Earnings releases

Audited Results & Final Dividend Declaration for the year ended 31 December 2003


Tongaat-Hulett experienced a year dominated by a number of external developments that had a significant impact on earnings. A headline loss of R93 million (2002: headline profit of R380 million) was incurred for the year.

The strengthening of the Rand affected export revenue adversely and led to a decrease in domestic selling prices in the face of import threats. Current reductions to the cost base in the business were not sufficient to compensate for reduced margins. The sharp decline in the maize price in the first half of the year led to a charge against income on the valuation of maize procurement contracts. The movement in the exchange rate during the year resulted in negative valuation adjustments in respect of foreign currency denominated balance sheet items.

The low rainfall and the resultant reduced sugar production in South Africa, as well as the low world sugar price further impacted underlying operating profit. The dividend received from Triangle Sugar in Zimbabwe was lower than the previous year.

The aforementioned factors offset the substantial progress that was achieved in growing sales volumes, particularly at Hulett Aluminium, and increased earnings by Moreland from the development of its prime land holdings.

Revenue grew by 7,5% to R6,6 billion and underlying operating profit amounted to R452 million (2002: R818 million).

Valuation items charged to the income statement amounted to R398 million for the year and included the mark-to-market adjustment of R211 million required on maize procurement contracts.

A total net loss of R41 million (2002: total net earnings of R388 million) was incurred for the year. The Board has declared a final dividend of 80 cents per share, which follows the interim dividend of 40 cents per share.

The Group's balance sheet at 31 December 2003 remains sound with net borrowings as a percentage of equity at 13,4% (2002: zero).


African Products' prime domestic volumes declined by 1,5% as a consequence of increased competition from imports. Domestic prices had to be decreased significantly in order to retain business. Export volumes grew by 3,5% in 2003, with reduced contributions as a result of the strong Rand. Fixed costs were maintained at levels below those of 2002. The impact of the stronger currency combined with the cost of maize purchased in 2002 for the 2003/2004 season resulted in a reduction in underlying operating profit to R114 million (2002: R262 million).

The mark-to-market valuation adjustment required on maize contracts resulted in a charge to the income statement of R211 million for the year. The decrease in the maize price of some 40 to 45% in the first six months of the year gave rise to a charge of R255 million at the half year. There was an increase in the maize price towards the end of the year and this resulted in a gain of R44 million in the second half of the year.

Tongaat-Hulett Sugar's revenue grew by 13% as a result of increased sales volumes in South Africa and Mozambique, while underlying operating profit for the year declined to
R263 million (2002: R391 million). The higher sales volumes were offset by lower margins.

Sugar production from South African operations at 652 000 tons was 24% lower than last year, resulting in an increase in the cost per ton of sugar produced. In addition, the domestic price of sugar decreased by 7% in October 2003 and export realisations declined due to the strength of the Rand.

In Mozambique, production at Xinavane and Mafambisse increased by 15% to 82 000 tons and progress has been made in securing the domestic market against imports, with sales by domestic producers growing by 68%. The rehabilitation and growth at Xinavane have not yet reached their potential and an operating loss combined with a high interest cost and valuation adjustments on foreign loans resulted in a loss being reported for this associate company.

Triangle Sugar in Zimbabwe continues to perform well in turbulent economic and business conditions. The decrease in dividends to R19 million (2002: R71 million) is attributable to the difficulty in the remittance of dividends from Zimbabwe.

Moreland reaped the benefit of the platform that it developed in past years and capitalised on the strong property market, posting a 55% increase in revenue to R226 million and a record operating profit of R92 million. This was achieved whilst generating a strong positive cash flow. A highlight of the year was the conclusion of the Zimbali joint venture agreement with Kuwaiti-based International Financial Advisers. Record sales were achieved in the residential portfolio, particularly in the Mount Edgecombe Country Club Estate and Ilala Ridge. Development of the RiverHorse Valley Business Estate and the Durban Point Waterfront, which are public private partnerships with the eThekweni Municipality, progressed well and good sales were recorded.

Hulett Aluminium increased total sales volumes by 22%, with export volumes growing by 37%. Sales of rolled products increased to 130 000 tons (2002: 105 000 tons). A record production level of over 150 000 tons annualised was achieved in December 2003. The increase in total rolled products manufacturing conversion costs has been limited to 2%, notwithstanding the significant increase in sales volumes. These benefits have been offset by the effects of the strength of the Rand, coupled with low international rolling margins and the effect of a metal price lag on cost of sales. Underlying operating profit accordingly declined and the Group's 50% share amounted to R22 million (2002: R179 million). An improvement in earnings in the second half was achieved in spite of a stronger Rand and reflects the benefits flowing from the sustained improvement in sales volumes and mix.


The developments impacting on Tongaat-Hulett's results for the past year have acted as a catalyst to accelerate management actions to improve profitability.

The Group's results will continue to be affected by fluctuating exchange rates and commodity prices and, in the first half of 2004, by restructuring costs as well as by the size of last year's sugar crop in South Africa. Group-wide initiatives to reduce the cost base, increase sales volumes and optimise capacity utilisation will provide benefits as the year progresses.

The Group expects to record a substantial headline earnings recovery in 2004. Its asset and business base remains sound, with considerable opportunities for sustained earnings growth.

For and on behalf of the board

C M L Savage P H Staude
Chairman Chief Executive Officer

Amanzimnyama, Tongaat, KwaZulu-Natal

20 February 2004