Tongaat Hulett Limited · JSE:TON
Tongaat Hulett — H1 2006 Earnings Presentation
26 slides from Tongaat Hulett's earnings presentation, June 2006
Slide 1: Current Focus
1 Current Focus • Accelerating the unlocking of value through increased utilisation of our assets • Enhancing the way in which we bring our products to the market • Reducing the cost inherent in the way we run our businesses • Investing in our businesses to create further value • Listing Hulamin and
Slide 2: Accelerating the unlocking of value through increased utilisation of assets
Accelerating the unlocking of value through increased utilisation of assets • Accelerate the pace at which we unlock value from our >R4 billion worth of land • Moreland EBIT H1 2003: R20 million, H1 2006: R117 million • Development expenditure 2003: R48 million, 2006(F): R223 million • Aggressive ca
Slide 3: Reducing the cost inherent in the way we run our businesses
Reducing the cost inherent in the way we run our businesses • Rationalised / closed / • Distribution de-layered • Warehousing • Corporate head office • Transport • London office - sold • Energy costs • Sugar head office - sold • Recycling costs • Maputo office • Yields and efficiencies • Refinery re
Slide 4: Investing in our businesses to create further value
Investing in our businesses to create further value • Road infrastructure projects on three major routes completed (R338 million) • Catalyst to unlock areas for further property development • Value added starch and glucose products • Sorbitol: 9 month payback • Adhesives • Increased ownership at Xin
Slide 5: Sibaya and Zimbali infrastructure
Sibaya • New interchanges on N2 national road and M4 coastal freeway • R46 million 9 Zimbali • Realignment of M4 coastal freeway • R42 million 10 5
Slide 6: Listing Hulamin and Introducing BEE Equity Participation
Listing Hulamin and Introducing BEE Equity Participation in both Entities 11 Two Substantial and Focused Listed Entities Market Capitalisation (Rbillion) Unitrans 3.3 46 49 57 59 69 71 72 76 79 83 84 88 91 92 95 Datatec 3.5 Astral 3.5 Mr Price 4.1 AVI 4.6 Consol 4.7 Grindrod 5.5 Spar 6.1 AECI 6.4 Il
Slide 7: Financial Results H1 2006
Financial Results H1 2006 13 Half-year to 30 June 2006 • Revenue of R3,5 billion (2005: R3,1 billion) • Increase of 13% • Operating profit R470 million (2005: R319 million) • Increase of 47% • Headline earnings of R297 million (2005: R208 million) • Increase of 43% • Interim dividend of 200 cents pe
Slide 8: Operating Profit by division; African Products
Operating Profit H1 2006 H1 2005 FY 2005 African Products 43 31 112 Hulett Aluminium (50%) 95 90 159 Moreland 117 77 231 Tongaat-Hulett Sugar 159 81 232 Triangle dividend 8 0 19 Corporate (20) (11) (44) Exchange rate translation gain 46 39 14 Exceptional items 22 12 7 Total (Rmillion) 470 319 730 •
Slide 9: Hulett Aluminium and Moreland
Hulett Aluminium (50%) H1 2006 H1 2005 FY 2005 Operating profit (Rm) 95 90 159 • Substantial increase in LME • Rolling industry margin reduction • Benefit from metal price lag in cost of sales • Rolled products sales volumes • Sales for first six months 180 000 tons annualised • May and June >190 00
Slide 10: Tongaat-Hulett Sugar; Other Income Statement Items
Tongaat-Hulett Sugar H1 2006 H1 2005 FY 2005 Operating profit (Rm) 167 81 251 • Higher export and local market realisations • H1 2006 results include average world sugar price of 11 US c/lb (H1 2005: 8 US c/lb) • Current price of around 15 US c/lb will impact H2 2006 • Increased contributions from M
Slide 11: Cash Flow and Balance Sheet; Looking Forward
Cash Flow and Balance Sheet • Cash flow and balance sheet to sustain: 9 Attractive dividend payments 9 BEE equity introduction 9 Growth opportunities • ROCE is increasing • H1 2006 annualised level: 15% 21 Looking Forward 22 11
Slide 12: Value Creation out of Agriculture; A Fundamentally Changing Sugar World
Value Creation out of Agriculture • Significance of agriculture to Tongaat-Hulett is increasing rapidly • We have established a successful track record of managing the dynamics around agricultural land • Mozambique sugar operations after expansion will entail >55 000 hectares of land • We have the c
Slide 13: Mozambique
Mozambique • Growth platform established • 2001: 36 000 tons sugar • 2006(F): 125 000 tons • Ideal growing conditions • Fully irrigated at low cost • Land dynamics favourable • Close to ports • Close proximity to South Africa 25 Xinavane Mozambique 26 13
Slide 14: Expanding Xinavane and Mafambisse
We can expand Xinavane to 180 000 tons Phase 2 • 2005 production 60 000 tons sugar • Includes plans for 17,6 million litre ethanol plant • Secured 12 900 hectare Chibanza Estate (R14 million) • Taninga Estate 1 500 hectares • Dogbone Estate 9 700 hectares • Total estimated cost R895 million • NPV R8
Slide 15: Renewable Energy
Renewable Energy Electricity Generation • White Paper on renewable energy sets target of 10 000 GWh to be achieved by 2013, equivalent to 1 870 MW • DME estimates SA electricity demand to be 42 000 MW by 2013 • Tongaat-Hulett currently supplies 9 MW into the SA national grid • Potential to supply up
Slide 16: Maize / Cassava; Hydropolymer
Maize / Cassava • US is the top maize producer, exporting about 20% of output • Exports expected to drop to 10% over next few years • Volume of US maize used to produce ethanol likely to exceed export volumes in 2007 • US ethanol output expected to more than double to 7,5 billion gallons by 2012 fro
Slide 17: Hydropolymer; Plant Rationalisation / Modified Starch Expansion
Hydropolymer • Secured exclusive technology agreement for Sub-Saharan Africa • ± R4 million committed to project to date • Detailed engineering to be complete by October 2006 • Estimated capital: R60 million • “Steady-state” operating profit: ±R40 million per annum 33 Plant Rationalisation / Modifie
Slide 18: Value Creation out of Agriculture
Value Creation out of Agriculture • Significance of agriculture to Tongaat-Hulett is increasing rapidly • We have established a successful track record of managing the dynamics around agricultural land • Mozambique sugar operations after expansion will entail >55 000 hectares of land • We have the c
Slide 19: Underlying value of prime land
Underlying value of prime land Before rezoning and development Comparable Bulk Values Extent – Anticipated Value per hectare Value Locality hectares commencement (R000’s) (Rmillion) Moreland stock 708 In progress 129 91,3 Umhlanga Triangle 141 In progress 1 741 245,5 Izinga / Umhlanga 409 2006 499 2
Slide 20: Umhlanga Ridge New Town Centre and Sibaya
Umhlanga Ridge New Town Centre • Underlying bulk value of unsold land of R24,3 million • Additional future gross profit contribution • Commercial: R101 million over 3 years • Residential: R111 million over 10 years • Unsold bulk: 235 000 m2 • Gateway catalyst: expanding for niche tenants • Parkside/
Slide 21: Zimbali; Hulett Aluminium
• Underlying bulk value of unsold land of R20 million Zimbali • Additional future gross profit contribution R376 million over 7 years • Approximately 400 hectares available for sale • 5-star Fairmont Hotel and Gary Player Zimbali Lakes golf course to commence in 2007 • Partnership with IFA expanded
Slide 22: Keeping Our Eye On The Ball; Volume Growth Continues
Keeping Our Eye On The Ball… • Sales Volumes • Mix and Margins • Costs 43 Volume Growth Continues • A tale of two quarters Rolled Products Sales Volumes • Q1: 172 000 tons annualised Tons Annualised 200000 • Q2: 188 000 tons annualised • Yields up: 1% = 2 900 tons – 160000 more to come 120000 • On t
Slide 23: Margins On The Comeback; Selecting The Most Profitable Mix
Margins On The Comeback…? • Pressure from end users 3-Month LME Price and substitutes 1980 2006 • Resisting high LME price 2750 • Increasing profit 2250 pressure on major $/Mt producers 1750 • Currency effect on rand 1250 margins • R1/$ = R180m EBIT 750 Jan-1980 Jan-1981 Jan-1982 Jan-1983 Jan-1984 J
Slide 24: First Half Successes; Two Great Opportunities
First Half Successes • Can end stock exports up 18% • Clad product sales up 31% 47 Two Great Opportunities Growth of high value products: • Light gauge foil: 3% to 8% of mix • Heat treated plate: 7% to 11% of mix 48 24
Slide 25: Heat Treated Plate Expansion; Getting Costs In Shape
Heat Treated Plate Expansion R54 million project • Completed ahead of schedule • Further opportunity unlocked Growth in Heat Treated Plate Sales 400 350 300 250 Index 200 150 100 50 0 2000 2001 2002 2003 2004 2005 H1 2006 A H2 2006 F 2007 F 49 Getting Costs In Shape Manufacturing Costs • Recycling e
Slide 26: Other Operations Growing; Staying Focused!
Other Operations Growing • EBIT up 70% in the last two years • Another big step ahead • Impact of 2010? 51 Staying Focused! 52 26