TIDMTHL
RNS Number : 1347O
Tongaat Hulett Limited
25 May 2015
Tongaat Hulett Limited
Registration No: 1892/000610/06
JSE share code: TON
ISIN: ZAE000096541
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2015
-- Revenue of R16,155 billion (2014: R15,716 billion) +2,8%
-- Operating profit of R2,089 billion (2014: R2,374 billion)
-12,0%
-- Cash flow from Operations of R2,533 billion (2014: R2,173
billion) +16,6%
-- Headline earnings of R945 million (2014: R1,106 billion)
-14,6%
-- Annual Dividend of 380 cents per share (2014: 360 cents per
share) +5,6%
COMMENTARY
The results for the year ended 31 March 2015 were attained in
difficult conditions in the sugar industry and with a number of
positive achievements by Tongaat Hulett in terms of cost
reductions, securing local markets and future cane supplies. The
starch operations again delivered a strong performance. Land
conversion and development activities continue to unlock
substantial value, albeit with operating profit recognised in the
year being below that reported last year. Overall, with revenue of
more than R16 billion, operating profit of R2,089 billion was
earned, reflecting a 12% reduction compared to the previous best of
R2,374 billion earned last year.
Operating profit from the various sugar operations totalled R806
million (2014: R908 million). The benefit of cost reductions over
the past two years, increased local market sales in Zimbabwe,
together with the negative cane valuation effect recorded in the
income statement last year not being repeated this year, were
offset by a reduction in sugar production volumes and lower prices.
Sales volumes included the sale of sugar from previous season
stocks in Zimbabwe. Revenue in Mozambique and Zimbabwe was impacted
by a further substantial reduction in prices (4,7 US cents per
pound, with a total impact of some R390 million) for exports into
the EU. World sugar prices declined further, with global stock
levels having increased following favourable weather conditions in
many sugar production regions of the world. The overall cane
valuation impact in the income statement was a positive R96 million
this year (driven mainly by the increased areas under cane and
new/replanting of roots), compared to a negative R153 million last
year (when there was a large negative impact of sugar price
reductions). Tongaat Hulett's sugar production for the year
totalled 1,314 million tons compared to 1,424 million tons in the
prior year.
The South African sugar operations, including the agriculture,
milling, refining and various downstream activities recorded
operating profit of R261 million (2014: R340 million). These
operations, which previously increased sugar production
substantially to 634 000 tons, saw sugar production this season
reduce to 541 000 tons due to low rainfall in KwaZulu-Natal (KZN).
The impact of the dry conditions has been partially mitigated by 11
554 hectares of new cane developments that were harvested for the
first time this year. Local sales were below prior years, with
various pressures in the market. Cost reduction actions have
limited the cost of goods, services, transport, marketing, salaries
and wages to an increase of 4% this year.
The Zimbabwe sugar operations' operating profit for the year
amounted to R386 million (US$35 million) compared to the R330
million (US$33 million) last year. Local market sales volumes
recovered significantly, with improved local market protection
(tariffs and import licences) implemented earlier in the year and
progress being made with distribution and marketing initiatives.
The local market remains suppressed by the macro-economic
conditions. Sugar production for the year was 445 000 tons (2014:
488 000 tons) as a consequence of no cane being diverted from the
independent ethanol plant at Chisumbanje (39 000 tons sugar
equivalent in the prior year) and after experiencing the impact of
low dam levels for irrigation at the end of 2013, which only
recovered in early 2014. The conversion of US dollar profits into
Rands on consolidation was positively impacted by exchange rate
movements. The cost of bought-in goods and services, salaries and
wages was US$11 million lower than the prior year and US$51 million
lower than two years ago, after absorbing input price, salary and
wage increases.
The Mozambique sugar operations recorded operating profit of
R130 million (2014: R168 million). Sugar production for the year
increased to 271 000 tons (2014: 249 000 tons). The local market
was significantly impacted by additional imports and this
necessitated increased exports by local producers at lower prices,
with a negative R77 million profit impact on Tongaat Hulett. The
cost of goods and services, salaries and wages was lower than two
years ago by an amount of Mt165 million, which was the Rand
equivalent of some R58 million, after absorbing price increases and
substantial salary and wage increases. Sugar production has grown
by 15% over the same period.
The Swaziland sugar operations reported operating profit of R29
million (2014: R70 million) as a result of the lower sucrose price
as a consequence of a reduction in export prices into the EU. The
Swaziland estates produced the raw sugar equivalent of 57 000 tons
(2014: 53 000 tons).
The starch operation increased operating profit to R561 million
(2014: R482 million), with improvements in the sales mix,
co-product recoveries, capacity utilisation and plant efficiencies.
Domestic sales volumes grew by 4%, with increases in the
coffee/creamer, confectionary and paper making sectors. Working
together with customers, success has been achieved in increasing
sales of products where demand is growing (locally and exporting
into the rest of Africa) and recovering local market from imports.
Starch and glucose processing margins were in line with the prior
year.
Land conversion and development activities generated profit of
R829 million from the sale of 108 developable hectares (2014:
profit of R1 080 million from sales of 259 developable hectares).
Sales came largely from Cornubia (industrial, business and retail)
with an average profit of R8,2 million per developable hectare and
Izinga/Kindlewood with average profit of R6,3 million per
developable hectare. Profit in Umhlanga Ridge Town Centre exceeded
R25 million per developable hectare. The momentum on larger land
sales has continued, with a single sale of 19 developable hectares
in Izinga and a sale of 27 developable hectares in a new area of
Cornubia. The sale of 42 developable hectares of highly valued land
in Umhlanga Ridgeside, precincts 1 and 2, which was previously
expected to be finalised by the end of March 2015, was not
concluded in this financial year. Negotiations with four parties
are at various stages, aimed towards reaching an imminent
conclusion. The development proposals received for Ridgeside are
confirming the value that has previously been attributed to the
land.
Cash flow from operations generated R2,533 billion (2014: R2,173
billion), an improvement of some R360 million, with a reduced cash
absorption in working capital. Net debt at the end of the year
reduced to R3,992 billion with a R419 million positive cash flow
after dividend payments.
Total net profit before the deduction of minority interests was
R1,047 billion (2014: R1,227 billion) and headline earnings
attributable to Tongaat Hulett shareholders amounted to R945
million compared to R1,106 billion last year. A final dividend of
210 cents per share has been declared, bringing the annual dividend
to 380 cents per share (2014: 360 cents per share).
LOOKING AHEAD
Tongaat Hulett has substantially enhanced its strategic
positioning over the past few years and expects to continue to do
so, focusing on multiple strategic thrusts, all with a positive
impact on earnings and cash flow.
More Favourable Sugar Markets in Coming Years
The sustainability of farmers in the sugar industry throughout
many parts of the world is under significant pressure at the low
current world price and taking into account the substantial input
cost increases over the past decade. This, together with possible
variable weather conditions, is likely to exert downward pressure
on global sugar production levels. Global sugar consumption is
predicted to continue to grow at a rate of some 2% per annum, with
most of this growth coming from low per capita consumption
developing countries. There are predictions for sugar demand growth
in southern and eastern Africa of some 30% over the next six years.
The current surplus global stock levels have also been putting
pressure on local and regional prices, as well as the EU market,
amplified by the EU market reforms. Tongaat Hulett is steadily
shifting export sales from the EU to regional deficit markets.
Attention is focused on capturing and growing local market sales.
In South Africa, the reference price used to calculate import duty
levels does not yet fully provide adequate and appropriate
protection for this socio-economically important rural industry. In
Mozambique, the imminent substantial increase in the reference
price should provide such assistance.
Further Cost Reductions
The sustainable cost reductions achieved over the past two
years, while having to absorb input price increases, provide a good
base for the next steps in the concerted cost reduction process in
the sugar operations. Unit costs of sugar production will benefit
substantially from growth in volumes and better yields, as milling
costs and many of the agricultural costs per hectare are mostly
fixed. The marginal cost of additional sugar production from
existing hectares under cane is typically 4 to 6 US cents per
pound.
Growing Sugar Production
The crop size in the coming season in South Africa is uncertain
and is likely to be at the lowest level for many years, while
Zimbabwe and Mozambique are likely to show modest growth in sugar
production.
Good progress continues to be made in growing the number of
hectares under cane and it is expected that by 2018/19 an
additional 22 800 hectares will be harvested, of which 9 074
hectares have already been planted. Agricultural improvement
programs aimed at improving yields and sucrose content are
proceeding well. Tongaat Hulett has more than 2,1 million tons of
sugar milling capacity. Sugar production is targeted to grow from
the 1,314 million tons in 2014/15 to some 1,821 million tons in
2018/19, under normal weather conditions. Of this growth, 37% is
expected to come from a return to normal weather conditions, 30%
from additional hectares under cane and 33% from yield and sugar
extraction improvements.
Creating Value For All Stakeholders
Tongaat Hulett continues to focus on value creation for all
stakeholders through an all-inclusive approach to growth and
development. In KZN there are established collaborations with
Provincial and Local authorities in the inextricably linked areas
of sugar and cane activities, the development of urban areas
(including Cornubia) and maximising the future benefit of renewable
energy. The planting of 28 687 hectares in the past four years has
created some 7 175 direct jobs in rural areas and the 12 000
hectare project currently underway for cane development and job
creation in rural KZN includes a Jobs Fund grant for R150 million
allocated over some three years, with the first R50 million already
received. In Zimbabwe, Tongaat Hulett, the Government and Local
communities are working together on socio-economic initiatives in
the south-eastern Lowveld region of the country. One of the key
focus areas remains the on-going orderly development of sustainable
private sugar cane farmers and at the end of the 2014/15 season,
some 857 active indigenous private farmers, farming some 15 880
hectares, employing more than 7 300 people, generated US$70 million
in annual revenue. Current initiatives should increase this, by the
2017/18 season, to some 1 023 private farmers supplying more than 1
900 000 tons of cane harvested from 19 270 farmed hectares, with
further job creation in rural communities. In Mozambique, 415 000
tons of cane were delivered from 4 370 hectares in the 2014/15
season, supporting 2 018 indigenous private farmers.
Growing Starch and Glucose
The starch and glucose operation, which is the only wet-miller
in Sub-Saharan Africa, is well positioned strategically, focused on
growing its sales volume, with an enhanced product mix and customer
growth prospects into Africa. This is underpinned by improving use
of its available capacity and the efficiency of its operations. Dry
weather conditions in the new season have resulted in maize prices
trading above international levels and the starch operations
current exposure to these higher prices comprises approximately 15%
of the coming year's maize requirements.
Momentum in Land Development
The momentum in unlocking value and cash flow from land
conversion and development continues, with a portfolio of 8 091
developable hectares in KZN ultimately earmarked for development.
The value achieved per hectare of land sold is increasingly
reflecting the steadily improving land conversion platform and
varies based on usage and location. A progressively larger area is
benefitting from planning activities and infrastructural investment
at key points. Tongaat Hulett continues to work together with
Government, related organisations and key stakeholders in the
property industry to capture the synergy of each other's unique
capabilities and to maximise value for all stakeholders. This has a
positive impact on economic development, ranging from industrial
and commercial to tourism and all levels of residential development
and the affordable housing backlog, in the Durban/Northern KZN area
and complements the simultaneous rural development taking place
around new agricultural cane developments. Over the next 5 years,
sales are expected to come primarily out of 3 801 developable
hectares in key focus areas comprising the urban expansion north of
Durban in the Umhlanga and Cornubia areas, coastal lifestyle areas
of Zimbali and Sibaya, business and residential development around
the airport, coastal development north of Ballito in Tinley Manor
and in the Ntshongweni area west of Durban. Further detail on the
land portfolio (including prospective usage, market momentum,
development themes, possible timing and values) is available on the
www.tongaat.com website.
Financial Prospects for the Year Ahead
The financial results for the year ahead will be influenced by a
number of varying dynamics, the magnitude and impact of which are
difficult to predict at this stage. It is likely that the sugar
operations will remain under pressure, particularly in South
Africa. Land development could have a record year. Starch volumes,
mix, cost and exchange rate dynamics are likely to counter maize
prices being closer to import parity.
The business is in a good position to benefit from multiple
actions across all of its well-grounded strategic thrusts, with its
footprint in six SADC countries, its ability to process both sugar
cane and maize, electricity generation and ethanol opportunities
and increased momentum in land conversion.
For and on behalf of the Board
Bahle Sibisi Peter Staude
Chairman Chief Executive Officer
Amanzimnyama
Tongaat, KwaZulu-Natal
21 May 2015
DIVIDEND DECLARATION
Notice is hereby given that the Board has declared a final gross
cash dividend (number 175) of 210 cents per share for the year
ended 31 March 2015 to shareholders recorded in the register at the
close of business on Friday 19 June 2015.
The salient dates of the declaration and payment of this final
dividend are as follows:
Last date to trade ordinary shares
"CUM" dividend Thursday 11 June 2015
Ordinary shares trade "EX" dividend Friday 12 June 2015
Record date Friday 19 June 2015
Payment date Thursday 25 June 2015
Share certificates may not be dematerialised or re-materialised,
nor may transfers between registers take place between Friday 12
June 2015 and Friday 19 June 2015, 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 Thursday 11 June
2015.
The dividend has been declared from income reserves. A net
dividend of 178,5 cents per share will apply to shareholders liable
for the local 15% dividend withholding tax and 210 cents per share
to shareholders exempt from paying the dividend tax. The issued
ordinary share capital as at 21 May 2015 is 135 112 506 shares. The
company's income tax reference number is 9306/101/20/6.
For and on behalf of the Board
M A C Mahlari
Company Secretary
Amanzimnyama
Tongaat, KwaZulu-Natal
21 May 2015
Income Statement
Summarised consolidated Audited Audited
Rmillion 2015 2014
-------------------------------- -------- --------
Revenue 16 155 15 716
-------- --------
Operating profit 2 089 2 374
Net financing costs (note
1) (617) (609)
Profit before tax 1 472 1 765
Tax (note 2) (425) (538)
Net profit for the year 1 047 1 227
-------- --------
Profit attributable to:
Shareholders of Tongaat
Hulett 989 1 155
Minority (non-controlling)
interest 58 72
1 047 1 227
-------- --------
Headline earnings attributable
to
Tongaat Hulett shareholders
(note 3) 945 1 106
-------- --------
Earnings per share (cents)
Net profit per share
Basic 864.6 1 034.4
Diluted 864.6 1 022.3
Headline earnings per share
Basic 826.1 990.5
Diluted 826.1 978.9
Dividend per share (cents) 380.0 360.0
Currency conversion
Rand/US dollar closing 12.17 10.56
Rand/US dollar average 11.05 10.13
Rand/Metical average 0.35 0.34
Rand/Euro average 13.96 13.59
US dollar/Euro average 1.26 1.34
Segmental Analysis
Summarised consolidated Audited Audited
Rmillion 2015 2014
--------------------------------------- -------- --------
REVENUE
Sugar
Zimbabwe 3 471 2 896
Swaziland 203 211
Mozambique 1 804 1 704
South Africa 6 143 6 224
11
Sugar operations - total 11 621 035
Starch operations 3 447 3 210
Land Conversion and Developments 1 087 1 471
15
Consolidated total 16 155 716
-------- --------
OPERATING PROFIT
Sugar
Zimbabwe 386 330
Swaziland 29 70
Mozambique 130 168
South Africa 261 340
Sugar operations - total 806 908
Starch operations 561 482
Land Conversion and Developments 829 1 080
Centrally accounted and consolidation
items (86) (75)
BEE IFRS 2 charge and transaction
costs (21) (21)
Consolidated total 2 089 2 374
-------- --------
FURTHER ANALYSIS OF SUGAR OPERATING
PROFIT
Sugar operations - before
cane valuations 710 1 061
Zimbabwe 320 571
Swaziland 40 56
Mozambique 215 272
South Africa 135 162
-------- --------
Cane valuations - income
statement effect 96 (153)
Zimbabwe 66 (241)
Swaziland (11) 14
Mozambique (85) (104)
South Africa 126 178
-------- --------
Sugar operations - after
cane valuations 806 908
Zimbabwe 386 330
Swaziland 29 70
Mozambique 130 168
South Africa 261 340
-------- --------
Statement of Financial Position
Summarised consolidated Audited Audited
Rmillion 2015 2014
----------------------------------- -------- --------
ASSETS
Non-current assets
11
Property, plant and equipment 12 059 279
Growing crops 5 473 5 005
Long-term receivable 518 485
Goodwill 376 338
Intangible assets 64 70
Investments 27 18
-------- --------
17
18 517 195
Current assets 8 026 6 781
Inventories 2 472 2 416
Trade and other receivables 3 291 2 866
Major plant overhaul costs 595 432
Cash and cash equivalents 1 668 1 067
-------- --------
23
TOTAL ASSETS 26 543 976
-------- --------
EQUITY AND LIABILITIES
Capital and reserves
Share capital 135 135
Share premium 1 544 1 543
BEE held consolidation shares (673) (700)
Retained income 7 959 7 412
Other reserves 2 924 2 172
-------- --------
10
Shareholders' interest 11 889 562
Minority interest in subsidiaries 1 887 1 628
-------- --------
12
Equity 13 776 190
Non-current liabilities 7 944 7 612
Deferred tax 2 491 2 131
Long-term borrowings 4 056 4 094
Non-recourse equity-settled
BEE borrowings 654 691
Provisions 743 696
-------- --------
Current liabilities 4 823 4 174
Trade and other payables
(note 4) 3 173 2 742
Short-term borrowings 1 604 1 293
Tax 46 139
-------- --------
23
TOTAL EQUITY AND LIABILITIES 26 543 976
-------- --------
Number of shares (000)
135 109
- in issue 113 967
114 111
- weighted average (basic) 388 655
114 112
- weighted average (diluted) 388 980
Statement of Changes in Equity
Summarised consolidated Audited Audited
Rmillion 2015 2014
----------------------------------- -------- --------
Balance at beginning of year 10 562 8 332
Total comprehensive income
for the year 1 815 2 397
Retained earnings 973 1 142
Movement in hedge reserve (2) 4
Foreign currency translation 844 1 251
-------- --------
Dividends paid (417) (240)
Share capital issued - ordinary 1 5
BEE held consolidation shares 18 16
Share-based payment charge 85 67
Settlement of share-based
payment awards (175) (15)
Shareholders' interest 11 889 10 562
Minority interest in subsidiaries 1 887 1 628
Balance at beginning of
year 1 628 1 373
Total comprehensive income
for the year 271 268
Retained earnings 58 73
Foreign currency translation 213 195
======== ========
Dividends paid to minorities (12) (13)
Equity 13 776 12 190
-------- --------
Statement of Other Comprehensive Income
Summarised consolidated Audited Audited
Rmillion 2015 2014
--------------------------------------- -------- --------
Net profit for the year 1 047 1 227
Other comprehensive income 1 039 1 438
Items that will not be reclassified
to profit or loss:
Foreign currency translation 1 057 1 446
Actuarial loss (23) (17)
Tax on actuarial loss 7 5
Items that may be reclassified
subsequently to profit or loss:
Hedge reserve (3) 6
Tax on movement in hedge reserve 1 (2)
Total comprehensive income
for the year 2 086 2 665
-------- --------
Total comprehensive income
attributable to:
Shareholders of Tongaat Hulett 1 815 2 397
Minority (non-controlling)
interest 271 268
2 086 2 665
-------- --------
Statement of Cash Flows
Summarised consolidated Audited Audited
Rmillion 2015 2014
------------------------------------- -------- --------
Operating profit 2 089 2 374
Surplus on disposal of property,
plant and equipment (77) (75)
Depreciation 564 571
Growing crops and other non-cash
items 1 64
Operating cash flow 2 577 2 934
Change in working capital (44) (761)
Cash flow from operations 2 533 2 173
Tax payments (353) (452)
Net financing costs (617) (609)
Cash flow from operating activities 1 563 1 112
Expenditure on property, plant
and equipment:
New (203) (117)
Replacement and plant overhaul (529) (411)
Capital expenditure on growing
crops (76) (118)
Other capital items 93 87
Net cash flow before dividends
and financing activities 848 553
Dividends paid (429) (253)
Net cash flow before financing
activities 419 300
Borrowings raised /(repaid) 218 (258)
Non-recourse equity-settled
BEE borrowings (37) (31)
Shares issued 1 5
Settlement of share-based
payment awards (175) (15)
Net increase in cash and cash
equivalents 426 1
Balance at beginning of year 1 067 917
Foreign currency translation 175 149
Cash and cash equivalents
at end of year 1 668 1 067
-------- --------
Notes
Summarised consolidated Audited Audited
Rmillion 2015 2014
----------------------------------- -------- --------
1. Net financing costs
Interest paid (685) (646)
Interest capitalised 1
Interest received 67 37
(617) (609)
-------- --------
2. Tax
Normal (261) (513)
Deferred (164) (29)
Rate change adjustment
- deferred 4
(425) (538)
-------- --------
3. Headline earnings
Profit attributable to
shareholders 989 1 155
Adjusted for:
Capital profit on disposal
of land and buildings (48) (66)
Loss/(surplus) on other
capital items 2 (1)
Tax on the above items 2 18
945 1 106
-------- --------
4. Trade and other payables
Included in trade and other payables is
the maize obligation (interest bearing)
of R246 million (2014: R334 million).
5. Capital expenditure
commitments
Contracted 163 74
Approved 478 152
641 226
-------- --------
6. Operating lease commitments 82 128
-------- --------
7. Guarantees and contingent
liabilities 33 116
-------- --------
8. Basis of preparation
The summarised consolidated financial information
for the year ended 31 March 2015 has been
prepared in accordance with the JSE Limited
Listings Requirements for provisional reports,
the framework concepts and the measurement
and recognition requirements of International
Financial Reporting Standards (IFRS), the
SAICA Financial Reporting Guides as issued
by the Accounting Practices Committee,
Financial Reporting Pronouncements as issued
by the Financial Reporting Standards Council,
contains the information as required by
International Accounting Standard 34 Interim
Financial Reporting and the requirements
of, including the audit thereof, in terms
of the Companies Act of South Africa. The
additional disclosure required in terms
of IFRS 7 Financial Instruments: Disclosures
and IFRS 13 Fair Value Measurement will
be included in the integrated annual report.The
report has been prepared using accounting
policies that comply with IFRS which are
consistent with those applied in the financial
statements for the year ended 31 March
2014 and were prepared under the supervision
of the Chief Financial Officer, M H Munro
CA (SA).
Tongaat Hulett has adopted all the new
or revised accounting pronouncements as
issued by the IASB which were effective
for Tongaat Hulett from 1 January 2014.
The adoption of these standards, had no
recognition and measurement impact on the
financial results.
9. Audited results
These summarised consolidated financial
statements, which have been derived from
the audited consolidated annual financial
statements for the year ended 31 March
2015 and with which they are consistent
in all material respects, have been audited
by Deloitte & Touche. Their unmodified
audit opinions on the consolidated annual
financial statements and on the summarised
financial statements are available for
inspection at the registered office of
the company. The auditor's report does
not necessarily report on all of the information
contained in this announcement and any
reference to future financial performance
included in this announcement has not been
audited or reported on. Shareholders are
therefore advised that in order to obtain
a full understanding of the nature of the
auditor's engagement they should obtain
a copy of the integrated annual report
from the registered office of Tongaat Hulett
after it has been released prior to 30
June 2015.
CORPORATE INFORMATION
Directorate: C B Sibisi (Chairman), P H Staude (Chief Executive
Officer)*,
S M Beesley, F Jakoet, J John, R P Kupara^, T N Mgoduso,
N Mjoli-Mncube, M H Munro*, S G Pretorius
* Executive directors ^ Zimbabwean
Company Secretary: M A C Mahlari
Registered office: Amanzimnyama Hill Road, Tongaat,
KwaZulu-Natal
P O Box 3, Tongaat 4400
Telephone: +27 32 439 4019
Facsimile: +27 31 570 1055
Transfer secretaries:
South Africa: Computershare Investor Services (Pty) Limited
Telephone: +27 11 370 7700
United Kingdom: Capita Registrars
Telephone: +44 20 8639 2406
Sponsor: Investec Bank Limited
Telephone: +27 11 286 7000
www.tongaat.com
e-mail: info@tongaat.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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