Slide 1: Tongaat-Hulett: Taking Action
TONGAAT-HULETT Taking Action
Slide 2: Transformation into 4 focused businesses
Tongaat-Hulett has transformed itself over the past decade from a diversified industrial conglomerate with many businesses to a Group with 4 strategically well positioned and focused businesses 2
Slide 3: Focus on optimising how businesses operate
Today the focus is on optimising how the businesses operate and how Group wide issues are dealt with 3
Slide 4: Earnings profile sensitivity
Tongaat-Hulett’s earnings profile remains sensitive to Currency movements Delivery on earnings enhancing opportunities 4
Slide 5: Interim Results
Interim Results For the half-year ended 30 June 2004 5
Slide 6: Income Statement
Rand/US$ average 6,67 8,03 7,55 Rand/US$ closing 6,23 7,48 6,67 INCOME STATEMENT (Rmillion) H1 2004 H1 2003 FY 2003 Revenue 2 950 3 021 6 559 Underlying operating profit 180 260 452 Triangle dividend 21 - 19 Restructure costs (22) - - Valuation adjustments (21) (375) (398) Exceptional items 1 - 7 Op
Slide 7: Revenue
REVENUE (Rmillion) H1 2004 H1 2003 FY 2003 African Products 650 756 1 487 Hulett Aluminium (50%) 819 773 1 600 Moreland 272 65 226 Tongaat-Hulett Sugar 1 209 1 427 3 246 Group total 2 950 3 021 6 559 Rand/US$ average 6,67 8,03 7,55 • African Products volumes of starch and glucose down 9% • Hulett Al
Slide 8: African Products
AFRICAN PRODUCTS H1 2004 H1 2003 FY 2003 Underlying operating profit (Rm) 7 67 114 Rand/US$ average 6,67 8,03 7,55 • High priced maize procured during previous cycle, under previous business model • Strengthening rand effect – Domestic selling prices – Export margins • Domestic volumes of starch and
Slide 9: Hulett Aluminium (50%)
HULETT ALUMINIUM (50%) H1 2004 H1 2003 FY 2003 Underlying operating profit (Rm) 39 - 22 Rand/US$ average 6,67 8,03 7,55 • Rolled Products volume up 19% – 142 000 tons annualised • Export sales up 26% – Strong growth in more profitable products • Total manufacturing costs (excl metal) only up 4% – Re
Slide 10: Moreland
MORELAND H1 2004 H1 2003 FY 2003 Underlying operating profit (Rm) 118 20 92 • Milestone performance • Continued acceleration of earnings from solid platform • Leading developments and prime land • Outstanding performances – prime residential and resort projects 10
Slide 11: Tongaat-Hulett Sugar South Africa
TONGAAT-HULETT SUGAR H1 2004 H1 2003 FY 2003 Underlying operating profit (Rm) 38 183 263 Rand/US$ average 6,67 8,03 7,55 South Africa • Domestic sales volumes down 10% • Depressed margins – Decrease in domestic sugar price – Export realisations – Small crop in 2003 => high cost of sales in H1 2004 •
Slide 12: Tongaat-Hulett Sugar Mozambique
Tongaat-Hulett Sugar Mozambique • Domestic sales up 24% • Production expected to be up 21% 12
Slide 13: Tongaat-Hulett Sugar Zimbabwe
Tongaat-Hulett Sugar Zimbabwe Triangle Sugar • Profitable • Remittance of dividends • R21 million in H1 2004 (Full Year 2003: R19m) 13
Slide 14: Valuation Adjustments
VALUATION ADJUSTMENTS H1 2004 H1 2003 FY 2003 Maize procurement contracts 18 (255) (211) Translation of foreign currency: - foreign cash (28) (61) (80) - other (9) (25) (57) Export receivables (3) (22) (33) Other financial instruments 1 (12) (17) Total (Rmillion) (21) (375) (398) Rand/US$ closing 6,
Slide 15: Balance Sheet
Balance Sheet • Total assets: R8,2 billion • Equity: R4,2 billion • Net debt/equity: 15,7% (2003: 14,9%) • R337 million improvement in cash flow before dividends • Strength to capitalise on opportunities 15
Slide 16: Taking Action: The Road Ahead is Clear
Taking Action The Road Ahead is Clear Recovery to Growth 16
Slide 17: Implementing a new approach to restore earnings
• Africa’s largest manufacturer of starch and glucose • Strong Southern African market position • Starch is one of nature’s most versatile raw materials • Leads to new product development opportunities Implementing a new approach to restore earnings 17
Slide 18: New maize procurement / product pricing model
Implementation of new maize procurement / product pricing model • Open maize futures position eliminated during H1 2004 • Maize cost in tandem with customer pricing as from November 2004 • Two product pricing models – Short term back-to-back fixed tonnage contracts where maize is priced when the cus
Slide 19: Reduce the cost of running the business
Reduce the cost of running the business • Fixed cash costs held below 2002 and 2003 levels • Good progress in maximising plant reliability and efficiency resulting in savings in variable costs • Future benefit of R25m p.a. 19
Slide 20: Grow volumes
Grow volumes • Domestic volumes of starch and glucose declined by 6% compared to H1 2003 – Imported glucose in the spray drying industry – Increased imports of final products such as confectionery • Steady progress on new products such as adhesives and modified starches • Future benefit of R20m p.a.
Slide 21: Earnings normalised 2005
2005 “Earnings normalised” 21
Slide 22: Realising aluminium rolled products investment objectives
Ensure that the Objectives of the Group’s Major Investment in Aluminium Rolled Products are Realised 22
Slide 23: Growing volumes, enhancing sales mix, reducing costs
• Currency movement masks progress being made • Industry structure favours an independent Hulamin • Targets 2% of the 11 million tons per annum global rolled products market, concentrating on attractive worldwide niches Growing volumes, enhancing sales mix and reducing costs 23
Slide 24: Achieving Full Capacity Utilisation
Achieving Full Capacity Utilisation FY 2002: 105 000 tons FY 2003: 130 000 tons H1 2004: 142 000 tons annualised • All products developed for specific customers and applications • Original feasibility: 143 000 tons • Current estimate: >200 000 tons beyond 2006 • Best month: 162 000 tons annualised 2
Slide 25: Moving up the product profitability curve
Moving up the product profitability curve High Profitability Low Easier to manufacture Products Tougher to manufacture Limited capital investment Larger capital investment Lower technology requirements Higher technology requirements Many competitors Fewer competitors Less competition from substitute
Slide 26: Enhanced Sales Mix
Enhanced Sales Mix 2004 Targeted Number of $ Rolling % market Volume Volume Producers margin share 2006 Can stock 31 48 5 $1 250/$1 700 7% global Clad Products 7 22 5 $1 500 8% global Painted Products 18 24 4 $1 150/$2 500 2% global Heat Treated Plate 13 14 5 $2 000 9% global Bright Treadplate 13 15
Slide 27: Enhanced sales mix
Enhanced sales mix • Local sales up 5% • Export sales up 26% • Total clad products up 233% • Closure sheet exports up 181% • Can stock exports up 21% • Painted exports up 30% 27
Slide 28: Reduce conversion costs
Reduce conversion costs • Total manufacturing costs excluding metal limited to increase of 4% • 13% reduction in conversion costs per ton • Identified cost reduction opportunities exceeding R75m p.a. 28
Slide 29: If we achieved our targets now
If we achieved our targets now - current market conditions and R7/US$ • Achieving full capacity utilisation Total rolling margin earned – 142 000 tons => 210 000 tons R1 840m • Enhanced sales mix – $1 250 per ton • Reduced conversion costs – Total costs of R950m R950m • Depreciation, admin and other
Slide 30: Unlocking full value from Hulett Aluminium
Focus is on unlocking full value from Hulett Aluminium for its three shareholders Tongaat-Hulett is well positioned to potentially exercise its right of last refusal on the other shareholders’ interests, should they wish to dispose of them 30
Slide 31: Transition from Sugar to Property Development
Manage the Transition from Sugar to Property Development on the KZN North Coast, Extracting Maximum Shareholder Value 31
Slide 32: Accelerating earnings
• Capitalising on the solid platform of leading property developments and 11 600 hectares of prime land • Critical mass with benefits of co- ordinated planning, quality developments and marketing • Good track record of delivery, including partnerships • Downstream opportunities Accelerating earnings
Slide 33: Project Pipeline
Project Pipeline Existing stock 1-6 years 7-10 years RESIDENTIAL Mount Edgecombe South Izinga Ridge Mdloti North Umhlanga Ridge New Town Centre Shongweni La Mercy Beach Mhlanga Forest Estate Umhlanga Triangle Mount Edgecombe North La Lucia / Izinga Ridge Westbrook Dudley Pringle Dam COMMERCIAL/INDUS
Slide 34: Executive Village – La Lucia Ridge
Executive Village – La Lucia Ridge • Gross area: 18 hectares • Development area: 8 hectares • Potential number of residential units 100 • Anticipated sale mid 2005 34
Slide 35: Umhlanga Ridge New Town Centre
Umhlanga Ridge New Town Centre • 700 apartments under development • Gateway expanding • 5 000 square metres of premium offices within the next 12 months • First major corporate offices about to commence construction • Sales to date: R150m 35
Slide 36: RiverHorse Valley Business Estate
RiverHorse Valley Business Estate • 100 ha development area • Bridging historically divided city • Straddling N2 at Effingham • Total investment: R1,6 billion • Construction start: April 02 • 1st phase opened: Nov 03 • Sales to date: R68 million • No of people employed: – Construction: 3 500 – Perma
Slide 37: Zimbali South and West
Zimbali South and West • Joint venture with IFA • 50 hectares • 550 Residential units • 1 Hotel • Sales to date: R160m 37
Slide 38: Future Opportunities: Zimbali Lakes
Future Opportunities (1-6 years) • Joint venture with IFA • Approximately 300 hectares • Golf course • Resorts • Approximately 1 000 residential units • Creating lake on Tongaat River Zimbali Lakes 38
Slide 39: Future Opportunities: Umhlanga Triangle
Future Opportunities (1-6 years) • Gross area: 148 hectares • Development area: 100 hectares • Potential number of Residential units: 1 200 • Hotels & Offices • Anticipated sales 2006 Umhlanga Triangle 39
Slide 40: Future Opportunities: Shongweni
Future Opportunities (1-6 years) • North & South of N3 Shongweni interchange • 2 000 hectares • Commercial • Residential N3 • Private cemetery Shongweni 40
Slide 41: Future Opportunities: Tinley Manor
Future Opportunities (1-6 years) • North and South bank of Umhlali river • 680 hectares • 5 000 potential units (subject to zoning & EIA approval) • Hotel & Retail • Golf course development • Potential for small craft harbour Tinley Manor 41
Slide 42: Zinkwazi (7-10 years)
Zinkwazi (7-10 years) 42
Slide 43: Expand business model
Expand business model • Build up international customer base • Downstream criteria and business plans are being developed – Capture full value from land developments – Sustain long term profitability – Reduce industry cyclicality impact 43
Slide 44: Transforming to ensure future success
• Powerful Huletts and other leading SADC sugar brands • World leader in process design and technology • Installed capacity for 1,5 million tons raw sugar production • Year round refining and packing capability of 700 000 tons p.a. • Well positioned value-added animal feeds business Transforming to
Slide 45: THS South Africa
THS South Africa • Move to a leaner and flatter structure – Size of THS Board halved – Regional structures in place and working well • Reduce head office overheads by at least 50% – Closure of head office completed in June 2004 – Building up for sale in prime area of La Lucia – Leadership team reloc
Slide 46: THS South Africa
THS South Africa • Reduce milling costs by 10% – Regional structures established – Closed Entumeni sugar mill – Future benefit of +R28m p.a. • Increase benefit from refining value chain – Benchmarking exercise completed – Future benefit of up to R80m p.a. 46
Slide 47: THS South Africa
THS South Africa • Leverage technology base – Restructuring of technical department completed – New refining technology pilot plant to be deployed in Brazil for trials • Cane procurement initiatives – 501 000 tons cane p.a. confirmed (6% of installed capacity) – 331 000 tons cane p.a. being explored
Slide 48: THS Mozambique
THS Mozambique • Increased access to preferential markets – Participating with other LDC countries for earlier and greater EBA access into EU – ACP beneficiary through shortfall allocations – Negotiating for a share of 18 000 ton Barbados reallocation • Grow production towards full capacity of 156 0
Slide 49: THS Zimbabwe: Survival, Growth
THS Zimbabwe Survival Growth 49
Slide 50: Actions could improve profitability by at least R150 million p.a.
All these actions have the potential to improve our profitability by at least R150 million per annum 50
Slide 51: Opportunities
Opportunities • Earnings translate into cash • Well positioned for acquisitions / expansions – World sugar deregulation • Co- and new product development, including product beneficiation • Leverage technology base • Extension of powerful Huletts brand 51
Slide 52: Taking the Group Forward
Taking the Group Forward Unlock substantial future earnings growth from the current business base Capitalise on the strategic positioning of the Group’s businesses 52
Slide 53: Information Pack
Information Pack For the half-year ended 30 June 2004 53
Slide 54: African Products
African Products TONGAAT-HULETT African Products
Slide 55: Volume Data
Volume Data Volume H1 2004 H1 2003 FY 2003 Local Starch 39 958 41 487 84 618 Local Glucose 136 908 146 579 297 753 Total Local 176 866 188 066 382 371 Export Starch 14 226 21 035 43 932 Export Glucose 12 633 12 889 21 389 Total Exports 26 859 33 924 65 321 Co-Products 73 945 83 481 161 840 Total 277
Slide 56: Financial Data
Financial Data Rmillion H1 2004 H1 2003 FY 2003 Revenue: 650 756 1 487 Domestic 465 527 1 065 Exports 65 90 166 Co-Products 120 139 256 Underlying Operating Profit 7 67 114 Valuation Adjustments 19 (258) (218) Operating Profit 26 (191) (104) 56
Slide 57: Afprod's Maize Position
Afprod’s Maize Position 30 Jun 2004 Tons 31 Dec 2003 Unpriced Priced Maize in Silo Zero 135 480 316 322 Committed Physical Contracts (not yet 119 404 191 958 167 480 delivered) Futures Contracts Zero 165 200 Not Hedge Accounted Futures Contracts (700) 3 600 Hedge Accounted 57
Slide 58: Afprod's priced maize at 30 June 2004
Afprod’s priced maize at 30 June 2004 Month Tons Priced Full Landed cost (R/t) Interest Component (R/t) July 2004 43 878 1 692.96 42.01 August 2004 45 256 1 795.80 104.86 September 2004 50 212 1 575.33 141.37 October 2004 34 297 1 284.91 48.62 November 2004 31 205 1 280.75 56.08 December 2004 25 696
Slide 59: Hulett Aluminium
Hulett Aluminium TONGAAT-HULETT = Aluminium 59
Slide 60: Hulett Aluminium
Hulett Aluminium H1 2004 H1 2003 FY 2003 Average R/US$ 6,67 8,03 7,55 Sales volumes – Rolled Products (t) 70 800 59 400 130 400 - Other 8 800 8 000 16 300 - Total 79 600 67 400 146 700 Revenue (Rm) 1 638 1 545 3 200 Underlying operating profit 78 0 44 Valuation adjustments 12 (36) (39) Operating pro
Slide 61: Financial data
Financial data H1 2004 H1 2003 FY 2003 Average R/US$ R/US$ 6,67 8,03 7,55 Local sales Tons 19 476 18 544 38 918 Export sales Tons 51 383 40 895 91 476 Total Tons 70 859 59 439 130 394 Coated tons Tons 19 939 16 800 35 799 Average rolling margin $/ton 1 083 1 081 1 080 Rolling margin Rm 512 516 1 063
Slide 62: H1 2004 Underlying Operating Profit
H1 2004 Underlying Operating Profit • Increased by R78m compared to H1 2003 • Adverse currency effect on rolling margins approximately R100 million • Offset by approximately R110 million gain from improved volumes, mix and costs • Metal price lag from negative to small positive 62
Slide 63: Industry Climate
Industry Climate • North American and Asian markets becoming more bouyant, with improved rolling margins • European market generally still quiet • Competitor dynamics – Alcan acquires Pechiney – now only 3 majors – Alcoa acquires Russian mills – Corus aluminium assets for sale – Alcan places rolling
Slide 64: Rolled Products Capacity Utilisation
Rolled Products Capacity Utilisation Sales Volumes % Increase (000t) 2001 actual 91 7 2002 actual 105 15 2003 actual 130 24 2004 estimate 150 15 64
Slide 65: Most Profitable Sales Mix
Most Profitable Sales Mix • Local sales up 5%, foil up 19% • Total clad products up 233% • Can stock exports up 21% • Painted exports up 30% • Closure sheet exports up 181% 65
Slide 66: Moreland
M4} Ol mdeesla) ast. ng rd TONGAAT-HULETT Moreland
Slide 67: Realising the Vision
Realising Realizing the Vision the Vision 67
Slide 68: H1 2004 Performance
H1 2004 Performance • Record performance • Reaping rewards from world-class platform and continued buoyancy in the property market • Revenue up 318% to R272m - Beat 2003 full year (R226m) - Outstanding Resorts and Residential performance - Good Industrial and Commercial performance • Underlying oper
Slide 69: Residential Sales R94m (up 211%)
Residential Sales R94m (up 211%) Izinga Ridge Ilala Ridge 69
Slide 70: Commercial/Industrial Sales R44m (up 35%)
Commercial/Industrial Sales R44m (up 35%) Umhlanga Ridge New Town Centre RiverHorse Valley Business Estate PPP with eThekwini Municipality 70
Slide 71: Resort Sales R135m (2003: R2m)
Resort Sales R135m (2003: R2m) JV with IFA 71
Slide 72: 2004 Highlights
2004 Highlights • Sibaya Entertainment Kingdom - On schedule for opening November • uShaka Marine World • Successful opening in May - Project managed for the Municipality • Durban Point Waterfront Development canal launch 72
Slide 73: Conclusion
Conclusion • On-going robust property market – Emerging market customers – Low interest rates – Positive outlook for key economic variables • KZN and National market leader – Exploring international customers • Increasing government infrastructural spend • Prime / extensive concentrated land holding
Slide 74: Tongaat-Hulett Sugar
Tongaat-Hulett Sugar TONGAAT-HULETT Tongaat-Hulett Sugar
Slide 75: 2004 Interim Results
2004 Interim Results • Revenue R1,209 billion • Underlying Operating Profit R38 million • Operating earnings margin 3,1% • Restructure costs R22 million • Triangle dividend R21 million • Operating profit R28 million 75
Slide 76: Domestic Volumes THS (SA)
Domestic Volumes THS (SA) Tons sugar H1 2004 H1 2003 FY 2003 Opening stock 175 607 158 454 158 454 Production 87 446 112 929 367 863 Prior season adjustment (1 459) 15 046 15 046 Sugar purchased in 49 554 48 859 133 163 Sales (211 767) (236 236) (498 919) Closing stock 99 381 99 052 175 607 76
Slide 77: Export Volumes THS (SA)
Export Volumes THS (SA) Tons sugar H1 2004 H1 2003 FY 2003 Opening stock 100 991 172 903 172 903 Production 78 555 85 560 284 156 Prior season adjustment 1 004 (11 680) (11 680) Sales (120 345) (172 007) (344 388) Closing stock 60 205 74 776 100 991 77
Slide 78: Total Volumes THS (SA)
Total Volumes THS (SA) Tons sugar H1 2004 H1 2003 FY 2003 Opening stock 276 598 331 357 331 357 Production 166 001 198 489 652 019 Prior season adjustment (455) 3 366 3 366 Sugar purchased in 49 554 48 859 133 163 Sales (332 112) (408 243) (843 307) Closing stock 159 586 173 828 276 598 78
Slide 79: Raw Sugar Export Realisations
Raw Sugar Export Realisations South African Industry Raw Sugar H1 2004 H1 2003 FY 2003 Price in US c/lb* 6,87 6,50 6,59 Average Rand/US $ R7,64 R9,32 R8,85 Average Rand realisations per ton R1 243 R1 574 R1 412 * Excludes preferential Table includes raw sugar markets and premiums for refined exports
Slide 80: Sugar Production
Sugar Production 2004 Installed Tons ‘000 2000 2001 2002 2003 (Est) capacity South Africa 969 755 861 652 712 974 Mozambique 39 36 71 82 99 156 Swaziland RSE 41 45 50 54 52 55 Zimbabwe 282 264 296 264 250 315 Total Sugar 1 331 1 100 1 278 1 052 1 113 1 500 80
Slide 81: SA Sugar Production
SA Sugar Production 3 Tons Sugar - Millions Industry: 2 247 000 tons 2.5 THS: 712 000 tons 31,7% (2003: 27,1%) share of industry 2 1.5 THS 1 Industry 2003 lowest THS 0.5 production in 7 years as a consequence of 0 low rainfall 1999 2000 2001 2002 2003 2004 Year 81
Slide 82: SA's Value-adding Activities
SA’s Value-adding Activities • Revenue – R320,5 million (H1 2003: R322,5 million) • Operating Profit – R34,8 million (H1 2003: R34,0 million) 82
Slide 83: Taking Action
TO Typecast burl e-t-t TONGAAT-+HULETT | | Taking Action 83
Slide 84: Sustainable development
Sustainable development • BEE procurement spend 15% – A major highlight was the procurement of the first 5 000 tons of maize from emerging farmers • Employment Equity: Blacks comprise – 46% management – 76% skilled and supervisory positions • Rated by Financial Mail/Empowerdex as a Top Empowerment C
Slide 85: Sustainable development
Sustainable development • Inclusion in JSE SRI Index • Improvement in safety – Lost time injury frequency rate YTD 0,49 compared to 1,50 a year ago – Total recordable case frequency rate YTD 1,12 compared to 2,50 a year ago • Eligible employees receive free ART 85
Slide 86: Sustainable development
Sustainable development • Training and development – 70 employees participating in formal development programmes – 144 employees participating in the Group’s tertiary education aid programme – Training approximately 2% of basic employment costs • Good reputation with the ability to constructively en
Slide 87: Thank you
Tongaat-Hwlett Thank you TONGAAT-HULETT | | Taking Action 87