005
Ordinary shares trade `EX` dividend Monday 22 August 2005
Record date Friday 26 August 2005
Payment date Thursday 1 September 2005
Share certificates may not be dematerialised or re-materialised, nor may
transfers between registers take place between Monday 22 August 2005 and Friday
26 August 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 19 August 2005.
For and on behalf of the board
M M L Mokoka
Group Secretary
Amanzimnyama, Tongaat, KwaZulu-Natal
29 July 2005
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2005 2004 2004
Restated Restated
Rmillion Note for IFRS for IFRS
INCOME STATEMENT
Revenue 3 091 2 950 6 298
Operating profit 1 319 157 358
Net financing costs 2 (35) (70) (93)
Share of associate company`s
(loss)/earnings (13) (12) 6
Profit before tax 271 75 271
Tax 3 (55) (14) (41)
Net profit 216 61 230
Attributable to:
Equity holders 216 55 220
Minority interest 6 10
216 61 230
Headline earnings attributable
to equity holders 4 208 53 206
Earnings per share (cents)
Net profit per share
Basic 210,4 54,2 216,3
Diluted 205,9 53,8 214,0
Headline earnings per share
Basic 202,6 52,2 202,5
Diluted 198,3 51,9 200,4
Dividend per share (cents) 120,0 50,0 170,0
Currency conversion
Rand/US dollar average 6,21 6,67 6,44
Rand/US dollar closing 6,68 6,23 5,65
Rand/GB pound closing 11,98 11,29 10,84
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2005 2004 2004
Restated Restated
Rmillion for IFRS for IFRS
SEGMENTAL ANALYSIS
REVENUE
African Products 616 650 1 344
Hulett Aluminium (50%) 1 005 819 1 671
Moreland 186 272 420
Tongaat-Hulett Sugar 1 284 1 209 2 863
Group total 3 091 2 950 6 298
OPERATING PROFIT
African Products 32 7 43
Maize procurement contracts valuation 18 18
Hulett Aluminium (50%) 90 44 74
Moreland 77 117 181
Tongaat-Hulett Sugar 83 29 111
Triangle dividend 21 51
Restructure costs (3) (23) (29)
Corporate (11) (30) (52)
Exchange rate translation gain/(loss) 39 (28) (47)
Exceptional items 12 2 8
Group total 319 157 358
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2005 2004 2004
Restated Restated
Rmillion for IFRS for IFRS
BALANCE SHEET
Assets
Non-current assets
Property, plant and equipment 4 072 4 130 4 115
Growing crops 223 205 185
Long-term receivable 210 210 210
Goodwill 21 21 23
Derivative instruments 8 20 36
Investments 61 7 23
4 595 4 593 4 592
Current assets 3 361 3 559 3 560
Inventories 1 230 1 307 1 649
Trade and other receivables 1 414 1 455 1 108
Cash and cash equivalents 717 797 803
Total assets 7 956 8 152 8 152
Equity and liabilities
Capital and reserves
Share capital 103 101 102
Share premium 789 734 759
Non-distributable reserves 18 38 60
Retained income 3 520 3 312 3 426
Equity holders` interest 4 430 4 185 4 347
Minority interests in subsidiaries 65 12 71
Equity 4 495 4 197 4 418
Deferred tax 862 867 854
Long-term borrowings 244 324 255
Provisions 279 264 271
Derivative instruments 28 41 52
Current liabilities 2 048 2 459 2 302
Trade and other payables (note 8) 1 030 1 305 1 171
Short-term borrowings 988 1 136 1 125
Tax 30 18 6
Total equity and liabilities 7 956 8 152 8 152
Number of shares (000)
- in issue 102 920 101 590 102 248
- weighted average (basic) 102 674 101 499 101 718
- weighted average (diluted) 104 889 102 197 102 791
Debt to equity 27,4% 34,8% 31,2%
Net debt to equity 11,5% 15,8% 13,1%
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2005 2004 2004
Restated Restated
Rmillion for IFRS for IFRS
CASH FLOW STATEMENT
Operating profit 319 157 358
Net financing costs (35) (70) (93)
Non-cash items:
Depreciation 135 109 231
Other non-cash items (80) (19) 17
Tax payments (17) (16) (71)
Change in working capital (31) (93) (203)
Cash flow from operating activities 291 68 239
Expenditure on property, plant and equipment:
New (60) (23) (81)
Replacement (27) (46) (78)
Major plant overhaul costs capitalised (34) (34) (32)
Growing crops disposals 21 20
Proceeds on disposal of property,
plant and equipment 23 16 44
Investments (59) (9) (19)
Net cash flow before dividends and
financing activities 134 (7) 93
Dividends paid (123) (81) (132)
Net cash flow before financing activities 11 (88) (39)
Borrowings (repaid)/raised (158) 112 32
Hedges of foreign loans (9) (11) (35)
Shares issued 31 4 30
Shares of a subsidiary issued to the minority 54
Net (decrease)/increase in cash resources (125) 17 42
Cash resources at beginning of period 803 808 808
Exchange rate translation gain/(loss) 39 (28) (47)
Cash resources at end of period 717 797 803
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2005 2004 2004
Restated Restated
Rmillion for IFRS for IFRS
STATEMENT OF CHANGES IN EQUITY
Balance at beginning of period 4 347 4 193 4 193
Effect of transition to IFRS (15) (15)
Accounting for fair value hedges as
required by IAS 39 (Revised) (5)
Restated balance 4 342 4 178 4 178
Net profit 216 55 220
Dividends paid (123) (81) (132)
Share capital issued 31 4 30
Share-based payment reserve 8 4 10
Hedge reserve released to income statement (4) 17 27
(Losses)/gains from cash flow hedges (14) 6 9
Share of associate`s movement in currency
translation reserve (7) 5 (4)
Currency exchange rate changes (19) (3) 9
Equity holders` interest 4 430 4 185 4 347
Minority interests in subsidiaries 65 12 71
Balance at beginning of period 71 6 6
Share of profit 6 10
Currency exchange rate changes (6) 1
Shares of a subsidiary issued
to the minority 54
Equity 4 495 4 197 4 418
Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2005 2004 2004
Restated Restated
Rmillion for IFRS for IFRS
NOTES
1. Operating profit
Operating profit includes results of operations, Triangle dividends,
restructure costs, valuation adjustments and exceptional items, as disclosed
in the segmental analysis.
2. Net financing costs
Interest paid (72) (189) (275)
Financial instrument income 16 98 112
Interest received 21 21 70
(35) (70) (93)
3. Tax
Normal (29) (34) (51)
Deferred (43) 25 22
Rate change adjustment (deferred) 28
Secondary tax on companies (11) (5) (12)
(55) (14) (41)
4. Headline earnings
Profit attributable to equity holders 216 55 220
Less after tax effect of surplus on
sale of fixed assets (8) (2) (14)
208 53 206
5. Capital expenditure commitments
Contracted 64 73 52
Approved but not contracted 150 62 86
214 135 138
6. Operating lease commitments 31 34 57
7. Guarantees and contingent liabilities 48 47 34
8. Trade and other payables
Included in trade and other payables is the maize obligation (interest bearing)
of R99 million (30 June 2004: R203 million and 31 December 2004: R218 million).
RECONCILIATION OF PREVIOUS SA GAAP TO IFRS
IFRS
Audited Unaudited transition
Year ended Half-year date
31 December 30 June 1 January
Rmillion 2004 2004 2004
Balance sheet
Equity
As previously reported - SA GAAP 4 357 4 199 4 193
Effect of goodwill now recorded in
Meticais and translated at the
closing exchange rate (14) (16) (15)
Share-based payment reserve 13 7 3
Effect of changes on income statement:
Current period (6) (2)
Prior periods (3) (3) (3)
Equity holders` interest 4 347 4 185 4 178
Minority interests in subsidiaries
previously reported outside of equity 71 12 6
Equity restated - IFRS 4 418 4 197 4 184
Income statement
Net profit as previously reported 226 57
Effect of transition to IFRS (6) (2)
Share-based payment charge (8) (3)
Goodwill no longer amortised 2 1
Net profit attributable to equity
holders restated - IFRS 220 55
Basis of preparation
The unaudited results of the Group for the half-year ended 30 June 2005 have
been prepared in accordance with the Group`s accounting policies which fully
comply with International Financial Reporting Standards (IFRS). The Group is
reporting under IFRS for the first time for the year ending 31 December 2005.
Comparative figures have accordingly been restated. The transition to IFRS has
resulted in the Group adopting IFRS 2 (Share-based Payment) and accounting for
goodwill in terms of IFRS 3 (Business Combinations). The Group continues to
account for its Zimbabwean operations, including Triangle Sugar, on a dividend
received basis.
The disclosures required by IFRS 1(First-time Adoption of International
Financial Reporting Standards) concerning the transition from South African
Statements of Generally Accepted Accounting Practice (SA GAAP) to IFRS and the
requisite changes in accounting policies are set out in the table above.
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: +27 32 439 4019,
Facsimile: +27 32 945 3333
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited,
Telephone: +27 11 370 7700
Sponsor: Investec Bank Limited, Telephone: +27 11 286 7000
www.tongaat.co.za e-mail: info@tongaat.co.za
Date: 01/08/2005 07:16:05 AM
Produced by the JSE SENS Department
