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ILV
ILV
Illovo Sugar Limited - Interim Results for the six months ended
30 September 2006 and dividend declaration
ILLOVO SUGAR LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1906/000622/06)
Share Code: ILV
ISIN: ZAE000083846
Interim Results for the six months ended 30 September 2006
* Group operating profit up 64% to R516.1 million
* Net financing costs down 25% to R32.9 million
* HEPS up 73% to 75.7 cents
* Interim dividend of 30 cents per share (2005: 20 cents per share)
* Record sugar production forecast for Malawi and Zambia
Don MacLeod, Managing Director said:
"This is another pleasing set of results on the back of higher world sugar
prices and greater efficiencies across the group. Our operations outside
South Africa performed extremely well with record production in Malawi and
Zambia, but in Tanzania there was an early season drought which affected our
outgrowers. Production in South Africa was impacted by variable weather
conditions. Overall we are set to have another year of solid growth."
16 November 2006
Enquiries:
Illovo Sugar 031 508 4300
Don MacLeod, Managing Director
Karin Zarnack, Financial Director
Chris Fitz-Gerald, Corporate Communications
College Hill 011 447 3030
Nicholas Williams 083 607 0761
Basis of preparation
This report incorporates financial statements which reflect both actual
results based on International Financial Reporting Standards ("IFRS") and
those determined on a sugar season basis which in the directors" opinion
provide a better basis for evaluating the financial performance of the
company.
The sugar industry is a seasonal agriculturally based business and the
payment processes are such that cash flows throughout the season, which runs
from 1 April to 31 March, are derived from the expected tonnages and prices
that will be achieved for the season as a whole. The effect of this is that
product sales tonnages and prices received, and raw material prices paid are
provisional in nature until the conclusion of the season. For this reason
the directors consider that profit figures based on actual cash flows may not
represent the best basis for evaluating the performance and the results for
the period. In respect of the sugar season basis results, operational
profits for cane growing and sugar production comprise the company"s view of
the position at 30 September 2006 as it relates to the season as a whole.
All other results are based on actual performance. The amounts disclosed in
respect of cane growing and sugar production operations are based on a profit
forecast for the year ending 31 March 2007 which has been examined by our
auditors, Deloitte & Touche. Their unqualified accountants" report is
available for inspection at the company"s registered office.
The unaudited actual results for the six months ended 30 September 2006 have
been prepared using accounting policies that comply with IFRS and are
prepared in accordance with IAS34 (Interim financial reporting). The
accounting policies adopted are consistent with those of the previous
financial period.
Review
On a sugar season basis the group has achieved pleasing results for the half
year with headline earnings of R259.2 million reflecting a 75% improvement
over the same period in the previous year. Headline earnings per share of
75.7 cents represents a 73% increase.
Group operating profits which increased by 64% to R516.1 million benefited
from a higher world sugar price, improved domestic market sales and prices,
weaker exchange rates and operating cost reductions. Lower sugar production
caused by adverse weather conditions in South Africa and Tanzania has partly
offset these benefits.
Net financing costs have reduced by R11.2 million whilst borrowings at R1
453.1 million are R20.0 million lower compared to the same period last year.
The contributions to operating profit were: sugar production 65%, cane
growing 28% and downstream 7%. By country contributions were: South Africa
24%, Malawi 33%, Zambia 23% Swaziland 9%, Tanzania 10% and Mozambique 1%.
The season to date has been affected by variable weather conditions in South
Africa and severe drought in Tanzania during the early growing season.
However the rest of the group has experienced normal weather which with
effective irrigation and long sunshine hours has been conducive to good cane
growth. In general the sugar factories have performed satisfactorily.
Assuming normal growing and operating conditions for the remainder of the
season, group sugar production is expected to be around 1.8 million tons
which is 70 000 tons below that of last year. The main decrease in
production has occurred in South Africa, where most of the cane is produced
under rainfed conditions, which has seen a decline in both tons of cane per
hectare and sucrose content in cane. The whole industry has been similarly
affected. Production in Tanzania is down by 10% as a result of reduced cane
production from the outgrowers who rely on seasonal rainfall. Record sugar
production is forecast for both Malawi and Zambia. Group own cane production
is anticipated to be 5.5 million tons which is 100 000 tons above that of
last year.
Downstream operations have performed well and with the exception of furfural,
which has been impacted by the lower cane tonnage at Sezela in South Africa,
production levels are expected to be slightly higher than those achieved last
season.
The world sugar price has been extremely volatile. Following a rise to
almost US20 cents/lb earlier in the year it has declined to levels of around
US12 cents/lb. Overall the average price is significantly higher than in the
previous year. The South African sugar industry has sold around 80% of
anticipated export raw sugar sales at US15.23 cents/lb. The improved world
price has impacted favourably on export revenues from regional markets.
Downstream product prices have improved in US dollar terms and the weaker
rand has impacted favourably on export realisations. The majority of
downstream output is exported.
The finalisation of the EU reform package, which came into effect from 1 July
2006, has created a period of certainty in respect of the EU market until
September 2015, and will underpin the expansion plans of the group. During
the period under review expansion projects commenced in Malawi, Zambia and
Swaziland, whilst the refinery capacity increases in South Africa were
completed. The United States Environmental Protection Agency recently
conditionally registered furfural as a pesticide product for non-food
greenhouse usage in that country which is an important first step in the
process of developing a new market for furfural. Nevertheless, it will take
at least 18 months for the project to achieve a commercial status.
Directorate
As a result of the acquisition of 51% of the share capital of Illovo by ABF
Overseas Limited, the following changes in directorate occurred on
5 September 2006:
Dr Mark Carr, and Messrs David Langlands and Paul Lister were appointed as
non-executive directors, whilst Messrs Ami Mpungwe, Nigel Hawley and Mandla
Hlatshwayo resigned from the board. We thank those directors who have
resigned for their valued contribution to the board. Nigel Hawley and Mandla
Hlatshwayo remain members of the group executive committee.
Dividend
An interim dividend of 30.0 cents per share (2005 : 20.0 cents) has been
declared. It is anticipated that for the full year the dividend will be
twice covered by headline earnings.
Prospects
Operations for the current year are progressing well, but results for the
year will be influenced by the level of the rand compared to other
currencies, the world sugar price and final sugar production.
Provided there is no major change to these factors and as an update to the
trading statement issued on 13 September 2006, headline earnings for the full
year to 31 March 2007 are expected to be between 35% and 45% higher than in
the previous financial year. The profit forecast has been examined by our
auditors, Deloitte & Touche, and their unqualified accountants" report is
available for inspection at the company"s registered office.
On behalf of the Board
R A Williams D G MacLeod Mount Edgecombe
Chairman Managing Director 16 November 2006
GROUP
INCOME
STATEMENTS
Actual Sugar season Actual
basis
Unaudited Unaudited Audited
Six months ended Six months ended Year
ended
30 September 30 September 31
March
2006 2005 2006 2005 Change 2006
Notes Rm Rm Rm Rm % Rm
Revenue 2 822.1 2 367.9 3 258.9 2 657.6 223 5 468.8
Operating 639.0 367.8 516.1 315.6 64 751.5
profit
Net 1 32.9 44.1 32.9 44.1 100.9
financing
costs
606.1 323.7 483.2 271.5 650.6
Profit
before
material
items
Material 2 0.4 0.6 0.4 0.6 3.5
items
606.5 324.3 483.6 272.1 654.1
Profit
before
taxation
Taxation 191.8 94.4 159.1 82.6 197.3
414.7 229.9 324.5 189.5 456.8
Profit
after
taxation
Attributabl
e to
outside
shareholder
s in
subsidiary 86.8 64.4 64.7 40.9 99.1
companies
Net profit
attributabl
e to
shareholder 327.9 165.5 259.8 148.6 75 357.1
s in Illovo
Sugar
Limited
Determinati
on of
headline
earnings :
Net profit 327.9 165.5 259.8 148.6 75 357.7
attributabl
e to
shareholder
s
Adjusted
for:
Profit on (0.4) (0.6) (0.4) (0.6) (3.3)
disposal of
property
(0.2) (0.3) (0.2) (0.3) (2.0)
Profit on
disposal of
plant and
equipment
327.3 164.6 259.2 147.7 75 352.4
Headline
earnings
348.7 337.5 348.7 337.5 340.1
Number of
shares in
issue
(millions)
Weighted
average
number of
shares on
which
headline 342.3 337.4 342.3 337.4 338.2
earnings
per share
are based
(millions)
95.6 48.8 75.7 43.8 73 104.2
Headline
earnings
per share
(cents)
94.8 48.0 75.2 43.2 101.4
Diluted
headline
earnings
per share
(cents)
Dividend 30.0 20.0 30.0 20.0 50 62.5
per share
(cents)
ABRIDGED GROUP
BALANCE SHEETS
Actual Sugar season basis Actual
Unaudited Unaudited Audited
30 September 30 September 31 March
2006 2005 2006 2005 2006
Rm Rm Rm Rm Rm
ASSETS
Non-current 2 661.7 2 339.1 2 661.7 2 339.1 2 362.6
assets
Property, plant 1 910.4 1 700.4 1 910.4 1 700.4 1 704.9
and equipment
Cane roots 677.8 557.6 677.8 557.6 589.1
Investments 73.5 81.1 73.5 81.1 68.6
Current assets 3 082.1 2 589.8 3 082.1 2 589.8 1 633.5
Inventories 1 433.3 1 327.5 1 433.3 1 327.5 470.8
Growing cane 739.8 412.6 739.8 412.6 657.9
Accounts 840.4 849.7 840.4 849.7 504.8
receivable
Financial 68.6 - 68.6 - -
instruments
Total assets 5 743.8 4 928.9 5 743.8 4 928.9 3 996.1
EQUITY AND
LIABILITIES
Total equity 2 161.9 1 697.1 2 071.7 1 656.7 1 813.5
Equity holders" 1 706.4 1 313.5 1 638.3 1 296.6 1 425.5
interest
Minority 455.5 383.6 433.4 360.1 388.0
shareholders"
interest
Non-current 2 026.4 1 949.7 2 026.4 1 938.1 922.5
liabilities
Deferred taxation 573.3 476.6 573.3 465.0 481.5
Net borrowings 1 453.1 1 473.1 1 453.1 1 473.1 441.0
Current 1 555.5 1 282.1 1 645.7 1 334.1 1 260.1
liabilities
Accounts payable 1 555.5 1 210.8 1 645.7 1 262.8 1 170.7
and provisions
Financial - 71.3 - 71.3 89.4
instruments
Total equity and 5 743.8 4 928.9 5 743.8 4 928.9 3 996.1
liabilities
OTHER SALIENT
FEATURES
Operating margin 22.6 15.5 15.8 11.9 13.7
(%)
Gearing (%) 67.2 86.8 70.0 88.9 24.3
Interest cover 19.4 8.3 15.7 7.2 7.4
(times)
Net asset value 620.0 502.8 594.1 490.9 533.2
per share (cents)
Depreciation 72.7 64.4 72.7 64.4 127.7
Capital 108.1 68.9 108.1 68.9 205.0
expenditure
- expansion 62.1 27.8 62.1 27.8 75.4
- product 3.7 2.0 3.7 2.0 8.8
registration
costs
- replacement 42.3 39.1 42.3 39.1 120.8
Capital 199.4 175.7 199.4 175.7 284.2
commitments
- contracted 44.0 81.3 44.0 81.3 28.1
- approved but 155.4 94.4 155.4 94.4 256.1
not contracted
Lease commitments 160.9 169.1 160.9 169.1 171.2
- land and 93.9 88.1 93.9 88.1 102.8
buildings
- other 67.0 81.0 67.0 81.0 68.4
Contingent 6.3 11.2 6.3 11.2 10.5
liabilities
ABRIDGED
GROUP CASH
FLOW
STATEMENTS
Actual Sugar season basis Actual
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30 September 30 September 31 March
2006 2005 2006 2005 2006
Rm Rm Rm Rm Rm
Cash flows from
operating and
investing
activities
Cash 678.5 575.1 555.6 522.9 710.5
operating
profit
Working (1,001.9) (980.8) (879.0) (928.6) 117.2
capital
requirements
Cash (323.4) (405.7) (323.4) (405.7) 827.7
(utilised
by)/generated
from
operations
Replacement (42.3) (39.1) (42.3) (39.1) (120.8)
capital
expenditure
Financing (350.6) (165.1) (350.6) (165.1) (341.3)
costs,
taxation and
dividend
Net (71.2) (45.9) (71.2) (45.9) (98.7)
investment in
future
operations
Other 2.3 2.6 2.3 2.6 43.9
movements
Net cash (785.2) (653.2) (785.2) (653.2) 310.8
(outflow) /
inflow before
financing
activities
STATEMENT OF CHANGES IN EQUITY
Share capital
and share
premium
Balance at 298.4 282.5 298.4 282.5 282.5
beginning of
the period
Issue of new 55.3 1.5 55.3 1.5 15.9
shares
Balance at 353.7 284.0 353.7 284.0 298.4
end of the
period
Share-based
payments
reserve
8.1 4.4 8.1 4.4 4.4
Balance at
beginning of
the period
2.7 1.5 2.7 1.5 3.7
Share-based
payment
expense
Balance at 10.8 5.9 10.8 5.9 8.1
end of the
period
Non-
distributable
reserves
Balance at 122.1 95.4 122.1 95.4 95.4
beginning of
the period
Realised - - - - 0.2
profit on
disposal of
land
Effect of 80.8 55.5 80.8 55.5 26.6
foreign
currency
translation
Effect of (40.7) - (40.7) - (0.1)
cash flow
hedges
Transfer to
retained
surplus -
Foreign - (58.8) - (58.8) -
Currency
Translation
Reserve
(FCTR)
Balance at 162.2 92.1 162.2 92.1 122.1
end of the
period
Retained
surplus
Balance at 852.3 707.2 852.3 707.2 707.2
beginning of
the period
Realised loss - - - - (0.2)
on disposal
of land
Transfer to (103.2) (67.5) (103.2) (67.5) (212.4)
dividend
reserve
Transfer from - 58.8 - 58.8 -
non-
distributable
reserves -
FCTR
Net profit 327.9 165.5 259.8 148.6 357.7
for the
period
Balance at 1,077.0 864.0 1,008.9 847.1 852.3
end of the
period
Dividend
reserve
Balance at 144.6 45.5 144.6 45.5 45.5
beginning of
the period
Transfer from 103.2 67.5 103.2 67.5 212.4
retained
surplus
Dividends (145.1) (45.5) (145.1) (45.5) (113.3)
paid
Balance at 102.7 67.5 102.7 67.5 144.6
end of the
period
Equity 1,706.4 1,313.5 1,638.3 1,296.6 1,425.5
holders"
interest
Minority
shareholders"
interest
Balance at 388.0 330.9 388.0 330.9 330.9
beginning of
the period
Effect of 24.9 3.1 24.9 3.1 (6.7)
foreign
currency
translation
Dividends (47.1) (14.8) (47.1) (14.8) (37.6)
paid
Increase in 2.9 - 2.9 - 2.3
shareholding
Net profit 86.8 64.4 64.7 40.9 99.1
for the
period
Balance at 455.5 383.6 433.4 360.1 388.0
end of the
period
Total equity 2 161.9 1 697.1 2 071.7 1 656.7 1 813.5
SEGMENTAL ANALYSIS
Actual Sugar season basis Actual
Unaudited Unaudited Audited
Six months ended Six months ended Year
ended
30 September 30 September 31 March
2006 2005 2006 2005 2006
Rm Rm Rm % Rm % Rm
BUSINESS
SEGMENTS
Revenue
Sugar 1,672.1 1,368.2 2,348.1 72 1,933.0 73 3 883.2
production
Cane growing 910.4 787.8 671.2 21 512.7 19 1,081.5
Downstream 239.6 211.9 239.6 7 211.9 8 504.1
2 822.1 2 367.9 3 258.9 2 657.6 5 468.8
Operating
profit
Sugar 224.8 257.0 336.5 65 220.5 70 456.9
production
Cane growing 380.4 86.1 145.8 28 70.4 22 235.3
Downstream 33.8 24.7 33.8 7 24.7 8 59.3
639.0 367.8 516.1 315.6 751.5
Total assets
Sugar 3 549.0 3 225.1 3 549.0 62 3 225.1 65 2 060.8
production
Cane growing 1 882.4 1 465.7 1 882.4 33 1 465.7 30 1 701.9
Downstream 312.4 238.1 312.4 5 238.1 5 233.4
5 743.8 4 928.9 5 743.8 4 928.9 3 996.1
GEOGRAPHICAL
SEGMENTS
Revenue
South Africa 1 175.2 919.2 1 477.5 46 1 268.3 47 2 631.1
Malawi 443.7 468.9 535.1 16 442.2 17 938.0
Zambia 484.9 384.7 592.3 18 389.3 15 784.9
Swaziland 370.7 381.0 321.7 10 290.0 11 586.1
Tanzania 176.9 86.5 232.6 7 181.9 7 353.9
Mozambique 170.7 127.6 99.7 3 85.9 3 174.8
2 822.1 2 367.9 3 258.9 2 657.6 5 468.8
Operating
profit
South Africa 107.5 30.0 126.4 24 59.3 19 156.8
Malawi 179.8 156.9 171.6 33 107.2 34 293.3
Zambia 198.0 37.1 119.8 23 83.4 26 153.2
Swaziland 71.0 82.1 44.4 9 31.6 10 73.0
Tanzania 36.8 39.7 50.4 10 36.4 12 68.6
Mozambique 45.9 22.0 3.5 1 (2.3) (1) 6.6
639.0 367.8 516.1 315.6 751.5
NOTES TO THE FINANCIAL STATEMENTS
Unaudited Audited
Six months ended Year ended
30 September 31 March
2006 2005 2006
Rm Rm Rm
1. Net financing costs
Interest paid 92.6 80.8 159.6
Interest received ( 47.0) ( 43.7) ( 46.0)
Foreign exchange gains and ( 11.6) 7.8 ( 11.7)
losses
Dividend income ( 1.1) ( 0.8) ( 1.0)
32.9 44.1 100.9
2. Material items
Profit on disposal of 0.4 0.6 3.5
property
Material profit before 0.4 0.6 3.5
taxation
Taxation - - ( 0.2)
Material profit
attributable to
shareholders
in Illovo Sugar Limited 0.4 0.6 3.3
DECLARATION OF DIVIDEND NO.30
Notice is hereby given that an interim dividend of 30.0 cents per share has
been declared on the ordinary shares of the company in respect of the six
months ended 30 September 2006.
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 Thursday, 28 December 2006
Shares commence trading ex-dividend Friday, 29 December 2006
Record date Friday, 5 January 2007
Payment of dividend Monday, 8 January 2007
Share certificates may not be dematerialised / rematerialised between Friday,
29 December 2006 and Friday, 5 January 2007, both days inclusive.
By order of the Board
G D Knox Mount Edgecombe
Company Secretary 16 November 2006
Directors:
R A Williams (Chairman)*, D G MacLeod (Managing Director), M I Carr#*. G J
Clark (Australian), B P Connellan*, D Konar*, D R Langlands#*, P A Lister#*,
P M Madi*, I N Mkhize*, R A Norton*, J T Russell, M J Shaw*, B M Stuart, K
Zarnack
# British * 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:
Link Market Services South Africa (Proprietary) Limited:
11 Diagonal Street, Johannesburg, 2001,
P O Box 4844, Johannesburg, 2000
Auditors:
Deloitte & Touche
Sponsor:
J.P. Morgan Equities Limited
Date: 17/11/2006 07:05:22 AM Produced by the JSE SENS Department
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