Tongaat Hulett Limited · JSE:TON
Tongaat Hulett — H1 2009 Earnings Presentation
71 slides from Tongaat Hulett's earnings presentation, June 2009
Slide 1: Tongaat Hulett Half-Year 2009
@ Tongaat Hulett HAULF:YEAR .28009
Slide 2: 2
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Slide 3: Financial Results
FINANCIAL RESULTS @ Tongaat Hulett 3
Slide 4: Half-year to 30 June 2009
Half-year to 30 June 2009 • Revenue of R3,9 billion (2008: R3,1 billion) • Profit from operations of R864 million (2008: R443 million) • Headline earnings of R440 million (2008: R252 million) • Consolidation of Zimbabwe operations • Interim dividend of 100 cents per share (2008: 160 cents per share)
Slide 5: Profit from Operations
Profit from Operations R million H1 2009 H1 2008 Sugar operations Zimbabwe (2008 dividends) 305 35 Swaziland 34 29 Mozambique 134 77 SA agriculture, milling and refining 77 37 Downstream value added activities 94 75 Starch operations 112 103 Land and property developments 64 115 Centrally accounted
Slide 6: Zimbabwe Sugar Operations
Zimbabwe Sugar Operations • Profit from operations: R305 million (2008: R35 million dividends) - Separate from consolidation balance sheet take-on gain in income statement • Other income statement effects - Interest paid: R1 million - Tax: R95 million - Minorities: R47 million • Cash flow in H1: + R
Slide 7: Mozambique Sugar Operations
Mozambique Sugar Operations • Profit from operations: R134 million (2008: R77 million) • Growth in agricultural activities - Mafambisse and Xinavane • Mafambisse - Expansion completed in 2008 - Mill: TH owns 85% - Agriculture: TH owns 100% • Xinavane - Mill: TH owns 88% after major expansion - Agric
Slide 8: South African Sugar Agriculture, Milling and Refining
South African Sugar Agriculture, Milling and Refining • Profit from operations: R77 million (2008: R37 million) • Higher export and domestic sugar volumes and realisations Downstream and Sugar Value Added Activities • Profit from operations: R94 million (2008: R75 million) Generated from: • Refined
Slide 9: Starch Operations
Starch Operations • Operating profit: R112 million (2008: R103 million) • Margin improvement • Local maize prices trading close to world prices • 11,6 million ton SA crop for 2009 season (2008: 12,7 million tons) • Second season of surplus maize production • Domestic sales volume decline by 4,3% • G
Slide 10: Agricultural Land Conversion and Developments
Agricultural Land Conversion and Developments • Operating profit: R64 million (2008 H1: R115 million, 2007 FY: R428 million) • Capital profit: R2 million (2008 H1: R15 million, 2007 FY: R48 million) • Sales of 95 developable hectares (183 gross hectares) • 93 hectares for affordable housing – Cornub
Slide 11: Income Statement
Income Statement • Centrally accounted and consolidation items • Recognition of pension fund 2007 employer surplus account allocation - unconditional entitlement in 2009: R82 million • Taxation • Effective tax rate: 29% • Finance costs R million Interest costs on debt 153 Interest on maize obligatio
Slide 12: Cash Flow and Balance Sheet
Cash Flow and Balance Sheet H1 2009 H1 2008 • Cash inflow from operations: Cash from operating profit after tax R420 million R253 million Working capital - R167 million - R73 million R253 million R180 million At 30 June 2009 • Tongaat Hulett net debt: R 3 064 million - Partial utilisation of establi
Slide 13: Consolidation of Zimbabwe Operations
Consolidation of Zimbabwe Operations • Triangle Sugar is 100% owned and Hippo Valley is 50,3% owned • Consolidation followed macroeconomic changes • Zimbabwe moved to a US$ and Rand based economy • Restored relevant key fundamentals • Commencement of consolidation: balance sheet take-on gain of R1,9
Slide 14: Consolidation of Zimbabwe Operations (cont.)
Consolidation of Zimbabwe Operations (cont.) Consolidation : Balance Sheet effect at 30 June 2009 R million - Fixed assets 2 797 Depreciated (consolidation take-on was US$373 million) IAS 41 Agriculture: growing crop valuation - Growing crops 527 (consolidation take-on was US$40 million) - Working c
Slide 15: Summary
Summary • 2009 - 6th consecutive year of growing profit from operations • Significant cash inflow to commence in the latter part of 2009 and early 2010 • Well positioned moving into 2010 15
Slide 16: An integrated Agriculture and Agric-processing Business
An integrated Agriculture and Agric-processing Business F&I ZIMBABWE M Mafambisse O NAMIBIA ZA Triangle Hippo Valley M CSI B IQ BOTSWANA U E Sugar Industries CSI Xinavane CSI Tambankulu Chloorkop Estates Germiston Mill Chloorkop SWAZILAND Kliprivier Germiston MillMill Meyerton MillMill Felixton Mill
Slide 17: Capitalise on the Changing World of Agriculture
Capitalise on the Changing World of Agriculture • Food consumption per capita rising • > 960 million people undernourished • Renewable energy adding a new dimension to agriculture • Increased competition for limited land and water 17
Slide 18: Land and Water
• Land and Water Tongaat Hulett > 264 000 hectares • Under cane > 65 000 hectares • Urban expansion > 13 900 hectares • Eco-tourism > 80 000 hectares • Regional integration 18
Slide 19: Renewable Energy
Renewable Energy • Global climate change • Energy market poised for substantial shift worldwide • Bio-mass predicted to be 10% of fast growing market CO Emission Saving 2 10% Blending Regime Ethanol vs petrol 60-90% Equivalent to 3 million tons raw sugar Tongaat Hulett bagasse Electricity Bagasse vs
Slide 20: Maize / Starch
Maize / Starch 20
Slide 21: International Maize price
US $ ton - 100.00 150.00 200.00 250.00 300.00 350.00 50.00 11/ 02/ 99 03/ 06/ 99 22/ 09/ 99 12/ 01/ 00 09/ 05/ 00 30/ 08/ 00 21/ 12/ 00 23/ 04/ 01 16/ 08/ 01 06/ 12/ 01 09/ 04/ 02 01/ 08/ 02 22/ 11/ 02 19/ 03/ 03 16/ 07/ 03 Tongaat Hulett view (average) 05/ 11/ 03 Last 15 years US$80 – US$100 / ton
Slide 22: Regional Maize (Production and Usage)
Regional Maize (Production and Usage) 2008/2009 Country Production (000 tons) Consumption (000 tons) South Africa 11 605 9 630 Malawi 2 789 2 353 Mozambique 1 709 1 480 Zimbabwe 647 1 646 Tanzania 3 594 3 911 Zambia 1 212 1 318 Other 853 1 460 Total 22 409 21 798 22
Slide 23: Starch
Starch • One of nature’s most versatile products with multiple applications, inter alia • Fermentation (beer, ethanol, pharmaceuticals) • Binder, adhesives (confectionary, paper sacks) • Thickener (food applications) • Sweeteners (soft drinks) • Growth • Outlook 2009/2010 23
Slide 24: Agricultural Land Conversion - KZN
Agricultural Land Conversion - KZN Total of 13 961 ha (8 996 developable ha) • West of eThekwini 2 050 gross ha (975 developable ha) • Coastal corridor 6 005 gross ha (3 976 developable ha) • eThekwini growth corridor 5 906 gross ha (4 045 developable ha) 24
Slide 25: Increasing the value of land holdings
Increasing the value of land holdings Urbanisation Income / Holding cost Planning Critical mass / Anchor investment Development rights Value benchmarks (Cash profit 2008/09) Bulk infrastructure • Higher value land - > R8 million / developable hectare • Lower value land - R725 000 / developable hecta
Slide 26: Development rights - Sibaya
Development rights - Sibaya SIBAYA CASINO TO UMDLOTI M27 M4 Nodes 1 and 5 Node 1 • First phase of Sibaya – 49 ha • EIA approved • Saleable and developable before end of year • 125 ha (developable) • 65 000 bulk sq.m. of commercial space + 1 200 residential units + 2 Hotels (250 hotel rooms) 26
Slide 27: Bulk Infrastructure
Bulk Infrastructure • Infrastructural investment BALLITO • Airport and Dube Tradeport - R8 billion km 10 International airport and Dube Tradeport T TONGAAT N2 • Road upgrades - R700 million w Upgrade to R102 and M41 m 5k w E M4 • Wastewater treatment - R400 million R102 VERULAM T LA MERCY T Upgraded
Slide 28: eThekweni Growth Corridor
eThekweni Growth Corridor Canelands Amanzimnyama Riverhorse Valley Business Estate Dudley Pringle Bridge City Mount Moriah 4 045 developable hectares Cornubia Mt Moreland Sibaya West/Waterloo Aberfoyle Inyaninga Compensation Flats Watson Highway 28
Slide 29: Watson Highway
Extent • Gross hectares - 970 • Developable hectares - 740 R102 R102 340 ha sold Sale of 180 ha being persured WATSON WATSON HIGHWAY HIGHWAY N2 N2 29
Slide 30: Sugar
Sugar | : | fit , 7 | fle Sugar eure Gasca i White Sugar,
Slide 31: Regional Sugar Dynamics
Regional Sugar Dynamics 2009/10 Imports Total TH Prod. TH Milling Domestic Pref. World Local raw thousand ton outside Prod. 2009 Capacity Mkt. Export Mkt. sugar Price sugar p.a. SADC 2009 Export (c/lb) Malawi 310 200 110 30 Mozambique 400 240 300 180 220 25 Tanzania 50 320 360 20 Zambia 470 160 250
Slide 32: Strategic Overview – Sugar in South Africa
Strategic Overview – Sugar in South Africa 32
Slide 33: Cane in South Africa - update
Cane in South Africa - update • Grower viability improving • 44% increase in price per ton cane paid to growers since 2007/08 • Estimated price to be paid to growers for 2009/10 season • R282,28 per ton cane • Cane supply (Tongaat Hulett mills full at 8,4 million tons cane) • 2009/10 cane supply – 5
Slide 34: Zimbabwe
Zimbabwe 34
Slide 35: Zimbabwe Sugar Operations
Zimbabwe Sugar Operations • Capacity • 600 000 tons sugar - 4,8 million tons cane • 140 000 tons refined sugar • 460 000 tons raw/brown sugar • 2002 • 580 000 tons sugar - 4,6 million tons cane • 40 million litre alcohol/ethanol capacity • Replacement value – R5,7 billion (Tongaat Hulett share) 35
Slide 36: Sugar Cane
Sugar Cane • Own estates - yields • 28 000 hectares (yield improvement) • 2,2 million tons cane (2009) • 3,3 million tons cane (2011/12) • Outgrower cane • 15 720 hectares • 304 000 tons cane (2009) • 1,5 million tons cane (2012/13) • Re-establishment cost R300 - R350 million • Socio-political chall
Slide 37: Cost Competitiveness
Cost Competitiveness • Mills • Capable of full crushing capacity by 2011 • Capital cost - R70 million • Cane haulage/transport • Capital required – R75 million • Cost competitiveness • Internationally competitive at 600 000 tons per annum • Cash cost < US$11 c/lb • Second lowest cost producer in the
Slide 38: Profit Potential
Profit Potential 600 000 tons per annum (no renewable energy) • Realisations • Domestic market (40% of production) • EU market (60% of production) • Ex factory realisations > US$20 c/lb • EBITDA - > US$110 million • Cash generator 38
Slide 39: Expansion Opportunity
Expansion Opportunity • Sugar production increased to 820 000 tons • Milling capacity expanded from 940 tcph to 1 350 tcph • Additional 17 000 hectares to be planted to cane • Water from Tokwe Mukorsi dam 39
Slide 40: Xinavane Expansion
Xinavane Expansion • Agricultural irrigated cane expansion • Additional 6 982 hectares planted to date • Further planting • 2009 H2 – 377 hectares • 2010 H1 – 757 hectares • Mill expansion • Major equipment tested in May • Commenced crushing mid June • Reach design capacity in August • Maximise seas
Slide 41: Mozambique Sugar Operations
Mozambique Sugar Operations • Capacity • 2,4 million tons cane • 300 000 tons sugar • Own estates • 21 928 hectares • > 2 million tons cane • Outgrower cane • 4 279 hectares • > 400 000 tons cane • Renewable Energy • 720 000 tons bagasse • 88 000 tons molasses 41
Slide 42: Organisational capability to make it happen
Tongaat Hulett is one of the few Agric-businesses in sub Saharan Africa that has the organisational capability and capacity to make it happen 42
Slide 43: Additional Information
ADDITIONAL INFORMATION @ Tongaat Hulett 43
Slide 44: Starch Operations Financial Data
Starch Operations Financial Data R millions H1 2009 H1 2008 Revenue: 1 085 999 Domestic 810 743 Exports 73 50 Co-Products 202 206 Operating Profit 112 103 44
Slide 45: Volume Data
Volume Data Volume (tons) H1 2009 H1 2008 Local Starch 39 903 47 348 Local Glucose 161 520 163 198 Total Local 201 423 210 546 Export Starch 11 827 6 612 Export Glucose 3 688 3 967 Total Exports 15 515 10 579 Co-Products 72 072 76 302 Total 289 010 297 427 45
Slide 46: Co-product Pricing
Co-product Pricing Price movement 2009 on Co-product Major price drivers 2008 50%: International edible oil price Germ Down 18,5% 50%: Local maize International protein (Soya, fishmeal) Gluten-60 Up 31,0% prices Gluten-20 Down 7,3% Local maize price 46
Slide 47: Outlook for RSA Maize: 2008/09 Season
Outlook for RSA Maize : 2008/09 Season 2007/08 2008/09 Forecast Hectares Planted (‘000 ha) 2 799 2 428 Yield (t/ha) 4,54 4,78 Opening Stocks 1 066 1 615 Production (‘000 tons) 12 700 11 605 Consumption – Market (8 843) (8 830) Consumption – On farm (1 082) (800) Exports (2 226) (2 100) Ending Stocks
Slide 48: Bridge City
Bridge City • PPP with eThekwini Municipality • A new Town Centre in a previously disadvantaged area / township • Mixed use high density town centre • Train, bus and taxi inter-modal transport hub • Regional 450 bed public hospital • Significant trigger: 40 000m2 shopping centre – opening late Octob
Slide 49: Umhlanga Ridge Town Centre
Umhlanga Ridge Town Centre • Only 2 sites remaining for sale • Increasingly important regional centre role • High density and critical mass • Catalyst for development on surrounding land 49
Slide 50: Umhlanga Ridgeside
Umhlanga Ridgeside • Commercial bulk 250 000m2 • 3 000 Residential units • Resort hotel 80 000m2 • Total bulk sold to date 271 377m2 • The M41 interchange is under construction - May 2010 • The contract for the Office Park Precinct is progressing well and is anticipated to be complete in March 2010
Slide 51: Izinga – Umhlanga Ridge
Izinga – Umhlanga Ridge • Medium to low density of 146 ha residential suburb of Umhlanga Ridge • 250 Potential dwelling units to be developed in first phase • 58 ha of open space including wetlands and buffer corridors • Visible street security patrols • Appropriate indigenous landscaping in the pub
Slide 52: Kindlewood
Kindlewood • 550 unit gated estate development • Comprises: • Special residential • Maisonette • Planned unit developments • Phase 1 (of 5) sold out • Phase 2 – 52% sold out • Successful Decorator’s on Display Exhibition held in May 2009 52
Slide 53: Sibaya – Mdloti (first phase)
Sibaya – Mdloti (first phase) • The EIA approved for Nodes 1 and 5 in March 2009 - 125 developable hectares • Rezoning and subdivision processes are underway • “One Planet Living” sustainability principles • Anticipated 2010 sales on Nodes 1 and 5 • Immediate access to new La Mercy airport 53
Slide 54: Zimbali South & West
Zimbali South & West • Additional recreational facility complete by June 2009 • Final few sites remaining • 7-star Fairmont Zimbali Hotel opening on track for October 2009 • Well established Zimbali brand being extended to Zimbali lakes 54
Slide 55: Zimbali Lakes
Zimbali Lakes • IFA’s construction of 18-hole Gary Player Golf course to commence by October 2009 • Mixed-use Resort node with beach access and man-made lake adjacent to river • Office Park to be completed in September – 8 out of 15 sites sold • Sales being progressed in Phases 1 and 2 55
Slide 56: Tinley Manor
Tinley Manor • 6 km coastal frontage / North and South bank of Mhlali River • N2 accessibility – convenience of new airport • Preparation for EIA and zoning under way • Hotel, residential and retail • Golf course, small craft harbour potential 56
Slide 57: EU Sugar Market Update
EU Sugar Market Update • Long-term supply agreement signed • 100 000 tons per annum from Mozambique and Zimbabwe • 6-year agreement • Price guaranteed above reference price • Reference price per ton • Raw €335,2 (US$ 21,3c/lb) • Refined €404,4 (US$ 25,7c/lb) Supply Balance (million tons) Season 2005
Slide 58: Triangle Hippo Tambankulu
Triangle Hippo Mafambisse Tambankulu Xinavane 58
Slide 59: Sugar Production
Sugar Production Tons ’000 2000 2001 2002 2003 2004 2005 2006 2007 2008 South Africa 969 755 860 652 723 753 666 604 644 Mozambique 39 36 71 82 85 115 106 108 108 Swaziland RSE 41 45 50 54 50 56 55 58 56 Zimbabwe * 282 264 296 264 222 236 240 349 298 Total 1 331 1 100 1 277 1 052 1 080 1 160 1 067 1
Slide 60: Zimbabwe Replacement Value
Zimbabwe Replacement Value (TH Holding*) R million Cane Growing Triangle 1 446 Hippo 697 Sugar Milling Triangle 2 014 Hippo 931 Refining and Packing Triangle 308 Hippo 86 Ethanol Plant 247 Total 5 729 *TH Holding - Triangle 100%, Hippo 51% 60
Slide 61: Zimbabwe - Production History
Zimbabwe - Production History Tons Cane 2002 2005 2006 2007 2008 Triangle 2 301 000 1 943 000 1 977 000 1 617 000 1 515 000 Hippo 2 320 000 1 590 000 1 705 000 1 280 000 1 086 000 Total 4 621 000 3 533 000 3 682 000 2 897 000 2 601 000 Tons Sugar 2002 2005 2006 2007 2008 Triangle 296 000 236 000 240
Slide 62: Zimbabwe - Water
Zimbabwe - Water • Annual evaporation – 1 730 mm per hectare • Effective rainfall – 60% of 550 mm per hectare • Supplementary irrigation to meet peak demand of 1 500 mm per hectare • Water allocation required in storage – 2 100 mm per hectare Location Mega Litres Triangle & Mutirikwe 280 000 Hippo V
Slide 63: Expanded Sugar Production
Expanded Sugar Production Tons Per Annum 2008 Production 2009 Capacity South Africa 644 000 > 1 000 000 Zimbabwe 298 000 > 600 000 Mozambique 108 000 > 300 000 Swaziland RSE 56 000 > 60 000 Total 1 106 000 > 1 960 000 63
Slide 64: Hectares under Cane
Hectares under Cane Tongaat Hulett Outgrowers Total South Africa (2008) 11 417 137 204 148 621 Mozambique (2010) 21 928 4 279 26 207 Zimbabwe (current) 27 900 15 720 43 620 Swaziland (current) 3 750 - 3 750 TOTAL 64 995 157 203 222 198 • To date 11 700 hectares transferred to new black farmers in So
Slide 65: Sugar Production - SA
Sugar Production - SA 3 Tons Sugar - Millions Industry: 2 367 000 tons THS: 635 000 tons 2.5 Share of industry 26,8% (2008: 28,5%) 2 1.5 1 0.5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 THS Year Industry 65
Slide 66: Total Volumes – THS (SA)
Total Volumes – THS (SA) Tons sugar H1 2009 H1 2008 FY 2008 Opening stock 261 473 206 493 206 493 Production 169 288 196 156 644 173 Prior season adjustment ( 1 372) (517) (517) Sugar purchased in 40 842 57 532 87 172 Sales (332 669) (296 374) (675 848) Closing Stock 137 562 163 290 261 473 66
Slide 67: Local Market Volumes – THS (SA)
Local Market Volumes – THS (SA) Tons sugar H1 2009 H1 2008 FY 2008 Opening stock 172 667 144 397 144 397 Production 108 325 110 607 407 970 Prior season adjustment 944 (474) (474) Sugar purchased in 40 842 57 532 87 172 Sales (240 118) (230 030) (466 398) Closing Stock 82 660 82 032 172 667 67
Slide 68: Export Volumes – THS SA
Export Volumes – THS SA Tons sugar H1 2009 H1 2008 FY 2008 Opening stock 88 806 62 096 62 096 Production 60 963 85 549 236 203 Prior season adjustment (2 316) (43) (43) Sales (92 551) (66 344) (209 450) Closing stock 54 902 81 258 88 806 68
Slide 69: Raw Export Realizations: South Africa
Raw Export Realizations: South Africa Raw Sugar H1 2009 H1 2008 FY 2008 Price in US c/lb* 12,95 10,82 12,12 Average Rand/US$ realisation R8,34 R7,50 R8,05 Average Rand realisations per ton R2 517 R1 950 R2 316 • Table includes raw sugar for refined exports • * Excludes preferential markets and premi
Slide 70: 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 71: Value-adding Activities
Value-adding Activities • Animal feeds in South Africa and Zimbabwe • Livestock in Zimbabwe - 9 000 head of cattle • Retail packing operations in South Africa, Mozambique, Zimbabwe, Namibia and Botswana • Refined and direct consumption raw sugar exports from South Africa and Zimbabwe • Speciality su