Tongaat Hulett Limited · JSE:TON
Tongaat Hulett — H1 2008 Earnings Presentation
68 slides from Tongaat Hulett's earnings presentation, June 2008
Slide 1: Half-year 2008
ee = longa Huet Half-year 2008
Slide 2: Financial Results
FINANCIAL RESULTS nn $2 Joga Huet
Slide 3: Half-year to 30 June 2008
Half-year to 30 June 2008 • Revenue up 28% to R3,1 billion (H1 2007: R2,4 billion) • Profit from operations up 44% to R443 million (H1 2007: R308 million) • Headline earnings of R252 million (H1 2007: headline loss of R155 million, including the once-off corporate structuring and BEE equity transact
Slide 4: Profit from Tongaat Hulett Operations
Profit from Tongaat Hulett Operations R million H1 2008 H1 2007 FY 2007 Starch 103 37 105 Land and Property Developments 115 127 428 Sugar 218 167 307 Triangle dividend 35 - 53 Centrally accounted costs (28) (23) (55) Total 443 308 838 4
Slide 5: Starch Operations H1 2008 H1 2007
Starch Operations H1 2008 H1 2007 FY 2007 Operating profit (Rm) 103 37 105 • Improvement in starch and glucose margins • Increases in international starch and glucose prices • High international maize prices encouraged local maize plantings • 11,6 million ton SA crop • Local maize prices trading clo
Slide 6: Land and Property Developments H1 2008 H1 2007
Land and Property Developments H1 2008 H1 2007 FY 2007 Operating profit (Rm) 115 127 428 Capital profit (Rm) 15 5 48 • Land sold in H1 2008 - 15 developable hectares Umhlanga Ridgeside, Umhlanga Ridge Town Centre, Zimbali Coastal Resort and Kindlewood • Valuable land attractive profitability per hec
Slide 7: Sugar Operations H1 2008 H1 2007
Sugar Operations H1 2008 H1 2007 FY 2007 Operating profit (Rm) 253 167 360 • Triangle dividends of R35 million brought to account (H1 2007: Nil) • Increased contributions from : Swaziland, Botswana, Mozambique and the Animal Feeds operations • 5 major operations in Mozambique, Swaziland and Zimbabwe
Slide 8: Other Income Statement Items
Other Income Statement Items • Finance costs • R85 million (H1 2007: R37 million) • Increased borrowings and higher interest rates • Tax • Tax rate change 29% 28% R22 million release from deferred tax 8
Slide 9: Cash Flow and Balance Sheet
Cash Flow and Balance Sheet • Cash inflow from operations : Cash generated R359 million Tax payments - R99 million Working capital - R73 million R187 million • Capital expenditure : R638 million • Tongaat Hulett net borrowings : R1,839 billion • BEE SPV’s consolidated non-recourse equity settled bor
Slide 10: Tongaat Hulett
' Tongaat Hulett [_
Slide 11: International Maize Stocks Are Declining
International Maize Stocks Are Declining World Corn Production and Consumption * 2004/2005 2008/2009 July Estimate Change Total production 716 million tons 775 million tons 8% Total consumption 689 million tons 794 million tons 15% Ending stocks 132 million tons 105 million tons (20%) * Source – USD
Slide 12: A More Competitive SA Maize Price
Price (US$ / ton) 12 ‐ ‐50 50 100 150 200 250 300 350 02/03/06 31/03/06 04/05/06 01/06/06 30/06/06 28/07/06 28/08/06 26/09/06 Gap 24/10/06 21/11/06 19/12/06 19/01/07 16/02/07 16/03/07 18/04/07 18/05/07 15/06/07 CBOT 13/07/07 13/08/07 10/09/07 09/10/07 A More Competitive SA Maize Price 06/11/07 Maize
Slide 13: Starch And Glucose Exports
Starch And Glucose Exports • Growing demand for starch and glucose products • Global excess capacity diminishing • Trading Operation in Australian markets in its second year Growth in Exports Tons Indicative EBIT 2007 19 225 - 2008 37 000 R36 million 2009 60 000 > R50 million 13
Slide 14: Animal Feeds and Edible Oils – Growth Sector
Animal Feeds and Edible Oils – Growth Sector • Turnover now exceeds R1 billion per annum • Beneficiation from sugar and starch by-products • Voermol Feeds (molasses, bagasse and maize) • Germ, Gluten 20 and Gluten 60 (co-products for maize wet millers) 14
Slide 15: Value Creation out of Agricultural Land Conversion
Value Creation out of Agricultural Land Conversion La Mercy Airport July 2008
Slide 16: Sales Over Next 5 Years
Sales Over Next 5 Years Gross Hectares Developable Hectares 21/2 years to end 2010 401 258 21/2 years after 2010 625 420 Total 5 year period 1 026 678 View February 2008 1 416 893 16
Slide 17: Breakdown Of Sales to End 2010
Breakdown Of Sales to End 2010 Categories eThekwini KwaDukuza Total % (hectares) (hectares) (hectares) Mixed use / office / 24 4 28 11% commercial Affordable Housing 27 2 29 11% Residential 21 9 30 12% Special use / 19 18 37 14% institutional / hotel Industrial / business 64 70 134 52% park / logist
Slide 18: Special Use Land Developments
Special Use Land Developments 18
Slide 19: Industrial / Business Park / Logistics Potential
Industrial / Business Park / Logistics Potential Durban and the North Coast • Pent up demand • Supply side constraints • Low vacancies • New airport • Increased industrial demand • Relocation to the north coast • 15% premium on rentals with airport proximity • Air cargo • Durban international – 6 50
Slide 20: KZN north coast corridor
P25 KZN north coast corridor N2 022 R01 Dube Trade Port R1 R7,2 billion Compensation P10 Salt Rock 0 TH Landholdings N2 Interchange R180 million m Ballito 15k Tongaat Zimbali Upgrade R102 – South of w Zimbali Airport - R550 million km 7. 5 M Waste Water Works 43 WR124 Million M 4 Water Verulam R22,1
Slide 21: Saleable Land with Unconditional Development Rights
Saleable Land with Unconditional Development Rights (Developable ha) – out of 14 500 ha • End H1 2008 69 ha • Targeted stock levels end 2010 +- 834 ha • Anticipated sales to end 2010 258 ha • Converted to land with unconditional development rights 1 023 ha 21
Slide 22: Land Acquisitions Aberfoyle and Tinley Manor
Land Acquisitions Aberfoyle and Tinley Manor
Slide 23: Aberfoyle
Aberfoyle MAIDSTONE ABERFOYLE SUGAR MILL • Purchase price – R15 million TONGAAT N2 • Gross extent – 324 hectares • Price per gross hectare – R46 000 R102 • Developable extent – 165 hectares King Shaka IL International Airport M4 • Price per developable hectare – RA & DubeTradeport R91 000 23
Slide 24: Tinley Manor
N2 Tinley Manor New Acquisitions • Purchase price – R56 million • Gross extent – 201 hectares • Price per gross hectare – R278 000 • Developable extent – 161 hectares • Price per developable hectare – R348 000 Existing TH landholdings 24
Slide 25: Value Creation out of Agricultural Land Conversion
Value Creation out of Agricultural Land Conversion Zinkwazi / Thukela Tinley Manor
Slide 26: February 2008 vs July 2008 land value
February 2008 July 2008 Developments within 5 years Developments within 21/2 years to end 2010 (1 416 Gross Ha 893 Developable Ha) (401 Gross Ha 258 Developable Ha) • Bulk transfer value of cane land R 744m • Bulk transfer value of cane land R 192m • Expected operating profit • Expected operating pr
Slide 27: Slide 27
Slide 28: EU Sugar Market – Update on Structural Changes
EU Sugar Market – Update on Structural Changes EU Reference Price (€ per ton) Season Raw Sugar (EU) Refined Sugar (EU) Past 15 years to 2007 496,80 (US$ 35,6 c/lb) 631,90 2009 up to 2015 335,20 (US$ 24 c/lb) 404,40 Forecasted Supply Balance (million tons) Season Production Imports Exports Demand 200
Slide 29: Mozambique - Latest Sugar Production Expectation
Mozambique - Latest Sugar Production Expectation Tons Per Annum 2007 Actual 2008 Forecast 2009 Forecast 2010 Forecast Xinavane 67 000 75 000 180 000 208 000 Mafambisse 41 000 59 000 84 000 91 000 Total 108 000 134 000 264 000 299 000 • Current Expansions • Xinavane expansion • Plant-up of cane on sc
Slide 30: Mozambique Operating Profit Potential > US $50 million
Mozambique Operating Profit Potential > US $50 million • TH Share > US $45 million • 292 000 tons • Consolidated production costs • 10,75 US c/lb • 84% of cane produced by Tongaat Hulett • Average ex-factory raw sugar realisation – 20,0 US c/lb • EU/USA market • Domestic market • Export cost to mark
Slide 31: Mozambique Ethanol Project – Feasibility Study
Mozambique Ethanol Project – Feasibility Study • MOU signed with COFOMOSA Farmers Association • Cane Estates at Moamba approximately 60 km from Xinavane Mill • Project allocated 29 000 hectares of land • Project would initially entail an area of 10 000 hectares under cane • Water rights allocated •
Slide 32: Update on Zimbabwe
UPDATE ON ZIMBABWE ne $2 Joga Huet
Slide 33: Zimbabwe Outgrowers
Zimbabwe Outgrowers • Currently > 500 growers • Farming model being established • In 2008 entails 15 670 hectares • Current average yield 30 TCPH (Tons Cane Per Hectare) • Target yield > 100 TCPH • Sugar gap currently 138 617 tons Fast Track Outgrower Rehabilitation 2008 2009 2010 2011 Cane Producti
Slide 34: South African Sugar Industry
South African Sugar Industry Focus Is On Structural Changes
Slide 35: Power Generation
Power Generation 35
Slide 36: Tongaat Hulett’s Realistic Short-term Capabilities
Tongaat Hulett’s Realistic Short-term Capabilities • Felixton, Amatikulu, Maidstone / Darnall and Xinavane • Excluding tops and trash • Capex – R26 million per MW • Timeline 30 months In season Out of season Power contribution to grid 106 MW 75 MW 554 GWh 172 GWh 36
Slide 37: Including Tops and Trash
Including Tops and Trash • Felixton, Amatikulu, Maidstone / Darnall and Xinavane • Timeline 3 – 7 years In season Out of season Power contribution to grid 266 MW 218 MW 1 416 GWh 501 GWh 37
Slide 38: Impact of EU Access On SA Sugar Industry
Impact of EU Access On SA Sugar Industry • Swaziland industry currently = limited access to EU via Cotonou Agreement Effect October 2009 likely to become unlimited access (€ 335,2 = US$ 24 c/lb,delivered EU raw sugar) • Swaziland supplies 320 000 tons to the SA local sugar market annually • SA indus
Slide 39: Conversion of SA Export Sugar to Ethanol
Conversion of SA Export Sugar to Ethanol Oil Revenue from Net additional Price Ethanol Contribution US $90 R1,7 billion R600 million US $120 R2,2 billion R1,1 billion Based on • World sugar price US 14 c/lb • SA exports of raw sugar • 500 000 tons per annum (Swaziland excluded) • 280 million litres
Slide 40: Liquid Fructose
@ Tongaat Hulett [— Liquid Fructose
Slide 41: Additional Information
ADDITIONAL INFORMATION @ Tongaat Hulet
Slide 42: Starch Financial Data
Starch Financial Data Rmillions H1 2008 H1 2007 Revenue: 999 741 Domestic 743 574 Exports 50 29 Co-Products 206 138 Underlying Operating Profit 103 36 Valuation Adjustments 0 1 Operating Profit 103 37 42
Slide 43: Starch and Glucose Volume Data
Starch and Glucose Volume Data Volume (tons) H1 2008 H1 2007 Local Starch 47 348 46 130 Local Glucose 163 198 159 458 Total Local 210 546 205 588 Export Starch 6 612 5 059 Export Glucose 3 967 3 835 Total Exports 10 579 8 894 Co-Products 76 302 72 549 Total 297 427 287 031 43
Slide 44: Value of land for development within 2 1/2 years to end 2010
Value of land for development within 21/2 years to end 2010 Affected by Expected gazetted land Gross Extent Developable Bulk transfer value operating profit Locality claims (Ha’s) (Ha’s) (Rm) contribution (Gross Ha’s) # (Rm) eThekwini: Umhlanga Ridge Town Centre 8 8 4 54 Umhlanga Ridgeside 32 18 52
Slide 45: Value of land for development within 2 1/2 years from end 2010
Value of land for development within 21/2 years from end 2010 Affected by Expected gazetted land Gross Extent Developable Bulk transfer value operating profit Locality claims (Ha’s) (Ha’s) (Rm) contribution (Gross Ha’s) # (Rm) eThekwini: Umhlanga Ridge Town Centre 7 7 4 47 Umhlanga Ridgeside 15 15 2
Slide 46: Bulk value of land for development: 5 years +
Bulk value of land for development : 5 years + Marketwithvalue as bulk agricultural land development potential Gross Extent Developable Affected by gazetted Value per Locality (Ha’s) (Ha’s) land claims developable Ha Bulk Value (Gross Ha’s) # (Rm) (Rm) eThekwini: Umhlanga Ridge Town Centre 12 12 0.5
Slide 47: Reconciliation of Total Hectares of Prime Land
Reconciliation of Total Hectares of Prime Land Gross Extent Developable (Ha) (Ha) Opening Balance – beginning 2008 14 015 8 935 Land purchased 2008 532 330 Land sold 2008 (24) (15) Adjustment in respect of open spaces and roads (37) 6 June 2008 14 486 9 256 47
Slide 48: Saleable Land with Unconditional Development Rights
Saleable Land with Unconditional Development Rights (Developable ha) – out of 14 500 ha Stock at June 2008 Additional land acquiring (Ha’s) unconditional Locality development rights (Ha’s) eThekwini: Umhlanga Ridge Town Centre 4 23 Umhlanga Ridgeside 11 39 Izinga 10 99 Canelands 21 Sibaya / Mdloti 1
Slide 49: Umhlanga Ridge
Umhlanga Ridge • Regional accessibility and regional centre role in north Durban • 616 000 of 633 000 m2 bulk sold • Final phases of construction under way – includes town centre park • Second hospital site sold in 2008 • Additional development rights applications made – anticipated late 2008 49
Slide 50: Umhlanga Ridgeside
Umhlanga Ridgeside • Magnificent sea views and major highway accessibility • Commercial bulk 250 000 m2 • 3 000 Residential units • Resort hotel 80 000 m2 • Sold to date : commercial bulk 153 470 m2 residential units 506 resort hotel 80 000 m2 • Construction of new interchange on M41 about to commen
Slide 51: Izinga – Umhlanga Ridge
Izinga – Umhlanga Ridge • First phase to be launched 2008 • Prime location – convenience of Umhlanga Ridge • Suburban lifestyle and inland views • Retirement niche market potential • Includes affordable market product 51
Slide 52: Kindlewood
Kindlewood • 550 unit gated estate without golf • Adjacent Mt Edgecombe Country Club Estates • Easy access to Umhlanga Ridge • Single residential/cluster housing mix 52
Slide 53: Bridge City
Bridge City PPP with eThekwini Municipality • Significant mixed-use town centre development in the Inanda, Ntuzuma and KwaMashu (INK) region • Strong support from National, Provincial and Local Government • Major infrastructure and bulk services in place • Sites becoming available for sale • Regiona
Slide 54: Cornubia
Cornubia Integrated, multi-use urban development • 840 developable hectares in total • Industrial and logistics at Ottawa flats • N2 / M41 /R102 highway access / Umhlanga Ridge and La Mercy road links • Integrated mixed-use development • Commercial 500 000+ m2 • Industrial 100 hectares • Residential
Slide 55: Sibaya – Mdloti (first phase)
Sibaya – Mdloti (first phase) • N2 / M4 / M27 excellent access • First off ramp south of new airport • Includes 4 hotel sites • R800 million Sibaya Entertainment World catalyst including two hotels • EIA / planning approval for Nodes 1 & 5 anticipated H2 2008 • “One Planet Living” sustainability con
Slide 56: Zimbali South & West
Zimbali South & West • Well established Zimbali brand being extended to Zimbali Lakes • Sales commenced December 2003 and is 95% sold out • 7-star Fairmont Zimbali Hotel in advanced stage of construction • October 2009 opening • Premium product and resales of developed sites achieving premium prices
Slide 57: Zimbali Lakes
Zimbali Lakes • Development rights received in July 2008 • Construction of Gary Player - designed Zimbali Lakes golf course, club house and academy to commence late 2008 • Zimbali Lakes launch last quarter 2008 / early 2009 • Niche resort node with beach access and river-related man made water body
Slide 58: Shongweni – Assagay Valley
Shongweni – Assagay Valley • North / M13 interchange • Potential PPP for infrastructural delivery • Mixed- use, residential and limited commercial • Conservation and recreation niche potential • 1st phase planning under way to permit residential development launch 2009 58
Slide 59: Tinley Manor
Tinley Manor • 732 developable hectares new resort node • 6km coastal frontage / North and South bank of Mhlali River • N2 accessibility – convenience of new airport • Preparation for EIA and zoning underway • Land acquisitions consolidated and enlarged the node – infrastructure efficiency improved
Slide 60: Zinkwazi / Thukela
Zinkwazi / Thukela • 1 459 developable hectares • N2 access • 12 km coastal frontage • Between Nonoti and Thukela Rivers 60
Slide 61: Sugar Production
Sugar Production Tons ’000 2000 2001 2002 2003 2004 2005 2006 2007 South Africa 969 755 860 652 723 753 666 604 Mozambique 39 36 71 82 85 115 106 108 Swaziland RSE 41 45 50 54 50 56 55 58 Zimbabwe * 282 264 296 264 222 236 240 349 Total 1 331 1 100 1 277 1 052 1 080 1 160 1 067 1 119 Capacity 1 500
Slide 62: Hectares Under Cane
Hectares Under Cane Tongaat Hulett Outgrowers Total South Africa* 10 298 135 623 145 921 Mozambique 22 094 4 133 26 227 Zimbabwe 33 994 15 670 49 664 Swaziland 3 818 - 3 818 TOTAL 70 204 155 426 225 630 • To date 11 871 hectares transferred to new black farmers in South Africa • Need at least anothe
Slide 63: Expanded Sugar Production
Expanded Sugar Production 2009 Tons ‘000 2007 production capacity South Africa 604 > 1 000 Zimbabwe 349 > 600 Mozambique 108 > 290 Swaziland RSE 58 > 60 Total 1 119 > 1 950 63
Slide 64: LDC Countries
LDC Countries • 50 LDC countries • 22 sugar producing LDC countries • Total production 2,5 million tons • Countries that have exported into EU • Ethiopia Tanzania Togo Senegal • Nepal Malawi Mozambique Zambia • Sierra Leone Sudan Congo Benin • LDC criteria • Gross national income per capita < US$750
Slide 65: Sugar Production - SA Industry: tons
Sugar Production - SA 3 Industry: 2 431 000 tons Tons Sugar - Millions THS: 722 000 tons Share of industry 29,6% (2007: 2.5 26,6%) 2 1.5 THS Industry 1 0.5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 Year 65
Slide 66: SA Regulatory Framework
SA Regulatory Framework • Sugar Act of 1978 and Sugar Industry Agreement of 2000 under review by DTI • Need for ongoing regulation accepted by DTI • Any changes implemented by 1 April 2009 earliest • Growers and Millers at odds on • Default cane price formula • Definition of net actual price for Div
Slide 67: Value-adding Activities
Value-adding Activities • Animal feeds in South Africa and Zimbabwe • Retail packing operations in South Africa, Mozambique, Zimbabwe, Namibia and Botswana • Refined and direct consumption raw sugar exports from South Africa and Zimbabwe • Speciality sugars and high intensity sweeteners in South Afr
Slide 68: Half-year 2008
ee = longa Huet Half-year 2008