Tongaat Hulett Limited · JSE:TON
Tongaat Hulett — FY2015 Earnings Presentation
63 slides from Tongaat Hulett's earnings presentation, May 2015
Slide 1: Tongaat Hulett May 2015
@ Tongaat Hulett MAY 2015
Slide 2: Financial Results for the Year Ended 31 March 2015
Financial Results for the Year Ended 31 March 2015 2 2
Slide 3: Financial Highlights
Financial Highlights 12 months to 12 months to R million % Change 31 March 2015 31 March 2014 Revenue 16 155 15 716 + 2,8% Operating Profit 2 089 2 374 - 12,0% Cash Flow from Operations 2 533 2 173 + 16,6% R295 million Net Cash Flow before Dividends 848 553 improvement R328 million Tongaat Hulett Ne
Slide 4: Operating Profit and Revenue by Segment
Tongaat Hulett Operating Profit Revenue 12 months to 12 months to 12 months to 12 months to R million 31 March 2015 31 March 2014 31 March 2015 31 March 2014 Sugar Zimbabwe 386 330 3 471 2 896 Swaziland 29 70 203 211 Mozambique 130 168 1 804 1 704 SA agriculture, milling, refining and 261 340 6 143
Slide 5: Land Conversion Activities
Land Conversion Activities • Operating profit: R829 million from the sale of 108 developable hectares • 2014: R1 080 million from 259 developable hectares • Sales largely from • Cornubia: R8,2 million per developable hectare • Izinga / Kindlewood: R6,3 million per developable hectare • Umhlanga Ridg
Slide 6: Starch Operations
Starch Operations • Operating profit: R561 million (2014: R482 million) • Overall sales volume growth of 4% • Local growth of 18 026 tons (4,3%): confectionary, coffee / creamer, canning, prepared foods, and paper making sectors • Export growth of 4 274 tons (7,6%) • Starch and glucose processing ma
Slide 7: Sugar Operations
Sugar Operations Benefit of: • Cost reductions - over past two years - after absorbing input price increases • Higher local market sales in Zimbabwe • Cane valuations - large negative impact in 2013/14 (price reductions) not repeated in 2014/15 - 2014/15: more new cane planted / replanted Offset by:
Slide 8: Further Analysis of Sugar Operating Profit
Further Analysis of Sugar Operating Profit 12 months to 12 months to R million 31 March 2015 31 March 2014 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)
Slide 9: Zimbabwe - Revenue and Cost Breakdown
Zimbabwe - Revenue and Cost Breakdown 2014/15 2013/14 2012/13 US$ million US$ million US$ million REVENUE 314 286 380 Sugar sales 292 260 360 Other activities 22 26 20 Sugar stock movement - 28 35 10 REVENUE ADJUSTED 286 321 390 LESS COSTS Payments for 3rd party cane 70 76 92 Goods/services/transpor
Slide 10: Mozambique - Revenue and Cost Breakdown
Mozambique - Revenue and Cost Breakdown 2014/15 2013/14 2012/13 Metical million Metical million Metical million REVENUE 5 171 5 035 5 644 Sugar sales 4 943 4 857 5 452 Other activities 228 178 192 LESS COSTS Payments for 3rd party cane 402 318 350 Goods/services/transport/marketing, salaries/wages 2
Slide 11: South Africa - Revenue and Cost Breakdown
South Africa - Revenue and Cost Breakdown 2014/15 2013/14 2012/13 R million R million R million REVENUE * 5 229 5 265 4 467 Sugar sales - own production 4 138 4 206 3 554 Other activities 1 091 1 059 913 LESS COSTS Payments for 3rd party cane/SASA levies 2 102 2 194 1 809 Goods/services/transport/ma
Slide 12: Further Cost Reductions
Further Cost Reductions Goods, Services, Transport, Marketing, Salaries Zimbabwe Mozambique South Africa and Wages US $ (million) Metical (million) Rands (million) Costs in 2012/13 (money of the day) 186 3 052 2 325 Price increases, salaries & wages, inflation etc. 3% 7% 8% (per annum over last 2 ye
Slide 13: More Favourable Sugar Markets
More Favourable Sugar Markets 13
Slide 14: Forecast Annual Consumption Growth
Forecast Annual Consumption Growth • Global demand growth of some 2% per annum • Demand growth in Eastern and Southern Africa of some 700 000 tons per annum over the four years 2015/16 - 2018/19 14
Slide 15: World Sugar Production Volatile
World Sugar Production Volatile Tons ‘000 Tons ‘000 200 140 Production & Consumption 190 120 180 100 Stocks 170 80 160 60 150 40 140 20 130 - Stocks Consumption Production Information provided by ED&F MAN 5 15
Slide 16: Capturing and Growing Local Market Sales
Capturing and Growing Local Market Sales • Improvements in local market protection • South Africa - second application for tariff increase • Mozambique • Substantial increase in reference price imminent • Per capita consumption currently 8 kg - significant room for growth • Leading sugar brands • Hu
Slide 17: Regional Sugar Exports
Regional Sugar Exports Tongaat Hulett Regional Markets into which Tongaat Hulett has • Tongaat Hulett has over 30 years exported over the past three years experience in selling to regional markets • Sales comprise value-added bagged exports that achieve a premium to the world price of sugar • Sales
Slide 18: Tongaat Hulett - Sugar Markets
Tongaat Hulett - Sugar Markets 2 000 Tons ‘000 1 800 3% 8% 0% 1 600 8% 1% 1 400 1 200 20% 1 000 22% 2014/15 2018/19 800 600 400 60% 200 67% 11% 0 2014/15 2018/19 Local EU Regional USA World 18
Slide 19: Growing Sugar Production
Growing Sugar Production 19
Slide 20: Sugar Production Growth
Sugar Production Growth Indicative - Next 4 Years Growth will come from ^ Tons Raw 2014/15 2018/19 Additional Hectares: New cane Regular Yield and Sugar Sugar Actual Target already planted, net of cane Growing Recovery losses and future planting partially Conditions Improvements grant funded South A
Slide 21: Sugar Production Growth: 2,1 Million Tons from Existing Capacity
Sugar Production Growth > 2,1 million Tons from Existing Capacity 2015/16 Tons Raw 2010/11 2012/13 2013/14 2014/15 2015/2016 Expectations Had 2018/19 Sugar Actual Actual Actual Actual Early Estimate Growing Conditions Target* Been Regular South Africa 455 000 486 000 634 000 541 000 < 421 000 720 00
Slide 22: South African Sugar Industry
South African Sugar Industry 22
Slide 23: Socio-Economic Impact of SA Sugar Industry
Socio-Economic Impact of SA Sugar Industry KZN has the highest proportion of rural dwellers • Population of 10,7 million people • 5,8 million or 54% live in rural areas - the national average is 37% 22 490 registered growers in the South African Sugar Industry • 21 107 Small-scale growers of which 1
Slide 24: Socio-Economic Impact of SA Sugar Industry
Socio-Economic Impact of SA Sugar Industry Current (Based on Potential 2013/14) Area under cane (hectares) 332 528 > 400 000 Cane tons 15 902 000 +- 21 000 000 Small-scale grower (tons) 1 443 000 +- 6 000 000 Small-scale grower (numbers) 19 627 +- 70 000 Land Reform growers (hectares) 51 540 ? Emplo
Slide 25: Success of the South African Sugar Industry
Success of the South African Sugar Industry • Productive farming and milling • Local market protection Current brown price (ex mill) • Malawi 41 US c/lb Zambia 33 US c/lb South Africa 25 US c/lb • Direct support to small-scale and land reform growers • Ethanol • Electricity generation 25
Slide 26: Growing Starch and Glucose
Growing Starch and Glucose 26
Slide 27: Starch and Glucose
Starch and Glucose Attractive prospects for growth Improving capacity utilisation and market mix • Available upstream capacity (wet mill) - 15% • R120 million investment in downstream capacity for Coffee Creamers • Project commissioning October 2015 • Immediate replacement of imported volumes under
Slide 28: Momentum in Land Development
Momentum in Land Development Go to www.tongaat.com for an updated copy of the 28 Portfolio of Land for Conversion in KZN
Slide 29: Additional Information
Additional Information 29
Slide 30: Index
Index Slide Title No Slide Title No Sugar operations Volumes and Financial Data 49 Sugar Production Growth - Indicative 31 Co-product pricing 50 Sugar Production Growth - 2,1 million 32 Background on Starch and Glucose 51 South Africa 33 - 35 Financial Results - Additional information Zimbabwe 36 -
Slide 31: Sugar Production Growth
Sugar Production Growth Indicative - Next 4 Years Growth will come from ^ Tons Raw 2014/15 2018/19 Additional Hectares: New cane Regular Yield and Sugar Sugar Actual Target already planted, net of cane Growing Recovery losses and future planting partially Conditions Improvements grant funded South A
Slide 32: Sugar Production Growth: 2,1 Million Tons
Sugar Production Growth > 2,1 million Tons from Existing Capacity 2015/16 Tons Raw 2010/11 2012/13 2013/14 2014/15 2015/2016 Expectations Had 2018/19 Sugar Actual Actual Actual Actual Early Estimate Growing Conditions Target* Been Regular South Africa 455 000 486 000 634 000 541 000 < 421 000 720 00
Slide 33: South Africa
South Africa Actual 2012/13 Actual 2013/14 Actual 2014/15 2018/19 Cane Milled and Sugar produced Season# Season Season Target* Total hectares farmed as at - 116 469 118 182 143 767 1 April (beginning of the season) Estimated hectares milled - 92 087 94 653 118 141 Cane yield (tcphm) - 56,34 46,64 60
Slide 34: South Africa: New Plantings and Net Gain in Hectares
South Africa New Plantings and Net Gain in Hectares Actual Actual Actual Actual Actual Actual Target Target Target Target South Africa 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 # 2016/17 # 2017/18 # 2018/19 # Small scale growers 1 636 3 689 4 411 4 297 1 651 885 1 485 1 450 1 450 1 450
Slide 35: South Africa: Approved External Grants
South Africa Approved External Grants Cash Received Type of Funding Approved Application of Funding To Date Planting, replanting, ratoon Comprehensive agricultural support R43 million R31 million management, irrigation and program (CASP) infrastructure repairs Recapitalisation and Development Planti
Slide 36: Zimbabwe
Zimbabwe Actual 2012/13 Actual 2013/14 Actual 2014/15 2018/19 Cane Milled and Sugar produced Season Season Season Target* Total hectares farmed as at 43 185 44 814 44 749 48 142 1 April (beginning of the season) Estimated hectares milled 37 473 39 615 40 731 43 811 Cane yield (tcphm) 90,54 90,20 84,
Slide 37: Zimbabwe: Yields
Zimbabwe 2010/11 2012/13 2013/14 2014/15 2018/19 Yields (tons cane per hectare) Actual Actual Actual Actual Target* Tongaat Hulett 85,04 96,90 99,00 87,64 114,00 Private Growers 47,78 75,75 73,72 80,04 100,18 Zimbabwe 75,51 90,54 90,20 84,92 108,72 Factors contributing to yield performance - 2014/15
Slide 38: Zimbabwe Operations: Developing Indigenous Private Growers
Zimbabwe Operations Developing Indigenous Private Growers Impact of Tongaat Hulett initiatives on Actual 2011/12 Actual 2012/13 Actual 2013/14 Actual 2014/15 Rural Communities Season Season Season Season Area farmed (hectares) excluding 9 501 12 573 14 120 14 726 fallow land* Area harvested (hectare
Slide 39: Mozambique
Mozambique Actual 2012/13 Actual 2013/14 Actual 2014/15 2018/19 Cane Milled and Sugar produced Season Season Season Target* Total hectares farmed as at 26 789 27 602 28 347 28 772# 1 April (beginning of the season) Estimated hectares milled 24 333 24 898 25 980 26 205 Cane yield (tcphm) 79,89 81,06
Slide 40: Mozambique - Agricultural Improvement Plans
Mozambique - Agricultural Improvement Plans 2014/15 2018/19 2007/08 2013/14 2014/15 Yields (tons cane per hectare) Sugar production Actual Actual Actual Target* (tons) Xinavane 202 000 77,60 92,86 97,68 104,53 Mafambisse 69 000 46,17 62,41 65,49 78,17 Total average yield 271 000 60,74 81,13 86,17 95
Slide 41: Mozambique Operations: Developing Indigenous Private Growers
Mozambique Operations Developing Indigenous Private Growers Impact of Tongaat Hulett initiatives on Actual 2007/08 Actual 2012/13 Actual 2014/15 Small-Scale Growers Season Season Season Cumulative hectares planted 571 2 952 4 370 Association members 249 1 522 2 018 Tons cane delivered by these growe
Slide 42: Sugar Operations - Dam Levels
Sugar Operations - Dam Levels Adequate water availability remains an important component of Tongaat Hulett achieving its projected yields going forward. Detailed below is information relevant to water availability for Mozambique and Zimbabwe Full Volume % Full as at % Full as at % Full as at Mozambi
Slide 43: Sugar Operations - Dam Levels
Sugar Operations - Dam Levels Full Volume % Full as at % Full as at % Full as at Zimbabwe Water Systems ML 31 March 2013 31 March 2014 31 March 2015 Mutirikwi - Tokwe System 1 740 206 25,3% 52,6% 49,0% Manjirenji - Siya System 379 634 35,9% 99,4% 82,0% Manyuchi system 303 473 80,5% 100,0% 88,3% • Th
Slide 44: Potential Irrigation Scheme - Amatikulu
Sugar Operations - Dam Levels Potential Irrigation Scheme - Amatikulu Construction of a new dam on the Matigulu River • 76 million m3 water storage • Capital cost: R1,4 billion (including irrigation canals and infield infrastructure) • Potential to irrigate some 4 500 hectares of sugarcane • Will pr
Slide 45: Raw Sugar Production History
Raw Sugar Production History 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 11/12 12/13 13/14 14/15 South Africa 977 762 868 659 731 760 674 612 652 573 455 486 486 634 541 Mozambique 39 36 71 82 85 115 106 108 108 134 164 233 235 249 271 Swaziland 41 45 5
Slide 46: Outlook for South African Maize
Tongaat Hulett Starch Outlook for South African maize 2014/15 Third 1979/80 2010/11 2011/12 2012/13 2013/14 Production Estimate* Hectares planted (000 ha) 4 031 2 372 2 699 2 781 2 688 2 653 Yield (t/ha) 3,37 4,37 4,38 4,21 5,32 3,68 Production (000 tons) 13 583 10 360 11 830 11 811 14 307 9 763 Car
Slide 47: Key Drivers Supporting Performance
Key Drivers Supporting Performance Improving capacity utilisation and investments in market mix • Evolving food sector customer mix to higher value products • Coffee creamer expansion • Customer expansions to replace imports and expand into Africa • Modified starches Operations • Continued improveme
Slide 48: Markets
Markets % Growth % Growth 2013/14 2014/15 2015/16 Tons 2014/15 vs. 2015/16 vs. Actual Actual Estimate 2013/14 2014/15 Alcoholic beverages 173 352 176 489 176 871 1,8% -0,9% Coffee creamers 70 734 75 201 93 180 6,3% 23,9% Confectionery 61 599 67 148 70 750 9,0% 5,4% Paper 56 486 59 870 60 339 6,0% 0,
Slide 49: Volumes and Financial Data
Volumes and Financial Data Volume (tons) March 2015 March 2014 Local Starch 92 557 88 209 Local Glucose 345 675 331 997 Total Local 438 232 420 206 Export Starch 34 422 31 980 Export Glucose 25 976 24 144 Total Exports 60 398 56 124 Co-Products 172 099 167 388 Total 670 729 643 718 R millions March
Slide 50: Co-product Pricing
Co-product Pricing Price movement Co-product Major price drivers 2015 over 2014 Germ Down 6,5% International edible oil prices Higher international priced Gluten-60 Up 10,7% competitive products Gluten-20 Down 6,9% Local maize price decline 50
Slide 51: Background on Starch and Glucose
Background on Starch and Glucose • Only maize wet miller in SADC • Use > 630 000 tons maize per annum • Significant market sectors where we manufacture complementary and substitute products from either maize or sugar cane • Various market segments • Fermentation (alcoholic beverages) • Spray drying
Slide 52: Zimbabwe Sugar Operations
Zimbabwe Sugar Operations Triangle and Hippo Valley Estates • Operating profit: 2014/15: R386 million (US$ 35 million) 2013/14: R330 million (US$ 33 million) • Lower sugar production • Recovery of local market sugar sales volumes • Progress being made with distribution and marketing initiatives • Mo
Slide 53: Mozambique Sugar Operations
Mozambique Sugar Operations • Operating profit: 2014/15: R130 million (Metical 373 million) 2013/14: R168 million (Metical 496 million) • Negative effect of additional imported sugar in the Mozambique market (R77 million profit impact) • Selling prices down on the the previous year • Reduced local m
Slide 54: South African Sugar Operations
South African Sugar Operations (Including Downstream Value Added Activities, Botswana, Namibia, Packing, Marketing, Sales and Distribution) • Operating profit: R261 million (2014: R340 million) • Sugar production lower - dry, low rainfall conditions - partly mitigated by 11 554 hectares of new cane
Slide 55: Growing Crops - Change in Fair Value
Growing Crops - Change in Fair Value IAS 41 Fair Value Change included in the Income Statement: Period to 31 March R million 2014/15 2013/14 R million 2014/15 2013/14 Sugar operations: profit before Roots + 197 - 78 710 1 061 cane valuations Standing cane - 101 - 75 Cane valuation: change in FV 96 -
Slide 56: Growing Crops - Change in Fair Value (cont.)
Growing Crops - Change in Fair Value (cont.) IAS 41 Fair Value Change included in the Income Statement: Year to 31 March South Africa R million 2014/15 2013/14 • Root planting and greater area under cane South Africa + 126 + 178 • Lower yields due to drought Zimbabwe Swaziland - 11 + 14 • Increased
Slide 57: Growing Crops on the Tongaat Hulett Balance Sheet
Growing Crops on the Tongaat Hulett Balance Sheet 31 Mar 13 31 Mar 14 31 March 2015 South Total Total Total Swaziland Zimbabwe Mozambique Africa Roots Hectares farmed 91 179 92 117 96 126 38 107 3 838 28 494 25 687 Amortised root value 25 108 27 484 30 406 30 516 16 660 24 403 34 520 (Rands per ha)
Slide 58: Cash Flow
Cash Flow Highlighting Sugar Related Dynamics R million 2014/15 2013/14 Operating profit + 2 089 + 2 374 Includes all agricultural costs Growing crop fair value adjustment - 96 + 153 As per income statement Root planting costs (direct planting, excluding + 476 + 128 Included below # other agricultur
Slide 59: Cost Reduction Actions - Mozambique Example
Cost Reduction Actions- Mozambique Example Agriculture and Workshops Mills and Stores • Optimise the Xinavane electrical power generation • Reduce labour cost - productivity improvements, capacity better management and supervisory structures • Reduce coal usage • Reduce expatriate cost • Reduce the
Slide 60: Average Exchange Rates
Average Exchange Rates Average 2014/15 2013/14 Rand/US$ 11,05 10,13 Rand/Euro 13,96 13,59 Rand/Metical 0,35 0,34 US$/Euro 1,26 1,34 Metical/Euro 40 40 • Export proceeds: US$ and Euro (exchange rates at time of export - Mozambique and Zimbabwe) • Earnings conversion on consolidation (at average excha
Slide 61: 2007 BEE Transaction - July 2014
2007 BEE Transaction - July 2014 SENS Announcement 2 July 2014 Compulsory conversion of the “A Preferred Ordinary” shares in issue into Ordinary shares, listed on the JSE, in terms of the 2007 BEE deal: • 2007 structure - an 18% participation structure for two strategic / broad-based groupings. • Or
Slide 62: 2007 BEE Transaction - July 2014 cont.
2007 BEE Transaction - July 2014 cont. • This buy-back right is subordinated in favour of the repayment of the external funding and the BEE shareholder loans, which have no recourse to Tongaat Hulett and are well covered by the assets in the BEE SPVs. This means that the buy-back by Tongaat Hulett c
Slide 63: Further Information
Further Information If you require further information Visit www.tongaat.com or Contact Michelle Jean-Louis Office: +27 32 439 4101 Mobile: +27 83 386 3846 Email: michelle.jean-louis@tongaat.com 63