Tongaat Hulett Limited · JSE:TON
Tongaat Hulett — FY2014 Earnings Presentation
65 slides from Tongaat Hulett's earnings presentation, May 2014
Slide 1: May 2014
MAY 2014 @ Tongaat Hulett
Slide 2: General Index
General Index Page • Map of Operations 3 • Tongaat Hulett’s Socio-Economic Positioning 4 • Sugar Operations 5 • Starch and Glucose 20 • Land Conversion activities 25 • Financial Results 44 2
Slide 3: Location of operations
Location of operations Harare ZIMBABWE Mafambisse NAMIBIA Triangle Beira CSI Hippo Valley BOTSWANA Gaborone Windhoek Sugar Industries CSI Xinavane Walvis Bay CSI Tambankulu Estates Maputo Chloorkop Germiston Mill SWAZILAND Kliprivier Mill Meyerton Mill Felixton Mill Amatikulu Mill Darnall Mill SOUTH
Slide 4: Positive Socio-Economic Profile in the Southern African Region
Tongaat Hulett’s Positive Socio-Economic Profile in the Southern African Region - Going from Strength to Strength Cornubia Launch – 6 April 2014 6 250 direct jobs 24 979 hectares SusCo Launch President of South Africa - Jacob Zuma and KZN Premier - Senzo Mchunu Cornubia Launch – 6 April 2014 Ingonya
Slide 5: Sugar Operations
SUGAR OPERATIONS 5
Slide 6: Index
Index Sugar Operations Page • Sugar Markets 7-8 • World sugar market (deficit to surplus to) 9 • World sugar price is volatile 10 • Growing sugar production 11 • Raw sugar production history 12 • Growing sugar production - indicative next 4 years 13 • Growing sugar production - Cane Ownership Mix 14
Slide 7: Sugar Markets
Sugar Markets Zimbabwe Mozambique • Total production 2013/14 season - 488 000 tons • Total production 2013/14 season - 383 000 tons • Local market 2013/14 season - 287 000 tons • Tongaat Hulett production - 249 000 tons • Imports - 139 000 tons • Local market 2013/14 season 188 000 tons • Supplied b
Slide 8: Sugar Markets (cont.)
Sugar Markets (cont.) South Africa - 2013/14 • Production - 2,344 million tons (SA industry) • Tongaat Hulett production - 634 000 tons (Industry share 27%) • Local market 2013/14 season - 2,2 million tons • Imports - 462 000 tons (342 000 tons sold in 2013/14 - estimate) • Swaziland - 330 000 tons
Slide 9: World Sugar Market (Deficit to Surplus to)
World Sugar Market (Deficit to Surplus to) 2014/15 ‘000 Tons* 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Estimate Sugarcane and Beet 167 041 150 070 159 782 167 982 174 777 186 458 180 109 177 783 Production Estimated Consumption# 161 066 160 787 162 969 164 908 168 837 173 747 176 825
Slide 10: World Sugar Price is Volatile
World Sugar Price is Volatile 35.00 30.00 25.00 Raw Sugar US c/lb 20.00 15.00 10.00 5.00 - Mid Mid Mid May Beginning Mid 2011 2012 2013 2014 2009 2010 10
Slide 11: Growing Sugar Production
Growing Sugar Production > 2,1 million Tons from Existing Capacity (All About Cane) Tons Raw 2010/11 2013/14 2017/18 Sugar Actual Actual Target Tongaat Hulett unutilised milling capacity > R13,3 billion South Africa 455 000 634 000 808 000 (current replacement value for 700 000 tons) Zimbabwe 333 00
Slide 12: Raw Sugar Production History
Raw Sugar Production History Milling Season Tons ‘000 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 South Africa 977 762 868 659 731 760 674 612 652 573 455 486 486 634 Mozambique 39 36 71 82 85 115 106 108 108 134 164 233 235 249 Swaziland 41 45 50 54 50 56 55
Slide 13: Growing Sugar Production - Indicative Next 4 Years
Growing Sugar Production – Indicative - Next 4 Years Growth will come from Tons Raw 2013/14 2017/18 Additional Hectares Yield and Sugar Sugar Actual Target Recovery Tongaat Hulett - 3rd Parties / TH Improvements Direct Supported South Africa 634 000 808 000 4% 89% 7% 488 000 Zimbabwe 449 000 628 000
Slide 14: Cane Ownership Mix
Cane Ownership Mix Supply of Cane to Tongaat Hulett Sugar Mills 2013/14 2017/18 Actual Target Tons Cane Tongaat 3rd Parties Tongaat Hulett 3rd Parties Hulett South Africa 2 568 567 2 909 427 3 796 000 3 207 000 Tongaat Hulett 1 016 766 - 1 546 000 - Tongaat Hulett supported 1 551 801 - 2 250 000 - Z
Slide 15: New Plantings and Net Gain in Hectares
South Africa New Plantings and Net Gain in Hectares Actual Actual Actual Actual Actual Target South Africa 2015/16 2016/17 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15# Small scale farmers 1 636 3 689 4 411 4 297 1 651 2 084 Commercial and 630 371 1 831 1 884 498 250 medium scale farmers Tongaat
Slide 16: Zimbabwe
Zimbabwe Cane Milled and Actual 2011/12 Actual 2012/13 Actual 2013/14 Sugar produced Season Season Season Total hectares farmed as at 38 626 43 185 44 814 1 April (beginning of the season) Hectares milled 35 307 37 473 39 615 % Hectares under cane milled 91,4% 86,8% 88,4% Cane yield (tcphm) 86,63 90
Slide 17: Mozambique
Mozambique Cane Milled and Actual 2011/12 Actual 2012/13 Actual 2013/14 Sugar produced Season Season Season Total hectares farmed as at 26 513 26 789 27 602 1 April (beginning of the season) Hectares milled 24 555 24 333 24 898 % Hectares under cane milled 92,6% 90,8% 90,2% Cane yield (tcphm) 80,36
Slide 18: Cost of Producing Sugar
Cost of Producing Sugar Goods & Services / Salaries & Wages / Transport* % Change Millions 2012/13 2013/14 Per ton raw Overall sugar produced Mozambique (Metical) Mt3 052 Mt2 785 9% down 14% down South Africa (Rands) R2 325 R2 558 10% up 16% down Zimbabwe (US$) $186 $146 21% down 23% down * Excludes
Slide 19: Off-Crop Expenditure
Off-Crop Expenditure • All costs incurred at the mill from shutdown of a season to 31 March of that financial year • Costs expensed against next seasons production Millions - Per 2012/13 2013/14 2014/15 Income Statement Mozambique 421 466 429 (Metical) South Africa 131 182 139 (Rand) Zimbabwe (US$)
Slide 20: Starch and Glucose
Vi. STARCH AND GLUCOSE
Slide 21: Starch and Glucose - Overview 2014/15
Starch and Glucose - Overview 2014/15 • Large crop: 13,55 million tons to be harvested May - July 2014 • Ensures continued competitiveness of local maize industry - remains in line with international markets • Some margin pressure in Q1: 2014/15 due to high old season maize prices • Improving capaci
Slide 22: Tongaat Hulett Starch - Outlook for Maize
Tongaat Hulett Starch Outlook for South African maize 2013/14 1979/80 2010/11 2011/12 2012/13 Estimate Hectares planted (000 ha) 4 031 2 372 2 699 2 781 2 688 Yield (t/ha) 3,37 4,37 4,38 4,21 5,04 Production (000 tons) 13 583 10 360 11 830 11 811 13 549 Carry in stock (000 tons) 2 115 2 336 994 1 41
Slide 23: Tongaat Hulett Starch - Maize
Tongaat Hulett Starch Maize South African Maize Crop 2011/12 11,83 million tons 2012/13 11,69 million tons 2013/14 Est. 13,55 million tons 23
Slide 24: Markets
Markets % Growth % Growth 2012/13 # 2013/14 2014/15 Tons 2013/14 vs. 2014/15 vs. Actual Actual Estimate 2012/13 2013/14 Alcoholic beverages 173 925 173 352 177 085 -0,3% +2,1% Coffee creamers 65 122 70 734 75 775 +8,6% +7,1% Confectionery 57 789 61 599 65 052 +6,6% +5,6% Paper 59 416 56 486 56 873 -
Slide 25: Land Conversion Activities
LAND CONVERSION ACTIVITIES 25
Slide 26: Index
Index Land Conversion activities Page • Magnitude of Tongaat Hulett’s Land Conversion Activities Going Forward 27 • Current context within which land conversion is undertaken 28 • Targeted areas for sale 1 000 to 1 500 hectares 29 • Urban expansion: Durban to Ballito 30 • Urban growth and consolidat
Slide 27: Magnitude of Land Conversion Activities Going Forward
Magnitude of Tongaat Hulett’s Land Conversion Activities Going Forward • Some 8 200 developable hectares (12 900 gross hectares) earmarked for conversion • Urban expansion: Durban to Ballito - 4 600 developable (7 100 gross) • Urban expansion to the West of Durban - 1 100 developable (2 050 gross) •
Slide 28: Current Context Within Which Land Conversion is Undertaken
Current Context Within Which Land Conversion is Undertaken • More land becoming “shovel ready” • Has many facets (Agricultural release, Infrastructure, Environmental, Zoning, Subdivision) • Bulk infrastructure - R22 billion unlocked • Opens up more possibilities for sales • Major positive has been t
Slide 29: Targeted Areas for Sales of 1 000 - 1 500 Hectares
Targeted Areas for Sales of 1 000 - 1 500 Hectares Next 5 Years - Based on Current Economic Conditions Targeted Areas - Total Developable Area Developable hectares hectares Urban expansion: Durban to Ballito 3 144 4 600 Urban expansion west of Durban 296 1 100 Coastal north of Ballito 270 2 500 Gran
Slide 30: Urban expansion: Durban to Ballito
Urban expansion: Durban to Ballito Sales Likely to come from 3 144 Developable Hectares in Targeted Areas (4 600 Developable Hectares Available) Targeted Areas - Area Developable Hectares Urban expansion: Durban to Ballito 3 144 Urban growth and consolidation - 1 122 Umhlanga region Coastal / Lifest
Slide 31: Urban growth and consolidation: Umhlanga Region
Urban growth and consolidation : Umhlanga Region Sales likely to come from 1 122 Developable Hectares in Targeted Areas Targeted Areas - Area Developable Hectares CORNUBIA PHOENIX INDUSTRIAL Urban growth and ESTATE WATERLOO consolidation - 1 122 Umhlanga region MARSHALL DAM CORNUBIA Ridgeside remain
Slide 32: Urban Growth and Consolidation - Umhlanga Region
Urban Growth and Consolidation – Umhlanga Region Ridgeside • Good progress being made with the targeted sale of 42 developable hectares • 20 developable hectares being retained • Net cash realisation of R34 Mega Transaction million per developable hectare has been achieved 32
Slide 33: Coastal / Lifestyle / Leisure / High End Residential
Coastal / Lifestyle / Leisure / High End Residential Sales Likely to come from 275 Developable Hectares in Targeted Areas (608 Developable Hectares Available) Targeted Areas - Area Developable Hectares Coastal / Lifestyle / Leisure / High end 275 residential R102 TONGAAT Zimbali Lakes 47 DUBE TRADEP
Slide 34: Coastal / Lifestyle / Leisure / High End Residential
Coastal / Lifestyle / Leisure / High End Residential Sibaya - Nodes 1 and 5: 125 “Shovel Ready” Developable Hectares Sibaya - Node 4: 103 Developable Hectares in EIA Process Sibaya - Total: 561 Developable Hectares • This year will see a comprehensive international launch of our commercial process t
Slide 35: Airport Region - Business, Industrial and Residential
Airport Region - Business, Industrial and Residential Sales Likely to come from 1 725 Developable Hectares in Targeted Areas Targeted Areas - Area Developable Hectares Airport Region - Business, 1 725 Industrial and Residential INYANINGA WEST uShukela Drive – Airport ABERFOYLE linked Industrial, Ret
Slide 36: Airport Region - Business, Industrial and Residential
Airport Region - Business, Industrial and Residential Sales Likely to come from 1 725 Developable Hectares in Targeted Areas Targeted Areas - Area Developable Act enabling Special Economic Hectares Zones - 23 May 2014 Airport Region - Business, 1 725 Industrial and Residential uShukela Drive – Airpo
Slide 37: Urban expansion: West of Durban and Coastal North of Ballito
Urban expansion: West of Durban and Coastal North of Ballito 566 Developable Hectares Targeted Areas - Area Developable Hectares Urban expansion west of Durban 296 Ntshongweni - residential infill / 57 consolidation Ntshongweni - retail and urban core 78 Ntshongweni - Logistics and 161 Business Park
Slide 38: Urban expansion: West of Durban
Urban expansion: West of Durban Sales Likely to come from 296 Developable Hectares in Targeted Areas (1 100 Developable Hectares Available) Targeted Areas - HILLCREST Area Developable RESIDENTIAL Hectares INFILL Urban expansion west of 296 Durban SUMMERVELD M13 Ntshongweni - RETAIL & residential inf
Slide 39: Urban Expansion West of Durban
Urban Expansion West of Durban Ntshongweni • 1 100 developable hectares strategically located on the N3 growth corridor • EIA for the retail and urban core of 78 developable hectares underway 39
Slide 40: Definitions Relevant for this Operation
Definitions Relevant for this Operation Land conversion The activity, consciously and proactively undertaken by Tongaat Hulett, of moving appropriate components of its land holdings from an agricultural land use to other uses in order to create and realise value for a range of its stakeholders. Land
Slide 41: Definitions Relevant for this Operation
Definitions Relevant for this Operation Gross hectares The total area of a land holding, defined by a line around it’s boundary. Developable hectares The area of a land holding left over after deducting areas not available for development, such as very steep, geologically unstable or environmentally
Slide 42: Definitions Relevant for this Operation
Definitions Relevant for this Operation Bulk infrastructure The large-scale roads, sewerage, water, electrical and drainage works necessary to enable a land holding to be converted from agricultural to other, higher value usage. Shovel ready The status of an element of the land portfolio where envir
Slide 43: Financial Results for the Year Ended March 2014
FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2014 43
Slide 44: Index
Index Financial Results for the year ended 31 March 2014 Page • Financial highlights and summary 45 - 46 • Land conversion activities 47 • Starch operations 48 • Sugar financial results 49 • Revenue and cost breakdown - by country 50 - 52 • Mozambique sugar operations 53 • Zimbabwe sugar operations
Slide 45: Financial Highlights
Financial Highlights 12 months to 12 months to R million % Change 31 March 2014 31 March 2013 Revenue 15 716 14 373 9% Operating Profit 2 374 2 131 11% Operating Cash Flow before Working Capital 2 934 2 182 34% Net Cash Flow for the year 300 - 180 Lower than Tongaat Hulett Net Debt at 31 March 4 320
Slide 46: Operating Profit and Revenue by Segment
Tongaat Hulett Operating Profit Revenue 12 months to 12 months to 12 months to 12 months to R million 31 March 2014 31 March 2013 31 March 2014 31 March 2013 Sugar Zimbabwe 330 625 2 896 3 222 Swaziland 70 76 211 207 Mozambique 168 421 1 704 1 688 SA agriculture, milling, refining and 340 308 6 224
Slide 47: Land Conversion Activities
Land Conversion Activities • Operating profit: R1,080 billion (2013: R366 million) +195% • Sales of 259 developable hectares (a further 8 200 developable hectares still available and earmarked for development) • 63 developable hectares - Umhlanga/Izinga/Kindlewood/Cornubia areas • Average profit of
Slide 48: Starch Operations
Starch Operations • Operating profit: R482 million (2013: R388 million) +24% • Starch and glucose processing margins benefited from • Local maize costs competitive with international prices • Co-product realisations • Overall sales volumes growth of 4% compared to prior year • Exports growth of 10 6
Slide 49: Sugar Financial Results
Sugar Financial Results Impacting factors in 2013/14 • Growth sugar production • Sugar market - lower prices and imports • Reducing costs • Cane valuations • Write-down in 2013/14 reflects current lower prices • Exchange rates • Export proceeds • Earnings conversion on consolidation • R/$ input cost
Slide 50: Mozambique - Revenue and Cost Breakdown
Mozambique - Revenue and Cost Breakdown 2013/14 2012/13 Per ton raw Variance sugar Metical million Metical million produced REVENUE 5 035 5 644 Sugar sales 4 857 5 452 11% down 16% down Other activities 178 192 7% down 12% down COSTS Payments for 3rd party cane 318 350 Goods/services/transport/marke
Slide 51: Zimbabwe - Revenue and Cost Breakdown
Zimbabwe - Revenue and Cost Breakdown 2013/14 2012/13 Per ton raw Variance sugar US$ million US$ million produced REVENUE 286 380 Sugar sales 260 360 28% down 30% down Other activities 26 20 31% up 28% up Sugar stock movement 35 10 COSTS Payments for 3rd party cane 76 91 Goods/services/transport/mar
Slide 52: South Africa - Revenue and Cost Breakdown
South Africa - Revenue and Cost Breakdown 2013/14 2012/13 Per ton raw R million R million Variance sugar produced REVENUE * 5 265 4 467 Sugar sales - own production 4 206 3 554 18% up 9% down Other activities 1 059 913 16% up 11% down COSTS Payments for 3rd party cane/SASA levies 2 194 1 809 Goods/s
Slide 53: Mozambique Sugar Operations
Mozambique Sugar Operations • Operating profit: 2013/14: R168 million (Metical 496 million) 2012/13: R421 million (Metical 1 408 million) • Reduction in cane valuations • Decrease in sugar prices • Export prices into the EU under pressure • Higher sugar production and sales volumes • Benefit of cost
Slide 54: Zimbabwe Sugar Operations
Zimbabwe Sugar Operations Triangle and Hippo Valley Estates • Operating profit: 2013/14: R330 million (US$ 33 million) 2012/13: R625 million (US$ 74 million) • Lower sugar sales volumes: 426 000 tons (2013: 456 000 tons) • Lower local market sales - increased imports • Export prices into the EU unde
Slide 55: South African Sugar Operations
South African Sugar Operations (Including Downstream Value Added Activities) • Operating profit: R340 million (2013: R308 million) +10% • Substantial growth in sugar production 634 000 tons (2013: 486 000 tons) • Volume growth of 30% achieved with a total increase in the cost of goods, services, tra
Slide 56: Growing Crops - Change in Fair Value: 2013/14
Growing Crops - Change in Fair Value: 2013/14 IAS 41 Fair Value Change included in the Income Statement: Year to 31 March R million 2013/14 2012/13 R million 2013/14 2012/13 Sugar operations: profit Roots - 78 303 1 061 962 before cane valuations Standing cane - 75 165 Cane valuation: change in FV -
Slide 57: Growing Crops - Change in Fair Value: 2013/14 (cont.)
Growing Crops - Change in Fair Value: 2013/14 (cont.) IAS 41 Fair Value Change included in the Income Statement: Year to 31 March R million 2013/14 2012/13 • South Africa Greater quantity of own standing cane South Africa 178 265 more than offset the impact of prices Swaziland 14 15 • Zimbabwe Zimba
Slide 58: Growing Crops on the Tongaat Hulett Balance Sheet
Growing Crops on the Tongaat Hulett Balance Sheet 31 Mar 12 31 Mar 13 31 March 2014 South Total Total Total Swaziland Zimbabwe Mozambique Africa Roots Hectares farmed 81 960 91 179 92 117 35 035 3 838 27 557 25 687 Amortised root value 20 355 25 108 27 484 25 964 15 278 23 136 36 045 (Rands per ha)
Slide 59: Sugar Cane Growing Crops
Sugar Cane Growing Crops • Accounted for in terms of International Accounting Standard - IAS 41: Agriculture • Measured and recognised at fair value • Changes in fair value are included in the income statement • Replanting and agricultural costs actually incurred are charged to the income statement
Slide 60: Accounting for Sugar Cane Growing Crops
Accounting for Sugar Cane Growing Crops International Accounting Standards - IAS 41: Agriculture • Sugar cane growing crops are accounted for as biological assets • Measured and recognised at fair value • Changes in the fair value are included in the income statement • The fair value of roots is det
Slide 61: Accounting for Sugar Cane Growing Crops (cont.)
Accounting for Sugar Cane Growing Crops (cont.) • Fair value adjustments - over time: “zero sum equation” in the income statement • At time of cane establishment / expansion: costs incurred, cash outflow and fair value gain • Approximately 18 months later: standing cane harvested, sugar produced and
Slide 62: Cash Flow: 2013/14
Cash Flow: 2013/14 12 months 12 months R million 2013/14 2012/13 Operating profit + 2 374 + 2 131 Includes all agricultural costs Growing crop fair value adjustment + 153 - 468 As per income statement Root planting costs (direct planting, excluding + 128 + 398 Included below # other agricultural cos
Slide 63: Cash Flow - Past 7 Years
Cash Flow - Past 7 Years July 2007 to March 2014 R billion • Operating cash flow + 13,0 (before root planting) • Working capital - 0,9 • Capex and sugar root investment - New plant and equipment - 4,4 - Replacement capital expenditure - 2,7 - Roots - 2,1 • Interest and tax - 4,5 • Dividends - 1,9 •
Slide 64: Average Exchange Rates
Average Exchange Rates Average 2013/14 2012/13 Rand/US$ 10,13 8,48 Rand/Euro 13,59 10,95 Rand/Metical 0,34 0,30 US$/Euro 1,34 1,29 Metical/Euro 40,16 36,61 • Export proceeds: US$ and Euro (exchange rates at time of export - Mozambique and Zimbabwe) • Earnings conversion on consolidation (at average
Slide 65: May 2014
MAY 2014 @ Tongaat Hulett