Tongaat Hulett Limited · JSE:TON
Tongaat Hulett — FY2011 Earnings Presentation
69 slides from Tongaat Hulett's earnings presentation, May 2011
Slide 1: Tongaat Hulett
@ Tongaat Hulett
Slide 2: Tongaat Hulett
Tongaat Hulett • > 42 000 Employees • Operations in 6 countries in SADC Harare • Sugar - 14 operations ZIMBABWE Mafambisse NAMIBIA Beira • Maize/corn - 6 operations CSI Triangle Hippo Valley BOTSWANA • 347 000 hectares supplying starch and Gabarone Windhoek Sugar Industries sugar operations CSI Xina
Slide 3: Financial Results for the 12 Months Ended 31 March 2011
FINANCIAL RESULTS FOR THE 12 MONTHS ENDED 31 MARCH 2011
Slide 4: Tongaat Hulett Earnings
Tongaat Hulett Earnings 12 months to 12 months to R million 31 March 2011 31 March 2010 % Change (2010/11) (2009/10) Revenue 9 681 8 789 +10% Profit from Operations 1 338 1 500 -11% Operating Profit 1 606 1 535 +5% Headline Earnings 806 815 -1% • Twelve months characterised by counteractive factors
Slide 5: Profit from Operations and Revenue
Profit from Tongaat Hulett Revenue Operations 12 months to 12 months to 12 months to 12 months to R million 31 March 2011 31 March 2010 31 March 2011 31 March 2010 Sugar operations Zimbabwe 454 518 1 646 1 325 Swaziland 17 51 126 133 Mozambique 135 141 715 447 SA agriculture, milling and refining (7
Slide 6: Exchange Rates
Exchange Rates Less Favourable in 2010/11 than in 2009/10 Average 2010/11 2009/10 % Change Rand/US$ 7,19 7,81 -8% Rand/Euro 9,49 11,03 -14% Rand/Metical 0,21 0,27 -22% US$/Euro 1,32 1,41 -6% • Export proceeds: US$ and Euro (exchange rates at time of export) • Earnings conversion on consolidation (at
Slide 7: Sugar Cane Growing Crops
Sugar Cane Growing Crops • Accounted for in terms of International Accounting Standard - IAS 41: Agriculture • Measured and recognised at fair value • Changes in fair value are included in the income statement • Replanting and agricultural costs actually incurred are charged to the income statement
Slide 8: Growing Crops on the Tongaat Hulett Balance Sheet
Growing Crops on the Tongaat Hulett Balance Sheet 31 March 2010 31 March 2011 South Total Total Swaziland Zimbabwe Mozambique Africa Roots Hectares 68 039 75 855 18 859 3 838 28 494 24 664 Amortised root value 13 148 15 540 11 718 12 261 12 993 21 915 (Rands per hectare) Standing Cane Hectares for h
Slide 9: Growing Crops - Income Statement
Growing Crops - Income Statement • IAS 41 Fair Value Change included in the Income Statement: Year to 31 March 2011 R million R million South Africa 109 Roots 332 Swaziland 7 Zimbabwe 283 Standing cane 330 Mozambique 263 Change in fair value 662 Change in fair value 662 • Comparative IAS 41 Fair Val
Slide 10: Zimbabwe Sugar Operations
Zimbabwe Sugar Operations • Profit from operations: R454 million (US$ 63 million) 2009/10: R518 million (US$ 66 million) • Re-establishment of sugar cane crop • Quantum of increase in value of sugar cane growing crops in 2010/11 lower than in 2009/10 • Price recovery in 2009/10 > 2010/11 price incre
Slide 11: Mozambique Sugar Operations
Mozambique Sugar Operations • Profit from operations: R135 million (Metical 628 million) 2009/10: R141 million (Metical 521 million) • Higher production and sales volumes: +24% • Local sugar prices - lagged response to higher world prices and weaker Metical: negative R120 million impact on profit -
Slide 12: South African Sugar: Agriculture, Milling and Refining
South African Sugar: Agriculture, Milling and Refining • Loss from operations: R7 million (2009/10: profit R136 million) • Lower sugar production volumes due to severe drought conditions • Higher cost per ton of sugar produced • Approximately 90% of sugar milling and overhead costs are fixed • SA su
Slide 13: Downstream and Sugar Value Added Activities
Downstream and Sugar Value Added Activities • Profit from operations: R241 million (2009/10: R200 million) Generated from • Botswana and Namibia sugar packing and distribution • Voermol animal feeds - affected by 3 week strike and availability of pith • Refined exports from South Africa - Rand stren
Slide 14: Starch Operations
Starch Operations • Operating profit: R303 million (2009/10: R251 million) • Improvements in manufacturing efficiencies • Maize prices close to or below world prices • Third consecutive year of a large maize crop (12,8 million tons) • Margin benefit of lower maize cost offset by lower co-product pri
Slide 15: Land Conversion and Development
Land Conversion and Development • 13 654 gross hectares (8 657 developable hectares) available for development in South Africa • Current economic climate - few hectares converted to development in prime areas • Sales of 144 developable hectares (209 gross hectares) in 2010/11 year • Cornubia, Umhlan
Slide 16: Defined Benefit Fund Surplus - Asset Recognition
Defined Benefit Fund Surplus - Asset Recognition • Formal split of South African pension fund - Tongaat Hulett and Hulamin • IAS 19, IFRIC 14 and SA’s AC 504 required the recognition of a portion of the defined benefit pension fund surplus as an asset on the Tongaat Hulett Balance Sheet and R288 mil
Slide 17: Income Statement - other items
Income Statement - other items • Finance costs R million 2010/11 2009/10 Interest costs on debt 378 320 Interest on maize obligation 25 32 BEE SPV interest 76 77 Interest paid 479 429 Interest capitalised (7) (64) Income Statement 472 365 • Taxation • 2009/10 : Zimbabwe rate reduction = deferred tax
Slide 18: Cash Flow
Cash Flow 12 months to 31 March 2011 • Cash flow from operations before working + R1,0 billion capital, forex and tax • 2009/10: + R1,0 billion • Working capital - R212 million • 2009/10: + R342 million • Capital expenditure - R806 million • 2009/10: - R1,6 billion • Capex commitments at 31 March 20
Slide 19: Tongaat Hulett Review
Tongaat Hulett Review @ Tongaat Hulett
Slide 20: Sugar Production
Sugar Production Actual Estimate Plan 2010/11 2011/12 2014/15 Total hectares harvested 33 737* 35 796 40 952 Cane yield tcph 76,03* 84,87 87,05 107,81 Total cane crush (tons) 2 684 516 3 038 000 3 116 000 4 415 236 Cane to sugar ratio 8,07 8,44 8,20 7,92 Sugar production (tons) 333 021 360 000 380 0
Slide 21: Own Estates
Own Estates Actual Estimate Plan 2010/11 2011/12 2014/15 Total hectares harvested 24 932 26 393 26 660 Cane yield tcph 86,28 98 100 112,01 Total cane crush (tons) 2 151 256 2 586 000 2 646 000 2 986 200 Root replant (hectares) 4 995 4 800 2 600 21
Slide 22: Private Farmers
Private Farmers Actual Estimate Plan 2010/11 2011/12 2014/15 Total hectares harvested 8 805 9 403 14 292 Cane yield tcph 47,00 48,09 99,98 Total cane crush (tons) 413 835 452 230 1 429 036 Root replant (hectares) # 450 3 990 1 500 EU funded private farmers new planting - 1 200 hectares to be complet
Slide 23: Increasing Cane Supply and Yields in SA
Increasing Cane Supply and Yields in SA SA Cane Supply Actual Plan Hectares Under Cane 2010/11 2014/15 Area as at 1 April 2011 and 2014 Tongaat Hulett owned 7 745 7 468 Tongaat Hulett leased * 11 114 30 367 Small scale farmers - Tongaat Hulett supported 25 610 36 342 Commercial and Medium Scale 85 0
Slide 24: New Plantings - South Africa
New Plantings - South Africa Target for Season 2009/10 2010/11 2011/12 Small scale farmers (hectares) 1 636 3 689 3 713 Commercial farmers (hectares) 630 371 340 Tongaat Hulett leased land (hectares) 1 824 1 546 3 970 Total 4 090 5 606 8 023 24
Slide 25: South Africa - Sugar Industry Reforms
South Africa - Sugar Industry Reforms World of sugar has fundamentally changed • EU Reforms • Emergence of renewable energy with its dynamics on sugar prices • Global sugar demand growth of 2% per annum - currently 3,2 million tons sugar • Expectation of future prices being above 20 US c/lb • Tradit
Slide 26: Sugar Production
Sugar Production Actual Estimate Plan 2010/11 2011/12 2014/15 Total hectares harvested 21 800 24 637 26 848 Cane yield tcph 72,89 85,63 89,22 93,59 Total cane crush (tons) 1 588 872 2 109 500 2 198 000 2 512 630 Cane to Sugar ratio 9,59 8,44 8,14 8,02 Sugar production (tons) 165 744 250 000 270 000
Slide 27: Cane Yields
Cane Yields Actual Estimate Plan Hectares harvested Tongaat Hulett hectares 2010/11 2011/12 2014/15 2014/15 Xinavane 91,07 100,06 105,10 11 623 Mafambisse 48,12 63,24 75,92 8 526 Home Estate 35,10 52,00 68,68 6 075 Lamego Estate 96,80 92,13 93,85 2 451 Total 70,89 83,65 92,75 20 149 Hectares Tongaat
Slide 28: Cane Yield and Sucrose Content Improvement Plans
Cane Yield and Sucrose Content Improvement Plans Field condition / Drainage Irrigation / Power Supply • Field layouts and row spacing • Improved irrigation control • Upgrading of drainage systems • Improved bulk water supply from pump • Positive drainage pumps stations • Renewal of one-way floodgate
Slide 29: Getting the First Electricity Plant On-Line
Getting the First Electricity Plant On-Line • Tariff (mid June 2011) • Power Purchase Agreement • Ensuring fibre supply • Value Sharing • Funding Structures • Design and Construction • Targeted first plant commission date - 2014 29
Slide 30: Starch - Opportunities from Operational Improvements
Starch - Opportunities from Operational Improvements and Competitively Priced Local Maize • Operational performance in 2010/11 improved at all plants against key benchmarks • Estimated benefit R26 million • Unlocks additional capacity • Local maize price currently below world price • Grew exports by
Slide 31: Value Extraction from Land under Sugar Cane
Value Extraction from Land under Sugar Cane Developable hectares: 8 657 in SA Value Benchmarks Net Cash Inflow (including overheads) • Majority of developments between R2 million and R6 million per developable hectare • Cornubia (affordable housing) • R815 000 per developable hectare • Ridgeside dev
Slide 32: Fewer Hectares - Value Intact
Fewer Hectares - Value Intact Ridgeside • Sold at R3 000 per bulk m2 • Net cash inflow R9,9 million per developable hectare Town Centre • Record price R3 610 per m2 • Net cash inflow R16,4 million per developable hectare River Horse Valley • R1 750 per m2 of platform • Net cash inflow of R6,2 millio
Slide 33: Cornubia
Cornubia Cornubia North • 1 231 gross hectares • 813 developable hectares Cornubia South • Tongaat Hulett • 593 gross hectares (345 developable) CORNUBIA NORTH • eThekwini • 667 gross hectares (369 developable) • National priority project • KZN & eThekwini’s 1st Sustainable Integrated Human Settleme
Slide 34: Cornubia Industrial and Business Estate
Cornubia Industrial and Business Estate New bridge over rail constructed 2010 203 Gross hectares 103 Developable hectares Platform Area of 85 hectares Start selling Feb/March 2012
Slide 35: Sibaya: Nodes 1 and 5
Sibaya : Nodes 1 and 5 Node 5 Gross – 106 ha Developable – 75 ha Node 1 Gross – 125 ha Developable – 50 ha Nodes 1 and 5 • EIA approved Node 1 • Zoning Approval • Permission to sell - Aug 2011 Node 5 • Zoning Approval - May 2012 • Bulk Sale / Partnership
Slide 36: Additional Information
ADDITIONAL INFORMATION @ Tongaat Hulett
Slide 37: Sugar
SUGAR @ Tongaat Hulett
Slide 38: Sugar Production
Sugar Production Milling Season Tons ’000 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 South Africa 969 755 860 652 723 753 666 604 644 564 445 Mozambique 39 36 71 82 85 115 106 108 108 134 166 Swaziland 41 45 50 54 50 56 55 58 56 54 54 RSE Zimbabwe * 547 509 578 507 422 430 451
Slide 39: Additional Revenue of Expanded Sugar Production
Additional Revenue Of Expanded Sugar Production If All Exported at 22 USc/lb with R/US$ = 7,00 Sugar Additional 2010/11 Additional Production at Export Production * Sugar * Capacity * Revenue # South Africa 445 463 1 000 000 554 537 1,88 Zimbabwe 333 021 600 000 266 979 0,91 Mozambique 165 744 327 0
Slide 40: EU Sugar Market - Tongaat Hulett
EU Sugar Market - Tongaat Hulett Institutional Price Reductions (€/Ton CIF) Raw Sugar White Sugar Effective date €/Ton Cumulatuve €/Ton Cumulatuve CIF % Change CIF % Change 1 October 2007 496,80 632,00 1 October 2008 448,40 -10% 524,50 -17% 1 October 2009 335,20 -33% 404,40 -36% Tongaat Hulett Retur
Slide 41: LDC Countries
LDC Countries • 50 LDC countries • 22 sugar producing LDC countries • Countries that have exported into EU Ethiopia Tanzania Togo Senegal Nepal Malawi Mozambique Zambia Sierra Leone Sudan DRC Benin Bangladesh • LDC criteria • Gross national income per capita < US$750 • Human asset index based on nut
Slide 42: Triangle, Hippo, Mafambisse, Xinavane, Tambankulu
Triangle Hippo Mafambisse Massingir Xinavane Tambankulu 42
Slide 43: Mozambique Sugar Operations
Mozambique Sugar Operations • Mafambisse • Expansion completed in 2008 • Mill: Tongaat Hulett owns 85% • Agriculture: Tongaat Hulett owns 100% • Xinavane • Mill: Tongaat Hulett owns 88% after major expansion • Agriculture: Tongaat Hulett owns 100% 43
Slide 44: Sugar Production - SA Industry
Sugar Production - SA 3 Industry 2010/11: 1 909 236 tons Tons Sugar - Millions Tongaat Hulett: 445 463 tons 2.5 2 1.5 1 0.5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 TH Industry Season ended March 44
Slide 45: Government Partnerships with Tongaat Hulett
Government Partnerships with Tongaat Hulett Cane Development Govt. Grant Application of Type of Funding Beneficiary Term (R million) Grant Planting, replanting, Comprehensive • 3 year partnership ratoon management, agricultural support R38 m • 84 beneficiaries • 2008/9, 2009/10, 2010/11 irrigation a
Slide 46: Accounting for Sugar Cane Growing Crops
Accounting for Sugar Cane Growing Crops International Accounting Standards - IAS 41: Agriculture • Sugar cane growing crops are accounted for as biological assets • Measured and recognised at fair value • Changes in the fair value are included in the income statement • The fair value of roots is det
Slide 47: Accounting for Sugar Cane Growing Crops (cont)
Accounting for Sugar Cane Growing Crops (cont) • Fair Value adjustments - over time: zero sum equation in the Income Statement • At time of cane establishment / expansion: costs incurred, cash outflow and fair value gain • Approximately 18 months later: standing cane harvested, sugar produced and so
Slide 48: Exchange Rates
Exchange Rates Currency Exchange Rates Prices Costs Export Euro US$ proceeds • EU exports: Euro • US$ Zimbabwe • USA quota: US$ Earnings • Zim inflation conversion on US$ Rands • Local market: US$ consolidation Export US$ Metical proceeds Euro Metical • USA quota: US$ • Rands Mozambique • EU exports
Slide 49: Ethanol From Sugar Cane
Ethanol From Sugar Cane Working towards • SADC introducing a workable ethanol regime as a CO2 mitigation strategy 10% ethanol blend • Equivalent to 2,2 million tons raw sugar • Current South African sugar market is 1,7* million tons • Existing Northern SADC sugar capacity is 2,2 million tons * Inclu
Slide 50: Starch
STARCH @ Tongaat Hulett
Slide 51: Maize/Corn Production in SADC Poised for Growth
Maize/Corn Production in SADC Poised for Growth • Products from cane or maize • Ethanol • Sweeteners • Fermentation products (beer) • Tongaat Hulett only maize wet miller in Southern Africa • World maize price • Last 15 years: US$80 - US$100 per ton • Recent price: US$220 - US$250 per ton • Starch a
Slide 52: Tongaat Hulett Starch
Tongaat Hulett Starch • Outlook for South African maize 2010/11 1979/80 2007/08 2008/09 2009/10 Forecast Hectares Planted (000 ha) 4 031 2 799 2 428 2 742 2 372 Yield (t/ha) 3,37 4,53 4,96 4,67 4,63 Production (000 tons) 13 583 12 700 12 050 12 815 10 993 Outlook for World maize International Starch
Slide 53: South African Maize Crop: Competitive Maize Price
53 04/04/11 21/02/11 10/01/11 29/11/10 18/10/10 12,05 million tons 12,82 million tons 10,88 million tons 06/09/10 26/07/10 South African Maize Crop 14/06/10 03/05/10 16/03/10 Competitive South African Maize CBOT - $ 02/02/10 18/12/09 05/11/09 23/09/09 2008/09 2009/10 2010/11 12/08/09 30/06/09 18/05/
Slide 54: Starch Operations Financial Data
Starch Operations Financial Data 12 months to 12 months to R millions March 2011 March 2010 Revenue: 2 357 2 243 Domestic 1 782 1 720 Exports 222 155 Co-Products 353 368 Operating Profit 303 251 54
Slide 55: Volume Data
Volume Data 12 months to 12 months to Volume (tons) March 2011 March 2010 Local Starch 92 350 87 690 Local Glucose 324 927 319 083 Total Local 417 277 406 773 Export Starch 36 557 30 011 Export Glucose 12 033 7 274 Total Exports 48 590 37 285 Co-Products 155 680 146 209 Total 621 547 590 267 55
Slide 56: Co-product Pricing
Co-product Pricing Price movement Co-product March 2011 over Major price drivers Comparative Period 50%: International edible oil price and Germ Down 18,8% local oil seeds 50%: Local maize International protein (Soya, fishmeal) Gluten-60 Down 5,6% prices Local maize price/hominy chop Gluten-20 Down
Slide 57: Developments
DEVELOPMENTS @ Tongaat Hulett
Slide 58: Inyaninga
Airport cities - “Even in today’s rocky economic times, airports and their immediate environments Airport Inner Ring are becoming 21st century commercial anchors, Tongaat Hulett Landholding taking on many features of destination retail 2 515 Gross hectares and urban centers.” Existing rail 1 517 Dev
Slide 59: Inyaninga: Bulk Land Sale / TH Development / Partnership
Inyaninga: Bulk Land Sale / TH Development / Partnership Gross hectares : 707 Developable hectares : 550 Yes? R6,3 million per developable hectare R3,465 billion Maybe? R4,4 million per developable hectare R2,420 billion No? 59
Slide 60: Ridgeside
Ridgeside Infrastructure • M41 interchange completed in December 2010 • Office park infrastructure complete • Security fence and gates in the office park completed • Phase one and two of Precinct one infrastructure now complete Top Structures • One hotel and seven office buildings completed and occu
Slide 61: Izinga – Umhlanga Ridge
Izinga – Umhlanga Ridge • Medium to low density of 177 hectares residential suburb • 48 hectares of open space including wetlands and buffer corridors • Open suburb with cameras and visible street security patrols • Appropriate indigenous landscaping • 280 potential dwelling units to be developed in
Slide 62: Kindlewood
Kindlewood • 573 units gated estate development • Comprises • Special residential • Maisonette • Planned unit developments • Phase 1 - sold out • Phase 2 - 79 % sold • 54 families are living in the estate • 23 new structures under construction 62
Slide 63: Bridge City
Bridge City • Successful PPP with eThekwini Municipality • Regional Magistrates court opening September 2011 • New mixed use, high density Town Centre in a previously disadvantaged area/township • Train line and station to open end 2012 • Regional 500 bed public hospital • Bus/taxi intermodal facili
Slide 64: Umhlanga Ridge Town Centre
Umhlanga Ridge Town Centre • One business park site and two mixed use sites left to sell • Residential Phase of 2 800 high density units commenced • Two residential developments under negotiation and one developer’s building contractor on site • Services installation virtually completed in the comme
Slide 65: uShukela Drive
uShukela Drive • Gross Extent: 137hectares (comprising 57 ha DTP and 80 ha Tongaat Hulett) • Formalised joint planning agreement with DTP for EIA and PDA processes • EIA process underway - planned date of approval of development rights for end 2012 65
Slide 66: Zimbali Lakes
Zimbali Lakes • Construction of 18 hole Gary Player golf course commenced November 2010 • Residential sales launch May 2011 • Construction of Lake 1 commenced • Servicing of Phases 1A and 1B to follow after trigger sales achieved 66
Slide 67: Ntshongweni
Ntshongweni Situated in the heart of the N3 Growth Corridor Supported by the Municipality’s SDP and LAPs Consists of 3 Nodes • Assagay Valley • Mixed use Node • South of N3 Gross Area = 2 047 hectares (975 developable hectares ) Potential for • 140 000 m2 of Retail • 559 000 m2 of Office • 222 000 m
Slide 68: Tinley Manor
Tinley Manor Bulk Land Sales/Partnership/Own Development • Largest consolidated property surrounding a river on North Coast • 882 developable hectares 1 042 gross hectares • Full coastal frontage (3,9 km) and access to both sides of Umhlali Lagoon and River Basin • Tinley Manor ski boat launch site
Slide 69: Tongaat Hulett
@ Tongaat Hulett