Tongaat Hulett Limited · JSE:TON
Tongaat Hulett — FY2008 Earnings Presentation
79 slides from Tongaat Hulett's earnings presentation, February 2009
Slide 1: Tongaat Hulett
Tongaat Hulett FEBRUARY 2009
Slide 2: Tongaat Hulett Operations
Tongaat Hulett Operations 6 countries 19 locations > 35 000 Employees F&I ZIMBABWE M Mafambisse O ZA NAMIBIA Triangle M CSI Hippo Valley B IQ U BOTSWANA E Sugar Industries CSI Xinavane CSI Tambankulu Chloorkop Estates Germiston Mill SWAZILAND Kliprivier Mill Meyerton Mill Felixton Mill Amatikulu Mil
Slide 3: Financial Results
FINANCIAL RESULTS @ Tongaat Hulett 3
Slide 4: Year to 31 December 2008
Year to 31 December 2008 • Revenue up 11% to R7,1 billion • Profit from operations up 35% to R1,132 billion • Headline earnings of R583 million (2007: R61 million – affected by corporate structuring transactions) • Annual dividend of 310 cents per share • Cash inflow from operations of R965 million
Slide 5: Profit from Operations
Profit from Operations R million 2008 2007 Sugar operations 606 360 Zimbabwe dividends 35 53 Swaziland operations 44 35 Mozambique operations 250 88 SA agriculture, milling and refining 73 46 Downstream value added activities 204 138 Starch operations 240 105 Land and property developments 263 428 C
Slide 6: Zimbabwe Sugar Operations; Swaziland - Tambankulu Estate
Zimbabwe Sugar Operations • Dividend accounted • Dividends received: R35 million (2007: R53 million) Swaziland - Tambankulu Estate • Operating profit up 26% to R44 million • High sugar cane yields • Increased realisations within the Swaziland industry 6
Slide 7: Mozambique Sugar Operations
Mozambique Sugar Operations • Operating profit: R250 million (2007: R88 million) • Expansions - 8 150 hectares planted-up and growing well • Mafambisse - Agriculture plant-up completed - TH shareholding increased from 75% to 85% - Shareholder loans converted to equity - R57 million currency gain rea
Slide 8: South African Sugar Agriculture, Milling and Refining
South African Sugar Agriculture, Milling and Refining • Contribution to operating profit: R73 million (2007: R46 million) • Small 2007 and 2008 crops • Lower export volumes and upward pressure on costs per ton • Higher export and domestic sales realisations Downstream and Sugar Value Added Activitie
Slide 9: Starch Operations
Starch Operations • Operating profit: R240 million (2007: R105 million) • Margins recovered • Improvement in international starch and glucose prices • Local maize prices trading close to world prices • 12 million ton SA crop for 2008 season (2007: 7 million tons) • Plantings and weather conditions f
Slide 10: Agricultural Land Conversion and Developments
Agricultural Land Conversion and Developments • Operating profit: R263 million (2007: R428 million) • Capital profit: R22 million (2007: R48 million) • Sales of 181 developable hectares (368 gross hectares) • 21 hectares in prime locations • Operating profit: R7 million / hectare • 160 hectares for
Slide 11: Income Statement
Income Statement Centrally accounted and consolidation items • Recognition of pension fund 2001 employer surplus account - unconditional entitlement in 2008: R86 million • End January 2009 : Pension fund assets substantially exceed liabilities Taxation • Effective tax rate: 24% - Lower tax rates in
Slide 12: Financing
Financing • Finance Costs R million Interest costs on debt 267 Interest on maize obligation 37 BEE SPV Interest 79 Interest paid 383 Interest capitalised on expansion projects - 103 Income Statement 280 • Higher interest rates in 2008 and increased borrowing levels 12
Slide 13: Cash Flow and Balance Sheet
Cash Flow and Balance Sheet • Cash inflow from operations: 2008 2007 Cash from operating profit after tax R882 million R677 million Working capital R83 million - R175 million R965 million R502 million • Capital expenditure in 2008: R1 576 million At 31 December 2008 • Tongaat Hulett net debt: R 2 35
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Slide 15: Agricultural Land Conversion - KZN
Agricultural Land Conversion - KZN Total of 14 142 ha (9 089 developable ha) • West of eThekwini • 2 050 gross ha (975 developable ha) • Coastal corridor • 6 006 gross ha (3 978 developable ha) • eThekwini growth corridor • 6 086 gross ha (4 136 developable ha) Operating profit per developable hecta
Slide 16: West
West Extent • 2 050 gross hectares • 975 developable hectares West 16
Slide 17: @ Tongaat Hulett
@ Tongaat Hulett
Slide 18: Coastal Corridor
Coastal Corridor Umhlanga Ridge Town Centre La Mercy Beach Umhlanga Ridgeside Westbrook Izinga Zimbali 3 978 developable hectares Sibaya/Mdloti Zinkwazi Kindlewood Tinley Manor Mdloti North Tugela
Slide 19: Umhlanga New Town Centre and Ridgeside
Umhlanga New Town Centre and Ridgeside 19
Slide 20: Tinley Manor
Tinley Manor @ Tongaat Hulett 20
Slide 21: eThekwini Growth Corridor
eThekwini Growth Corridor Canelands Amanzimnyama Riverhorse Valley Business Estate Dudley Pringle Bridge City Mount Moriah 4 136 developable hectares Cornubia Mt Moreland Sibaya West/Waterloo Aberfoyle Inyaninga Compensation Flats Watson Highway
Slide 22: Worldwide urbanization continues unabated
• Worldwide urbanization continues unabated • 1950 - 30% of population in cities • 2005 - 50% of population in cities • 2030 - 60% of population in cities eThekwini > 500 major informal settlements > 800 000 people impacted 22
Slide 23: Opening April 2010
Opening April 2010 340 ha sold Sale of 180 ha being persured December 2008 23
Slide 24: Tongaat Hulett land in Growth Corridor
• Tongaat Hulett land in Growth Corridor • 6 086 gross hectares remaining • 4 136 developable hectares remaining • Land sales in 2008 • 338 gross hectares • 160 developable hectares • R725 000 per developable hectare 24
Slide 25: Cornubia / Waterloo
R102 Cornubia / Waterloo 340 ha sold • Extent (remaining) Sale of 180 ha being persured • 1 644 gross hectares • 1 253 developable hectares • Mixed use development • 80 hectares light industrial • Housing, schools and hospitals • Intensive agriculture M41 N2 25
Slide 26: Aberfoyle
• Aberfoyle • Gross hectares - 324 • Developable hectares - 165 340 ha sold Sale of 180 ha being persured LOOKING WEST KING SHAKA AIRPORT TONGAAT LOOKING NORTH-EAST 26
Slide 27: Adjacent to airport; multi modal logistics hub
• Extent • Gross hectares - 930 • Developable hectares - 578 • Adjacent to airport on western boundary • Multi modal logistics hub 340 ha sold Sale of 180 ha being persured 27
Slide 28: Extent
Extent • Gross hectares - 970 • Developable hectares - 740 R102 R102 340 ha sold Sale of 180 ha being persured WATSON WATSON HIGHWAY HIGHWAY N2 N2 28
Slide 29: Canelands
Canelands • Extent • 20 hectares platform potential • Zoned land awaiting EIA approval • Closest sizable zoned industrial land to the airport • 3 km from the airport 29
Slide 30: Extent
Extent • Gross hectares - 1 197 • Developable hectares - 833 30
Slide 31: Riverhorse Valley
Riverhorse Valley • 72 hectares sold over 2 years • Revenue - R622 million • Operating profit - R322 million • R4,47 million operating profit per hectare 31
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Slide 33: Starch and Glucose
Starch and Glucose 33
Slide 34: Competitive South African Maize Price
Price(US$/ton) 50 50 100 150 200 250 300 350 02/03/06 31/03/06 04/05/06 01/06/06 30/06/06 28/07/06 28/08/06 26/09/06 24/10/06 21/11/06 Gap 19/12/06 19/01/07 16/02/07 16/03/07 18/04/07 18/05/07 15/06/07 13/07/07 13/08/07 10/09/07 09/10/07 CBOT 06/11/07 04/12/07 08/01/08 05/02/08 04/03/08 03/04/08 06/
Slide 35: 2009 Domestic Market
2009 Domestic Market Back-to-Back deals concluded 34,2% • Price Maize when final product price agreed with customer Toll manufacturing agreements 31,5% • Product price calculated by cost plus formula with maize cost as an input Gap hedge • Maize price hedged at an acceptable relative price to Intern
Slide 36: Annual sugar consumption growth 2,2% past 26 years
Annual sugar consumption growth 2,2% past 26 years Tongaat Hulett’s Sugar Sales 2009 Crop Market size 08/09 - 151 million tons sugar Domestic /Regional 57% Supply Demand Balance: EU 22% 08/09 Deficit > 5 million tons World Market 21% 09/10 ? 36
Slide 37: EU Sugar Market Update
EU Sugar Market Update • Long-term supply agreement signed • 100 000 tons per annum from Mozambique and Zimbabwe • 6-year agreement • Price guaranteed above reference price • Reference price per ton • Raw €335,2 (US$ 20,5c/lb) • Refined €404,4 (US$ 23,8c/lb) Supply Balance (million tons) Season 2005
Slide 38: Renewable Energy – It is a Matter of Time
Renewable Energy – It is a Matter of Time • Clean energy premium versus CO2 penalties • Power contribution to the grid • Medium term excluding tops and trash • In season 106 MW (554 GWh) • Out of season 75 MW (172 GWh) • Longer term including tops and trash • In season 266 MW (1 416 GWh) • Out of se
Slide 39: Triangle, Hippo, Mafambisse, Tambankulu, Xinavane
Triangle Hippo Mafambisse Tambankulu Xinavane 39
Slide 40: Xinavane Expansion
Xinavane Expansion • Agricultural irrigated cane expansion • Additional 5 598 hectares planted • Mill expansion • Shut down since 12 December 2008 • Early testing scheduled for May 2009 • Maximise season-end cane crush • Capital outflows and revenue inflows • R467 million outflow in H1 2009 • Revenu
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Slide 51: Agriculture, Milling and Refining – South Africa
Agriculture, Milling and Refining – South Africa • Cane yields • 2008 Actual 47 tcp hectare • 2000 Actual 64 tcp hectare • 26% Gap • Area under cane increased by 8 103 hectares • 2007 - 140 518 hectares • 2008 - 148 621 hectares • 2008 hectares 8% less than hectares in 2000 • Land reform • Mills com
Slide 52: Downstream Value Added Activities
Downstream Value Added Activities Food brands on shelf Only sizable stand alone sugar refinery Markinor survey in Southern Africa 1. Tastic • 600 000 tons per annum 2. Huletts • White premium US$80/ton 3. Ace • Refinery cash cost US$36/ton 4. Koo • 3 year performance turnaround 52
Slide 53: Zimbabwe Replacement Value (TH Holding)
Zimbabwe Replacement Value (TH Holding*) R million Cane Growing Triangle 1 446 Hippo 697 Sugar Milling Triangle 2 014 Hippo 931 Refining and Packing Triangle 308 Hippo 86 Ethanol Plant 247 Total 5 729 *TH Holding - Triangle 100%, Hippo 51% 53
Slide 54: Resurgence - Markets and Pricing
Resurgence - Markets and Pricing • Domestic and regional market • Domestic pricing from 1 February 2009 - 32,2 USc/lb* • Regional prices Zambia - 33,7 USc/lb Malawi - 34,0 USc/lb Mozambique - 26,1 USc/lb South Africa - 23,6 USc/lb • Annual per capita consumption South Africa - 32 kg Swaziland - 30 k
Slide 55: Resurgence – Volumes
Resurgence – Volumes • Sugar volumes • 2002 - 580 000 tons 2010 - 411 000 tons • 2008 - 298 000 tons 2012 - 600 000 tons • Sugar cane recovery • Own estates - yields (tons cane per hectare) 2008 - 100 2012 - 115 • Outgrower cane • Revenue stream re-established • EU funding of €45 million - pre condi
Slide 56: Profitability
Profitability 2008 Money 2010 2012 TH 2008 Production (tons sugar) 411 000 600 000 Operating Profit (TH Share) > R540 million > R790 million R 1 132 million Headline earnings (TH Share) > R350 million > R510 million R583 million 56
Slide 57: Additional Information
ADDITIONAL INFORMATION @ Tongaat Hulett 57
Slide 58: Bridge City
Bridge City • PPP with eThekwini municipality • Mixed use high density town centre • Multi modal transport hub • Regional public hospital • 40 000m2 shopping centre under construction • R700 million public infrastructure • Magistrate court land sale • R2,5 million per developable hectare 58
Slide 59: Umhlanga Ridge
Umhlanga Ridge • Only 2 sites remaining for sale • Increasingly important regional centre role • High density and critical mass • Catalyst for development on surrounding land 59
Slide 60: Umhlanga Ridgeside
Umhlanga Ridgeside • Commercial bulk 250 000m2 • 3000 residential units : 300 000m2 • Resort hotel 80 000m2 • Sold to date - 271 378m2 bulk R565,5 m revenue • Sales Q4 2008: 21 954m2 , R76,5 million • M41 interchange under construction - completion March 2010 • Office Park infrastructure commenced -
Slide 61: Izinga – Umhlanga Ridge
Izinga – Umhlanga Ridge • Prime location – convenience of Umhlanga Ridge • Includes affordable market product • First phase launched late 2008 • R15 million sales achieved 61
Slide 62: Kindlewood
Kindlewood • 550 unit development • Five phase development • Phase 1 fully serviced - sold out • Phase 2 fully serviced - 52% sold 62
Slide 63: Sibaya – Mdloti (first phase)
Sibaya – Mdloti (first phase) • “One Planet Living” sustainable principles • 8km from new airport – access via N2, M4 and M27 • EIA / Planning approvals nodes 1 and 5 anticipated H1 2009 • 2010 potential 63
Slide 64: Zimbali South & West
Zimbali South & West • Additional recreational facility complete by June 2009 • Final few sites remaining • 7-star Fairmont Zimbali Hotel opening on track for October 2009 • Well established Zimbali brand being extended to Zimbali lakes 64
Slide 65: Zimbali Lakes
Zimbali Lakes • Interest established for phases 1 and 2 in November 2008 • Office Park sales of R24,7 million 10 924m2 Q4 2008 • Mixed-use Resort node with beach access and man-made lake adjacent to river 65
Slide 66: Tinley Manor
Tinley Manor • 6 km coastal frontage / North and South bank of Mhlali River • N2 accessibility – convenience of new airport • Preparation for EIA and zoning under way • Land acquisitions consolidated and enlarged the node – infrastructure efficiency improved • Hotel, residential and retail • Golf co
Slide 67: Starch Operations Financial Data
Starch Operations Financial Data R millions FY 2008 FY 2007 Revenue: 2 150 1 679 Domestic 1 554 1 296 Exports 130 63 Co-Products 466 320 Operating Profit 240 105 67
Slide 68: Volume Data
Volume Data Volume (tons) FY 2008 FY 2007 Local Starch 96 720 97 304 Local Glucose 336 539 332 302 Total Local 433 259 429 606 Export Starch 18 823 12 376 Export Glucose 8 199 6 849 Total Exports 27 022 19 225 Co-Products 157 222 153 525 Total 617 503 602 356 68
Slide 69: Co-product Pricing
Co-product Pricing Price movement 2008 on Co-product Major price drivers 2007 50%: International edible oil price Germ Up 80,6% 50%: Local maize International protein (Soya, fishmeal) Gluten-60 Up 31,5% prices Gluten-20 Up 29,1% Local maize price 69
Slide 70: Outlook for RSA Maize: 2008/09 Season
Outlook for RSA Maize : 2008/09 Season 2008/09 2009/10 Forecasts Hectares Planted (‘000 ha) 2 799 2 596 2 596 2 596 Yield (t/ha) 4,54 4,00 4,30 4,54 Opening Stocks 1 070 2 213 2 213 2 213 Production (‘000 tons) 12 700 10 384 11 163 11 785 Consumption – Market (8 600) (8 600) (8 600) (8 600) Consumpt
Slide 71: Sugar Production
Sugar Production Tons ’000 2000 2001 2002 2003 2004 2005 2006 2007 2008 South Africa 969 755 860 652 723 753 666 604 644 Mozambique 39 36 71 82 85 115 106 108 108 Swaziland RSE 41 45 50 54 50 56 55 58 56 Zimbabwe * 282 264 296 264 222 236 240 349 298 Total 1 331 1 100 1 277 1 052 1 080 1 160 1 067 1
Slide 72: Expanded Sugar Production
Expanded Sugar Production Tons Per Annum 2008 Production 2009 Capacity South Africa 644 000 > 1 000 000 Zimbabwe 298 000 > 600 000 Mozambique 108 000 > 300 000 Swaziland RSE 56 000 > 60 000 Total 1 106 000 > 1 960 000 72
Slide 73: Hectares under Cane
Hectares under Cane Tongaat Hulett Outgrowers Total South Africa (2008) 11 417 137 204 148 621 Mozambique (2010) 21 521 4 299 25 820 Zimbabwe (current) 30 055 16 279 46 334 Swaziland (current) 3 750 - 3 750 TOTAL 66 743 157 782 224 525 • To date 11 700 hectares transferred to new black farmers in So
Slide 74: Sugar Production - SA
Sugar Production - SA 3 Tons Sugar - Millions Industry: 2 260 000 tons THS: 644 000 tons 2.5 Share of industry 28,5% (2007: 26,6%) 2 1.5 THS Industry 1 0.5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 Year 74
Slide 75: Total Volumes – THS (SA)
Total Volumes – THS (SA) Tons sugar FY 2008 FY 2007 Opening stock 206 493 226 120 Production 644 173 604 313 Prior season adjustment (517) (459) Sugar purchased in 87 172 82 367 Sales (675 848) (705 848) Closing Stock 261 473 206 493 75
Slide 76: Local Market Volumes – THS (SA)
Local Market Volumes – THS (SA) Tons sugar FY 2008 FY 2007 Opening stock 144 397 150 243 Production 407 970 372 122 Prior season adjustment (474) 85 Sugar purchased in 87 172 82 367 Sales (466 398) (460 420) Closing Stock 172 667 144 397 76
Slide 77: Export Volumes – THS SA
Export Volumes – THS SA Tons sugar FY 2008 FY 2007 Opening stock 62 096 75 877 Production 236 203 232 191 Prior season adjustment (43) (544) Sales (209 450) (245 428) Closing stock 88 806 62 096 77
Slide 78: Raw Export Realizations: South Africa
Raw Export Realizations: South Africa Raw Sugar FY 2008 FY 2007 Price in US c/lb* 12,12 11,77 Average Rand/US$ realisation R8,05 R7,12 Average Rand realisations per ton R2 316 R1 944 • Table includes raw sugar for refined exports • * Excludes preferential markets and premiums 78
Slide 79: 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