Tongaat Hulett Limited · JSE:TON
Tongaat Hulett — H1 2010/11 Earnings Presentation
70 slides from Tongaat Hulett's earnings presentation, November 2010
Slide 1: November 2010
NOVEMBER 2010
Slide 2: Financial Results for the 6 Months Ended 30 September 2010
FINANCIAL RESULTS FOR THE 6 MONTHS ENDED 30 SEPTEMBER 2010 2
Slide 3: Tongaat Hulett Earnings
Tongaat Hulett Earnings 6 months to 6 months to % 12 months to R million 30 Sept 2010 30 Sept 2009 Increase 31 March 2010 Revenue 4 724 4 011 +18% 8 789 Profit from Operations 963 873 +10% 1 500 Headline Earnings 507 452 +12% 815 • Six months characterised by counteractive factors • Independent repo
Slide 4: Tongaat Hulett Profit from Operations
Profit from Tongaat Hulett Revenue Operations 6 months to 6 months to 6 months to 6 months to R million 30 Sept 2010 30 Sept 2009 30 Sept 2010 30 Sept 2009 Sugar operations Zimbabwe 303 326 734 665 Swaziland 19 29 108 113 Mozambique 163 79 489 138 SA agriculture, milling and refining 47 77 1 267 1 1
Slide 5: Exchange Rates Less Favourable than Corresponding Period
Exchange Rates Less Favourable than Corresponding Period Average H1 2010/11 H1 2009/10 % Change Rand/US$ 7,39 8,13 - 9% Rand/Euro 9,58 11,33 - 15% Rand/Metical 0,22 0,30 - 27% US$/Euro 1,30 1,40 - 7% • Export proceeds: US$ and Euro (exchange rates at time of export) • Earnings conversion on consolid
Slide 6: Sugar Cane Growing Crops
Sugar Cane Growing Crops • Tongaat Hulett is a Cane Grower and a Sugar Miller • > 70 000 hectares of own land under cane • Consolidated balance sheet value of Growing Crops: R2 billion • Growing with new root planting and replanting • Increases as cane yields and sugar content improves and prices ri
Slide 7: Growing Crops for the Half Year to 30 Sept 2010
Growing Crops for the Half Year to 30 Sept 2010 Balance Sheet R million Income Statement R million March 2010 (R million) 2 041 South Africa + 29 Fair value gain 189 Swaziland - 29 Capex on new areas 12 Zimbabwe + 106 Foreign Currency Translation -223 Mozambique + 83 September 2010 (R million) 2 019
Slide 8: Tongaat Hulett: Cane Grower and Sugar Miller
Tongaat Hulett: Cane Grower and Sugar Miller • “Miller” - South Africa only some 10 000 hectares Miller cum Planter • South Africa - history - Zimbabwe operations not consolidated - Mozambique in its early development • Cane Grower - South Africa cane supply initiatives and - Mozambique expansion Su
Slide 9: 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 10: 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 11: Growing Crops on the Tongaat Hulett Balance Sheet
Growing Crops on the Tongaat Hulett Balance Sheet 31 March 2010 30 September 2010 South Total Total Swaziland Zimbabwe Mozambique Africa Roots Hectares 68 039 73 725 17 023 3 835 29 128 23 739 Amortised root value 13 148 14 024 10 733 9 792 11 992 19 562 Rands per hectare Cane Standing cane value 17
Slide 12: Growing Crops - Income Statement: Half-Year to 30 Sept 2010
Growing Crops - Income Statement: Half-Year to 30 Sept 2010 • IAS 41 Fair Value Change included in the Income Statement R million R million South Africa + 29 Roots + 247 Swaziland - 29 Zimbabwe + 106 Standing cane - 58 Mozambique + 83 Fair Value Gain + 189 Fair Value Gain + 189 • Comparative IAS 41
Slide 13: Zimbabwe Sugar Operations
Zimbabwe Sugar Operations • Profit from operations : R303 million (US$ 41 million) : prior period R326 million (US$ 40 million) • Relevant fundamentals for a sugar business maintained • Local market prices in line with regional levels • Increased sugar production and sales • H1 sales volume + 3% • E
Slide 14: Mozambique Sugar Operations
Mozambique Sugar Operations • Profit from operations : R163 million (Metical 739 million) : prior period R79 million (Metical 263 million) • Higher production and sales volumes • Local sugar prices - not yet responded to higher world prices and weaker Metical - need to increase by >50% to be in line
Slide 15: South African Sugar Agriculture, Milling and Refining
South African Sugar Agriculture, Milling and Refining • Profit from operations: R47 million (prior period: R77 million) • Higher local and export sales realisations • Exports at 19 US c/lb • Lower sugar production volumes due to severe drought conditions • Higher cost of sales • Lower share of indus
Slide 16: Downstream and Sugar Value Added Activities
Downstream and Sugar Value Added Activities • Profit from operations: R136 million (prior period: R127 million) Generated from • Refined exports from South Africa - Rand strength in 2010 • South African domestic marketing sales and distribution - Huletts brand • Botswana and Namibia sugar packing an
Slide 17: Starch Operations
Starch Operations • Operating profit: R125 million (prior period: R117 million) • Third consecutive year of a large maize crop (13 million tons) • Maize prices close to world prices • Margin benefit of lower maize cost offset by co-product prices and exchange rate • Starch and glucose volumes simila
Slide 18: Land Conversion and Development
Land Conversion and Development • 13 807 gross hectares (8 763 developable hectares) available for development in South Africa • Current economic climate - few hectares converted to development along prime coastline • Sales of 39 developable hectares (56 gross hectares) in last six months • Umhlanga
Slide 19: Income Statement - other items
Income Statement - other items • Centrally accounted and consolidation items • Recognition of pension fund employer surplus account allocation - unconditional entitlement in 2010: R130 million (prior period: R82 million) • Contribution holiday - 4 years • Finance costs R million 30 Sep 2010 30 Sep 2
Slide 20: Cash Flow and Debt
Cash Flow and Debt 6 Months to 6 Months to 30 Sep 2010 30 Sep 2009 • Cash inflow from operating profit before working capital R929 R867 Working capital (typical for this point in the sugar season) - R956 - R762 Cash flow from operations - R27 R105 • Capital expenditure, Mozambique expansion and majo
Slide 21: Agricultural Land Conversion
Agricultural Land Conversion Conversion of Developable Land in South Africa 13 807 gross hectares 8 763 developable hectares
Slide 22: Industrial Land Ethekwini / Ballito In Short Supply
Imbonini Industrial Land Mid 2011 Compensation Flats Early 2012 320 35 Ethekwini / Ballito Inyaninga In Short Supply Mid 2012 280 90 uShukela – mid 2012 Canelands 105 DTP 5 Cornubia End 2011 86 250 ? Cato Ridge 65 RiverHorse Hammarsdale 70 Mahogany 15 Pinetown Ridge Umgeni River Node DEVELOPED AREAS
Slide 23: Tongaat Development Map
Railwa Tongaat yLine uS hu k ela uShukela Highway Development Dr Hazelmere DTP 0 2 R1 TH Inyaninga re Industrial/Commercial ns tu ay ion u Business Park Node ns rtF nw t Dicke pa o Ru E x a d ep re Gross – 707 Ha tu Tr Developable – 550 Ha Fu Vincen t or ep Rd ad Tr Ca Te rgo rm ina l KingShaka 02 A
Slide 24: Cornubia
Cornubia CORNUBIA Cornubia South Boundary NORTH Cornubia North Tongaat Hulett landholdings CORNUBIA Land already purchased by eTM SOUTH SIBAYA 517 ha Gross - 253 Developable ha R725 000/Developable ha Land Purchased by eTM - Oct 2010 34,6 ha Gross - 25 Ha Developable R725 000/Developable IZINGA M41
Slide 25: Update on Tongaat Hulett Starch
Update on Tongaat Hulett Starch • Outlook for South African maize 2010/11 1979/80 2007/08 2008/09 2009/10 Forecast Hectares Planted (000ha) 4 031 2 799 2 428 2 742 2 468 Yield (t/ha) 3,37 4,53 4,96 4,76 4,75 Production (000 tons) 13 583 12 700 12 050 13 043 11 732 • Outlook for World maize • Interna
Slide 26: Sugar - Who is Going to Supply the Demand?
Sugar - Who is Going to Supply the Demand? Raw Sugar Mills Starting up in Brazil 35 30 Number of mills 25 20 15 10 5 0 06/07 07/08 08/09 09/10 10/11 11/12 Source: LMC International 26
Slide 27: EU Sugar Regime: Underestimated Global Dynamics
EuroperTon Oc 200 250 300 350 400 450 500 550 600 650 700 t De 07 c Fe 07 b Ap 08 r0 Ju 8 n Au 08 g Oc 08 EURefPrice t0 De 8 c Fe 08 b Ap 09 r0 Ju 9 n EUPrice Au 09 g Oc 09 t0 De 9 c Fe 09 b Ap 10 EU Sugar Regime r1 Ju 0 No5C&Fin€ n Underestimated Global Dynamics Au 10 g 1 Oc 0 t1 0 27
Slide 28: Sellers Market
Sellers Market • Wrestler left Maputo port on 24 September 2010 • Destination Savannah, Georgia • Carrying 13 000 tons sugar from Mozambique and Zimbabwe • Raw sugar price - 34 US c/lb FOB • Tongaat Hulett awarded by tender for 25 000 tons / EU • Leaves port December 2010 • 8 bidders 28
Slide 29: Zimbabwe and Mozambique - Sugar Production
Zimbabwe and Mozambique - Sugar Production 2009/10 2010/11 2010/11 2011/12 Milling Sugar production Actual Estimate/June * Capacity Current Estimate Current Estimate (tons) Zimbabwe 258 965 330 000 - 350 000 330 000 - 350 000 380 000 - 400 000 600 000 Mozambique 133 802 230 000 - 250 000 185 000 - 2
Slide 30: Getting the Basics Right: Zimbabwe and Mozambique
Getting the Basics Right Zimbabwe and Mozambique
Slide 31: Efficiency of Sugar Mills - Other Than Cane Crushing Rates
Efficiency of Sugar Mills - Other Than Cane Crushing Rates Overall sugar recovery Time efficiency World Class - 88% World Class - 85% 2009/10 2010/11 2009/10 2010/11 Actual Estimate Actual Estimate Triangle 80,3% 84,8% 78,1% 74,0% Hippo Valley 67,7% 83,3% 57,5% 76,8% Mafambisse 79,9% 82,3% 55,0% 64,
Slide 32: Cane Growing
Cane Growing 2010/11 2011/12 2009/10 2010/11 Current Current Target Actual Estimate/June Estimate Estimate Zimbabwe Hectares harvested 26 318 31 058 32 388* 32 665 46 000 Yields tcph - TH 92 99 85 103 >112 Yields tcph - Outgrowers 78 83 70* 79 >100 Mozambique Hectares harvested 18 415 23 448 22 220
Slide 33: Zimbabwe Replant - Root Replacement
Zimbabwe Replant - Root Replacement Sep 2010 - Mar 2011 Projects completed June 2010 Estimate Tongaat Hulett (Replant) 2 700 3 600 Outgrowers (Replant) 470 450 Total 3 170 4 050 • Outgrowers new planting - 1 200 hectares by June 2011 33
Slide 34: Crop Positioning - Cane Age for Optimum Sugar Production
Crop Positioning - Cane Age for Optimum Sugar Production 2010/2011 Season 2011/2012 Season Youngest Cane Oldest Cane Youngest Cane Oldest Cane Harvested Harvested Harvested Harvested (months) (months) (months) (months) Triangle 10,5 17,2 11,8 14,8 Hippo Valley 12,0 20,0 11,8 13,5 Mafambisse 10,7 18,
Slide 35: South Africa
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Slide 36: New Plantings – South Africa
New Plantings – South Africa Status of cane at October 2010 Target to be Targeted # completed by Sep 2010 - Mar 2011 March 2011 Planted cane Land prepared Small scale growers 3 741 98 618 3 216 * Commercial growers 1 620 40 691 * Tongaat Hulett leased land 2 723 221 376 2 097 Total 8 084 319 1 034 6
Slide 37: Operation Vuselela - Private Public Partnership
Operation Vuselela - Private Public Partnership • Partnership between KZN Department of Economic Development and Tourism and Tongaat Hulett • KZN Economic Development Tourism – R51 million • Tongaat Hulett - R12,3 million • 3 534 hectares of new cane to be planted over a three year period • 291 hect
Slide 38: Electricity from Bagasse / Fibre in Cane
Electricity from Bagasse / Fibre in Cane India Brazil SADC 2010 (mainly for own use) 3 000 MW 3 500 MW 380 MW Possible / when ? 10 500 MW 15 000 MW 1 200 MW All Tongaat Hulett Mills - Full Capacity (million tons cane) 15,9 Fuel value (Rand billion) 2,1 Electricity (Rand billion) 3,2 Investment (Rand
Slide 39: When Will We See Ethanol in SADC?
When Will We See Ethanol in SADC? South Africa • Every 10% of South Africa’s fuel blend • 1,5 billion litres ethanol equivalent to 2,2 million tons raw sugar SADC • Agriculture potential of Northern SADC comparable to Brazil • Energy Markets • South Africa is 70% of SADC fuel market and 80% of the e
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Slide 41: Additional Information
ADDITIONAL INFORMATION 53 x @ Tongaat Hulett Ss
Slide 42: Ridgeside
Ridgeside Infrastructure • M41 interchange will be complete in December 2010 • Office Park and phase one of Precinct one infrastructure complete. Phase two of Precinct one will be complete in November 2010 Top Structures • New office for Nedbank in the Mixed Use Precinct will be completed in Decembe
Slide 43: Izinga - Umhlanga Ridge
Izinga - Umhlanga Ridge • Medium to low density 152 ha residential suburb • 73 ha of open space including wetlands and buffer corridors • Open suburb with cameras and visible street security patrols • Appropriate indigenous landscaping 43 • 280 dwelling units to be developed in first phase • 29 site
Slide 44: Kindlewood - Mount Edgecombe
Kindlewood - Mount Edgecombe • 550 units gated estate development • Comprises • Special residential • Maisonette • Planned unit developments • Phase 1 - sold out • Phase 2 - 78 % sold • 42 families living in the estate • 22 new structures under construction 44
Slide 45: Cornubia
Cornubia • Ministerial / priority project - unique partnership between private landowner and government • The largest sustainable integrated development in KZN • Phase one EIA in progress, planning approvals expected end 2011 • Includes 86 ha industrial platform • Pilot phase of 486 housing units to
Slide 46: Bridge City
Bridge City • Successful PPP with eThekwini Municipality • Regional Magistrates court opening mid 2011 • New mixed use, high density Town Centre in • Train line and station to open early 2012 a previously disadvantaged area / township • Bus/taxi intermodal facility constructed by • Regional 450 bed
Slide 47: Umhlanga Ridge Town Centre
Umhlanga Ridge Town Centre • 1 business park site and 2 mixed use sites left to sell • Residential phase of 2 800 high density units commenced • 3 residential development sites under negotiation • Services installation virtually completed 47
Slide 48: Inyaninga
Inyaninga • 550 developable hectares 280 for industrial / business park • EIA underway – expected completion of rights process mid 2012 • Plans being developed in alignment with Municipal plans under the IDP • Part of a joint planning initiative with Dube Trade Port 48
Slide 49: uShukela Highway (Herrwood)
uShukela Highway (Herrwood) • Immediately adjacent to and on access road to Dube Trade Port • Planning partnership with Dube Trade Port for joint land holdings • Total 137 ha • DTP 57 ha • TH 80 ha • EIA in progress. Expect completion of rights process mid 2012 49
Slide 50: Zimbali Lakes Resort
Zimbali Lakes Resort • 280 Gross ha development by Tongaat Hulett / IFA JV • 160 ha of developable area zoned for low and medium density residential, commercial, retail and resort • Only available resort site with direct beach access in the region • IFA’s construction of 18-hole Gary Player golf cou
Slide 51: Competitive South African Maize
51 18 / 1 0 / 1 0 06 / 0 9 / 1 0 26 / 0 7 / 1 0 14 / 0 6 / 1 0 12,70 million tons 12,05 million tons 13,04 million tons 03 / 0 5 / 1 0 Competitive South African Maize South African Maize Crop 16 / 0 3 / 1 0 02 / 0 2 / 1 0 18 / 1 2 / 0 9 05 / 1 1 / 0 9 23 / 0 9 / 0 9 Hedges being extended to July 201
Slide 52: Starch Operations Financial Data
Starch Operations Financial Data 6 months to 6 months to R millions September 2010 September 2009 Revenue: 1 185 1 110 Domestic 912 849 Exports 107 70 Co-Products 166 191 Operating Profit 125 117 52
Slide 53: Volume Data
Volume Data 6 months to 6 months to Volume (tons) September 2010 September 2009 Local Starch 44 660 43 826 Local Glucose 158 695 158 713 Total Local 203 355 202 539 Export Starch 17 622 14 079 Export Glucose 6 201 3 025 Total Exports 25 823 17 104 Co-Products 77 548 73 375 Total 304 726 293 018 53
Slide 54: Co-product Pricing
Co-product Pricing Price movement 6 months to Co-product Major price drivers September 2010 over Comparative Period 50%: International edible oil price Germ Down 24,3% and local oil seeds 50%: Local maize International protein (Soya, Gluten-60 Down 2,3% fishmeal) prices Local maize price/hominy chop
Slide 55: 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 56: 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 South Africa 969 755 860 652 723 753 666 604 644 564 Mozambique 39 36 71 82 85 115 106 108 108 134 Swaziland RSE 41 45 50 54 50 56 55 58 56 54 Zimbabwe * 282 264 296 264 222 236 240 349 298 259 Tota
Slide 57: 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 2009/10 Additional Production at Export Production * Sugar * Capacity * Revenue # South Africa 563 707 1 000 000 436 293 1,48 Zimbabwe 258 965 600 000 193 198 0,66 Mozambique 133 802 327 0
Slide 58: 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% 58
Slide 59: Sugar Operations Locations
Triangle Hippo Mafambisse Massingir Xinavane Tambankulu 59
Slide 60: 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$750 • Human asset index based on nut
Slide 61: Rainfall, Cane Yields and Replant in South Africa
Rainfall, Cane Yields and Replant in South Africa • Yields • 2000 SA North Coast 63,8 tcph • 2009 SA North Coast 44,8 tcph • 2010 SA North Coast 34,0 tcph • Rainfall (mm) - Maidstone, Darnall and Amatikulu • Jan - Sep 2010 285 vs 639 (LTM) • Supplies 75% of Tongaat Hulett milled cane • Rainfall (mm)
Slide 62: Sugar Production - SA
Sugar Production - SA 3 Tons Sugar - Millions 2.5 Industry 2010/11 Estimate: 1 963 768 tons 2 1.5 1 0.5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 E TH Season ended March Industry 62
Slide 63: Raw Export Realisations: Sugar SA
Raw Export Realisations: Sugar SA Raw Sugar 2010 H1 2009 H1 Price in US c/lb* 19,04 16,53 Average Rand/US$ realisation R7,71 R8,16 Average Rand realisations per ton R3 674 R3 221 • Table includes raw sugar for refined exports * Excludes preferential markets and premiums 63
Slide 64: Capacity for Sugar Milling and Electricity Generation
Capacity for Sugar Milling and Electricity Generation 2009/10 TH Capacity Zimbabwe Mozambique South Africa > 290 000 > 850 000 (2011/12) (2013/14) Sugar production 1 010 955 (ton per annum) > 2 000 000 > 600 000 > 327 000 > 1 000 000 (2017/18) Generation (MW) 60 350 110 50 189* Phase 1 Generation (M
Slide 65: South African Electricity
South African Electricity Key Role Players • Department of Energy • Responsible for the Integrated Resource Plan (IRP 2010) • NERSA • Determine pricing for different energy sources • Approve license for new electricity capacity based on IRP • ESKOM • Independent power producers (IPP’s) sell power in
Slide 66: Indicative pricing for Electricity Generation from Bagasse in South Africa
Indicative pricing for Electricity Generation from Bagasse in South Africa Value cent/kWh Return on Capital 30-85 Operating cost (indicative) 9 Fuel (bagasse) >110 66
Slide 67: Bagasse Relative to Cane
Bagasse Relative to Cane • Target fuel cost of bagasse > R130 per ton cane • After direct cost R107 per ton cane • 2009/10 cane price in South Africa was R279 per ton cane • 2009/10 miller share of raw sugar revenue equivalent to R155 per ton cane 67
Slide 68: Current and Future Bagasse Usage
Current and Future Bagasse Usage • Current • Mainly for electricty and steam to produce sugar • Inefficient generation of electricity for own use • Animal feeds use pith of bagasse • Paper use fibre of bagasse • Future (phase 1) • Full mills will increase supply of bagasse • Use existing bagasse eff
Slide 69: 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:
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