Earnings releases

Interim Results for the half-year ended 30 June 2003


Revenue from operations rose by 8% to R3 billion driven by increases in sales volumes offset by the strengthening of the Rand and lower commodity prices. Underlying operating profit for the half-year to
30 June 2003 decreased by 40% to R233 million. Current reductions to the cost base were not sufficient to compensate for reduced margins. 

Dividends declared by Triangle during the period have not been brought to account as Zimbabwean Reserve Bank approval for their remittance is still awaited. 

The consistent application of accounting statements AC133 and AC112 has led to a R375 million valuation adjustment charge to the income statement for the six month period to 30 June 2003. The valuation adjustments relate to the recognition and valuation of certain contracts and balance sheet items. Maize has been secured to meet customers' requirements through to late 2004. The valuation adjustment required at 30 June 2003 on maize contracts has resulted in a charge to the income statement of R255 million, due to the significantly lower average maize price of R846 per ton at that date. African Products' maize procurement strategy and its link to domestic pricing will be changed to significantly reduce earnings volatility. 

Cash continues to be held offshore for growth opportunities and the application of the exchange rate at 30 June 2003 has resulted in a reversal of R61 million of previous unrealized translation gains. Other valuation adjustments relating to export receivables, loans to foreign subsidiaries and other financial instruments, in total, have resulted in a charge against earnings of R59 million. 

A headline loss of R190 million (2002 ­ headline earnings of R205 million) was incurred. Notwithstanding this loss, the Board has declared an interim dividend for the half-year of 40 cents per share (2002 ­ 80 cents per share). 


Tongaat­Hulett Sugar's revenue for the half-year to 30 June 2003 was 7% up over the comparable period last year while underlying operating profit was R183 million. After foreign exchange and valuation adjustments of R24 million, earnings before interest and tax were R159 million. 

Increased contributions from value-added activities (comprising sugar pre-packing, speciality sugars, animal feeds and refined exports) and higher cane profitability in Swaziland have been offset by reduced raw sugar export margins. Domestic market volumes in South Africa at 236 200 tons were marginally up on the same period last year, while raw sugar export volumes increased by 35% as a consequence of higher carry-in stocks compared to 2002. 

Total sugar production for the current season is forecast at 1,118 million tons, 12% below last year. Production from South African operations in the current year is estimated to be approximately 19% down at 681 000 tons sugar while that of Mozambique is expected to rise to 98 000 tons. In Swaziland, Tambankulu is expected to produce the raw sugar equivalent of 54 000 tons. Triangle Sugar in Zimbabwe continues to perform well in a difficult economic and business environment and this year is expected to produce 285 000 tons of sugar. A dividend of R21 million (net of withholding tax and at current exchange rates) has been declared by Triangle in respect of the period to 30 April 2003. 

Hulett Aluminium continues to make good progress in growing its manufacturing output and international customer base. Rolled products export volumes increased by 46% to 40 900 tons for the half-year to 30 June 2003. This contributed to Hulett Aluminium's overall sales volume growth of 24% to 67 500 tons for the six months. 

Cost reduction measures at Hulett Aluminium have resulted in its average conversion cost per ton reducing by approximately 16%. This, together with the benefits from the increased sales on underlying operating profit, has been offset by the significant impact of a strengthening Rand, lower international rolling margins and a metal price lag impacting on cost of sales. In addition, the effect of exchange rate movements on the valuation of foreign currency debtors and foreign loan forward cover contracts, resulted in Hulett Aluminium incurring a loss before interest and tax of R36 million of which the Group's share is R18 million. 

African Products' prime domestic volumes increased by 6% to 189 000 tons compared to the first half of 2002 and export volumes grew by 5% to 33 900 tons. The strengthening of the Rand has exerted downward pressure on domestic sales prices and has reduced export contributions, resulting in underlying operating profit declining from R93 million to R40 million. 

African Products has followed a consistent strategy of securing the bulk of its customers' maize requirements during maize planting seasons. The focus is on price stability, the genetically modified free status of the maize, locality and other quality issues. Maize is purchased from various sources, including direct purchases from farmers, contracts with traders and the use of the futures market. An element of African Products' procurement has been a hedging strategy that reduces the impact when maize prices rise while keeping the maize price stable into a second season if the market price falls. The average maize market price during the period of planting for the 2003 season was some 50% higher than the prevailing maize price at the end of June 2003. The resultant valuation adjustment on maize procurement contracts of R255 million has resulted in a loss before interest and tax of R218 million. 

The property market in the area between Umhlanga and Zimbali in KwaZulu-Natal in which Moreland operates has continued to grow and has out-performed the national average. This market strength and the availability of high value residential, commercial and industrial land resulted in revenue for the half-year increasing by 30% to R65 million with profit before interest and tax increasing to R20 million. 


The Group's operations remain sound with continued growth in sales volumes expected in the second half. Each of the Group's businesses is implementing actions to improve profitability, the full benefits of which will be felt in 2004 and should result in an improvement in earnings for that year.

Valuation adjustments will continue to have either a positive or negative impact on headline earnings. Key valuation adjustments for the second half of 2003 will be made against the base of an average maize price of R846 per ton and exchange rates of R7,48/US dollar and R12,37/GB pound, set on 30 June 2003. 

At an average exchange rate of R7,50 per US dollar for the second half, underlying operating profit for that period will be below that of the first half of 2003, with a sensitivity of approximately R8 million for every 10 South African cents move against one US dollar.

For and on behalf of the board
C M L SavageP H Staude
ChairmanChief Executive
Amanzimnyama, Tongaat, KwaZulu-Natal1 August 2003