Voluntary Trading Statement for the Half-year ended 30 September 2015

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

Voluntary Trading Statement for the Half-year ended 30 September 2015

The following trading statement is issued for the six months ended 30 September 2015.

Tongaat Hulett’s operating profit for the half-year is expected to be R1,361 billion (2014: R1,510 billion), a decrease of some 9,9 .   Headline earnings are expected to be approximately R673 million, compared to the R773 million earned in the previous half-year, a decrease of some 12,9 . Strong performances from the land conversion activities and the starch operation have been more than off-set by the impact of difficult conditions for the sugar industry in the region. 

Operating profit for the half-year from the various sugar operations is expected to total approximately R562 million (2014: R864 million), with a relatively even percentage reduction in the three main sugar producing countries for Tongaat Hulett. A reduction in sugar production is being driven by poor growing conditions, particularly in South Africa. Export revenues are also being impacted by a lower international sugar price, with regional deficit markets and EU exports linked to that price. This is being mitigated by cost reduction initiatives, which continue across all operations. The overall sugar operating profit before cane valuations is R1,13 billion (2014: R1,45 billion) and the impact of cane valuations on the income statement is similar to the first half of last year. 

Operating profit from the starch and glucose operation is expected to reflect an increase for the past six months to approximately R281 million (2014: R264 million). Total sales volumes were similar to the first half of last year, maize costs were competitive and there were ongoing improvements in operating efficiencies, co-product recoveries and cost control.

The momentum in Tongaat Hulett’s land development and conversion activities continues, with good progress on numerous value unlocking activities. In the past six months, 65 developable hectares have been sold and operating profit of R576 million is expected to be reported, compared to the previous comparative period when 49 developable hectares were sold and profit of R435 million was earned. Sales in this period came from Cornubia (industrial and office), Sibaya (commencement of node 1 for high-end residential), Umhlanga Ridge Town Centre, Kindlewood, Izinga and Bridge City. Good progress is being made towards unlocking optimal value from the prime 42 developable hectares in precincts 1 and 2 of Umhlanga Ridgeside.

Taking all of the aforementioned into account together with the centrally accounted items, Tongaat Hulett’s operating profit for the half-year is expected to be R1,361 billion (2014: R1,510 billion). Operating cash flow, before working capital, was some R2,3 billion (2014: R2,4 billion). The absorption of cash in working capital was R2,4 billion (2014: R1,8 billion) at the half-year, being the middle of the sugar season when sugar stocks are substantially higher than at the end of the financial year. There is also an increased level of debtors in the land development activity. Capital expenditure has increased, mainly as a result of high return initiatives being undertaken, for example the R135 million coffee/creamer production facility expansion in the starch and glucose business. 

Total net profit per share is expected to be approximately 609 cents per share (2014: 701 cents per share) while headline earnings per share for the year are expected to be approximately 585 cents per share (2014: 677 cents per share), reflecting a decrease of some 13,1 and 13,6 respectively.

This trading statement is issued in accordance with the JSE Listings Requirements. The above information has not been reported on by the auditors.

The interim results for the half-year ended 30 September 2015 are scheduled for release on Monday, 16 November 2015. 

4 November 2015

Investec Bank Limited