Tongaat-Hulett impacted by valuation items at half-year
Tongaat-Hulett announced that the strengthening of the Rand and the reduction in
commodity prices, especially maize, together with the consistent application of
accounting statements AC133 and AC112 would lead to a substantial charge to the
income statement for the period to 30 June 2003. This announcement is being made
ahead of its release of half-year results as the impact of the valuation
adjustments relating to the recognition and valuation of certain contracts and
balance sheet items can now be determined.
African Products has secured
maize to meet customers' requirements through to late 2004. The mark-to-market
valuation adjustments due to a 40 to 45 percent decrease in the maize price in
the last six months, to a level below farmers' input costs, will result in a
charge to the income statement of R255 million.
African Products has
followed a consistent strategy of securing the bulk of its maize requirements
during the maize planting season and does not buy on speculation. 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.
Cash continues to
be held offshore for growth opportunities and the application of the exchange
rate at 30 June 2003 will result in a reversal of R61 million of previous
unrealized translation gains.
There are also ongoing and less significant
impacts arising, inter alia, from the valuation of export debtors, inventories,
foreign loan hedges and financial instruments.
The magnitude of all
period end valuation adjustments is such that it will exceed core underlying
operating earnings for the half-year. This will result in a loss at the headline
earnings level for the six months to 30 June 2003.
remain under pressure and each of the Group's businesses is implementing actions
to improve profitability.
The unaudited results for the half-year ended
30 June 2003 will be released on 4 August 2003.