Tongaat Hulett Limited · JSE:TON
Tongaat Hulett — H1 2013 Earnings Presentation
68 slides from Tongaat Hulett's earnings presentation, November 2012
Slide 1: Tongaat Hulett
Tongaat Hulett NOVEMBER 2012
Slide 2: Financial Results for the 6 Months Ended 30 September 2012
FINANCIAL RESULTS FOR THE 6 MONTHS ENDED 30 SEPTEMBER 2012 2
Slide 3: Tongaat Hulett Earnings
Tongaat Hulett Earnings 6 months to 6 months to R million % Change 30 Sept 2012 30 Sept 2011 Revenue 7 398 6 027 + 22,7% Profit from Operations 1 313 1 047 + 25,4% Headline Earnings 654 501 + 30,5% Interim Dividend 150 cents 120 cents + 25,0% 3
Slide 4: Tongaat Hulett Profit from Operations
Profit from Tongaat Hulett Revenue Operations 6 months to 6 months to 6 months to 6 months to R million 30 Sept 2012 30 Sept 2011 30 Sept 2012 30 Sept 2011 Sugar operations Zimbabwe 437 364 1 633 1 179 Swaziland 41 30 135 117 Mozambique 270 267 1 286 1 082 SA agriculture, milling, refining and 221 1
Slide 5: Starch Operations
Starch Operations • Operating profit: R147 million (H1 - 2011/12: R167 million) -12% • Margins were under pressure from higher local maize prices - above CBOT • Starch and glucose local market sales volumes 3,8% higher than prior year • Growth in coffee & coffee creamer, paper making and converting
Slide 6: Land Conversion and Developments
Land Conversion and Developments • Financial results for the half-year to 30 September 2012 • Profit from operations: R244 million (H1 - 2011/12: R62 million) • Capital profit: R2 million (H1 - 2011/12: R3 million) • Revenue generated from 40 developable hectares sold • Cornubia Industrial, Umhlanga
Slide 7: Mozambique and Zimbabwe Sugar Operations
Mozambique Sugar Operations • Profit from operations: H1 - 2012/13: R270 million (Metical 909 million) H1 - 2011/12: R267 million (Metical 1 096 million) • Margin pressure • Wage increase - 11% • Export proceeds negatively affected by strength of Metical vs Euro - 15% • Positive impact of exchange r
Slide 8: South African Sugar and Downstream Operations
South African Sugar and Downstream Operations Profit from operations: R221 million (H1 - 2011/12: R196 million) +13% • Agriculture, sugar milling and refining: R99 million (H1 - 2011/12: R54 million) • Export and local market sales: 271 000 tons (2011: 253 000 tons) • Lower cost per ton of sugar pro
Slide 9: Cash Flow (R million)
6 months to 6 months to Cash Flow (R million) 30 Sept 2012 30 Sept 2011 • Operating cash flow - IFRS format 1 747 1 555 (before working capital and interest, after tax) o R192 million improvement • Operating cash flow - before root planting 2 131 1 795 (before working capital, interest and tax) o R3
Slide 10: BEE ESOP and MSOP - Vesting Mechanics
BEE ESOP and MSOP - Vesting Mechanics • July 2012 was the 5 year anniversary: vesting (as per 2007 Circular to Shareholders) • Tongaat Hulett repurchased 6,4 million B shares for R64 000 and cancelled these shares • The 3,3 million remaining B shares converted to ordinary shares and listed on the JS
Slide 11: Land Conversion and Developments
Land Conversion and Developments 8 560 developable hectares 13 561 gross hectares (1 October 2012) 11
Slide 12: Active Developments - Hectares Unsold
Active Developments - 507 Hectares Unsold 2005: 151 Hectares Indicative cash Status - Indicative cash Developable realisation# Area Developable hectares realisation# hectares to sell (R m/developable sold Still to come hectare) Ridgeside 42 ha sold 62 15,1 R936 million Umhlanga Ridge Town Centre 123
Slide 13: Additional Active Developments - 80% by March 2014
Additional Active Developments - 80% by March 2014 Developable Area Ready for Development hectares to sell Cornubia New Town - Phase 1 EIA 30% complete 26 Cornubia New Town - Phase 2 EIA 30% complete 252 iNyaninga EIA 55% complete 550 uShukela Drive EIA 55% complete 49 Compensation (East) EIA 80% co
Slide 14: Ridgeside
Ridgeside-–13 Ridgeside X October 2012 • Current phases infrastructure substantially complete • Major electrical sub station commissioning November 2012 • Major bank head office of 16 000 m2 to commence March 2013 • Preparing application for 14 increased development rights 14
Slide 15: Umhlanga Ridge Town Centre
Umhlanga Ridge Town Centre • Residential phase and last commercial sites selling • New retail park nearing completion • 4 high density residential developments underway • New BRT route being planned by Municipality • First residents taking occupation October 2012 • Application for further developmen
Slide 16: Starch Operations
Starch Operations 16
Slide 17: Starch and Glucose
Starch and Glucose • Expanding product range and downstream capacity • Initial phase of enzyme capacity expansion for creamer sector completed • Product development trials for modified starches concluded • Low capital investment commenced - commercialisation H1 - 2013/14 • Competiveness of local mai
Slide 18: Tongaat Hulett Starch - Maize
Tongaat Hulett Starch Maize South African Maize Crop 2009/10 12,82 million tons 2010/11 10,36 million tons 2011/12 11,49 million tons Impacted margins H1 – 2012/13 Gap Hedge in place for 14% of 2013/14 maize requirements 18
Slide 19: Sugar Operations
Sugar Operations 19
Slide 20: Growing Sugar Production Utilizing Installed Milling Capacity
Progress - Growing Sugar Production Utilizing Installed Milling Capacity 2010/11 2011/12 November 2012/13 May 2012/13 Tons Raw Sugar Actual Actual Estimate # Estimate # South Africa 455 000 486 000 (7%) 501 000 - 536 000 537 000 - 610 000 Zimbabwe 333 000 372 000 (12%) 460 000 - 490 000 450 000 - 50
Slide 21: South Africa
South Africa Actual Cane Milled and November Estimate May Estimate 2011/12 Sugar produced 2012/13 Season 2012/13 Season ^ Season Total hectares under cane as at 129 513 137 652 137 652 1 April (beginning of the season) Hectares milled 95 815 87 171 93 380 102 779 % Hectares under cane milled 74,0% 6
Slide 22: Gap Between Hectares Milled vs Hectares Under Cane
Gap Between Hectares Milled vs Hectares Under Cane At an All Time High New • Carryover cane for 2013/14 season Plantings Hectares 2012/13 Target • Unseasonal rainfall - Tongaat Hulett 2009/10 4 090 To date (Oct) 2012 2010/11 5 606 3 019 hectares mills rainfall statistics • September 2012 - 540% of L
Slide 23: Zimbabwe: Major Step-Up In Production
Zimbabwe: Major Step-Up In Production Actual Cane Milled and November Estimate May Estimate 2011/12 Sugar produced 2012/13 Season 2012/13 Season ^ Season Total hectares under cane as at 38 626 43 185 43 185 1 April (beginning of the season) Hectares milled 35 307 37 346 37 577 % Hectares under cane
Slide 24: Mozambique - Year of Consolidation (Xinavane)
Mozambique - Year of Consolidation Xinavane Actual Cane Milled and November Estimate May Estimate 2011/12 Sugar produced 2012/13 Season ^ 2012/13 Season ^ Season Total hectares under cane as at 16 200 16 702 16 702 1 April (beginning of the season) Hectares milled 15 178 14 756 15 450 % Hectares und
Slide 25: Mozambique - Year of Consolidation (Mafambisse)
Mozambique - Year of Consolidation Mafambisse Actual Cane Milled and Actual May Estimate 2011/12 Sugar produced 2012/13 Season 2012/13 Season ^ Season Total hectares under cane as at 10 313 10 087 10 087 1 April (beginning of the season) Hectares milled 9 377 9 462 9 436 % Hectares under cane milled
Slide 26: Renewable Energy
Renewable Energy Electricity • First window of Renewable Energy IPP Procurement Process completed • Request for Proposal for first bid window issued 3 August 2011 • Contracts for 1 400 MW, cost of R47 billion signed with 28 IPP’s on 5/6 November 2012 Ethanol • Mandatory biofuel regulation gazetted o
Slide 27: Additional Information
ADDITIONAL INFORMATION 27
Slide 28: Izinga
Izinga • Medium to low density open residential suburb with cameras and security patrols • Phase 1 • 280 Potential dwelling units • 193 units transferred to date • 5 sites remain available to sell • Currently 33 building contractors on-site and 11 homes occupied • Phase 2E zoned and subdivision appr
Slide 29: Cornubia map
N2 R102 M4 CORNUBIA NORTH (AIRPORT PHASE) 5 CORNUBIA NORTH 4 1 (PHASE 1) SIBAYA Industrial Integrated Housing CORNUBIA SOUTH New M41 Town UMHLANGA RIDGE 29
Slide 30: Cornubia South
Cornubia South • Industrial and Business Estate • Permission to sell obtained March 2012 • 1st transfers in March 2013 • Civils contract commenced June 2012 • New Town Phase One • 100 000 m2 value destination retail to be developed near Mt Edgecombe - opening October 2016 • EIA well under way • New
Slide 31: Kindlewood
Kindlewood 573 units gated estate development • 89 families living in the estate • 22 new structures under construction • Phase 1 sold out • Phase 2 90% sold • Phase 3 now selling 31 31
Slide 32: Bridge City
Bridge City • Successful PPP with eThekwini Municipality • Mixed use, high density Town Centre and Business Estate • Regional 500 bed public hospital • Building commenced October 2012 • Up to 60 000 m2 to be developed • 48 000 m2 shopping centre • 13 000 m2 second phase and 45 000 m2 residential to
Slide 33: Inyaninga
Inyaninga Bulk Sale / Partnership / Tongaat Hulett Own Development • Planning aligned with Municipal plans for Northern Urban Development Corridor • EIA process underway - anticipated date of approval for development rights is March 2014 • Phase 1 - envisaged around existing rail line • Opportunity
Slide 34: Ushukela Drive
Ushukela Drive Bulk Sale Opportunity • Total gross extent - 137 ha (DTP 57 ha and Tongaat Hulett 80 ha) • Formalised Joint Venture Planning Agreement with DTP for EIA and PDA processes • Business park, retail park, office park logistics and Trade Zone extension • Frontage onto N2 and M34. DTP Link R
Slide 35: Sibaya
Sibaya Bulk Sale Opportunity / Partnership / Tongaat Hulett Own Development Node 1 Node 5 Node 4 • EIA approved • Office/commercial node • All development approvals • Zoning and subdivisional • Excellent location relative to Umhlanga received applications approved Ridge and airport • Assessing own d
Slide 36: Ntshongweni
Ntshongweni Partnership / Tongaat Hulett Own Development • Development supported by Municipal SDP and LAP’s • Important logistics location and in Strategic Integrated Project 2 (SIP 2) of Presidential Infrastructure Coordinating Committee (PICC) • 3 major uses • Residential infill • Mixed use centre
Slide 37: Zimbali and Zimbali Lakes
Zimbali and Zimbali Lakes • Last few Zimbali sites being marketed • Zimbali Lakes • Golf course construction delayed while EIA amendments are processed • Semi-Bulk sales of Resort Node and Retirement Village being progressed 37
Slide 38: Tinley Manor
Tinley Manor Bulk Sale Opportunity / Partnership / Tongaat Hulett Own Development • Largest consolidated property surrounding a river on North Coast • 882 developable ha 1 042 gross ha • Coastal frontage (3,9 km) and access to both sides of Umhlali Lagoon and River Basin • Tinley Manor ski boat laun
Slide 39: Compensation
Compensation Bulk Sale Opportunity / Partnership • Large, flat landholding strategically situated adjacent to the R102 about 13 km from King Shaka International Airport and Dube Tradeport • One of very few good general industrial site locations near Durban • Adjacent to the main northern railway lin
Slide 40: Airport Cities and Landholding
Airport cities - “Even in today’s rocky economic times, airports and their immediate environments Airport Inner Ring are becoming 21st century commercial anchors, Tongaat Hulett Landholding taking on many features of destination retail 2 515 Gross hectares and urban centers.” Existing rail 1 517 Dev
Slide 41: Starch Operations Financial Data
Starch Operations Financial Data Six months to Six months to R millions September 2012 September 2011 Revenue 1 401 1 210 Domestic 1 041 882 Exports 111 120 Co-Products 249 208 Operating Profit 147 167 41
Slide 42: Volume Data
Volume Data Six months to Six months to Volume (tons) September 2012 September 2011 Local Starch 48 564 44 433 Local Glucose 163 544 159 850 Total Local 212 108 204 283 Export Starch 11 413 17 997 Export Glucose 5 235 6 621 Total Exports 16 648 24 618 Co-Products 79 057 77 332 Total 307 813 306 233
Slide 43: Co-product Pricing
Co-product Pricing Price movement Co-product September 2012 over Major price drivers Comparative six month Period 50%: International edible oil price and Germ Up 14,6% local oil seeds 50%: Local maize International protein (Soya, fishmeal) Gluten-60 Up 2,7% prices Gluten-20 Up 34,8% Local maize pric
Slide 44: Tongaat Hulett Starch - Maize Outlook
Tongaat Hulett Starch Outlook for South African maize 1979/80 2008/09 2009/10 2010/11 2011/12 Hectares Planted (000 ha) 4 031 2 428 2 742 2 372 2 699 Yield (t/ha) 3,37 4,96 4,67 4,37 4,26 Production (000 tons) 13 583 12 050 12 815 10 360 11 494 Outlook for World maize International Starch and Glucos
Slide 45: Cane Ownership Mix
Cane Ownership Mix Supply of Cane to Tongaat Hulett South Africa Sugar Mills Actual Actual Actual Plan % Change SA Cane Supply 1 April 1 April 1 April 1 April from 2010 Hectares Under Cane 2010 2011 2012 2014 ^ to 2014 Tongaat Hulett owned 7 745 7 745 7 803 7 468 - 4% Tongaat Hulett leased/co-manage
Slide 46: New Plantings - South Africa
New Plantings - South Africa Actual Actual Actual Target Categories - new hectares 2009/10 2010/11 2011/12 2012/13 # Small scale farmers 1 636 3 689 4 411 4 320 Commercial and medium scale farmers 630 371 1 831 1 180 Tongaat Hulett leased land 1 824 1 546 2 445 4 006 Total 4 090 5 606 8 687 9 506 Ac
Slide 47: Yield Improvement - Commercial and Medium Scale Farmers
Yield Improvement - Commercial and Medium Scale Farmers in South Africa • Root age is fundamental to good yields • Yields for old roots are significantly impacted by drought conditions • Tongaat Hulett scheme • Interest free loan given to commercial farmers to replant their oldest cane on condition
Slide 48: Government Partnerships with Tongaat Hulett
Government Partnerships with Tongaat Hulett Cane Development in South Africa Govt. Grant Application of Type of Funding Beneficiary Term (R million) Grant Planting, replanting, Comprehensive • 5 year partnership ratoon management, agricultural support R45,2 m • 84 beneficiaries • 2008/9, 2009/10, 20
Slide 49: South African Sugar Sales
South African Sugar Sales Sep 2012/13 May 2012/13 2011/12 Actual Estimate Estimate Saleable sugar production - Total Industry sugar production (tons) 1,822 million 2,101 million @ 2,205 million @ - Tongaat Hulett share of Industry 26% ? ? Tongaat Hulett raw sugar production (tons) 486 000 501 000 -
Slide 50: Zimbabwe - Private Farmers
Zimbabwe - Private Farmers • 15 880 hectares • 2011/12 season produced 531 990 tons cane • Plan to increase to > 1,4 million tons in the 2014/15 season • Funding • EU funding for replanting of 1 200 hectares • BancABC 4-year revolving US$ 30 million financing scheme • Tongaat Hulett US$ 3 million in
Slide 51: Zimbabwe - Private Farmers
Zimbabwe - Private Farmers November Actual May Estimate Estimate 2011/12 2012/13 ^ 2012/13 ^ Total hectares allocated to cane farmers 15 880 15 880 15 880 Total hectares under cane as at 1 April 9 501 14 060 14 060 Total hectares milled 8 966 11 138 11 184 Cane yield tcphm 59,33 69,35 68,26 Total ca
Slide 52: Zimbabwe - Own Estates
Zimbabwe - Own Estates November Actual May Estimate Estimate 2011/12 2012/13 ^ 2012/13 ^ Total hectares under cane 29 122 29 125 29 125 Total hectares milled 26 341 26 208 26 393 Cane yield tcphm 95,92 96,66 103,88 Total cane crush (tons) 2 526 517 2 533 168 2 741 800 Root replant (hectares) 5 439 4
Slide 53: Mozambique
Mozambique Cane Yields - Tons cane per hectare milled November November Actual May Estimate Tongaat Hulett hectares Estimate 2012/13 Estimate 2011/12 2012/13 ^ Hectares milled 2012/13 Xinavane 96,84 11 022 97,54 102,00 Mafambisse 55,27 8 856 53,17 * 65,10 Home Estate 48,15 6 379 38,98 * 54,87 Lamego
Slide 54: Mafambisse
@ Tongaat Hulett
Slide 55: Increase in Hectares Under Cane
Increase in Hectares Under Cane 1 April 1 April 1 April 2013 1 April 2013 1 April 2011 1 April 2012 Hectares 2009 2010 November May Actual Actual Actual Actual Estimate Estimate South Africa 119 817 123 907 129 513 137 652 147 158 147 158 Zimbabwe 37 815 37 815 38 626 43 185 43 152 45 069 Mozambique
Slide 56: Raw Sugar Production
Raw Sugar Production 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 South Africa 977 762 868 659 731 760 674 612 652 573 455 486 Mozambique 39 36 71 82 85 115 106 108 108 134 164 233 Swaziland 41 45 50 54 50 56 55 58 56 54 54 59 RSE Zimbabwe * 282 26
Slide 57: Triangle, Hippo, Mafambisse, Xinavane, Tambankulu
Triangle Hippo Mafambisse Xinavane Tambankulu 57
Slide 58: Sugar Production - South Africa
Sugar Production - South Africa 3 Industry 2011/12: 1 822 488 tons Tons Sugar - Millions Tongaat Hulett share of Industry: 26,1% 2.5 2 1.5 1 0.5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 TH Industry Season ended March 58
Slide 59: Financial Information
Financial Information 59
Slide 60: 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 61: 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 62: 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 s
Slide 63: Growing Crops on the Tongaat Hulett Balance Sheet
Growing Crops on the Tongaat Hulett Balance Sheet 30 Sep 11 31 Mar 12 30 September 2012 South Total Total Total Swaziland Zimbabwe Mozambique Africa Roots Hectares 77 206 81 960 87 394 30 098 3 838 28 527 24 931 Amortised root value 19 427 20 355 22 284 15 650 12 649 21 572 32 590 (Rands per ha) Sta
Slide 64: Growing Crops - Income Statement
Growing Crops - Income Statement • IAS 41 Fair Value Change included in the Income Statement: Six months to 30 September 2012 R million R million South Africa 40 Roots 172 Swaziland -21 Zimbabwe -110 Standing cane - 407 Mozambique -144 Change in fair value - 235 Change in fair value -235 • Comparati
Slide 65: Cash Flow: Cane Valuations and Root Planting
Cash Flow : Cane Valuations and Root Planting highlighted in a Sugar Business 6 months 6 months R millions 2012/13 2011/12 Operating profit + 1 288 + 1 029 Includes all agricultural costs Growing crop fair value adjustment + 235 + 239 As per Income Statement Root planting costs (direct planting, exc
Slide 66: Average Exchange Rates
Average Exchange Rates H1 H1 Average % Change 2012/13 2011/12 Rand/US$ 8,18 6,95 +18% Rand/Euro 10,40 9,91 +5% Rand/Metical 0,30 0,24 +25% US$/Euro 1,27 1,43 -11% Metical/Euro 35 41 -15% • Export proceeds: US$ and Euro (exchange rates at time of export - Mozambique and Zimbabwe) • Earnings conversio
Slide 67: Exchange Rates
Exchange Rates Currency Exchange Rates Prices Costs Export Euro US$ proceeds • EU exports: Euro • US$ Zimbabwe Earnings • Local market: US$ • Zim inflation conversion on US$ Rands consolidation Export • Rands Euro Metical proceeds • EU exports: Euro • US$ Mozambique Earnings • Local market: Metical
Slide 68: Thank You
Thank You 68