Tongaat Hulett Limited · JSE:TON
Tongaat Hulett — FY2020 Earnings Presentation
47 slides from Tongaat Hulett's earnings presentation, August 2020
Slide 1: Tongaat Hulett Annual Results for the year ended 31 March 2020
TONGAAT HULETT ANNUAL RESULTS For the year ended 31 March 2020
Slide 2: Presenters
Presenters Gavin Hudson Chief Executive Officer Rob Aitken Chief Financial Officer
Slide 3: Agenda
Agenda Introduction and strategic update 1 Gavin Hudson 2 Financial results Rob Aitken 3 Divisional performance Rob Aitken 4 Outlook Gavin Hudson 5 Q&A
Slide 4: Acknowledgements
Acknowledgements The Board Recent appointments: Ms Louisa Stephens and Mr David Noko Our Shareholders Our Lenders Customers and Suppliers 4
Slide 5: Experienced team leading and executing our strategy
Experienced team leading and executing our strategy Management Team Gavin Hudson Rob Aitken Dan Marokane Chief Executive Officer Chief Financial Officer Strategy, Property and Business February 2019 March 2019 Transformation Executive Tongaat Hulett employee since 2018 April 2019 Tongaat Hulett empl
Slide 6: Tongaat Hulett: a leading player in the sectors in which we operate
Tongaat Hulett: a leading player in the sectors in which we operate Group Starch 4 R4.2bn >850k Plants In FY20 Revenue Tons of maize per annum Highlights processing capacity Leading agri-business in Africa 13 R15.2bn ~45k Production facilities(1) In FY20 Revenue Hectares farmed(2) Sugar A Leader in
Slide 7: In the last 12 months, we have seen significant improvements
In the last 12 months, we have seen significant improvements Board and Governance Management Business Financial Strengthened Improved transformation Improved Health and Enhanced our cash governance and at Board and Exco Safety in our workspaces: position financial control • Fatalities: 1 vs 5 FY19 •
Slide 8: PwC forensic investigation – Key findings
PwC forensic investigation – 8 Key findings Early recognition of revenue Overstatement of cane root Overstatement of value: capital Overstatement of from land sales and standing cane valuations work in progress, plant and sugar sales in Zimbabwe machinery Capitalisation of Incorrect apportionment of
Slide 9: Our strategy remains fit for purpose…
Our strategy remains fit for purpose… Drive Rightsize and Create a Build efficiencies fix the platform for capability in within our fundamentals sustainable our people business to of our profitable and truly leverage business growth processes our asset base … is delivering the desired results 9
Slide 10: Some operational highlights
Some operational highlights • Mozambique refinery to >60 000 tons • White sugar market in SA share to above 35%, overall sugar to > 27% • Milling costs in SA down by 31% • Strong sales growth in Mozambique • SA Refining costs down by 24% • Improving power generation revenue • Refinery and Ethanol ou
Slide 11: Progress on debt reduction initiatives
Progress on debt reduction initiatives … R6.4 bn Core and non-core asset disposals : 1. Pension fund R512 million 2. Namibia R109 million 3. Ongoing land sales R101 million 4. Tambankulu Estates (Eswatini) R372 million 5. Starch R5,350 million • MAC Key dates: ➢ 1st submissions: Barloworld – 18 Jul;
Slide 12: Cash flow improvement to deliver R3 bn over 2 years
Cash flow improvement to deliver R3 bn over 2 years FY20 R1.57 bn achieved against R1 bn target Working Capital Improvement R320m Cost Reduction ~R1.250 bn FY21 target R1.5 bn: - Cost reduction - Working capital improvement - Interest savings 12
Slide 13: Financial highlights – FY20
Financial highlights – FY20 Revenue Adj. EBITDA* Up 18% Up 397% to R15.4 bn to R3.0 bn Cash flow from Sugar: R2.7 bn (2019: R395m) operating activities Starch: R729m (2019: R777m) Up 62% Property: R660m (2019: R279m) to R2.1 bn Operating Profit Up 491% Headline loss to R3.3 bn Improved 79% Sugar: R3
Slide 14: Video
ext t602 Tongaat “‘; DAWN, IT'S A NEW DAY, IT'S THE TONGAAT HULETT WAY
Slide 15: Financial Results
Financial Results IT'S A NEW DAWN, IT'S A NEW DAY, IT'S THE TONGAAT HULETT WAY m TongaatHulett: 15
Slide 16: Improved financial results in a weak market
Improved financial results in a weak market Substantial recovery in Strong progress in Significant improvement financial results turnaround strategy in all Sugar operations Solid performance in Recovery countered by Hyperinflationary effects Starch net finance cost and in Zimbabwe RECLASSIFIED AS hy
Slide 17: Salient financial features (Continuing operations – excl starch)
Salient financial features (Continuing operations – excl starch) Revenue Adjusted EBITDA* Operating Up 18% profit Up 397% to R15.4 bn to R3.0 bn Up 491% Net monetary loss Headline loss to R3.3 bn R1.3 bn Improved 79% Effect of hyperinflation to -R285m Operating profit Cash flow from excl Zimbabwe HL
Slide 18: Zimbabwe hyperinflation inflates financial results
Zimbabwe hyperinflation inflates financial results • Application of IAS 29 Financial Zimbabwe only March 2020 Reporting in Hyperinflationary Economies As reported: Sensitivity: • Official inflation rate: 676% (March) Hyperinflation + Hyperinflation % R million • Group comparatives not restated offic
Slide 19: Statement of Profit or Loss (Continuing operations – excl starch)
Statement of Profit or Loss(Continuing operations – excl starch) 12 months ended 12 months ended 31 March 31 March Strong operational 2020 2019 progress, impact of hyperinflation, land deals included R ‘millions (Audited) (Audited) Revenue 15,382 13,061 Repricing of debt, Cost of sales (8,591) (9,39
Slide 20: Revenue up 18%
Revenue up 18% Revenue (1) (R bn) #% YoY Change Commentary • Solid performances within operations. 6% 37% 23% 1% 18% 7% • Improved sales mix in sugar weighted towards 15.4 more profitable local sales. 13.1 • Excluding Zimbabwe, revenue increased by 7%. • Zimbabwe revenue up 37% due to hyperinflation
Slide 21: Operating profit increased by 491%
Operating profit increased by 491% Operating profit (1) (Rm) #% YoY Change Commentary 73% 140% 126% 141% 491% (7)% • Solid operational progress on a variety of fronts. 3 257 2 882 Mar 19 • A turnaround in Mozambique and South African Mar 20 sugar operations. 1 201 273 658 551 656 616 • The applicati
Slide 22: Adjusted EBITDA up 397%
Adjusted EBITDA up 397% Once-off & Restructuring Costs R13m R214m R million R72m R164m Adjusted EBIDTA is defined as EBITDA adjusted to exclude any impairment (or reversal thereof), any non-trading items as well as any fair value adjustments related to biological assets. To align with the EBTIDA use
Slide 23: Corporate costs
Corporate costs • Substantial increase is mainly transitionary R million • Temporary contracted-in resources • Administrative penalties accrued • Certain group-wide support costs not yet on- charged Restructuring costs Treasury & Legal Asset Disposals Restatements R176m Equity Raise Forensic 23 23
Slide 24: FY 2020 Comprehensive income
FY 2020 Comprehensive income Bridge from Operating Profit to Total Comprehensive Income (Rm) 24
Slide 25: Headline earnings (Continuing operations – excl starch operations)
Headline earnings (Continuing operations – excl starch operations) March 2020 March 2019 % change Loss for the period (Rm) -R286m -R1,518m +81% Headline loss for the period (Rm) -R285m -R1,378m +79% Weighted average number of shares (000’s) 134,820 112,277 +20% Loss per share (cents) -212 cents -1,3
Slide 26: Cash flow highlights
Cash flow highlights March March R million 2020 2019 Net cash inflow generated from operating activities 2,098 1,312 • Strong conversion Additions to property, plant and equipment (538) (1,090) of operating profit to cash flow Net finance costs (1,310) (1,107) • Capital expenditure Borrowings raised
Slide 27: Movement in net debt
Movement in net debt FY20 Group net debt profile Rm 1 682 11 354 10 476 255 3 692 376 168 1 287 548 591 1 355 March 2019 Held For Sale Operating Working Capex Pension Finance Tax, Moz & Zimbabwe March 2020 Profit (Cash) Capital Fund & Costs (Net) Dividends Other FX Inflation Other & Other & FX Proce
Slide 28: Borrowings
Borrowings South Africa Debt Restructure Commentary Total Utilised • On 10 March 2020 closed debt restructure in SA, resulting in new Facility Facility type (Rm) (Rm) facilities, with a maturity date of 31 March 2021 Senior Term Loan • Originally required to reduce debt in SA by at least R8.1 bn by
Slide 29: Average SA Borrowings – Flattening the curve
Average SA Borrowings – Flattening the curve South African Term & Call Borrowings 12 000 10 000 8 000 Millions 6 000 4 000 2 000 - 29
Slide 30: Borrowings
Borrowings Mozambique Debt Standstill Commentary Type Total (Rm) Mozambique Long term Term loan (MZN) 602 • Standstill agreement with Mozambican lenders until 30 June 2021 with debt reduction plan proposed. Short term Overdraft and similar 560 • Short-term liquidity facility raised to cover peak bor
Slide 31: Debt reduction glidepath
Debt reduction glidepath R6,4 billion in sales agreements Financial covenants have been renegotiated given uncertainties around COVID-19 and the starch transaction. Delays against original milestones will however result in additional finance costs. A capital raise remains a consideration 31
Slide 32: Divisional Performance
Divisional Performance m TongaatHulett: IT'S A NEW DAWN, IT'S A NEW DAY, IT'S THE TONGAAT HULETT WAY
Slide 33: Tongaat Hulett Sugar
TONGAAT HULETT SUGAR m TongaatHulett: Sugar IT'S A NEW DAWN, IT'S A NEW DAY, IT'S THE TONGAAT HULETT WAY
Slide 34: Sugar South Africa
Sugar South Africa Adjusted EBITDA Bridge Commentary R million • A notable decline in the operating loss to R130m (2019: loss of R482m). • Sugar mills - one of best performances in recent years - sugar production 602,000 tons (2019: 598,000 tons). • Exited a significant portion of direct sugarcane f
Slide 35: Sugar Zimbabwe
Sugar Zimbabwe Adjusted EBITDA Bridge Commentary R million • Operating profit of R2.9 bn (2019: R1.2 bn). FY19 646 • Sugar production of 436,400 tons (2019: 453,700 tons). Triangle up 10,400 tons, Hippo Valley Estates down 27,700 tons. Revenue 1 657 • Good recovery in cane yields at Triangle from 96
Slide 36: Sugar Mozambique
Sugar Mozambique Adjusted EBITDA Bridge Commentary R million FY19 -36 • A notable turnaround. • Sugar production at Xinavane 176,800 tons, in line previous Revenue 187 season. Refinery 119 • Cyclone Idai reduced sugar production at Mafambisse to 27,100 tons (2019: 51,100 tons). Production Costs -148
Slide 37: Tongaat Hulett Property
TONGAAT HULETT PROPERTY Ww TongaatHulett: Property IT'S A NEW DAWN, IT'S A NEW DAY, IT'S THE TONGAAT HULETT WAY
Slide 38: Property
Property • Revenue R944m (2019: R940m). Legacy Debtors Balance • Operating profit up 134% to R658m (2019: R273m). R million • Focus on concluding legacy deals and transferring properties. 2 562 1 293 • Revenue from land sales now only recognised on the date the property is transferred. • Two large l
Slide 39: Tongaat Hulett Starch
TONGAAT HULETT STARCH IT'S A NEW DAWN, IT'S A NEW DAY, IT'S THE TONGAAT HULETT WAY m TongaatHulett: Starch 39
Slide 40: Starch
Starch Operating profit bridge Commentary R million FY19 656 • Operating profit R616m (2019: R656m) largely due to margin pressure. Price Variance 128 • Sales up 1.7% to 509,100 tons (2019: 500,400 tons). • Domestic sales up 4.2% → increased alcoholic beverages Volume Variance 5 demand, growth in co
Slide 41: Outlook
Outlook IT'S A NEW DAWN, IT'S A NEW DAY, IT'S THE TONGAAT HULETT WAY m TongaatHulett: 41
Slide 42: COVID-19 changed the world in which we operate
COVID-19 changed the world in which we operate 1• We are an essential service provider 2• We continued to operate during the lockdown restrictions 3• We are maintaining stringent Health & Safety protocols and assured protective gear for onsite employees 4• On average more than 20 000 employees are b
Slide 43: Tongaat Hulett continues supporting employees and communities impacted by COVID-19
Tongaat Hulett continues supporting employees and communities impacted by COVID-19 43
Slide 44: Progress has been made, but much remains to be done, our plan
Progress has been made, but much remains to be done, our plan: • Continue to build on our current momentum • Increase local sales and market share in each market Sugar • Deliver on our cost commitments – low cost producer • Deliver diversification opportunities • Return to profitability in SA • Extr
Slide 45: Further debt reduction initiatives
Further debt reduction initiatives MillCo PropCo • Strategic equity partnerships in • Strategic equity partnership in our SA Sugar assets our R11bn property portfolio • Completion: March 2021 • Completion: March 2021 • Debt reduction: R1bn • Debt reduction: R1.5bn May require a Capital Raise 45
Slide 46: Reasons to believe in Tongaat Hulett
Reasons to believe in Tongaat Hulett 1• Our strategy remains fit for purpose 2• Cost savings and cash flow improvement initiatives delivering results 3• Critical indicators are moving in the right direction 4• We have streamlined the business 5• We continue navigating COVID-19 challenges 6• Actively
Slide 47: Questions?
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