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01-08-2001

Tongaat-Hulett Group revenue rises on strong divisional export performance


In line with expectations, the Tongaat-Hulett Group saw revenue from continuing operations driven by strong export performance rise by 20 percent to R2,6 billion and earnings rise 23 percent to R311 million, in the six months ended June 30, 2001.

The Group's three internationally competitive businesses - sugar, starch & glucose and aluminium- as well as its property division produced good results.

As forecast, headline earnings were down by 4 percent to R204 million. This was mainly as a result of the financing costs now being expensed for the R2,4 billion Hulett Aluminium plant commissioned in November last year.

"While the Group is on track to record solid growth and operating earnings, we are unlikely to escape entirely the effects of the slowing world economy, " said Cedric Savage, Group executive chairman.

"On a divisional level all companies performed well. The sugar division turned in a 19 percent increase in operating income. It is pleasing to see that there was an increased contribution from our operations in Mozambique and Swaziland."

Sugar production from the South African operations is expected to be about 865 000 tons. Although this estimate is down on last year's record season because of lower rainfall, increased world sugar prices and a favourable exchange rate has offset the effect of the lower volume.

The Starch and Glucose division has sought out new international business opportunities which provided strong growth in exports of both value-added and commodity products. Sales of prime products into the domestic market improved by 2 percent and export volumes by 68 percent. Yields improved at all of the division's mills and earnings before interest and tax, rose 81 percent to R58 million.

Hulett Aluminium continued its good progress following the commissioning of its expanded plant and increased sales by 40 percent with new records in turnover and operating profits.

The business is steadily entering a wide range of niche markets driven by the capability that is being developed on its new facilities. It has responded quickly to changing world markets and conditions, adjusting its product range and markets to optimise its competitive position. This strategy is proving to be particularly advantageous in the present local and international market circumstances, enabling the business to capitalise on some attractive market opportunities in spite of a disconcerting reduction in global demand.

Hulett Aluminium's operating income before depreciation increased by 36 percent and after taking depreciation into account increased by 23 percent to R116 million before interest and tax of which the Group's 50 percent share was R58 million.

Higher residential and commercial sales were achieved by Moreland Estates, the Group's property division, improving revenue earned by 53 percent.

During the six months the Group disposed of two non-core operations - the sale of the Building Materials division was finalised at the end of May and the sale of the Textiles division is still subject to certain preconditions, including the approval of the Competition Commission.

An interim dividend of 62 cents a share was declared.

With regard to the year ending 2001, Mr Savage said "as indicated in our 2000 annual report, the higher financing costs will tend to offset increases in operational earnings, with headline earnings for the year slightly lower than those of last year. Thereafter as strong cash flows progressively drive down debt, operating growth should translate into real growth in earnings per share."

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