Earnings releases

Audited Results & Final Dividend Declaration for the year ended 31 December 2004


Management actions continue throughout the Group to improve profitability. Early benefits of these actions are reflected in the 2004 results. The proactive optimisation of capacity utilisation, enhancement of sales mix, improvement of raw material procurement, growth of volumes and reduction of costs will realise further considerable value from the Groupís strong asset and business base.

The Group recorded headline earnings of R214 million, generated off revenue of R6,3 billion (2003: R6,6 billion) in a year when the Rand strengthened against the US dollar by 15%. These earnings show an improvement of R307 million from the headline loss in 2003. This is in line with the ongoing Tongaat- Hulett strategy of unlocking the earnings improvement opportunities that exist in the balanced group of four sizeable, strategically positioned and focused operating companies.

African Products experienced a year of transition, with a move to a new maize procurement and product pricing model, and the commencement of a profit recovery. Operating profit improved to R63 million (2003: loss of R104 million) despite the pressure of the exchange rate on local pricing and export contributions, together with the high priced maize procured under the previous business model. Domestic sales volumes of prime products were 2% below those of 2003 as a result of the pressure from imports of starch and glucose in African Productsí markets and imports of finished products in its customersí markets. A large proportion of the volumes lost to direct imports were regained during the last quarter of 2004. The maize priced under the previous procurement approach was utilised by the end of October. The maize for all sales thereafter was priced when the product prices and volumes were agreed with customers. Using this approach, more than 35% of the maize required for 2005 has been priced against product prices with margins that will contribute to a return to an acceptable level of profitability for African Products. Fixed cash costs were again held below the 2002 levels, with ongoing focus on procurement practices and manning structures.

Hulett Aluminium improved its operating profit to R150 million (2003: R5 million), with the Groupís share being 50% thereof. The focus remains on increasing volumes, improving product mix and reducing unit costs. These factors have together generated financial benefits approaching R450 million in the past two years, and have largely offset the effects of the strengthening Rand. Hulett Aluminium started benefiting late in 2004 from rising US dollar rolling margins, especially in North America and Asia. As one of the few independent rolled products producers that are able to manufacture high quality, higher margin and technically demanding niche products, the business continues to experience strong demand. Total sales volumes of rolled products grew by 10% to 144 000 tons. Local market sales grew by 11%, particularly in the transport, automotive and packaging sectors. Export sales growth was limited to 10% by the increased local demand and the available production output. Production was hampered by a fire on the Camps Drift hot mill in May 2004 and a four week strike in the second half of the year. The average output of rolled products in the last quarter increased to 160 000 tons annualised. The rolled products target for 2005 is 175 000 tons, moving towards 200 000 tons in the years thereafter. Conversion costs per ton decreased by 5% in 2004 as a result of the volume growth and cost savings, particularly in metal recycling. The aluminium extrusion operation grew local market sales by 13% and increased profitability, as did the commercial products businesses.

Morelandís platform of prime property developments established over the past decade has enabled it to capitalise on the favourable resorts and residential property market and post a record operating profit of R182 million (2003: R90 million). New projects were launched during the year, with outstanding performances achieved in the Zimbali resort and the Ilala and Izinga Ridge residential projects in La Lucia and Umhlanga respectively. Increased sales have been achieved in the Umhlanga Ridge New Town Centre including sites for apartments and offices. Several large transactions were concluded at RiverHorse Valley Business Estate, a partnership with the eThekweni Municipality (Durban), and Briardene Industrial Park. The three new major road developments in areas where Moreland operates are opening-up new development nodes for substantial future growth. A number of environmental impact studies and planning programmes are due to be completed in 2005 to maintain Morelandís current momentum.

Tongaat-Hulett Sugarís profit from operations, before interest, totalled R184 million (2003: R202 million). This includes dividends from Triangle, the equity accounted share of operating profit at Xinavane in Mozambique and is before restructuring costs. The relatively low sugar crop for the second year in a row, together with the decrease in the South African domestic sugar price late in 2003 and the strengthening Randís effect on export realisations, depressed margins in 2004. Sales volumes in South Africa were 464 365 tons with raw sugar export volumes at 291 922 tons. The recent increase in the international sugar price has not yet impacted the financial results.

Sugar production for the 2004 year grew by 2,8% to 1,081 million tons. Production from the South African operations increased by 11% to 724 000 tons while that of Mozambique rose to 85 000 tons. In Swaziland, Tambankulu produced the raw sugar equivalent of 50 000 tons. Triangle Sugar in Zimbabwe produced 222 000 tons.

Actions completed this year by Tongaat-Hulett Sugar include the closure of the Entumeni mill with the diversion of cane to the Amatikulu mill, the closure of the sugar head office, downsizing of centralised services and the reorganisation of the South African milling operations from five mill structures to two regional business units. Restructuring costs of R29 million were incurred in 2004. The Mozambique operations achieved a turnaround with a positive contribution to earnings. Triangle Sugar continues to operate profitably in the difficult Zimbabwean economic and business environment.

Managementís profit improvement actions across the Group, which have started taking effect, largely offset the effects of factors such as the strengthening Rand, high priced maize and the small sugar crops harvested in 2003 and 2004. This limited the decrease in underlying operating profit to R65 million. The valuation adjustments charged against income were R347 million less than the prior year. These valuation items relate mainly to the valuation of certain contracts and balance sheet items at the end of the period. The maize futures position reported in the previous year, which was required to be marked to market through the income statement, was eliminated in 2004 and a close-out valuation gain of R18 million realised, compared to the R211 million charge in the previous year. The Groupís total operating profit improved to R364 million from R80 million in 2003.

The Groupís balance sheet remains sound with net borrowings as a percentage of equity at 13,2% (2003: 13,4%).

The board has declared a final dividend of 120 cents per share, which brings the total annual dividend to 170 cents per share (2003: 120 cents per share).

Tongaat-Hulett is well placed to increase the returns in its businesses and there are signs of improving economic conditions in the areas where it operates. The benefits of the actions being taken across the Group to grow earnings will increasingly be reflected in future financial results. Considerable earnings growth is expected in the year ahead.

For and on behalf of the board

C M L Savage P H Staude
Chairman Chief Executive Officer

Amanzimnyama, Tongaat, KwaZulu-Natal

18 February 2005