| Mon 31 Jul 2006, 7:01 | | Tongaat-Hulett - Interim Results for the half-year |
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TNT
THGL
Tongaat-Hulett - Interim Results for the half-year ended 30 June 2006
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 2006
Revenue of R3,5 billion (2005: R3,1 billion)
Operating profit of R470 million (2005: R319 million)
Headline earnings of R297 million (2005: R208 million)
Interim dividend of 200 cents per share (2005: 120 cents per share)
COMMENTARY
Operating profit in the first half of 2006 grew by 47% to R470 million, compared
to R319 million for the same period last year. Headline earnings increased by
43% to R297 million (2005: R208 million), after taking into account higher tax
and lower interest costs. The half-year results include an average exchange rate
of R6,31/US dollar (2005: R6,21/US dollar). Actions to increase profitability
continue throughout the Group. In addition, the results are starting to reflect
the benefits of changing global sugar fundamentals.
Tongaat-Hulett Sugar"s operating profit increased by 106% to R167 million (2005:
R81 million), including dividends from Triangle Sugar in Zimbabwe. An increase
in domestic and export market realisations more than offset slightly lower sales
volumes. In South Africa, domestic sales volumes were 209 311 tons (2005: 215
430 tons) and raw sugar export volumes were 162 301 tons (2005: 172 680 tons) as
a result of lower export stocks carried forward from the previous year. The
results for the first six months of 2006 include exports at an average world
sugar price of 11 US cents per pound (2005: 8 US cents per pound) while the
current price of some 15 US cents per pound will impact the second half of 2006.
Improved contributions were achieved from the Swaziland and Mozambique
operations. Dividends of R8 million, compared to nil in the first half of 2005,
were received from Triangle Sugar in Zimbabwe, which continues to operate
profitably.
Total sugar production by Tongaat-Hulett for the 2006 year is expected to grow
by 6% to 1,228 million tons. Sugar production from South African operations is
estimated to increase by 4% to 780 000 tons (2005: 753 000 tons) while that of
Mozambique is expected to rise by 9% to 125 000 tons (2005: 115 000 tons). In
Swaziland, Tambankulu is expected to produce the raw sugar equivalent of 53 000
tons (2005: 56 000 tons). Triangle is expected to produce 270 000 tons of sugar
(2005: 236 000 tons). New cane expansion and procurement initiatives continue
across all the regions.
African Products improved operating profit by 39% to R43 million (2005: R31
million). Margins are being affected by pressure on starch and glucose selling
prices and by maize costs increasing towards import parity levels. Domestic
sales volumes were 5% above 2005 first half volumes and included growth rates in
excess of 30% being achieved on the value added spray dried glucose and adhesive
products. Co-product prices improved during the period. Overhead and other
manufacturing cost increases, excluding maize, have been kept below inflation as
a result of the benefits derived from the organisational restructuring process
and other efficiency initiatives.
Moreland"s operating profit of R117 million (2005: R77 million) was 52% higher
than the same period last year, arising mainly from significantly increased
contributions from the commercial and the resorts portfolios. This included
transactions relating to the Umhlanga Triangle site for the 5-star Marriott
hotel, a large private tertiary education site at the Umhlanga Ridge New Town
Centre and a 255 hectare site on the south bank of the Tongaat river to extend
the Zimbali development. The industrial and residential portfolios were
constrained by low stock levels. The strength in the KwaZulu-Natal north coast
property market continues.
Hulett Aluminium"s operating profit increased by 6% to R190 million (2005: R180
million), with the Group"s share being 50% thereof. Rolled products sales
volumes in May and June exceeded 190 000 tons annualised, after the raw material
constraints of the first quarter were overcome. Sales volumes of rolled products
for the first half of the year increased by 4% to 180 000 tons annualised. The
substantial increase in the LME price of aluminium resulted in a reduction in
rolling industry margins while there was a benefit from the metal price lag
effect on cost of sales. The business continues to grow its high value products,
with exports of can-end stock and clad product sales increasing by 18% and 31%
respectively. High margin heat-treated plate sales were affected by the plate
plant expansion project and reduced by 14% for the half-year. The plate
expansion, which will increase heat-treated plate capacity by 50%, has been
completed ahead of schedule, with production commencing in July and orders
already booked to utilise the new capacity. The extrusion operation increased
its contribution to the business. Local market sales of rolled products and
extrusions grew by 10% and 15% respectively, driven by increased local
consumption and customers" exports.
The Rand weakened against major foreign currencies towards the end of the half-
year. There was a valuation gain of R46 million (2005: R39 million gain) in
respect of foreign cash. Net financing costs reflect the benefit of lower
interest rates and reduced maize finance costs. The tax charge was higher in the
first half of 2006 compared to the same period in 2005 and was, inter alia,
affected by higher STC costs on the increased dividend payments.
The Board has declared an interim dividend for the half-year of 200 cents per
share (2005: 120 cents per share).
OUTLOOK
In February 2006, the Board communicated the decision to embark on the
unbundling of the Group"s 50% interest in Hulett Aluminium to Tongaat-Hulett
shareholders, the listing of Hulett Aluminium and the introduction of Black
Economic Empowerment (BEE) equity participation in both Tongaat-Hulett and
Hulett Aluminium. Progress is being made on the multiple aspects of these
initiatives, including the BEE equity partner selection process and the various
elements of the transaction structuring. Significant preparatory work, including
the relevant approvals and regulatory compliance, will be required to implement
the aforementioned initiatives. Further announcements with progress in this
regard will be made in due course.
Considerable earnings growth is expected for the full 2006 year. Second half
profits are expected to benefit from ongoing earnings enhancing actions, higher
2006 sugar production and an improved world sugar price. Continued growth is
expected in aluminium rolled product volumes, progressing towards full
utilisation of the 210 000 tons current installed capacity, together with sales
mix optimisation and conversion cost containment.
For and on behalf of the Board
C M L Savage P H Staude
Chairman Chief Executive Officer
Amanzimnyama, Tongaat, KwaZulu-Natal
28 July 2006
DIVIDEND DECLARATION
Notice is hereby given that the Board has declared an interim dividend (number
158) of 200 cents per share for the half-year ended 30 June 2006 to shareholders
recorded in the register at the close of business on Friday 25 August 2006.
The salient dates of the declaration and payment of this interim dividend are as
follows:
Last date to trade ordinary shares
"CUM" dividend Friday 18 August 2006
Ordinary shares trade "EX" dividend Monday 21 August 2006
Record date Friday 25 August 2006
Payment date Thursday 31 August 2006
Share certificates may not be dematerialised or re-materialised, nor may
transfers between registers take place between Monday 21 August 2006 and Friday
25 August 2006, 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 18 August 2006.
For and on behalf of the Board
M M L Mokoka
Group Secretary
Amanzimnyama, Tongaat, KwaZulu-Natal
28 July 2006
INCOME STATEMENT (Rmillion) Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
Note 2006 2005 2005
Revenue 3 472 3 091 6 926
Operating profit 1 470 319 730
Share of associate company"s
profit/(loss) 0 (13) (25)
Net financing costs 2 (19) (35) (60)
Profit before tax 451 271 645
Tax 3 (131) (55) (162)
Net profit 320 216 483
Attributable to:
Shareholders 317 216 472
Minority interest 3 0 11
320 216 483
Headline earnings attributable
to shareholders 4 297 208 466
Earnings per share (cents)
Net profit per share
Basic 302,1 210,4 458,2
Diluted 294,0 205,9 447,2
Headline earnings per share
Basic 283,1 202,6 452,4
Diluted 275,5 198,3 441,5
Dividend per share (cents) 200,0 120,0 400,0
Currency conversion
Rand/US dollar average 6,31 6,21 6,37
Rand/US dollar closing 7,15 6,68 6,35
Rand/GB pound closing 13,21 11,98 10,92
SEGMENTAL ANALYSIS (Rmillion) Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2006 2005 2005
REVENUE
African Products 614 616 1 293
Hulett Aluminium (50%) 1 203 1 005 2 081
Moreland 285 186 459
Tongaat-Hulett Sugar 1 370 1 284 3 093
Group total 3 472 3 091 6 926
OPERATING PROFIT
African Products 43 31 112
Hulett Aluminium (50%) 95 90 159
Moreland 117 77 231
Tongaat-Hulett Sugar 159 81 232
Triangle dividend 8 0 19
Corporate (20) (11) (44)
Exchange rate translation gain 46 39 14
Exceptional items 22 12 7
Group total 470 319 730
BALANCE SHEET (Rmillion) Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2006 2005 2005
Assets
Non-current assets
Property, plant and equipment 4 185 4 062 4 093
Growing crops 263 223 182
Long-term receivable 203 210 203
Goodwill 22 21 21
Intangible assets 13 10 12
Investments 70 61 57
4 756 4 587 4 568
Current assets 3 726 3 369 3 360
Inventories 1 279 1 230 1 456
Trade and other receivables 1 767 1 414 1 337
Derivative instruments 44 8 41
Cash and cash equivalents 636 717 526
Total assets 8 482 7 956 7 928
Equity and liabilities
Capital and reserves
Share capital 106 103 104
Share premium 902 789 821
Retained income 3 674 3 520 3 651
Other reserves 31 18 37
Shareholders" interest 4 713 4 430 4 613
Minority interest in subsidiaries 80 65 75
Equity 4 793 4 495 4 688
Non-current liabilities 1 375 1 385 1 357
Deferred tax 980 862 936
Long-term borrowings 106 244 138
Provisions 289 279 283
Current liabilities 2 314 2 076 1 883
Trade and other payables (note 8) 1 326 1 030 1 119
Short-term borrowings 895 988 702
Derivative instruments 71 28 18
Tax 22 30 44
Total equity and liabilities 8 482 7 956 7 928
Number of shares (000)
- in issue 105 698 102 920 103 896
- weighted average (basic) 104 925 102 674 103 018
- weighted average (diluted) 107 818 104 889 105 552
Debt to equity 20,9% 27,4% 17,9%
Net debt to equity 7,6% 11,5% 6,7%
STATEMENT OF CHANGES IN EQUITY(Rmillion)Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2006 2005 2005
Balance at beginning of period 4 613 4 347 4 347
Accounting for fair value hedges as
required by IAS 39 (Revised) 0 (5) (5)
Restated opening balance 4 613 4 342 4 342
Net profit attributable to shareholders 317 216 472
Dividends paid (294) (123) (247)
Share capital issued 83 31 62
Share-based payment reserve 10 8 17
Hedge reserve released to income statement (9) (4) (4)
(Losses)/gains from cash flow hedges (21) (14) 9
Share of associate"s movement in currency
translation reserve (1) (7) (7)
Foreign currency translation 15 (19) (31)
Shareholders" interest 4 713 4 430 4 613
Minority interest in subsidiaries 80 65 75
Balance at beginning of period 75 71 71
Share of profit 3 0 11
Foreign currency translation 2 (6) (7)
Equity 4 793 4 495 4 688
CASH FLOW STATEMENT (Rmillion) Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2006 2005 2005
Operating profit 470 319 730
Net financing costs (19) (35) (60)
Non-cash items:
Depreciation 131 135 265
Other non-cash items (127) (80) 0
Tax payments (97) (17) (38)
Change in working capital (28) (31) (109)
Cash flow from operating activities 330 291 788
Expenditure on property, plant and equipment:
New (98) (58) (169)
Replacement (74) (27) (101)
Major plant overhaul costs capitalised (39) (34) (35)
Expenditure on intangible assets (1) (2) (4)
Growing crops disposals 1 0 5
Proceeds on disposal of property, plant
and equipment 22 23 42
Investments (5) (59) (72)
Net cash flow before dividends and
financing activities 136 134 454
Dividends paid (294) (123) (247)
Net cash flow before financing activities (158) 11 207
Borrowings raised/(repaid) 144 (158) (558)
Hedges of foreign loans (5) (9) (2)
Shares issued 83 31 62
Net increase/(decrease) in cash
resources 64 (125) (291)
Cash resources at beginning of period 526 803 803
Exchange rate translation gain 46 39 14
Cash resources at end of period 636 717 526
NOTES (Rmillion) Unaudited Unaudited Audited
Half-year Half-year Year ended
30 June 30 June 31 December
2006 2005 2005
1. Operating profit
Operating profit includes results of operations, Triangle dividends, restructure
costs, valuation adjustments and exceptional items.
2. Net financing costs
Interest paid (56) (72) (131)
Financial instrument income 19 16 33
Interest received 18 21 38
(19) (35) (60)
3. Tax
Normal (38) (29) (51)
Deferred (56) (43) (113)
Rate change adjustment (deferred) 0 28 28
Secondary tax on companies (37) (11) (26)
(131) (55) (162)
4. Headline earnings
Profit attributable to shareholders 317 216 472
Less after tax effect of surplus on
sale of fixed assets (20) (8) (6)
297 208 466
5. Capital expenditure commitments
Contracted 115 64 112
Approved but not contracted 199 150 187
314 214 299
6. Operating lease commitments 34 31 39
7. Guarantees and contingent liabilities 51 48 44
8. Trade and other payables
Included in trade and other payables is the maize obligation (interest bearing)
of R75 million (30 June 2005: R99 million and 31 December 2005: R110 million).
9. Basis of preparation
The unaudited results of the Group for the half-year ended 30 June 2006 have
been prepared in accordance with the Group"s accounting policies which fully
comply with International Financial Reporting Standards, including IAS 34
Interim Financial Reporting. The Group continues to account for its Zimbabwean
operations, including Triangle Sugar, on a dividend received basis.
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)
Registered office: Amanzimnyama Hill Road, Tongaat, KwaZulu-Natal
P O Box 3, Tongaat 4400
E-mail: info@tongaat.co.za
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
Additional information about the Group is available at our website:
www.tongaat.co.za
Date: 31/07/2006 07:01:31 AM Produced by the JSE SENS Department
