Tongaat Hulett Limited · JSE:TON
Tongaat Hulett — FY2010 Earnings Presentation
63 slides from Tongaat Hulett's earnings presentation, June 2010
Slide 1: Tongaat Hulett June 2010
@ Tongaat Hulett JUNE 2010
Slide 2: Financial Results
FINANCIAL RESULTS @ Tongaat Hulett aga aes
Slide 3: Earnings Growth
Earnings Growth 15 months to 15 months to R million 31 March 2010 31 March 2009 % Increase Audited Pro forma Revenue 11 136 9 453 +18% Profit from Operations 1 691 1 323 +28% Headline Earnings 858 626 +37% • Comparative pro forma results for 15 months to 31 March 2009: Reporting accountant’s report
Slide 4: March Year-end
March Year-end • Financial year-end changed to 31 March 2010 - 15 months results include • Revenue from single sugar production season and the increased value of the growing cane crop • Costs for a 15 month period, including costs incurred from January to March in the off-crop period that are requir
Slide 5: Profit from Operations and Revenue
Profit from Revenue Operations Audited Pro forma Audited Pro forma 15 months 15 months R million 15 months to to 31 March 15 months to to 31 March 31 March 2010 2009 31 March 2010 2009 Sugar operations Zimbabwe (2008 dividends) 576 93 1 636 311 Swaziland 63 56 134 138 Mozambique 192 301 463 543 SA a
Slide 6: Zimbabwe Sugar Operations
Zimbabwe Sugar Operations • Profit from operations: R576 million - Relevant fundamentals for a sugar business re-introduced - Local market prices restored to regional levels - Sugar production volumes affected by conditions in 2008 - Profit from operations is separate from consolidation balance shee
Slide 7: Mozambique Sugar Operations
Mozambique Sugar Operations • Profit from operations: R192 million (prior period: R301 million) • R122 million currency gain in 2008 (as financial structures were finalised) not repeated in 2009/2010 • Stronger Rand in 2009/2010 - effected earnings conversion on consolidation • Xinavane - mill start
Slide 8: South African Sugar Agriculture, Milling and Refining
South African Sugar Agriculture, Milling and Refining • Profit from operations: R158 million (prior period: R95 million) • Higher local and export sales realisations • Lower sugar production volumes • Almost all of Tongaat Hulett’s sugar production sold in the local market • Huletts brand SA sugar i
Slide 9: Downstream and Sugar Value Added Activities
Downstream and Sugar Value Added Activities • Profit from operations: R226 million (prior period: R230 million) Generated from • Refined exports from South Africa - Rand strength in 2009/10 • South African domestic marketing sales and distribution - Huletts brand • Botswana and Namibia sugar packing
Slide 10: Starch Operations
Starch Operations • Operating profit: R301 million (prior period: R290 million) • Domestic sales volumes of starch and glucose declined by 5% • Contraction in consumer spending - alcoholic beverage, paper and coffee creamer and confectionary sectors • Margin improvement • Local maize prices trading
Slide 11: Land Conversion and Development
Land Conversion and Development • 13 863 gross hectares (8 802 developable hectares) for development in SA • Sales of 169 developable hectares (280 gross hectares) in 2009/10 • 159 hectares in eThekwini growth corridor north of Durban, including around new international airport • 108 hectares: reali
Slide 12: Income Statement
Income Statement • Centrally accounted and consolidation items • Recognition of pension fund 2007 employer surplus account allocation - unconditional entitlement in 2009: R82 million (prior period: R86 million) • Finance costs R million Interest costs on debt 401 Interest on maize obligation 42 BEE
Slide 13: Cash Flow and Balance Sheet
Cash Flow and Balance Sheet 15 months to March 2010 • Cash inflow from operations: Cash from operating profit before tax and working capital R1 423 million Working capital R789 Tax - R257 R1 955 million • Capital expenditure, Mozambique expansion and major plant R1 987 million overhaul costs At 31 M
Slide 14: Dividends
Dividends • Final dividend 2010: scrip distribution with a cash alternative of 175 cents per share (interim dividend: 100 cents per share) • Number of shares will be determined in the ratio that 175 cents multiplied by a factor of 1,05 bears to a 22 day VWAP - Provides shareholders with an alternati
Slide 15: Conversion of Developable Land Under Cane
Conversion of Developable Land Under Cane Creating stakeholder value South Africa • 13 863 gross hectares • 8 802 developable hectares 15
Slide 16: Bulk Land Sales vs Partnerships
Smaller land parcels sold Bulk Land Sales vs from within a Tongaat Hulett Partnerships development • Ridgeside development • R9,9 million per developable hectare • Cornubia • Sold 108 hectares at R725 000 per developable hectare • Tongaat Hulett: 497 developable hectares • Municipality: 269 developa
Slide 17: Canelands Inyaninga R1
Airport Inner Ring Tongaat Hulett Landholding CANELANDS 2 515 Gross hectares Existing rail 1 517 Developable hectares TONGAAT R1 INYANINGA 02 MAIN AIRPORT ACCESS KING SHAKA INTERNATIONAL AIRPORT & DUBE TRADEPORT Proposed new road N2 M4 17
Slide 18: Inyaninga: Partnership / Bulk Land Sales / Own Development
Inyaninga: Partnership / Bulk Land Sales / Own Development Gross hectares : 707 Developable hectares : 550 Yes? R6,3 million per developable hectare R3,465 billion Maybe? R4,4 million per developable hectare R2,420 billion No? 18
Slide 19: Sime LE a
Sime LE a Congae hih® 9 Fv ome a). ey igi) Sw nie aad BE, @ Tongaat Hulett 19
Slide 20: Fairmont Hotel - Zimbali
Fairmont Hotel - Zimbali 20
Slide 21: Sibaya Bulk Land Sales / Own Development / Partnership
Sibaya (nodes 1 and 5) Bulk Land Sales / Own Development / Partnership EIA approved : Nodes 1 and 5 Gross hectares : 231 Developable hectares : 125 UMDLOTI SIBAYA CASINO M4 Yes? R6,8 million per developable hectare R850 million Maybe? R5,4 million per developable hectare R675 million No? 21
Slide 22: Tinley Manor
Tinley Manor Bulk Land Sales / Partnership / Own Development • Largest consolidated property surrounding a river on North Coast • 882 developable hectares • 1 042 gross hectares • Full coastal frontage (3,9 km) • Access to both sides of Umhlali Lagoon and River Basin • Tinley Manor ski boat launch s
Slide 23: Update on Tongaat Hulett Starch
Update on Tongaat Hulett Starch • Outlook for South African maize 2009/10 1979/80 2007/08 2008/09 Forecast Hectares Planted (000 ha) 4 031 2 799 2 428 2 740 Yield (t/ha) 3,37 4,53 4,96 4,86 Production (000 tons) 13 583 12 700 12 050 13 317 • Outlook for World maize • Record US Crop of 334 million to
Slide 24: Competitive South African Maize
Price in U S$ per Ton - -50.00 50.00 100.00 150.00 200.00 250.00 300.00 350.00 03/02/06 10/03/06 18/04/06 24/05/06 28/06/06 01/08/06 05/09/06 10/10/06 13/11/06 15/12/06 23/01/07 26/02/07 02/04/07 Gap 10/05/07 13/06/07 17/07/07 21/08/07 25/09/07 29/10/07 30/11/07 10/01/08 13/02/08 18/03/08 SAFEX - YM
Slide 25: Volumes
Volumes • Volume growth for 2010/11 in line with GDP forecasts of 2,9% - 3,5% • Improved sales to alcoholic beverage sector • Improved export margins for starch and glucose products leading to higher export volumes • Downward pressure on co-product pricing 25
Slide 26: Sugar Price Dynamics and Renewable Energy
Sugar Price Dynamics Renewable Energy Tongaat Hulett Sugar Sales • Destination 2010/11 season • Local and regional markets 64% • World market 16% • EU market 20% • Priced world market: 48% at 19,67 US c/lb • Brazil: Sugar vs ethanol - relative returns • India Production Consumption 2007: 29,1 millio
Slide 27: Substantially Increase Sugar Production, Reduce Unit Cost
Substantially Increase Sugar Production Reduce the Unit Cost of Production Utilising Available Milling Capacity 27
Slide 28: Growth in Sugar Production
Growth in Sugar Production Zimbabwe, Mozambique 2010/11 2009/10 Target Gap Swaziland* and South Africa Estimate Sugar Production - tons (000) 1 011 1 987 976 1 202 - 1 254 Cane harvested - tons (000) 8 986 16 445 7 459 10 280 - 10 725 Hectares farmed under cane Tongaat Hulett 65 655 68 802 3rd Parti
Slide 29: What is at stake?
What is at stake? Indicative EBIT Gap > R1,3 billion p.a. “Mills Full” • World sugar price: 18c/lb • ZAR/US$: 8.00 • No electricity cogeneration Typical cost New Greenfield Sugar Mill 300 000 tons per annum Capital cost of the Mill > $340 million 29
Slide 30: Sugar Industry - Time Lag
Sugar Industry - Time Lag What you do today Impacts on sugar production and with its cash outflows cash inflows 12-18 months later • Replanting • On average every 8 years • R7 000 - R11 000 per hectare • South Africa: September to March • Mozambique and Zimbabwe: April to October • 11 - 16 months be
Slide 31: South Africa
South Africa 31
Slide 32: Cane Yields in South Africa
Cane Yields in South Africa • Rainfed vs irrigated • Rainfed yields achieved in the past have been competitive - Brazil / India • 2000 SA North Coast 63,8 tcph • 2009 SA North Coast 44,8 tcph • Commercial growers - 2 year lag in replant • Land reform / small scale growers - little replant • Agri-Bus
Slide 33: Hectares Supplying Tongaat Hulett's SA Mills
Hectares Supplying Tongaat Hulett’s SA Mills New planting Targeted Sep 2009 - Jan 2010 Sep 2010 - Mar 2011 Small scale growers 2 153 3 741 Commercial growers 1 100 1 620 Tongaat Hulett leased land 1 260 2 723 Total 4 513 8 084 Hectares harvested • Exited from cane in 2010/11 (airport) • 2009: 111 00
Slide 34: Zimbabwe
Zimbabwe Socio economic and political issues 34
Slide 35: Zimbabwe – Rehabilitation of Mills: US $26 million
Zimbabwe – Rehabilitation of Mills: US $26 million 35
Slide 36: Zimbabwe
Zimbabwe 2009/10 Actual 2010/11 Estimate Target Sugar production (tons) 258 965 330 000 - 350 000 600 000 Yields tcph (irrigated) Tongaat Hulett 92 99-100 >112 Outgrowers 78 81-85 >100 Replant • April to September 2009 New Cane Plantings • Tongaat Hulett: 2 500 hectares • April to September 2010 • A
Slide 37: Mozambique
Mozambique 2009/10 Actual 2010/11 Estimate 2011/12 Estimate Sugar production (tons) 133 802 230 000 - 250 000 290 000 - 310 000 • Hectares under cane • Current - 24 931 • Target - 27 791 • Yields • Forecast 2010/11 - 86 tcph • Target - > 100 tcph • Irrigation • 12 new pumps in 2009/10 • 26 new pumps
Slide 38: Mozambique – Further Expansion
Mozambique – Further Expansion Massingir expansion • 30 000 hectares agro-processing Cofamosa expansion project • Next phase of the Xinavane • Sugar/ethanol expansion (151 000 tons sugar p.a.) • Maize growing/processing • Increase area under cane by • Downstream from the large 11 280 hectares Massin
Slide 39: 39
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Slide 40: Additional Information
ADDITIONAL INFORMATION @ Tongaat Hulett aga “s
Slide 41: Canelands
Canelands • Last available site in Canelands Industrial Park sold to Shoprite Checkers • Purchased 4,3 hectares adjacent land from others • Site sold unserviced • Purchaser to undertake servicing including fill above 100 year floodline • Cost of R4,25 million per hectare • Distance to airport - 5,5
Slide 42: Cornubia
Cornubia • Ministerial /priority project - unique partnership between private landowner and government Gross hectares Developable hectares Municipality 517 269 Tongaat Hulett 683 497 Total 1 200 766 • Mixed use/income • Over 19 000 subsidised homes • Over 40 000 homes in total • 1,5 million m2 of co
Slide 43: Bridge City
Bridge City • Successful PPP with eThekwini Municipality • New mixed use, high density Town Centre in a previously disadvantaged area / township • Regional 450 bed public hospital • 48 000 m2 shopping centre opened October 2009 • Phase 2: 13 000 m2 retail scheduled for 2011 • Regional Magistrate cou
Slide 44: Umhlanga Ridge Town Centre
Umhlanga Ridge Town Centre • Impressive enquiries for residential phase (3 000 units) being received • Link infrastructure with neighbouring Prestondale to be commenced • A new Holiday Inn Garden Court hotel opened on 15 May 2010 adjacent to Chris Saunders Park • Liberty Life Regional Offices comple
Slide 45: Ridgeside
Ridgeside INFRASTRUCTURE • M41 interchange under construction – completion November 2010 • Office Park Precinct contract to be completed June 2010 and phase one of the Mixed Use Precinct May 2010 TOP STRUCTURES • Holiday Inn Express hotel in Mixed Use Precinct opened in May 2010 • New office for Ned
Slide 46: Izinga
Izinga • Medium to low density 152 hectare residential suburb • 73 hectare of open space including wetlands and buffer corridors • Open suburb with cameras and visible street security patrols • Appropriate indigenous landscaping • 280 dwelling units potential in first phase • First phase of civil in
Slide 47: Compensation
Compensation • Total 325 hectare of which 248 hectare is developable • Strategically situated on both sides of the R102 • 15 km from the new King Shaka International Airport and Dube Tradeport • Ability to accommodate new industrial/logistics operations together with business park, office and activi
Slide 48: Starch Operations Financial Data
Starch Operations Financial Data 15 Months 15 Months R millions Ended March Ended March 2010 2009 Revenue: 2 778 2 685 Domestic 2 110 1 943 Exports 195 171 Co-Products 473 571 Operating Profit 301 290 48
Slide 49: Volume Data
Volume Data 15 Months Ended 15 Months Ended Volume (tons) March 2010 March 2009 Local Starch 105 452 114 482 Local Glucose 401 025 418 480 Total Local 506 477 532 962 Export Starch 36 493 25 298 Export Glucose 9 151 10 076 Total Exports 45 644 35 374 Co-Products 181 919 192 939 Total 734 040 761 275
Slide 50: Co-product Pricing
Co-product Pricing Price movement Co-product 15 Months Ended March Major price drivers 2010 over Comparative Period 50%: International edible oil price Germ Down 26,4% 50%: Local maize International protein (Soya, Gluten-60 Up 14,1% fishmeal) prices Local maize price/hominy chop Gluten-20 Down 17,6%
Slide 51: Sugar Production
Sugar Production Tons ’000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009/10 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 Total 1 331 1 100 1 277 1
Slide 52: Expanded Sugar Production
Expanded Sugar Production Tons Per Annum 2009/10 Production Capacity South Africa 564 000 > 1 000 000 Zimbabwe 259 000 > 600 000 Mozambique 134 000 > 327 000 Swaziland RSE 54 000 > 60 000 Total 1 011 000 > 1 987 000 52
Slide 53: EU Sugar Market Update
EU Sugar Market Update • Long-term supply agreement signed • 100 000 tons per annum from Mozambique and Zimbabwe • 6-year agreement • Price guaranteed above reference price • Reference price per ton • Raw €335,20 • Refined €404,40 Quota Supply Balance (million tons) Season 2005/2006 2009/2010 Produc
Slide 54: 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% 54
Slide 55: Triangle Hippo Tambankulu
Triangle Hippo Mafambisse Massingir Xinavane Tambankulu 55
Slide 56: 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$750 • Human asset index based on nut
Slide 57: Consolidation of Zimbabwe Operations
Consolidation of Zimbabwe Operations • Triangle Sugar is 100% owned and Hippo Valley is 50,3% owned • Consolidation followed macroeconomic changes • Zimbabwe moved to a US$ and Rand based economy • Restored relevant key fundamentals, domestic market sales prices • Commencement of consolidation: bala
Slide 58: Consolidation of Zimbabwe Operations (cont.)
Consolidation of Zimbabwe Operations (cont.) Consolidation : Balance Sheet Effect at 31 March 2010 R million - Fixed assets 2 637 - Growing crops 814 - Working capital 291 - Net debt (22) - Goodwill 165 Upon consolidation - Foreign Currency Translation Reserve 505 On consolidation - stronger Rand -
Slide 59: Zimbabwe Replacement Value
Zimbabwe Replacement Value (TH Holding*) R million Cane Growing Triangle 1 392 Hippo 585 Sugar Milling Triangle 2 940 Hippo 1 359 Refining and Packing Triangle 450 Hippo 126 Ethanol Plant 264 General Infrastructure Triangle 220 Hippo 110 Total 7 446 *TH Holding - Triangle 100%, Hippo 50,3% 59
Slide 60: Sugar Production - SA Industry
Sugar Production - SA 3 Industry: 2 178 000 tons Tons Sugar - Millions TH: 564 000 tons 2.5 Share of industry 25,9% (2008/9: 26,8%) 2 1.5 1 0.5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TH Season ended March Industry 60
Slide 61: Raw Export Realisations: Sugar SA
Raw Export Realisations: Sugar SA Raw Sugar 2009/10 2008 Price in US c/lb* 15,39 12,12 Average Rand/US$ realisation R8,20 R8,05 Average Rand realisations per ton R2 887 R2 316 • Table includes raw sugar for refined exports * Excludes preferential markets and premiums 61
Slide 62: Value-adding Activities
Value-adding Activities • Animal feeds in South Africa and Zimbabwe • Livestock in Zimbabwe - < 9 000 head of cattle • Retail packing operations in South Africa, Mozambique, Zimbabwe, Namibia and Botswana • Refined and direct consumption raw sugar exports from South Africa and Zimbabwe • Speciality
Slide 63: Tongaat Hulett
@ Tongaat Hulett