Tongaat Hulett Limited · JSE:TON
Tongaat Hulett — FY2021 Earnings Presentation
44 slides from Tongaat Hulett's earnings presentation, June 2021
Slide 1: Results Presentation for the Year Ended 31 March 2021
TONGAAT HULETT 20 21 RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2021 PARTNERING IN GROWTH
Slide 2: Partnering in Growth
PARTNERING IN GROWTH 2
Slide 3: Agenda
AGENDA 01 Introduction 02 03 Divisional PARTNERING IN GROWTH Financial and business overview results performance Gavin Hudson Rob Aitken Rob Aitken 04 Outlook Gavin Hudson 05 QGavin &A Hudson and Rob Aitken 3
Slide 4: We acknowledge and value your ongoing support
WE ACKNOWLEDGE AND VALUE YOUR ONGOING SUPPORT Employees Growers, Customers and Suppliers PARTNERING IN GROWTH The Board Government Shareholders Lenders 4
Slide 5: Our comprehensive and sustained response to COVID-19
OUR COMPREHENSIVE AND SUSTAINED RESPONSE TO COVID-19 HEALTHY PEOPLE • +18 000 employee medical assessments conducted • COVID-19 safety protocols consistently applied • Infections limited to 1 240* cases • +5 000 vaccines administered in Zimbabwe • +10 million total employee daily screenings on site
Slide 6: We have intensified our commitment to ESG
WE HAVE INTENSIFIED OUR COMMITMENT TO ESG* 13% LTIFR** Improvement (0.093) R122 million (excl. COVID-19 spend) • ~78 million person hours worked • Spent on Socio-economic Development • Sadly, 1 fatality in Mozambique initiatives o Health care, education and basic services PARTNERING IN GROWTH Enviro
Slide 7: Operational performance overview
OPERATIONAL PERFORMANCE OVERVIEW MOZAMBIQUE ZIMBABWE SUGAR SA PROPERTY • 10-year record – local sugar • Dividend of R323m • Refinery production +39% • Sales R215m sales • Ethanol +10% • Local market sales +22% • Legacy infrastructure highlights • Refinery ramped up +49% obligations reduced R82m PART
Slide 8: Operational challenges resolved – SA refinery sugar loss unpacked
OPERATIONAL CHALLENGES RESOLVED – SA REFINERY SUGAR LOSS UNPACKED Context Financial Impact (Rm) A significant increase in local refined sugar demand 143 21 369 Tongaat took a decision to increase refining throughput Refinery 205 Budget: 340k tons PARTNERING IN GROWTH Actual: 453k tons Protected loca
Slide 9: Debt reduction update
DEBT REDUCTION UPDATE We delivered 75% against our debt reduction target of R8.1bn Borrowings (Rm) 11 354 • R6.57bn in deals 42% • R6.1bn in cash (R450m in escrow) 6 570 • Concluded asset sales despite MAC dispute and COVID-19 headwinds • Secured milestone waivers and extensions from lenders PARTNER
Slide 10: Financial overview
FINANCIAL OVERVIEW * CASH FLOW FROM REVENUE (Rbn) ADJUSTED EBITDA (Rbn) OPERATIONS (Rbn) 15,4 3,0 2,3 14,9 2,5 1,8 1,7 13,1 PARTNERING IN GROWTH 0,6 2019 2020 2021 2019 2020 2021 2019 2020 2021 OPERATING PROFIT (Rbn) HEADLINE LOSS HEADLINE LOSS (Rbn) (Rm) NET BORROWINGS (Rbn) 3,2 11,3 Hyperinflation
Slide 11: Financials
m TongaatHulett Financials PARTNERING IN GROWTH
Slide 12: Financial overview
FINANCIAL OVERVIEW * REVENUE ADJUSTED EBITDA CASH FLOW FROM OPERATIONS R14.9bn R2.5bn R1.8bn PARTNERING IN GROWTH down 3% down 17% down 22% from R15.4bn from R3.0bn from R2.3bn OPERATING PROFIT HEADLINE LOSS NET BORROWINGS R1.8bn R1.1bn R6.6bn down 44% down 42% improvement from R3.2bn from R285m fro
Slide 13: Tangible progress in a challenging environment
TANGIBLE PROGRESS IN A CHALLENGING ENVIRONMENT Strong performance Steady results in A step change in debt levels, in Mozambique operations Zimbabwe, with dividends of after the successful defence of R323m paid to South Africa the starch ‘MAC’ dispute PARTNERING IN GROWTH H1 progress in South Africa
Slide 14: Zimbabwe hyperinflation impact on results
ZIMBABWE HYPERINFLATION IMPACT ON RESULTS • IAS 29 Financial Reporting in Hyperinflationary Economies As reported Sensitivity (Official FX (Unofficial FX • Significantly improvement in inflation rate from 676% to 241% Rm rate) rate) Difference • Foreign currency auction system introduced in June 202
Slide 15: Statement of profit and loss
STATEMENT OF PROFIT AND LOSS * Commentary FY 2021 FY 2020 • Gross profit margin reduced from 44% to 29%: Rm (Audited) (Audited) Revenue 14 918 15 382 44.1 Cost of sales (10 649) (8 591) (2.5) 0.9 0.9 PARTNERING IN GROWTH Gross profit 4 269 6 791 (8.2) (2.2) 28.6 Operating profit 1 818 3 257 (3.8) (0
Slide 16: Headline earnings reconciliation
HEADLINE EARNINGS RECONCILIATION * 2 497 375 1 818 (515) (134) (405) (1 338) 22 (245) FY 2021 (626) (259) (301) (929) (180) (1 109) PARTNERING IN GROWTH Earnings impact: 513 115 1 294 375 122 1 439 113 76 670 2 31 122 643 181 824 889 3 257 3 010 (12) (630) (1 451) (169)
Slide 17: Revenue by segment
REVENUE BY SEGMENT * FY 2021 (3%) 2% FY 2021 FY 2020 % change 6% Rm Revenue 14 918 15 382 (3%) 41% Sugar 14 670 14 437 2% R14.9bn Zimbabwe 6 162 6 126 1% 42% PARTNERING IN GROWTH Mozambique 1 845 1 682 10% South Africa 6 212 6 023 3% Other SADC 933 1 451 (36%) 12% Inter-segment (482) (845) 43% Zimba
Slide 18: 'Adjusted EBITDA' by segment
‘ADJUSTED EBITDA’ BY SEGMENT * FY 2021 (6%) 2% Rm FY 2021 FY 2020 % change 7% Adjusted EBITDA 2 497 3 010 (17%) (4%) Sugar 2 579 2 760 (7%) R2.5bn Zimbabwe 2 116 2 281 (7%) 85% PARTNERING IN GROWTH Mozambique 392 285 38% 16% South Africa (100) 64 (256%) Other SADC 171 130 32% Property 59 660 (91%) Z
Slide 19: Operating profit by segment
OPERATING PROFIT BY SEGMENT * FY 2021 (9%) 3% Rm FY 2021 FY 2020 % change 27% Operating profit 1 818 3 257 (44%) Sugar 1 902 3 010 (37%) R1.8bn 87% Zimbabwe 1 578 2 882 (45%) (21%) PARTNERING IN GROWTH Mozambique 230 124 85% South Africa (388) (130) (198%) 13% Other SADC 482 134 260% Property 58 658
Slide 20: Finance costs impacted by debt restructure and FX losses
FINANCE COSTS IMPACTED BY DEBT RESTRUCTURE AND FX LOSSES Mozambique Metical Higher weighted Sale and leaseback South African Net SA borrowings Forex loss reduced year- devalued by 24%, average cost of debt transaction; annualised lending rates decreased from on-year partially hedged impacting foreig
Slide 21: Cash flows
CASH FLOWS Commentary Rm 2021 2020 • The investment in working capital was similar to FY 2020: Operating cash flows before working capital 3 245 3 692 Working capital movements (1 426) (1 355) 178 859 (1 355) (12) (1 426) Cash generated from operations 1 820 2 337 (305) PARTNERING IN GROWTH (412) Re
Slide 22: Cash flows – improvement in SA working capital cycle
CASH FLOWS – IMPROVEMENT IN SA WORKING CAPITAL CYCLE South Africa – Working Capital Funding (Rm) - (500) PARTNERING IN GROWTH (1 000) (1 500) (2 000) (2 500) Apr 20 May 20 May 20 Jun 20 Jul 20 Aug 20 Sep 20 Oct 20 Nov 20 Dec 20 Jan 21 Feb 21 Mar 21 FY 2021 FY 2020 Commentary • Average working capita
Slide 23: A significant reduction in debt levels
A SIGNIFICANT REDUCTION IN DEBT LEVELS Gross Borrowings (Rm) Commentary • Net borrowings at 31 March 2021 were R6.6bn, compared to R11.4bn 12 596 11 303 11 438 at 31 March 2020, a reduction of R4.8bn 9 955 -43% • Debt reduction transaction agreements totalling R6.6bn had been 7 199 10 937 signed at
Slide 24: Progress with debt reduction milestones
PROGRESS WITH DEBT REDUCTION MILESTONES Pricing Milestones R500m R500m R4.0bn R4.0bn R6.0bn R6.0bn R8.1bn R8.1bn Signed Agreements Nov 19 Mar 20 Jun 20 Sep 20 Pricing PARTNERING IN GROWTH Proceeds Jun 20 Sep 20 Dec 20 Mar 21 Milestone Status ✓ ✓ ✓ ✓ ✓ ✓ Default Milestones R500m R500m R4.0bn R5.5
Slide 25: South African debt refinance
SOUTH AFRICAN DEBT REFINANCE Rm 6 563 Salient terms of the new facilities 6,372 300 191 300 Termination Facility 600 1 172 Facility Purpose Date Amount Senior Facility A To partially refinance amounts 30 June 2024 R1 500m 2,200 (Term Loan) outstanding under the existing facilities that are considere
Slide 26: South African debt refinance – salient terms
SOUTH AFRICAN DEBT REFINANCE – SALIENT TERMS Term Detail PIK Settlement • PIK Facility C is required to be repaid through an equity capital raise, the sale of strategic assets, or a combination thereof Initiatives • An asset sell-down is triggered if the equity capital raise conditions are not met,
Slide 27: South African debt refinance – PIK facilities
SOUTH AFRICAN DEBT REFINANCE – PIK FACILITIES Senior Facility C (PIK Facility) Equity raise: 31 Dec 21 31 Jan 22 28 Feb 22 31 Mar 22 Share Placing Required Announcement EGM Notices / Underwriting Closure Agreement Strategic asset sell-down: PARTNERING IN GROWTH 31 Mar 23 30 Sep 23 Timeline accelerat
Slide 28: Mozambique debt refinance
MOZAMBIQUE DEBT REFINANCE Rm Commentary 966 966 • The debt standstill agreement concluded on 18 December 2019, was 80 extended to 31 July 2021 to allow for the refinancing to be concluded 116 • Improved performance of the Mozambique operations has increased 66 437 earnings and reduced the leverage m
Slide 29: Mozambique debt refinance – salient terms
MOZAMBIQUE DEBT REFINANCE – SALIENT TERMS Term Detail Capital Repayment • Facility A will be prepaid by way of a cash sweep whereby cash on hand after taking Facility B and c.R22m (MZN 100m) of headroom into account • Facility B will be repaid with certain proceeds received from the sugar industry,
Slide 30: Divisional performance
DIVISIONAL PERFORMANCE PARTNERING IN GROWTH
Slide 31: Zimbabwe
ZIMBABWE Commentary ‘Adjusted EBITDA’ bridge (Rm) • ‘Adjusted EBITDA’ profit of R2.12bn (FY 2020: R2.28bn) FY 2020 2 281 • Sugar production down 7% to 408 000 tons – unseasonal rainfall impeded ripening, while a wet spell ended the season early Price (103) • Overall cane yields declined – low dam le
Slide 32: Mozambique
MOZAMBIQUE Commentary ‘Adjusted EBITDA’ bridge (Rm) • ‘Adjusted EBITDA’ profit up 38% to R392m (FY 2020: R285m) FY 2020 285 • Sugar production down 5% to 195 300 tons, limited by cane supply caused by lower cane yields at Xinavane Local Pricing 112 • Revitalised sugarcane assets through enlarged roo
Slide 33: South Africa
SOUTH AFRICA Commentary ‘Adjusted EBITDA’ bridge (Rm) • ‘Adjusted EBITDA’ loss of R100m (FY 2020: R64m profit) FY 2020 64 • Strong first half of the year, followed by a challenging second half Export Market 156 • Sugar production down 10% to 535 000 tons as the lockdown delayed the start-up during l
Slide 34: Other SADC
OTHER SADC Commentary ‘Adjusted EBITDA’ contribution (Rm) • ‘Adjusted EBITDA’ of R171m (FY 2020: R130m profit) • Namibia 40 Namibia -83% • The Namibian operation was disposed of with effect from 1 July 2020 and 7 consequently the profit in FY 2021 represents 3 months of trading PARTNERING IN GROWTH
Slide 35: Financials
et. 1092 Tongaat Financials PARTNERING IN GROWTH
Slide 36: Property
PROPERTY Commentary ‘Adjusted EBITDA’ bridge (Rm) • ‘Adjusted EBITDA’ profit of R59m (FY 2020: R660m) FY 2020 660 • Township property sales reduced from 239 000m2 new floor area to 67 000m2 new floor area as COVID-19 saw deals in progress delayed or cancelled Township (353) • Large land sales totall
Slide 37: Corporate
CORPORATE Commentary ‘Adjusted EBITDA’ bridge (Rm) • Significantly reduced adjusted EBITDA loss at R141m (FY 2020: R410m loss) FY 2020 (410) • Restructure costs reduced by R115m to R24m (excluding costs directly attributable Restructure Costs 115 to the disposal of the starch, Namibian and Eswatini
Slide 38: Starch
STARCH Commentary ‘Adjusted EBITDA’ bridge (Rm) • ‘Adjusted EBITDA’ reduced by R352m from R729m at March 2020 to R377m at March 2021 FY 2020 729 (12 months) • The starch operation contributed to profits for 7 months of the year less 5 (277) • Trading profits at October 2020 were 17% lower than Octob
Slide 39: Outlook
Outlook PARTNERING IN GROWTH
Slide 40: Tongaat has a significant asset base and footprint
TONGAAT HAS A SIGNIFICANT ASSET BASE AND FOOTPRINT SUGAR 14 59k 1.5m Leading agri-business in sugar, Production facilities Hectares farmed Tons p/a in by Tongaat sugar production ethanol, animal feeds & cattle South Africa Zimbabwe 177k ha capacity • 4 mills • 2 mills total feedstock PARTNERING IN G
Slide 41: Our strategy remains fit for purpose
OUR STRATEGY REMAINS FIT FOR PURPOSE Vision To be the most trusted partner in all we do Mission Build our future by creating sustainable value for all our stakeholders PARTNERING IN GROWTH 1 Rightsize and fix Create a platform 3 the fundamentals of our business for sustainable and profitable growth
Slide 42: Our key focus areas
OUR KEY FOCUS AREAS GROWTH • Improve yield & feedstock expansion • Leverage brand & route to market opportunities • Extract value from repositioned property portfolio • Consider diversification opportunities ASSETS • Entrench asset care programs PARTNERING IN GROWTH • Improve capability & reliabilit
Slide 43: Outlook
OUTLOOK Continued demand for sugar Ongoing dividend from Zimbabwe Progressing both delayed and additional property sales PARTNERING IN GROWTH Lower interest burden Debt reduction ~R2bn (Equity /Asset sales) Challenging start to the crushing season, mainly in South Africa Lower sugar inventory Slight
Slide 44: Thank you!
PARTNERING IN GROWTH 44 THANK YOU!