Cautionary Announcement


Tongaat Hulett Limited
(Registration number 1892/000610/06)
Share code: TON
ISIN ZAE000096541


Tongaat Hulett intends to consolidate its Zimbabwe sugar operations in its financial statements in 2009. Shareholders are advised that the impact on the financial results of Tongaat Hulett is currently being finalised and is expected to be sizeable. Accordingly, shareholders are advised to exercise caution when dealing in the company’s securities until a further announcement is made. The consolidation of the Zimbabwean operations would be included in Tongaat Hulett’s interim results, for the half-year ended 30 June 2009.

This consolidation follows the macroeconomic changes that essentially occurred when Zimbabwe moved to a US dollar and Rand based economy and, in so doing, restored key relevant fundamentals to the economy. This removed many of the distortions that existed in the Zimbabwean economy, which included unrealistic local market sugar price realisations, not receiving the full benefit of export proceeds, exchange rate uncertainty and foreign currency restrictions, shortage of inputs and the effects of extreme hyperinflation.

Previously, in terms of the relevant international accounting standard (IAS 27 Consolidation and Separate Financial Statements), these operations were not consolidated and were accounted for on a dividend received basis. As a result of the changes at the beginning of 2009, Tongaat Hulett meets the requirement for consolidating its Zimbabwean operations in terms of IAS 27, namely that it obtains the benefits from the assets and activities in Zimbabwe, with the requisite control over the operations. Triangle Sugar (100% owned by Tongaat Hulett) and Hippo Valley Estates (50,3% owned) will thus be consolidated into Tongaat Hulett’s financial results for 2009.

The carrying value of the Zimbabwe “investment” on the Tongaat Hulett balance sheet at 31 December 2008 was R263 million, which arose when the 50,3% stake in Hippo Valley Estates was acquired through Triangle Sugar under the conditions prevailing at the end of 2006.  The commencement of consolidation will be accounted for in terms of IFRS 3 (revised 2008), the international accounting standard on Business Combinations. The appropriate balance sheet values for the Zimbabwe entities will be taken onto the Tongaat Hulett consolidated balance sheet. The
accounting treatment of the gain in respect of the net increase in the Tongaat Hulett balance sheet values on consolidation is currently being finalised. The ongoing revenue, operating profit, interest, tax, minorities share of profits and cash flow from the effective date and balance sheet at reporting dates will be reflected in the Tongaat Hulett consolidated financial statements.

18 June 2009

Investec Bank Limited

Notes to Editors

Tongaat Hulett’s sugar operations in Zimbabwe are situated in the south-eastern lowveld of the country, which is acknowledged as one of the world’s lowest cost sugar producing areas.  The operations comprise two large sugar mills with a combined capacity to crush 4,8 million tons of cane in a 38-week crushing season, to produce 600 000 tons of sugar. Sugar production in 2008 amounted to 298 000 tons compared to the 580 000 tons that were produced in 2002. Opportunities to expand the sugar production from 600 000 tons to 820 000 tons have been identified. Sugar production is sold into the Zimbabwean, regional and preferential export markets.  Zimbabwe has duty-free and, with effect from 1 October 2009, quota-free access into the preferential markets of the European Union. It also has a duty-free quota into the United States of America.

The cane estates supplying the two sugar mills comprise 46 300 hectares of fully irrigated cane land yielding in excess of 110 tons cane per hectare per annum under normal operating conditions.  In 2008, company estates delivered 86% of the cane crush with the balance delivered from estates farmed by outgrowers. The cane estates are served by a number of river systems and large dams, the largest of which is Lake Mutirikwi. Bulk water supply to the estates is via a unique and extensive network of canals and water courses.

At full capacity the two sugar mills produce 160 000 tons of molasses with the alcohol distillery at Triangle having the capacity to convert this molasses to 40 million litres of alcohol/ethanol. Both sugar mills operate white-end sugar refineries with a combined capacity to produce 140 000 tons of white sugar per annum. The operations will be in a position to resume the sale of co-generated electricity at higher levels of cane-throughput. The Zimbabwe operations, which run extensive livestock and game sections, have significant eco-tourism potential.