Tongaat Hulett Ltd THL Interim Results

  Tongaat Hulett Ltd (THL) - Interim Results

RNS Number : 8691Q
Tongaat Hulett Limited
12 November 2012


                                                                             

                                                                             

Tongaat Hulett Limited



Registration No: 1892/000610/06

JSE share code: TON

ISIN: ZAE000096541



  INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012



· Revenue of R7,398 billion (2011: R6,027 billion) +22,7%

· Profit from operations of R1,313 billion (2011: R1,047 billion) +25,4%

· Headline earnings of R654 million (2011: R501 million) +30,5%

· Interim dividend of 150 cents per share (2011: 120 cents per share) +25,0%



COMMENTARY



Tongaat Hulett's headline earnings for  the half-year ended 30 September  2012 
increased by  30,5% to  R654 million  (2011: R501  million), benefitting  from 
growth in sugar and industrial land sales.



Revenue for the six months grew by  23% to R7,4 billion (2011: R6,0  billion). 
Total sugar sales volumes in the first six months of the 2012/13 year were  9% 
above the first  half of  last year, with  higher sugar  production levels,  a 
larger crop  and  a  drive  to  end the  milling  season  earlier  this  year. 
Significant sales were concluded in the land conversion activities, mainly  in 
the Cornubia Industrial and Umhlanga Ridge areas.



Profit from operations grew  by 25% to R1,313  billion from R1,047 billion  in 
the same period  last year. Tongaat  Hulett is benefitting  from higher  sugar 
production volumes with the related reduction in the unit cost of  production, 
against the  background of  general  margin pressure  in the  relationship  of 
selling price movements versus higher input costs.



Operating profit from land  conversion and development for  the six months  to 
September 2012 amounted  to R244 million  (prior period: R62  million) with  a 
further R2  million  in  capital  profits (prior  period:  R3  million)  being 
realised. In the present economic conditions few hectares are being  converted 
to development. In the first half of the 2012/13 year, 40 developable hectares
(46 gross hectares) were sold. Revenue was generated mainly from sales in  the 
Cornubia Industrial, Umhlanga Ridge Town Centre, La Lucia Ridge Office Estate,
Izinga, Kindlewood, Mount Moriah and Zimbali areas.



Operating profit  from  the  South  African  sugar  operations  including  the 
downstream sugar value added activities increased by 13% to R221 million.  The 
agriculture, sugar milling and refining operations continued to recover,  with 
operating profit amounting  to R99  million (2011: R54  million). The  various 
downstream sugar value added activities recorded profit of R122 million (2011:
R142 million). Export and local market sales volumes totalled 271 000 tons  in 
the six months (2011: 253000 tons).



Operating profit in Mozambique  was R270 million compared  to R267 million  in 
2011. Sugar production in Mozambique is consolidating this year following  the 
record 42% increase last year. Rainfall conditions in the irrigation catchment
area at  Mafambisse  have  led  to  a reduction  in  that  harvest.  Costs  of 
production reflect the impact of the  last wage increase of 11%. The  strength 
of the  Metical (Euro  weakness) impacted  negatively on  export  realisations 
while it had a positive effect on converting Metical earnings into Rands.



The Zimbabwean sugar  operations generated  operating profit  of R437  million 
(US$53 million) compared  to R364  million (US$52 million)  last year.  Margin 
pressure is being  experienced in  the nexus  of selling  price movements  and 
input cost  increases, following  the  last 18%  wage increase.  Hippo  Valley 
experienced an increase in agricultural expenditure and cane supply costs,  as 
the operations invest in increasing future cane supplies. The weaker  Euro/US$ 
exchange rate impacted negatively on export proceeds while the weaker  average 
Rand/US$ impacted positively on the conversion  of US$ profits into Rands.  As 
at 30 September  2012, the  year to  date sugar  production was  341 000  tons 
compared to 265 000 tons in the same period in 2011, a 29% increase.



In Swaziland, the Tambankulu sugar estate's operating profit increased to  R41 
million (2011: R30 million), as a result of higher sucrose prices.



Profit from the starch operations decreased by 12% to R147 million (2011: R167
million). Starch  and glucose  processing  margins came  under pressure  as  a 
result of higher local maize prices, which were above the Chicago (CBOT) price
following a dry  summer and expectations  of a reduced  crop. Domestic  market 
volumes reflected a growth of 3,8% despite a poor first quarter and the impact
of  the  national  transport  strike.  Manufacturing  plant  performance   has 
continued to improve.



Operating cash flow, before working  capital, increased to R1,7 billion  which 
was in line with the growth  in operating profit. The R1,4 billion  absorption 
of cash in working  capital during the six  months to September is  consistent 
with this being a high point in the sugar season. This particularly applies to
South Africa, with large cane payments having been made and sugar stock levels
having increased, in  advance of them  reducing again towards  the end of  the 
season. The increase in operating cash flow follows the previous absorption of
cash in  the numerous  expansion and  new sugar  cane establishment  programs. 
Tongaat Hulett's net  debt at  the end of  September was  R5,088 billion.  The 
replacement of  significant portions  of short  term debt  with  appropriately 
structured long term debt has been successfully concluded.



Total net  profit was  R734 million  for the  half-year to  30 September  2012 
(2011: R597 million).



The interim dividend declaration has increased  by 25% to 150 cents per  share 
(2011: 120 cents per share).



OUTLOOK



Building on  its  current  increasing  momentum as  it  increases  sugar  cane 
supplies, Tongaat Hulett is  now examining how much  above 2 million tons  per 
annum it could grow its sugar  production from its existing mills. This  would 
include maximising production rates and  up-times in the mills, extending  the 
length of the  milling season  and debottlenecking  at a  moderate cost.  Unit 
costs will  benefit  substantially  from increasing  volumes  and  yields,  as 
milling costs and many of the agricultural costs per hectare are mostly fixed.



Sugar production for the full 2012/13 year is expected to grow between 8%  and 
15%, following last year's 14% increase  to 1,150 million tons. The season  is 
well advanced and the major variable is excessive rainfall, which could hamper
harvesting and lead to cane being carried over to the next season.



Good progress is being made with the many initiatives underway to improve root
age, farming practices and crop positioning  that are aimed at improving  cane 
yields and sucrose content. The low  dam levels in the Triangle, Hippo  Valley 
and  Mafambisse  areas  have  already   impacted  root  planting  and   yields 
respectively and it  is important  to have good  rainfall this  season in  the 
catchment areas. New sugar cane root plantings across the various cane growing
areas in the current year are targeted to reach 11 600 hectares, which follows
last year's  actions  that  increased the  area  under  cane by  some  13  520 
hectares.



Tongaat Hulett's operations in  Zimbabwe, employing 18 000  people, are in  an 
important  recovery,  growth   and  expansion  phase,   which  should   create 
sustainable value for all stakeholders. Sugar production has already increased
from 259 000 tons in 2009/10 to an expected 460 000 to 490 000 tons this year,
with substantial reinvestment  in the  business by Tongaat  Hulett. A  central 
part of  this  recovery has  been  the  re-establishment of  cane  growing  by 
improving agricultural  yields on  Tongaat  Hulett estates  and  substantially 
developing indigenous private cane farmers. As  at October 2012, at least  670 
active indigenous private farmers, farming some 11 100 hectares and  employing 
more than 5  550 people, supply  772 000  tons of cane  which generates  US$50 
million in annual revenue for them.



Zimbabwe, with  Tongaat Hulett  as a  partner, has  the potential  to  further 
develop indigenous  private  cane  farmers substantially.  This  potential  is 
linked to how  much annual production  can be achieved  in the existing  sugar 
mills. Based on  Tongaat Hulett's view  of its existing  mills, a further  600 
farmers on 12 700 hectares could supply an additional 1,4 million tons of cane
per annum. In  total, all  these indigenous private  cane farmer  developments 
could earn US$150 million gross revenue per annum and employ more than 12  000 
people. Dialogue is maintained with key stakeholders including the appropriate
authorities at the highest  levels to ensure a  full understanding of all  the 
relevant dynamics and issues.



The current  focus in  Mozambique is  to maximise  sugar production  from  the 
existing mills  to  well  above  310  000 tons  per  annum,  reduce  costs  of 
production  and   to  investigate   brownfield  expansion   opportunities   at 
Mafambisse.



The strategy to increase cane supply in South Africa is focused on  commercial 
farmers, small-scale farmers and increasing Tongaat Hulett's influence in cane
development through leasing additional land and collaborating with  Government 
to rehabilitate cane supply on land reform  farms that have gone out of  cane. 
The gap between hectares under cane and hectares milled will remain a  feature 
of the next few  years as a  result of accelerated  root replanting (with  the 
time required from planting to first harvesting) to improve cane age, generate
better yields and increase  the crop's ability  to withstand variable  weather 
conditions and as the  business makes progress improving  the cane age /  crop 
positioning for  optimal harvesting  to increase  future cane  supplies.  This 
year, this dynamic has been further affected by the national transport  strike 
in South Africa  followed by  unusually heavy  rains. The  increased level  of 
carry-over cane from  the current season  into next season  could lead to  the 
mills opening earlier than usual in 2013 to accommodate the increased level of
sugar production.



Severe drought  conditions in  the  United States  have  led to  increases  in 
international prices  as global  grain stocks  have come  under pressure.  The 
higher prices  are  expected  to  encourage an  increase  in  the  new  season 
plantings for  the  South  African  maize  crop.  This,  combined  with  final 
estimates of the prior season crop  being above initial forecasts, has led  to 
local maize  prices trading  below Chicago  (CBOT) prices  which will  support 
margins in  the  second half  of  the year.  Approximately  86% of  the  maize 
requirements for  the remainder  of the  current year  have been  priced  with 
starch customers or hedged at levels close to or below the Chicago price.



Tongaat Hulett has  targeted some  8 560  developable hectares  (13 561  gross 
hectares) for development  in South  Africa. There are  on-going processes  on 
most  of  the  developable  land  to  enhance  its  usage  and  value  to  all 
stakeholders.  The  extent  and  pace  of  planning,  in  collaboration   with 
Government,  has  increased  substantially.  At  present,  2  049  developable 
hectares  are  the  subject  of  environmental  and  planning  processes.   An 
increasing number  of hectares  of  land are  moving towards  becoming  active 
developments, including the Cornubia New  Town Centre where the  environmental 
impact assessment  is  well underway.  Various  sales strategies  (bulk  sale, 
partnership or own development) continue to be reviewed for each land  holding 
and implemented as appropriate. The exact timing of land sales, including bulk
sales, remains variable in the current economic climate.



Tongaat Hulett's financial results remain  sensitive to movements in  exchange 
rates, which impact particularly on export realisations and the conversion  of 
profits from Zimbabwe and Mozambique into Rands.



The future revenue  stream would  benefit significantly  from electricity  and 
ethanol developments. Tongaat  Hulett continues to  interface with  Government 
towards establishing an appropriate regulatory framework for both  electricity 
generation and ethanol production from sugar cane.



For and on behalf of the Board



J   B    Magwaza 
Peter Staude

Chairman
Chief Executive Officer



Amanzimnyama

Tongaat, KwaZulu-Natal



8 November 2012













DIVIDEND DECLARATION



Notice is hereby given that the  Board has declared an interim gross  dividend 
(number 170) of 150 cents per share for the half-year ended 30 September  2012 
to shareholders recorded in the register at the close of business on Friday 18
January 2013.



The salient dates of the declaration and payment of this interim dividend  are 
as follows:



Last date to trade ordinary shares

          "CUM"           dividend 
Friday 11 January 2013

Ordinary  shares  trade  "EX"  dividend  Monday   14 
January 2013

Record                date 
Friday 18 January 2013

Payment                date 
Thursday 24 January 2013



Share certificates  may  not be  dematerialised  or re-materialised,  nor  may 
transfers between  registers take  place between  Monday 14  January 2013  and 
Friday 18 January 2013, both days inclusive.



The dividend is  declared in  the currency of  the Republic  of South  Africa. 
Dividends paid by  the United  Kingdom transfer  secretaries will  be paid  in 
British currency at the rate  of exchange ruling at  the close of business  on 
Friday 11 January 2013.



The dividend has been declared from income reserves. There are no STC  credits 
available for utilisation. A net dividend of 127,5 cents per share will  apply 
to shareholders liable  for the  local 15%  dividend withholding  tax and  150 
cents per share  for shareholders  exempt from  paying the  dividend tax.  The 
issued ordinary share capital as at 8 November 2012 is 108500 806 shares. The
company's income tax reference number is 9306/101/20/6.





For and on behalf of the Board



M A C Mahlari

Company Secretary



Amanzimnyama

Tongaat, KwaZulu-Natal



8 November 2012





                               Income Statement
Condensed consolidated                    Unaudited    Unaudited       Audited
                                        6 months to  6 months to  12 months to
                                       30 September 30 September      31 March
Rmillion                                       2012         2011          2012
Revenue                                       7 398        6 027        12 081
Profit from operations                        1 313        1 047         1 921
Bulk sales / capital profit on land               2            3             3
Other capital items                             (1)
BEE IFRS 2 charge and transaction
costs                                          (28)         (24)          (48)
Valuation adjustments                             2            3             2
Operating profit                              1 288        1 029         1 878
Share of associate company's profit                                          1
Net financing costs (note 1)                  (281)        (249)         (507)
Profit before tax                             1 007          780         1 372
Tax (note 2)                                  (273)        (183)         (351)
Net profit for the period                       734          597         1 021
Profit attributable to:
 Shareholders of Tongaat Hulett                655          505           889
 Minority (non-controlling) interest            79           92           132
                                                734          597         1 021
Headline earnings attributable to
 Tongaat Hulett shareholders (note
3)                                              654          501           891
Earnings per share (cents)
 Net profit per share
 Basic                                 605.2        477.4         837.0
 Diluted                               594.0        466.3         817.6
 Headline earnings per share
 Basic                                 604.3        473.6         838.9
 Diluted                               593.1        462.6         819.4
Dividend per share (cents)                    150.0        120.0         290.0
Currency conversion
 Rand/US dollar closing                     8.27         8.06          7.67
 Rand/US dollar average                     8.18         6.95          7.44
 Rand/Metical average                       0.30         0.24          0.27
 Rand/Euro average                         10.40         9.91         10.24
 US dollar/Euro average                     1.27         1.43          1.38





                              Segmental Analysis
Condensed consolidated                    Unaudited    Unaudited       Audited
                                        6 months to  6 months to  12 months to
                                       30 September 30 September      31 March
Rmillion                                       2012         2011          2012
REVENUE
Starch operations                             1 401        1 210         2 580
Land Conversion and Developments                430           92           366
Sugar
 Zimbabwe operations                       1 633        1 179         2 266
 Swaziland operations                        135          117           163
 Mozambique operations                     1 286        1 082         1 437
 SA agriculture, milling and
refining                                      1 509        1 353         3 465
 Downstream value added activities         1 004          994         1 804
Consolidated total                            7 398        6 027        12 081
PROFIT FROM OPERATIONS
Starch operations                               147          167           363
Land Conversion and Developments                244           62           215
Sugar
 Zimbabwe operations                         437          364           621
 Swaziland operations                         41           30            51
 Mozambique operations                       270          267           402
 SA agriculture, milling and
refining                                         99           54            93
 Downstream value added activities           122          142           261
Profit from the operating areas               1 360        1 086         2 006
Centrally accounted and consolidation
items                                          (47)         (39)          (85)
Consolidated total                            1 313        1 047         1 921







                       Statement of Financial Position
Condensed consolidated                        Unaudited    Unaudited   Audited
                                           30 September 30 September  31 March
Rmillion                                           2012         2011      2012
ASSETS
Non-current assets
Property, plant and equipment                     9 559        9 144     9 026
Growing crops                                     3 540        2 897     3 575
Defined benefit pension fund asset                  294          295       294
Long-term receivable                                 85          135       115
Goodwill                                            276          272       260
Intangible assets                                    69           67        65
Investments                                          10            8        12
                                                 13 833       12 818    13 347
Current assets                                    7 502        5 908     4 435
 Inventories                                     3 255        2 556     1 483
 Trade and other receivables                     3 147        2 529     2 356
 Derivative instruments                              1            2         4
 Cash and cash equivalents                       1 099          821       592
TOTAL ASSETS                                     21 335       18 726    17 782
EQUITY AND LIABILITIES
Capital and reserves
Share capital                                       134          140       140
Share premium                                     1 535        1 524     1 528
BEE held consolidation shares                     (775)        (833)     (799)
Retained income                                   6 357        5 645     5 888
Other reserves                                      351          512      (48)
Shareholders' interest                            7 602        6 988     6 709
Minority interest in subsidiaries                 1 234        1 069     1 087
Equity                                            8 836        8 057     7 796
Non-current liabilities                           6 630        4 143     4 706
 Deferred tax                                    1 758        1 541     1 663
 Long-term borrowings                            3 534        1 295     1 732
 Non-recourse equity-settled BEE
borrowings                                          737          748       737
 Provisions                                        601          559       574
Current liabilities                               5 869        6 526     5 280
 Trade and other payables (note 4)               2 984        2 583     1 997
 Short-term borrowings                           2 653        3 804     3 264
 Derivative instruments                              8           20         1
 Tax                                               224          119        18
TOTAL EQUITY AND LIABILITIES                     21 335       18 726    17 782
Number of shares (000)
- in issue                                      108 501      105 014   105 143
- weighted average (basic)                      108 220      105 785   106 209
- weighted average (diluted)                    110 274      108 298   108 739



                        Statement of Changes in Equity
Condensed consolidated                    Unaudited    Unaudited       Audited
                                        6 months to  6 months to  12 months to
                                       30 September 30 September      31 March
Rmillion                                       2012         2011          2012
Balance at beginning of period                6 709        4 800         4 800
Total comprehensive income for the
period                                        1 070        2 293         2 125
 Retained earnings                             655          505           889
 Movement in hedge reserve                                 (16)           (2)
 Foreign currency translation                  415        1 804         1 238
Dividends paid                                (184)        (150)         (279)
Share capital issued - ordinary                                              4
BEE held consolidation shares                    24           22            42
Share-based payment charge                       26           27            47
Settlement of share-based payment
awards                                         (43)          (4)          (30)
Shareholders' interest                        7 602        6 988         6 709
Minority interest in subsidiaries             1 234        1 069         1 087
 Balance at beginning of period              1 087          840           840
 Total comprehensive income for the
period                                          155          235           256
 Retained earnings                            79           92           132
 Foreign currency translation                 76          143           124
 Dividends paid to minorities                  (8)          (6)           (9)
Equity                                        8 836        8 057         7 796



                   Statement of Other Comprehensive Income
Condensed consolidated                    Unaudited    Unaudited       Audited
                                        6 months to  6 months to  12 months to
                                       30 September 30 September      31 March
Rmillion                                       2012         2011          2012
Net profit for the period                       734          597         1 021
Other comprehensive income                      491        1 931         1 360
Movement in non-distributable
reserves:
 Foreign currency translation                  491        1 947         1 362
 Hedge reserve                                             (18)           (3)
 Tax on movement in hedge reserve                             2             1
Total comprehensive income for the
period                                        1 225        2 528         2 381
Total comprehensive income
attributable to:
 Shareholders of Tongaat Hulett              1 070        2 293         2 125
 Minority (non-controlling) interest           155          235           256
                                              1 225        2 528         2 381



                           Statement of Cash Flows
Condensed consolidated                    Unaudited    Unaudited       Audited
                                        6 months to  6 months to  12 months to
                                       30 September 30 September      31 March
Rmillion                                       2012         2011          2012
Operating profit                              1 288        1 029         1 878
Profit on disposal of property, plant
and equipment                                   (5)          (4)          (10)
Depreciation                                    231          232           366
Growing crops and other non-cash
items                                           280          327         (352)
Tax payments                                   (47)         (29)         (125)
Operating cash flow                           1 747        1 555         1 757
Change in working capital                   (1 390)      (1 044)         (519)
Cash flow from operations                       357          511         1 238
Net financing costs                           (281)        (249)         (507)
Cash flow from operating activities              76          262           731
Expenditure on property, plant and
equipment:
 New                                         (61)         (89)         (329)
 Replacement                                (338)        (156)         (336)
 Major plant overhaul costs                  (97)         (74)           (9)
Other capital items                            (35)         (40)          (62)
Net cash flow before dividends and
financing activities                          (455)         (97)           (5)
Dividends paid                                (192)        (156)         (288)
Net cash flow before financing
activities                                    (647)        (253)         (293)
Borrowings raised                             1 160          579           516
Non-recourse equity-settled BEE
borrowings                                                  (13)          (24)
Shares issued                                                                4
Settlement of share-based payment
awards                                         (43)          (4)          (30)
Net increase in cash and cash
equivalents                                     470          309           173
Balance at beginning of period                  592          350           350
Foreign exchange adjustment                      37          162            69
Cash and cash equivalents at end of
period                                        1 099          821           592



                                    Notes
Condensed consolidated            Unaudited       Unaudited            Audited
                                6 months to     6 months to       12 months to
                               30 September    30 September           31 March
Rmillion                               2012            2011               2012
1. Net financing costs
 Interest paid                     (295)           (256)              (528)
 Interest
capitalised                                               1                  1
 Interest received                    14               6                 20
                                      (281)           (249)              (507)
2. Tax
 Normal                           (251)           (129)              (112)
 Deferred                          (17)            (34)              (187)
 Rate change
adjustment - deferred                   (5)                               (16)
 Secondary tax on
companies                                              (20)               (36)
                                      (273)           (183)              (351)
3. Headline earnings
 Profit attributable
to shareholders                         655             505                889
 Less after tax
effect of:
 Capital profit
on disposal of land                     (2)             (3)
 Fixed assets and
other disposals                           1             (1)                  2
                                        654             501                891
4. Trade and other
payables
Included in trade and other payables is the maize obligation (interest
bearing) of R407 million (30 September 2011: R293 million and 31 March 2012:
R161 million).
5. Capital expenditure
commitments
 Contracted                         127             178                132
 Approved                           162              87                210
                                        289             265                342
6. Operating lease
commitments                              81              38                 95
7. Guarantees and
contingent liabilities                   30              30                 24
8. Basis of preparation
The condensed consolidated unaudited results for the half-year ended 30
September 2012 have been prepared in accordance with the framework concepts
and the measurement and recognition requirements of International Financial
Reporting Standards (IFRS), the AC 500 standards as issued by the Accounting
Practices Board, the information as required by International Accounting
Standard 34 Interim Financial Reporting and the requirements of the Companies
Act of South Africa. The report has been prepared using accounting policies
that comply with IFRS which are consistent with those applied in the audited
financial statements for the year ended 31 March 2012. These financial
statements were prepared under the supervision of the Chief Financial Officer,
M H Munro CA (SA).



Corporate Information



Directorate: J B Magwaza (Chairman), P H Staude (Chief Executive Officer)*,  B 
G Dunlop*, F  Jakoet, J  John, R P  Kupara^, A  A Maleiane+, T  N Mgoduso,  N 
Mjoli-Mncube, M H Munro*, S G Pretorius, C B Sibisi.

* Executive directors ^ Zimbabwean + Mozambican



Company Secretary: M A C Mahlari



Registered office: Amanzimnyama Hill Road, Tongaat, KwaZulu-Natal

P O Box 3, Tongaat 4400

Telephone: +27 32 439 4019

Facsimile: +27 31 570 1055



Transfer secretaries:

Computershare Investor Services (Pty) Limited

Telephone: +27 11 370 7700



Sponsor: Investec Bank Limited Telephone: +27 11 286 7000



www.tongaat.com



e-mail: info@tongaat.com



                     This information is provided by RNS
           The company news service from the London Stock Exchange

END


IR FFSFSEFESEFF -0- Nov/12/2012 10:14 GMT