Slide 1: Interim results for the half-year ended 30 June 2003
Interim results For the half-year ended 30 June 2003
Slide 2: Group income statement
Rand/US$ average 8,03 10,99 10,48 Rand/US$ closing 7,48 10,37 8,58 INCOME STATEMENT H1 2003 H1 2002 FY 2002 Revenue 3 021 2 809 6 103 Underlying operating profit 233 387 802 Triangle dividend 31 71 Valuation adjustments (375) (74) (215) EBIT (142) 344 658 Net interest paid (62) (55) (100) Headline (
Slide 3: Revenue by segment
REVENUE H1 2003 H1 2002 % change FY 2002 Tongaat-Hulett Sugar 1 427 1 336 6,8 2 864 Hulett Aluminium (50%) 773 745 3,8 1 623 African Products 756 678 11,5 1 470 Moreland 65 50 30,0 146 Group total 3 021 2 809 7,5 6 103 Rand/US$ average 8,03 10,99 (26,9) 10,48 • SA raw sugar export volumes up 35% • H
Slide 4: Underlying operating profit H1 2003
UNDERLYING OPERATING PROFIT H1 2003 H1 2002 % change FY 2002 Corporate (10) (11) (9,1) (34) Tongaat-Hulett Sugar 183 193 (5,2) 391 Hulett Aluminium (50%) 0 108 (100,0) 179 African Products 40 93 (57,0) 246 Moreland 20 4 400,0 20 Group total 233 387 (39,8) 802 Rand/US$ average 8,03 10,99 (26,9) 10,48
Slide 5: Valuation adjustments
VALUATION ADJUSTMENTS H1 2003 H1 2002 FY 2002 Maize procurement contracts (255) 15 (20) Translation of foreign currency: - offshore cash holdings (61) (57) (151) - other (25) (12) (15) Export receivables (22) (14) (26) Financial instruments (12) (6) (3) Total (375) (74) (215) • Maize contracts value
Slide 6: Cash flow
CASH FLOW H1 2003 H1 2002 FY 2002 Cash flow from operating activities 21 491 1 130 Interest paid (62) (55) (100) Working capital changes (30) 63 (321) Cash flow from operations (71) 499 709 Capex (net of disposals) (195) (131) (227) Growing crops (78) (43) (12) Net cash flow (344) 325 470 • Reductio
Slide 7: Bruce Dunlop – Tongaat-Hulett Sugar
Tongaat-Hulett Sugar w+» Bruce Dunlop Tongaat-Hulett
Slide 8: The sweetest way to sweeten your day
The sweetest way to sweeten your day
Slide 9: 2003 Half-year results
2003 Half-year results • Revenue – R1,427 billion – Up 6,8% • Underlying Operating Earnings – R183 million – Down 5,2% • Operating earnings margin 12,8%
Slide 10: 2003 Half-year results (cont'd)
2003 Half-year results (cont’d) • EBIT – R159 million – Down 15,4% • EBIT margin 11,2% • Triangle dividend – R21 million to end April declared by Triangle – Not yet remitted to THS
Slide 11: Sales Volumes THS (SA)
Sales Volumes THS (SA) Tons Actual Actual Actual Sugar Year to Dec 2002 6 months to June 6 months to June 2002 2003 Local Market 471 380 236 033 236 236 Export Raws 340 400 127 159 172 007
Slide 12: Raw Sugar Export Realisations
Raw Sugar Export Realisations South African Industry Raw Year to Dec 6 months to 6 months to 6 months to 2002 June 2002 June 2003 Dec 2003 Sugar Price in Usc/lb 6,48 6,78 6,50 7,00 Average R9,91 R9,84 R9,32 R??? Rand/$ Table includes raw sugar for refined exports
Slide 13: Sugar Production Estimates for the 2003 season
Sugar Production Estimates for the 2003 season • South Africa – 681 000 tons (2002 – 860 000 tons) • Zimbabwe – 285 000 tons (2002 – 296 000 tons) • Mozambique – 98 000 tons (2002 – 71 000 tons) • Swaziland – 54 000 tons (2002 – 50 000 tons) • Total – 1,118 million tons (2002 – 1,277 million tons)
Slide 14: SA Sugar Production
SA Sugar Production 3 Tons Sugar - Million Industry Estimate – 2 386 777 tons 2.5 THS Estimate - 681 000 tons 28,53% share of Industry 2 1.5 THS Industry 1 0.5 Lowest THS production in 7 years as a 0 consequence of low rainfall 99 00 01 02 03 19 20 20 20 20 Year
Slide 15: THS Profile
THS Profile • SADC’s leading sugar brands • Unique supplier of sweetener solutions to the region’s markets 9 Latest addition to range - Huletts EquiSweet® and Sugalite® • Profitable value-adding activities • A world leader in process design and technology
Slide 16: THS Profile (cont'd)
THS Profile (cont’d) • Core competency in cane growing, sugar milling and refining • Milling capacity for 1,5 million tons sugar – 75% utilised in 2003 (86% - 2002) • 47% of milling capacity under irrigation • Leading animal feeds brand – Voermol Feeds
Slide 17: Value-adding activities
Value-adding activities • Animal Feeds in South Africa and Zimbabwe • Retail packing operations in South Africa, Mozambique, Zimbabwe, Namibia and Botswana • Refined and direct consumption raw sugar exports from South Africa and Zimbabwe
Slide 18: Value-adding activities (cont'd)
Value-adding activities (cont’d) • Speciality sugars and high intensity sweeteners in South Africa • Alcohol production in Zimbabwe • Technology and royalty revenue in South Africa
Slide 19: SA's value-adding activities (cont'd)
SA’s value-adding activities (cont’d) • Revenue - R322,5 million (2002 - R298,3 million) • Underlying Operating Earnings - R45,5 million (2002 – R13,7 million)
Slide 20: Sundry highlights of the period under review
Sundry highlights of the period under review • Record performance of Voermol Feeds • Official re-opening of the rehabilitated Xinavane sugar mill by President Chissano in June 2003 • Completion of acquisition of Xinavane cane estate • Launching of Huletts EquiSweet® & Huletts Sugalite® • Internation
Slide 21: SA's regulatory framework
SA’s regulatory framework • Little progress in the review of the Sugar Act • Desired outcomes – Cane price based on a fixed division of proceeds between millers and growers – Equitable sharing of the “dumped” world market realisations – redistribution of proceeds pro-rata to production • US$-based i
Slide 22: Update on Zimbabwe
Update on Zimbabwe • Operations – Triangle trading profitably – Remains fundamentally a low cost producer with sugar production intact • Political landscape – Domestic market price control – Land reform – Forex
Slide 23: Update on Swaziland
Update on Swaziland • Conversion of citrus orchards complete • Sucrose production estimates up 8% in 2003 vs 2002 • Estate overheads headed downwards following conversion to a single crop
Slide 24: Update on Mozambique
Update on Mozambique • 2003 Production expected to rise 38% to 98 000 tons • Total industry domestic market sales for six months ended June 2003 up 110% year-on-year 9 Good progress on illegal imports but more work to be done • Production to reach 140 000 ton production capacity by 2005/6
Slide 25: World market price outlook
World market price outlook • Short/medium term – Range bound around 6,5 to 7,5 USc/lb • Longer term more bullish – WTO Negotiations – Doha Development Round – Mid-term review of the EU’s CAP (Common Agricultural Policy) – Special and differential treatment for developing countries
Slide 26: The next 6 months
The next 6 months • 2nd 6 months expected to be tough: – Lower cane growing margins (seasonal spending patterns) – Lower margins on domestic market sugar sales (higher R/ton milling costs as a result of lower raw sugar production) – Lower margins on export sugar (higher R/ton milling costs as a resu
Slide 27: Initiatives to improve short-term profitability
Initiatives to improve short-term profitability • Freeze on recruitment – running at a higher level of vacancies • Sugar mills operating on 5-day week where appropriate • Reduction of maintenance spend to critical items • Deferment of all discretionary spend • Aggressive “take it or leave it” approa
Slide 28: Energising for growth
Energising for growth Over the past 6 months good progress on: • Move to a task-based organisational structure • Re-organisation of SA operations into a single business unit wef 1st Feb 2003 – Appointment of Martin Mohale as MD THS – SA – New SA team • Capacity to pursue growth plans • Many projects
Slide 29: The road ahead
The road ahead • Expand low cost sugar production within SADC both organically & by acquisition – Focus currently SA, Zimbabwe, Swaziland and Mozambique • Exploit cross-border marketing synergies within SADC • Positioning for deregulation in world sugar markets – EBA, etc • Continuous and step chang
Slide 30: Alan Fourie – Hulett Aluminium
Hulett Aluminium Alan Fourie Investment Analysts Society Presentation
Slide 31: Hulett Aluminium
Hulett Aluminium H1 2003 H1 2002 Average R/$ rate 8,03 10,99 Sales volumes (t) 67 500 54 300 Revenue (Rm) 1 545 1 489 Underlying operating profit 0 216 Valuation adjustments (36) (40) EBIT (36) 176
Slide 32: Currency Impact
Currency Impact Effect on rolling margin exceeded R150 million compared with 2002 Metal price lag impact on cost of sales Value added portion of debtors book
Slide 33: Industry Climate
Industry Climate Market conditions remain weak International margins reduced by average of $40 per ton Competitors’ performance reflects weak conditions Early signs of recovery? Concentration of ownership continues
Slide 34: Delivering Value from our major Rolled Products investment
Delivering Value from our major Rolled Products invesment Achieving high levels of capacity utilisation Achieving the most profitable sales mix Capitalising on our low cost base
Slide 35: Rolled Products Capacity Utilisation
Rolled Products Capacity Utilisation Benefits as an independent producer Rolled Products exports increased by 46% Rolled Products total sales increased by 27%
Slide 36: Rolled Products Capacity Utilisation
Rolled Products Capacity Utilisation Annualised Capacity output (t) Utilisation 2002 Full year 105 000 53% 2003 First half 119 000 60% Full year (est) 130 000 65% 2004 Estimate 150 000 75% 10 000 tons --> R60 million EBIT effect
Slide 37: Most Profitable Sales Mix
Most Profitable Sales Mix Margin range : $700 to $2 000 per ton Average: +\- $1 000 per ton Big opportunities at the upper end of the range At current volumes, $100 increase in margin --> R100 million EBIT
Slide 38: Can End Stock Exports
Can End Stock Exports Margins > $1 400 per ton Growth in 2003: 200% up on 2002 100% up on 2001 Future growth: 20 000 tons over three years
Slide 39: Clad Products
Clad Products Margins > $1 500 per ton Growth in 2003: > 200% up on 2002 Future growth: 12 000 tons over three years
Slide 40: Other opportunities
Other opportunities Established products continue to do well Exports of painted products up by 60% Closure sheet to Russia exceeding expectations Local market underlying growth trend Value added exports offer promise
Slide 41: Capitalising on our low Cost Position
Capitalising on our low Cost Position Low cost base relative to competitors “Full operating costs” are presently being incurred 2003 manufacturing cost increase below 5% Remelt success with R20 million annual cost saving Unit cost reductions - 16% at June 2003 - further reduction ahead
Slide 42: Conclusion
Conclusion • We expect a better second half based on: – Metal price lag has been absorbed – Further growth in sales, particularly high margin products – Cost improvements flowing through • These same factors are key to delivering returns on our investment over the next few years
Slide 43: Nico Kruger – African Products
~N African’ Preducts Nico Kruger Tongaat-Hulett
Slide 44: Introduction
Introduction Currently operating under unfavourable conditions: ¾Maize price effect ¾Co-product ¾Import threats ¾Slowing domestic economy ¾Reduced customer exports
Slide 45: Volume Data
Volume Data Volumes H1 2003 H1 2002 % Local Starch 42 973 39 888 7,7 Local Glucose 146 254 139 514 4,8 TOTAL LOCAL: 189 227 179 402 5,5 Export Starch 23 590 23 358 1,0 Export Glucose 10 334 8 869 16,5 TOTAL EXPORTS: EXPORTS 33 924 32 227 5,3 Co-Products 83 481 79 645 4,8 TOTAL: 306 632 291 274 5,3
Slide 46: Financial Data
Financial Data (R’millions) H1 2003 H1 2002 2002 % Revenue 758 678 11,8 Domestic: 527 445 18,4 Exports: 90 97 (7,2) Co-Products: 141 139 1,4 Underlying Operating 40 93 (56,9) Earnings Valuation Adjustments (258) 14 EBIT (218) 107
Slide 47: Higher Maize Costs & Lower Co-Product Prices Increase Costs
Higher Maize Costs & Lower Co-Product Prices Increase Costs Cost Comparisons H1 2003 H1 2002 % Maize Cost/ton Grind 1 470 1 041 41,2 Production Variable 248 247 0,4 Costs/ton Grind Fixed and Other Costs/ton 571 585 (2,4) Grind Co-Products Turnover/ 473 488 (3,1) ton Grind TOTAL: 1 816 1 385 31,1
Slide 48: Maize Impact
Maize Impact Maize is the most significant factor impacting on results. Price paid relative to market price Valuation adjustment effect Handout pack contains answers to a number of key questions around maize
Slide 49: Maize Purchasing Strategy
Maize Purchasing Strategy • Focus on • Physical supply for grind • GM status • Security of supply • Locality • Price • Consistent strategy of purchasing bulk of requirements just prior to and into planting season • Use of hedging strategies to reduce the impact of upward price movements or to gain b
Slide 50: Maize Procurement 2002/03
Maize Procurement 2002/03 Conditions at time of Events Post- Post-Contracting Contracting Period Yellow Maize Price R1 602 – R1 715/ton R762 Low – April White Maize Price R1 712 – R1 841/ton R743 Low – April Rand/Dollar 10,51 – 10,87 Down to 7,17 at strongest CBOT Increasing Decreasing RSA Planting
Slide 51: Maize Pricing
Maize Pricing Comparative Maize Prices (Inflation Adjusted) 2,500 2,000 1,50 0 Price 1,00 0 50 0 - Date SAFEX Price Afprod Cost
Slide 52: Maize Procurement Going Forward
Maize Procurement Going Forward • Major issues: – Pressure on accepting product prices based on a stable maize price, due to the rapid strengthening of the Rand. – Earnings volatility created through valuation adjustments arising out of the strategy when maize price is volatile. • Strategy will chan
Slide 53: The Next Six Months
The Next Six Months • Confluence of critical external drivers turned against Afprod: – Rand/Dollar – Maize price * Rand/Dollar * CBOT * Crop size – Co-Product prices • Operating earnings for the next six months will be influenced by: ¾ Volumes ¾ Selling prices ¾ Rand/Dollar ¾ Maize price
Slide 54: The Next Six Months
The Next Six Months • Valuation adjustment effect must be split into two parts: • Maize Subject to Valuation Adjustments in June, which is physically used during the second half of 2003 will be written back to original cost (±R40-R50 million) • Maize Futures held for use next year will be subject to
Slide 55: Looking Ahead to 2004
Looking Ahead to 2004 • Operating earnings will be influenced by: – Selling prices – Rand/Dollar – Maize market price level – Co-product prices • Valuation adjustment: – As maize is utilised the valuation adjustment will reverse – the bulk of this will apply to the second half of 2004 – There could
Slide 56: Managing through this challenging period
Managing through this challenging period Drive on cost reductions: • 2003 fixed costs targeted at below 2002 • Continued efficiency programmes Continued drive to establish new applications/product opportunities Focused efforts to combat imports Drive to maintain export markets
Slide 57: Afprod: The Business
Afprod : The Business • Afprod is the leading producer of Starch and Glucose in Africa • The Company has world-class facilities in terms of: – Product quality – Product range – Efficiencies • Afprod has capacity in a number of products to take advantage of market opportunities • The Afprod team has
Slide 58: How much maize is subject to future MTM valuations
HOW MUCH MAIZE DOES AFPROD HAVE WHICH IS SUBJECT TO FUTURE MTM VALUATIONS THROUGH THE INCOME STATEMENT? The open futures position is: White Yellow December 2003 Futures Tons 140 000 84 400 MTM price 907 945 March 2004 Futures Tons 137 600 3 700 MTM price 938 969 For as long as this position remains
Slide 59: What has the logic behind the hedging strategy been?
WHAT HAS THE LOGIC BEHIND THE HEDGING STRATEGY BEEN? A large proportion of Afprod’s customers are selling consumer products where price movements relative to inflation are important. Afprod has tried to reduce the impact of sharply rising maize prices using a hedging strategy which can have one of t
Slide 60: Will Afprod use a similar strategy going forward?
WILL AFPROD USE A SIMILAR STRATEGY GOING FORWARD? Unlikely. Under circumstances where the rand has strengthened to the extent which it has, many customers are unable or unwilling to accept poduct prices required for reasonable margins for Afprod, even though the maize input cost has been effectively
Slide 61: Does Afprod trade in the maize market for trading profits?
DOES AFPROD TRADE IN THE MAIZE MARKET FOR TRADING PROFITS? No. Afprod’s procurement of maize is geared toward physical procurement to meet grind requirements. However, in order to manage both the physical supply requirements (including G.M. status) and price, Afprod uses a range of procurement contr
Slide 62: Gordon Hibbert – Moreland
Moreland Gordon Hibbert Tongaat-Hulett
Slide 63: Realising the Vision
Realising the Vision (errr Moreland ty P
Slide 64: 2003 Half-Year Performance
2003 Half-Year Performance • SA property market bull-run – Umhlanga to Zimbali well ahead of average • Revenue up 30% to R65m • EBIT up 400% to R20m • Cash break-even – With re-investment into new projects • More than 200 houses and 5 000m2 business premises under construction
Slide 65: Residential Sales R30m (up 62%)
Residential Sales R30m (up 62%)
Slide 66: Commercial R20m (up 97%)
Commercial R20m (up 97%) & = OZ — ms anki oreland
Slide 67: Industrial Sales R34m
Industrial Sales R34m Moreland share R12m (up 400%)
Slide 68: Resort Sales R2m (down 86%)
Resort Sales R2m (down 86%) - Zimbali East sold out
Slide 69: Outlook
Outlook • Falling interest rates • Increasing government commitment to infrastructural investment / Growth Summit • Exciting and extensive projects pipeline • Expect to sustain improved performance for second half – Whilst restocking for 2004/5 growth
Slide 70: 2003 Project Pipeline – Zimbali South and West
2003 Project Pipeline Zimbali South and West • Revenue R400m (5-7 years)
Slide 71: 2003 Project Pipeline – Mhlanga Forest Estate
2003 Project Pipeline Mhlanga Forest Estate •Revenue R200m (2-3 years)
Slide 72: Book Value R250m
Book Value R250m Estimated current value ¾existing use R660m ¾including added value R1bn+ Ballito Tongati Zimbali La Mercy Airport Site Mdloti Further 8 000 hectares Ohlanga Durban CBD Mgeni
Slide 73: Peter Staude – Tongaat-Hulett
Tongaat-Hulett Peter Staude
Slide 74: Group structure
Group structure • Anglo American stake • Hulett Aluminium (50%)
Slide 75: AC133/AC112 and other valuation adjustments
AC133/AC112 and other valuation adjustments • Continued application of AC133/AC112 throughout the group • Major impact on earnings volatility • Reviewing underlying business processes – Keep market informed
Slide 76: Growth and Investment Pipeline
Growth and Investment Pipeline • Continue to further develop options • Focus in African Products and Hulett Aluminium to improve earnings and ROCE • Tongaat-Hulett Sugar most likely to make earnings enhancing investment in near term • Moreland well-positioned to unlock value from land holdings with
Slide 77: Outlook
Outlook • Benefits of current actions will flow into 2004 • Earnings improvement in 2004 • Ongoing valuations will be from a base maize price of R846/ton and R7,48/US$ exchange rate • Improvement in cash flow and revenue in H2 2003 • At an average H2 2003 exchange rate of R7,50/US$, underlying opera
Slide 78: Tongaat-Hulett
Tongaat-Hulett