| Mon 19 Feb 2007, 7:00 | | TNT - Tongaat-Hulett - Audited Group Results and F |
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TNT
THGL
TNT - Tongaat-Hulett - Audited Group Results and Final Dividend Declaration
THE TONGAAT-HULETT GROUP LIMITED
Registration No. 1892/000610/06
Share code: TNT
Issuer code: THGL
ISIN: ZAE000007449
AUDITED GROUP RESULTS AND FINAL DIVIDEND DECLARATION
for the year ended 31 December 2006
Revenue of R7,8 billion (2005: R6,9 billion)
Operating profit of R1,02 billion (2005: R730 million)
Headline earnings of R703 million (2005: R466 million)
Annual dividend of 550 cents per share (2005: 400 cents per share)
Unbundling and listing of Hulett Aluminium
BEE equity participation in Tongaat-Hulett and Hulett Aluminium
COMMENTARY
Headline earnings increased by 51% to R703 million in 2006, compared to
R466 million in 2005. This increase was due to a 40% growth in operating
profit to R1,02 billion (2005: R730 million), a reduction in finance costs
and an improvement in the result from the Xinavane mill, in Mozambique,
which is equity accounted as an associate.
Tongaat-Hulett Sugar`s operating profit increased by 42% to R356 million
(2005: R251 million), including dividends from Triangle Sugar in Zimbabwe.
An increase in domestic and export realisations more than offset lower sales
volumes. In South Africa, domestic sales were 469 264 tons (2005: 474 387
tons) with raw sugar export volumes at 316 104 tons (2005: 386 876 tons) as
a consequence of lower production. The 2006 South African crop was the
second lowest in 10 years, mainly due to adverse growing conditions
impacting on cane yields and quality. This resulted in utilisation of 72% of
installed cane crushing capacity. The 2006 results include an effective
world sugar price for exports of 12,8 US cents per pound at an average
R6,56/US dollar (2005: 9,0 US cents per pound at R6,58/US dollar). The drive
to reduce costs and the focus on additional cane supplies continue.
Dividends of R61 million (2005: R19 million) were received from Triangle
Sugar in Zimbabwe.
Total sugar production in 2006 was 1,067 million tons, which was 8% below
the 1,160 million tons produced in 2005. Production in South Africa was 666
000 tons (2005: 753 000 tons). In Swaziland, Tambankulu Estates produced the
raw sugar equivalent of 55 000 tons (2005: 56 000 tons). Triangle`s sugar
production increased 1,7% to 240 000 tons despite the difficulties of
operating in Zimbabwe. In Mozambique sugar production at Xinavane increased
to 65 000 tons (2005: 61 000 tons) while Mafambisse decreased to 41 000 tons
(2005: 54 000 tons) due to extreme drought conditions placing pressure on
irrigation.
Tongaat-Hulett is well positioned to take advantage of being a low cost
sugar producer with preferential market access and to benefit from the
global drive to renewable energy through bio-fuels and electricity
cogeneration. The imminent R1,3 billion expansion of the Mozambique
operations and the recent completion of the Muda dam near Mafambisse are
indicative of Tongaat-Hulett being poised to capitalise on growth
opportunities. The recent acquisition of 50,35% of Hippo Valley Estates
increases the ability to capitalise on the synergies with Triangle Sugar,
particularly when the socio-economic environment in Zimbabwe improves.
African Products` operating profit reduced to R96 million in 2006 (2005:
R112 million) under difficult trading conditions. Starch and glucose selling
prices were under pressure from imports and maize input costs were higher,
resulting in depressed trading margins. Maize costs rose towards import
parity levels as a result of the smaller 2005/6 crop. Sales volumes in the
domestic market increased by 3,7% with growth in excess of 13,5% being
achieved in value added spray dried glucose. Overhead cost increases were
contained to levels below inflation for the third consecutive year, as the
benefits of the organisational restructuring process were achieved. World
starch and glucose markets saw significant changes in the last quarter of
2006 with international prices increasing by over 30% in certain instances
driven by a 60% increase in world corn prices. The effect of these changes
combined with a move in the South African 2006/7 season maize price towards
export parity levels should benefit African Products during the second half
of 2007. African Products has priced 35% of its maize requirements for 2007,
following its back-to-back pricing model.
Moreland achieved operating profit of R325 million (2005: R231 million)
which was an increase of 41%. Tongaat-Hulett`s prime land, the well-
established property development platform and continuing solid market demand
are being capitalised upon. Significant contributions were achieved from the
commercial, industrial and resorts portfolios, including RiverHorse Valley
Business Estate, Umhlanga Ridge Town Centre, the Marriott International 5-
star Hotel site in the Umhlanga Triangle and Zimbali Coastal Resort.
Development approvals have been secured for Izinga and Kindlewood
residential developments. Other new phases and developments likely to be
launched in 2007 include Zimbali Lakes, Sibaya at Umdloti, Umhlanga Triangle
Ridgeside commercial precincts, Umhlanga Ridge Town Centre residential
precincts, Bridge City, Kindlewood at Mt Edgecombe South and Shongweni.
Hulett Aluminium grew its operating profit by 32% to R422 million (2005:
R319 million), with the Group`s share being 50% thereof. Sales revenue
exceeded R5 billion for the first time. Sales volume growth continued and
record annual rolled products sales of 183 000 tons (2005: 173 000 tons)
were achieved. Local market sales of both extrusions and rolled products
grew firmly, with increases of 15% and 11% respectively. Strong sales into
the distributor, automotive and transport sectors were achieved. The higher
LME price of aluminium continued throughout 2006, resulting in reductions in
rolling margins while benefits accrued from the metal price lag effect on
cost of sales. Manufacturing costs increased due to sharp rises in metal and
energy costs, and from spot purchases of LP Gas during the SAPREF supply
disruptions, which also had a significant negative impact on volumes in
2006. Benefits are expected in 2007 from further volume growth, improved
product mix and cost controlling actions. In October 2006, a R950 million
rolled products expansion project was approved, to grow annual capacity to
250 000 tons and increase output of high margin products, including light
gauge foil and heat-treated plate. Project contracts totalling R63 million
have been concluded.
The Board has declared a final dividend of 350 cents per share, which brings
the total annual dividend to 550 cents per share (2005: 400 cents per
share).
OUTLOOK
A detailed cautionary announcement was made on 14 December 2006, which
provided the proposed transaction framework to further enhance shareholder
value, leading towards the creation in 2007 of two separately listed,
focused companies:
- Tongaat-Hulett, an agri-processing business which includes integrated
components of land management, property development and agriculture; and
- Hulett Aluminium (Hulamin), an independent niche producer of aluminium
rolled, extruded and other semi-fabricated and finished products.
This will be achieved by the listing of Hulamin on the JSE followed
immediately by the unbundling of Hulamin by Tongaat-Hulett to its
shareholders. It will be accompanied by the simultaneous introduction of
broad based Black Economic Empowerment (BEE) equity participation in both
Tongaat-Hulett and Hulamin. The capital structures of both businesses will
be optimised, including facilitating the BEE equity participation, a R500
million share buy-back and retaining the balance sheet capacity to take
advantage of growth opportunities.
These transactions will have a considerable impact on the headline earnings
to be reported in 2007. Once the requisite agreements have been signed, the
financial effects have been finalised and the date of unbundling and listing
Hulamin established, a final announcement will be made and the circular and
pre-listing documents posted to shareholders, which is anticipated to be in
May 2007.
The fundamental profit drivers remain in place in both Tongaat-Hulett and
Hulamin. Profit from operations of both these entities is expected to grow
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
16 February 2007
DIVIDEND DECLARATION
Notice is hereby given that the Board has declared a final dividend (number
159) of 350 cents per share for the year ended 31 December 2006 to
shareholders recorded in the register at the close of business on Friday 16
March 2007.
The salient dates of the declaration and payment of this final dividend are
as follows:
Last date to trade ordinary shares
"CUM" dividend Friday 9 March 2007
Ordinary shares trade "EX" dividend Monday 12 March 2007
Record date Friday 16 March 2007
Payment date Thursday 22 March 2007
Share certificates may not be dematerialised or re-materialised, nor may
transfers between registers take place between Monday 12 March 2007 and
Friday 16 March 2007, 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 9 March 2007.
For and on behalf of the Board
M M L Mokoka
Group Secretary
Amanzimnyama
Tongaat, KwaZulu-Natal
16 February 2007
Rmillion Note 2006 2005
INCOME STATEMENT
Revenue 7 848 6 926
Operating profit 1 1 020 730
Share of associate company`s loss (4) (25)
Net financing costs 2 (23) (60)
Profit before tax 993 645
Tax 3 (269) (162)
Net profit 724 483
Attributable to:
Shareholders 723 472
Minority interest 1 11
724 483
Headline earnings attributable to shareholders 703 466
Earnings per share (cents)
Net profit per share
Basic 685,3 458,2
Diluted 667,8 447,2
Headline earnings per share
Basic 666,4 452,4
Diluted 649,4 441,5
Annual dividend per share (cents) 550,0 400,0
Interim paid 200,0 120,0
Final proposed 350,0 280,0
Currency conversion
Rand/US dollar average 6,77 6,37
Rand/US dollar closing 7,00 6,35
Rand/GB pound closing 13,73 10,92
Rmillion Note 2006 2005
HEADLINE EARNINGS
Profit attributable to shareholders 723 472
Less after tax effect of:
Surplus on disposal of property, plant and equipment (21) (8)
Estate closure costs 1 2
Headline earnings 703 466
Rmillion 2006 2005
BALANCE SHEET
Assets
Non-current assets
Property, plant and equipment 4 270 4 093
Growing crops 212 182
Long-term receivable 203 203
Goodwill 21 21
Intangible assets 14 12
Investments 320 57
5 040 4 568
Current assets 4 016 3 360
Inventories 1 595 1 456
Trade and other receivables 1 879 1 337
Derivative instruments 33 41
Cash and cash equivalents 509 526
Total assets 9 056 7 928
Equity and liabilities
Capital and reserves
Share capital 107 104
Share premium 932 821
Retained income 3 868 3 651
Other reserves 50 37
Shareholders` interest 4 957 4 613
Minority interests in subsidiaries 76 75
Equity 5 033 4 688
Non-current liabilities 1 401 1 357
Deferred tax 1 055 936
Long-term borrowings 49 138
Provisions 297 283
Current liabilities 2 622 1 883
Trade and other payables (note 7) 1 388 1 119
Short-term borrowings 1 174 702
Derivative instruments 16 18
Tax 44 44
Total equity and liabilities 9 056 7 928
Number of shares (000)
- in issue 106 591 103 896
- weighted average (basic) 105 497 103 018
- weighted average (diluted) 108 261 105 552
Debt to equity 24,3% 17,9%
Net debt to equity 14,2% 6,7%
Rmillion 2006 2005
STATEMENT OF CHANGES IN EQUITY
Balance at beginning of year 4 613 4 342
Net profit 723 472
Dividends paid (506) (247)
Share capital issued 106 62
Share-based payment reserve 22 17
Hedge reserve released to income statement (9) (4)
Gain from cash flow hedges 8 9
Foreign currency translation (31)
Share of associate`s movement in currency
translation reserve (7)
Shareholders` interest 4 957 4 613
Minority interests in subsidiaries 76 75
Balance at beginning of year 75 71
Share of profit 1 11
Foreign currency translation (7)
Equity 5 033 4 688
Rmillion Note 2006 2005
CASH FLOW STATEMENT
Operating profit 1 020 730
Net financing cost (23) (60)
Profit on disposal of property, plant and equipment (45) (19)
Non-cash items:
Depreciation 272 265
Other non-cash items (59) 19
Tax payments (152) (38)
Change in working capital (407) (109)
Cash flow from operating activities 606 788
Expenditure on property, plant and equipment:
New (281) (169)
Replacement (163) (101)
Major plant overhaul costs capitalized (38) (35)
Expenditure on intangible assets (3) (4)
Growing crops disposals 7 5
Proceeds on disposal of property, plant and equipment 78 42
Investments - shares in Hippo Valley Estates (254)
Investments - unlisted (3) (72)
Net cash flow before dividends and financing activities (51) 454
Dividends paid (506) (247)
Net cash flow before financing activities (557) 207
Borrowings raised/(repaid) 358 (558)
Hedges of foreign loans 19 (2)
Shares issued 106 62
Net decrease in cash and cash equivalents (74) (291)
Balance at beginning of year 526 803
Exchange rate translation gain 57 14
Cash and cash equivalents at end of year 509 526
SEGMENTAL ANALYSIS
Revenue Operating Total
R million Profit Assets
2006
African Products 1 316 96 1 530
Hulett Aluminium (50%) 2 738 211 3 081
Moreland 598 325 1 199
Tongaat-Hulett Sugar 3 196 295 2 733
Triangle dividend 61
Corporate (51) 513
Exchange rate translation gain 57
Exceptional items 26
Group total 7 848 1 020 9 056
2005
African Products 1 293 112 1 558
Hulett Aluminium (50%) 2 081 159 2 695
Moreland 459 231 645
Tongaat-Hulett Sugar 3 093 232 2 423
Triangle dividend 19
Corporate (44) 607
Exchange rate translation gain 14
Exceptional items 7
Group total 6 926 730 7 928
Total Capital Capital Depreciation
R million Liabilities Employed Expenditure
2006
African Products 250 1 280 101 89
Hulett Aluminium 50%) 613 2 608 117 86
Moreland 368 838 2 1
Tongaat-Hulett Sugar 379 2 376 262 96
Triangle dividend
Corporate 1 314 506
Exchange rate
translation gain
Exceptional items
Group total 2 924 7 608 482 272
2005
African Products 224 1 333 58 88
Hulett Aluminium 564 2 403 69 89
(50%)
Moreland 287 383
Tongaat-Hulett Sugar 355 2 061 177 88
Triangle dividend
Corporate 830 567 1
Exchange rate
translation gain
Exceptional items
Group total 2 260 6 747 305 265
Rmillion 2006 2005
NOTES
1. Operating profit
Operating profit includes results of operations, Triangle dividends,
restructure costs, valuation adjustments and exceptional items.
2. Net financing costs
Interest paid (149) (131)
Financial instrument income 104 33
Interest received 22 38
(23) (60)
3. Tax
Normal (88) (51)
Deferred (118) (113)
Rate change adjustment (deferred) 28
Secondary tax on companies (63) (26)
(269) (162)
4. Capital expenditure commitments
Contracted 169 112
Approved but not contracted 640 187
809 299
5. Operating lease commitments 45 39
6. Guarantees and contingent liabilities 79 44
7. Trade and other payables
Included in trade and other payables is the maize obligation (interest
bearing) of R130 million (2005: R110 million).
8. Audited results
The Group financial statements for the year ended 31 December 2006
have been audited by Deloitte & Touche. Their unqualified audit
opinion is available for inspection at the registered office of the
company.
9. Basis of preparation
The audited Group financial statements for the year ended 31 December
2006 have been prepared in accordance with the Group`s accounting
policies which fully comply with International Financial Reporting
Standards and are consistent with those applied in the previous year.
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, 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: 19/02/2007 07:00:00 Produced by the JSE SENS Department.
