Tongaat Hulett Limited · JSE:TON
Tongaat Hulett — H1 2013/14 Earnings Presentation
56 slides from Tongaat Hulett's earnings presentation, November 2013
Slide 1: Tongaat Hulett November 2013
@ Tongaat Hulett NOVEMBER 2013
Slide 2: Sugar Operations
• Milling capacity > 2,1 million tons • 8 Sugar mills Sugar Operations • Leading brands • 6 Countries 2
Slide 3: Markets / Prices / Brands
Markets / Prices / Brands Multiple actions underway to ensure best possible outcomes for sugar prices, brand strength, combatting import competition and the mix of sugar flow destinations Key areas • Unsustainably low international prices • EU market going forward • Imports and protection 3
Slide 4: Growing Sugar Production
Growing Sugar Production > 2,1 million Tons from Existing Capacity 2003/04 2011/12 2012/13 Tons Raw Sugar 2013/14 November Estimate Actual Actual Actual South Africa 652 000 486 000 (7%) 486 000 605 000 - 620 000 (25%) Zimbabwe 507 000 372 000 (12%) 475 000 (28%) 460 000 - 478 000 Hippo 243 000 170
Slide 5: Hectares Under Cane
Hectares Under Cane Zimbabwe and Mozambique 2013/14 versus 2012/13 • Zimbabwe (Miller cum planter) • Down 734 hectares • Mozambique (Miller cum planter and private farmers) • Up 558 hectares • Additional 1 945 hectares required to reach milling capacity South Africa – Hectares Milled versus Previous
Slide 6: Cost Reduction
Cost Reduction > R5 billion Goods and Services Costs Variable component of Salaries and Wages Lower versus previous year Exclude costs related to Targeted Costs - 2013/14 versus 2012/13* US$/Metical Rand • Root replant Zimbabwe - Total operations (US$) $29 million R290 million • Capital expenditure
Slide 7: Off-crop: Milling Costs
Off-crop: Milling Costs • Seasonal milling costs • Costs incurred from April to mill shutdown (normally November/December) • Costs include all expenses associated with running the mill • Costs expensed in the current financial year • Off-crop costs • Costs incurred from mill shutdown to March of the
Slide 8: Renewable Energy - Electricity and Ethanol
Renewable Energy - Electricity and Ethanol Electricity Ethanol • Currently produce 52 MW at 4 Tongaat Hulett • South African fuel market - 12 billion litres South African sugar mills petrol per annum • Ability to produce between 320 MW - 360 MW • Convert SA industry export sugar to at South African
Slide 9: Financial Results
FINANCIAL RESULTS FOR THE 6 MONTHS ENDED 30 SEPTEMBER 2013 9
Slide 10: Financial Results
Financial Results 6 months to 6 months to R million % Change 30 Sept 2013 30 Sept 2012 Revenue 7 854 7 398 + 6,2% Operating Profit 1 381 1 290 + 7,1% Operating Cash Flow before Working Capital 2 402 1 794 + 33,9% Cash Flow before Dividends (450) (455) + 1,1% Headline Earnings 663 655 + 1,2% Interim
Slide 11: Operating Profit and Revenue by Segment
Tongaat Hulett Operating Profit Revenue 6 months to 6 months to 6 months to 6 months to R million 30 Sept 2013 30 Sept 2012 30 Sept 2013 30 Sept 2012 Sugar Zimbabwe 232 435 1 324 1 633 Swaziland 53 41 173 135 Mozambique 151 270 1 402 1 286 SA agriculture, milling, refining and 248 221 2 740 2 513 do
Slide 12: Sugar Financial Results
Sugar Financial Results Impacting factors in H1 of 2013/14 • Increasing sugar production • Sugar market - prices and imports • Reducing costs • Cane valuations • Negative impact - mainly sugar prices: effect on standing cane valuations • Exchange rates • Export proceeds • Earnings conversion on cons
Slide 13: Growing Crops - Change in Fair Value: H1 2013/14
Growing Crops - Change in Fair Value: H1 2013/14 • IAS 41 Fair Value Change included in the Income Statement: Six months to 30 September 2013/14 2012/13 R million H1 H1 2013/14 2012/13 R million H1 H1 South Africa 47 40 Roots - 40 172 Swaziland - 33 - 21 Zimbabwe - 410 - 110 Standing cane - 733 - 40
Slide 14: Starch Operations
Starch Operations • Operating profit: R232 million (2012: R147 million) • Improved processing margins • Competitive local maize costs • Good co-product realisations • Favourable exchange rates • Total sales volumes grew by 5% • Increased export sales • Growth in alcoholic beverage and coffee/creamer
Slide 15: Land Conversion and Developments
Land Conversion and Developments • Operating profit: R512 million (2012: R246 million) • Includes capital profit: R46 million (2012: R2 million) • Revenue generated from 174 developable hectares sold • Sale of land to Dube Tradeport • 151 developable hectares • R350 million profit • Umhlanga Ridgesi
Slide 16: Cash Flow: H1 2013/14
Cash Flow: H1 2013/14 6 months 6 months R million 2013/14 2012/13 Operating profit + 1 381 + 1 288 Includes all agricultural costs Growing crop fair value adjustment + 773 + 235 As per income statement Root planting costs (direct planting, excluding + 67 + 337 Included below # other agricultural cos
Slide 17: Starch Operations
Starch Operations Improving Capacity Utilisation and Market Mix 17
Slide 18: Starch and Glucose
Starch and Glucose Lower international prices due to record US corn crop • Local maize prices trading close to US price for new season • Initial planting intentions for new season 3,46% below prior season Operations • Increased exports and growth in grind of 6,5% in H1 - 2013/14 • Significant improv
Slide 19: Land Conversion and Developments
Land Conversion and Developments Gaining Momentum - High Expectations 19
Slide 20: Hectares Targeted for Development in South Africa
Hectares Targeted for Development in South Africa • Some 8 300 developable hectares (13 100 gross hectares) still to be sold * • Urban expansion: Durban to Ballito - 4 700 developable (7 300 gross) • Urban expansion to the West of Durban - 1 100 developable (2 050 gross) • Coastal North of Ballito -
Slide 21: Aerotropolis
USHUKELA DRIVE Aerotropolis USHUKELA • Sale to DubeTradeport • R350 million “cash profit” • R2,32 million per developable hectare • 328 gross (151 developable) hectares INYANINGA • Option for DTP to acquire an additional 161 gross hectares • Option expires end January 2014 • Inyaninga R102 N2 • 707
Slide 22: Sibaya Nodes 1 & 5
Sibaya Nodes 1 & 5 • “Shovel ready” on 125 developable hectares • Node 4 EIA well advanced (further 103 developable hectares) 22 22
Slide 23: Greater Umhlanga Area
Greater Umhlanga Area IZINGA IZINGA N2 PARK M4 MARSHALL DAM MARSHALL PHASE DAM N2 2A UMHLANGA HILLS BUSINESS PARK RETAIL M41 PARK UMHLANGA TOWN ROCKS CENTRE UMHLANGA RIDGE TOWN CENTRE MT EDGECOMBE COUNTRY CLUB ESTATE GATEWAY R102 PRECINCTS 1&2 RIDGESIDE Existing road Under construction or future roa
Slide 24: Izinga
Izinga • > R99 million sales (H1 - 2013/14) • Sales constrained due to construction • Sell out Izinga Park in 2013/14 financial year? 24 24
Slide 25: Ridgeside
Ridgeside Sold Precinct 3 Precinct 2 Remainder of Precinct 1 Sold Precinct 1 25
Slide 26: Ridgeside - A Unique Opportunity
Ridgeside - A Unique Opportunity • Remainder of precinct 1 and precinct 2 • 42 developable hectares or 485 000 m2 • Above ground development expected to exceed R12 billion • Single purchaser or consortium 26
Slide 27: Additional Information
: ~ oe Np @ Tongaat Hulett ems SS
Slide 28: Raw Sugar Production
Raw 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 11/12 12/13 South Africa 977 762 868 659 731 760 674 612 652 573 455 486 486 Mozambique 39 36 71 82 85 115 106 108 108 134 164 233 235 Swaziland RSE 41 45 50 54 50 56 55 58 56 54 54 59 58
Slide 29: World Sugar Market
World Sugar Market ‘000 Tons 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Sugarcane and Beet 171 292 151 134 156 008 168 024 178 872 185 201 182 564 Production Consumption 162 823 165 029 166 583 168 194 171 235 174 395 177 860 Surplus/(Deficit) 8 469 (13 895) (10 575) (170) 7 637 10 806
Slide 30: South Africa
South Africa New Plantings and Net Gain in Hectares Actual Actual Actual Actual Target South Africa 2013/14 # 2014/15 2015/16 2009/10 2010/11 2011/12 2012/13 (Nov 2013) Small scale farmers 1 636 3 689 4 411 4 297 4 043 Commercial and medium 630 371 1 831 1 884 670 scale farmers Tongaat Hulett leased
Slide 31: Zimbabwe
Zimbabwe Actual Actual November 2013/14 Early Cane Milled and 2011/12 2012/13 Estimate 2013/14 Season Forecast Sugar produced Season Season Season (May 2013) Total hectares farmed as at 38 626 43 185 44 814 44 519 1 April (beginning of the season) Hectares milled 35 307 37 473 40 592 40 125 % Hectar
Slide 32: Mozambique
Mozambique Actual Actual November 2013/14 Early Cane Milled and 2011/12 2012/13 Estimate 2013/14 Season Forecast Sugar produced Season Season Season (May 2013) Total hectares farmed as at 26 513 26 789 27 602 27 824 1 April (beginning of the season) Hectares milled 24 555 24 333 24 797 25 042 % Hect
Slide 33: Starch Operations Financial Data
Starch Operations Financial Data Six months to Six months to R million September 2013 September 2012 # Revenue 1 594 1 401 Domestic 1 094 1 015 Exports 202 137 Co-Products 298 249 Operating Profit 232 147 # 2012 domestic and export revenue reclassified to reflect BLNS customer countries as exports 3
Slide 34: Volume Data
Volume Data Six months to Six months to Volume (tons) September 2013 September 2012 # Local Starch 45 442 48 278 Local Glucose 163 481 158 347 Total Local 208 923 206 625 Export Starch 15 830 11 699 Export Glucose 14 414 10 432 Total Exports 30 244 22 131 Co-Products 83 677 79 057 Total 322 844 307
Slide 35: Co-product Pricing
Co-product Pricing Price movement Co-product September 2013 over Major price drivers Comparative six month Period 50%: International edible oil price and Germ Up 7,3% local oil seeds 50%: Local maize International protein (soya, fishmeal) Gluten-60 Up 28,4% prices Gluten-20 Up 2,7% Local maize price
Slide 36: Tongaat Hulett Starch – Markets
Tongaat Hulett Starch – Markets 2012/13 2013/14 % Growth 2013/14 vs Tons Actual Estimate 2012/13 Alcoholic beverages 173 822 175 888 1,2% Coffee and Coffee Creamer 65 122 75 588 16,1% Confectionery 59 202 61 122 3,2% Paper 59 416 56 980 - 4,1% Prepared foods 14 197 15 159 6,8% Other 47 698 47 210 -
Slide 37: Tongaat Hulett Starch Outlook for Maize
Tongaat Hulett Starch Outlook for South African maize 1979/80 2009/10 2010/11 2011/12 2012/13 Hectares planted (000 ha) 4 031 2 742 2 372 2 699 2 781 Yield (t/ha) 3,37 4,38 4,37 4,38 4,21 Production (000 tons) 13 583 12 016 10 360 12 121 11 723 Carry in stock (000 tons) 2 115 2 131 2 336 994 1 417 T
Slide 38: Additional Shovel Ready Land Well Advanced
Additional “Shovel Ready” Land Well Advanced Developable Area hectares Cornubia Retail Park 26 Cornubia New Town – Umhlanga Ridge 252 Town Centre extension iNyaninga 550 uShukela Drive 49 Compensation (East) 71 Sibaya Node 4 91 Ntshongweni 78 Tinley Manor South Banks 270 Total 1 387 38
Slide 39: uShukela Highway – Dube TradePort
uShukela Highway – Dube TradePort Northern Expansion oThongathi R102 • 49 hectares developable FUTURE RUNWAY • EIA with DTP well advanced • TradeZone Link road to uShukela Highway USHUKELA 50% complete N2 39
Slide 40: Retail Park
Retail Park • Phase 1 retail near Umhlanga and Gateway – 2013/14 target activation and sale • EIA well advanced both phases 40 40
Slide 41: Bridge City
Bridge City • Successful PPP with eThekwini Municipality • Mixed use, high density Town Centre and Business Estates • Regional 500 bed public hospital – building programme 2014 – 2017 • 48 000 m2 shopping centre • 13 000 m2 second phase and 45 000 m2 residential bulk • Rail public transport: station
Slide 42: Compensation
Compensation • 224 hectares industrial/logistics park • Potential industrial platform sizes between 20 hectares and 65 hectares R102 • Strategically located approx. 13 km’s north COMPENSATION of the Dube Tradeport • Quick access to the R102, N2 and northern N2 rail line M4 • Northern inter modal log
Slide 43: Ntshongweni
Ntshongweni • Development supported by Municipal SDP and LAP’s • Important logistics location and in Strategic Integrated Project 2 (SIP 2) of Presidential Infrastructure Coordination Committee (PICC) • 3 major uses - 1 105 developable hectares • Residential • Mixed use centre HILLCREST • Business P
Slide 44: Zimbali and Zimbali Lakes
Zimbali and Zimbali Lakes • Revised golf course and residential layout approved • Layout more responsive to current market trends • Potential Retirement Village node at scale • Interest around the Resort Node and Retirement Village pursued 44 • EIA amendment approvals expected mid 2014 44
Slide 45: Tinley Manor
Tinley Manor • Largest consolidated property surrounding a river on North Coast • > 850 developable ha 1 042 gross ha • EIA for the South Bank progressing well after finalisation of block layout • Resort and low density residential with some commercial opportunity around the N2 • 5 planned resort no
Slide 46: Financial Information
Financial Information 46
Slide 47: South African Sugar and Downstream Operations
South African Sugar and Downstream Operations: R248 million • Agriculture, sugar milling and refining: R133 million (2012: R99 million) • Increased sugar production offset by • Local market pressure from imports • Increased export volumes at lower prices • Lower cost per ton of sugar produced • Down
Slide 48: Zimbabwe Sugar Operations
Zimbabwe Sugar Operations Triangle and Hippo Valley Estates • Operating profit: H1 2013/14: R232 million (US$ 23 million) H1 2012/13: R435 million (US$ 53 million) • Lower sales volumes: 193 000 tons (2012: 248 000 tons) • Lower local market sales - increased imports • Export prices into the EU unde
Slide 49: Mozambique Sugar Operations
Mozambique Sugar Operations • Operating profit: H1 2013/14: R151 million (Metical 457 million) H1 2012/13: R270 million (Metical 909 million) • Higher production and sales volumes by half-year • Export prices into the EU under pressure • Reduction in cane valuations • Decrease in sugar prices • Bene
Slide 50: Growing Crops on the Tongaat Hulett Balance Sheet
Growing Crops on the Tongaat Hulett Balance Sheet 30 Sept 12 31 Mar 13 30 September 2013 South Total Total Total Swaziland Zimbabwe Mozambique Africa Roots Hectares 87 394 91 179 90 911 33 978 3 838 27 245 25 850 Amortised root value 22 284 25 108 26 981 23 575 15 171 24 828 35 481 (Rands per ha) St
Slide 51: 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 52: 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 53: 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 s
Slide 54: Cash Flow - Past 7 Years
Cash Flow - Past 7 Years July 2007 to September 2013 R billion • Operating cash flow + 11,9 (before root planting) • Working capital - 2,2 • Capex and sugar root investment - New plant and equipment - 4,4 - Replacement capital expenditure - 2,2 New plant and equipment 4,4 New roots/accelerated repla
Slide 55: Average Exchange Rates
Average Exchange Rates 2013/14 2012/13 Average H1 H1 Rand/US$ 9,78 8,18 Rand/Euro 12,87 10,40 Rand/Metical 0,33 0,30 US$/Euro 1,32 1,27 Metical/Euro 38,92 35,02 • Export proceeds: US$ and Euro (exchange rates at time of export - Mozambique and Zimbabwe) • Earnings conversion on consolidation (at ave
Slide 56: Thank You
@ Tongaat Hulett =) \e) > ~< c © <=