NOTES (11-20) TO THE
FINANCIAL STATEMENTS



21.  TAX (Rmillion) Consolidated  Company 
    2016  2015  2016  2015 
           
  Earnings before capital profits:         
  Current  287  260  14  13 
  Deferred  65  161  (66) (17)
  Prior years  3  1  2   
    355  422  (50) (4)
           
  Capital profits:         
  Current  1       
  Deferred  2  3  2  3 
    3  3  2  3 
           
  Tax charge/(relief) for the year  358  425  (48) (1)
           
  Foreign tax included above  84  194  14  13 
           
           
  Reconciliation of statutory rate to effective rate:         
  Tax charge at normal rate of South African tax  316  412  60  145 
  Adjusted for:         
  Non-taxable income and permanent allowances/deductions  (37) (56) (141) (164)
  Assessed losses of foreign subsidiaries  9  10     
  Non-allowable expenditure  26  33  9  9 
  Foreign tax rate variations  15  12     
  Foreign withholding tax  10  10  7  6 
  Capital gains  16  3  15  3 
  Prior years  3  1  2   
  Tax charge/(relief) 358  425  (48) (1)
           
  Normal rate of South African tax  28,0%  28,0%  28,0%  28,0% 
  Adjusted for:         
  Non-taxable income and permanent allowances/deductions  (3,3) (3,8) (65,8) (31,7)
  Assessed losses of foreign subsidiaries  0,8  0,7     
  Non-allowable expenditure  2,3  2,2  4,2  1,7 
  Foreign tax rate variations  1,3  0,8     
  Foreign withholding tax  0,9  0,7  3,2  1,2 
  Capital gains  1,4  0,2  7,0  0,6 
  Prior years  0,3  0,1  1,0   
  Effective rate of tax  31,7%  28,9%  (22,4%) (0,2%)
 

22.  HEADLINE EARNINGS (Rmillion) Consolidated     
    2016  2015     
           
  Profit attributable to shareholders  820  989     
           
  Less after tax effect of:  (37) (44)    
  Capital profit on disposal of land and buildings  (42) (48)    
  Capital profit on other items    (2)    
  Loss on disposal of property, plant and equipment  4  4     
    (38) (46)    
  Minority (non-controlling) interest  (1)      
  Tax charge on capital profit on sale of land  3  3     
  Tax charge on disposal of other fixed assets  (1) (1)    
           
  Headline earnings  783  945     
           
  Headline earnings per share (cents)        
  Basic  678,1  826,1     
  Diluted  678,1  826,1     
 

23.  EARNINGS PER SHARE         
           
  Earnings and headline earnings per share are calculated using the weighted average number of relevant ordinary shares in issue during the year. The weighted average number of shares in issue during the year for both basic earnings per share and diluted earnings per share was 115 471 378 (2015: 114 388 093). 
 
 
           
24.  DIVIDENDS (Rmillion) Consolidated  Company 
    2016  2015  2016  2015 
           
  Ordinary share capital         
  Final for previous year, paid 25 June 2015: 210 cents
(2015: 210 cents)		 283  231  283  231 
  Interim for current year, paid 4 February 2016: 170 cents (2015: 170 cents) 229  229  229  229 
           
  A preferred ordinary share capital         
  Interim for previous year, paid 30 June 2014: 223 cents    28    28 
           
    512  488  512  488 
           
  Less dividends relating to BEE SPV consolidation shares  (95) (71)    
    417  417  512  488 
           
  The final ordinary dividend for the year ended 31 March 2016 of 60 cents per share declared on 26 May 2016 and payable on 30 June 2016 has not been accrued. 
 

25.  FINANCIAL RISK MANAGEMENT (Rmillion)        
           
  Financial instruments consist primarily of cash deposits with banks, unlisted investments, derivatives, accounts receivable and payable, and loans to and from associates and others. Financial instruments are carried at fair value, amortised cost or amounts that approximate fair value. 
           
  Categories of financial instruments  Consolidated  Company 
    2016  2015  2016  2015 
           
  Financial assets         
  Derivative instruments in designated hedge
   accounting relationships 		 60  1  60  1 
  Unlisted shares  26  27     
  Loans and receivables at amortised cost  5 242  3 808  1 467  1 308 
  Cash and cash equivalents  1 877  1 668  100  97 
    7 205  5 504  1 627  1 406 
           
  Financial liabilities         
  Derivative instruments in designated hedge
   accounting relationships 		 1  28  1  28 
  Financial liabilities at amortised cost  10 788  8 688  8 517  6 687 
  Non-recourse equity-settled BEE borrowings  605  654     
    11 394  9 370  8 518  6 715 
           
  Risk management is recognised as being dynamic, evolving and integrated into the core of running the business. The approach to risk management in Tongaat Hulett includes being able to identify and describe/analyse risks at all levels throughout the organisation, with mitigating actions being implemented at the appropriate point of activity. The very significant, high impact risk areas and the related mitigating action plans are monitored at a Tongaat Hulett risk committee level. Risks and mitigating actions are given relevant visibility at various appropriate forums throughout the organisation. 
           
  In the normal course of its operations, Tongaat Hulett is inter alia exposed to capital, credit, foreign currency, interest, liquidity and commodity price risks. In order to manage these risks, Tongaat Hulett may enter into transactions, which make use of derivatives. They include forward exchange contracts (FECs) and options, interest rate swaps and commodity futures and options. Separate committees are used to manage risks and hedging activities. Tongaat Hulett does not speculate in or engage in the trading of derivative instruments. Since derivative instruments are utilised for risk management, market risk relating to derivative instruments will be offset by changes in the valuation of the underlying assets, liabilities or transactions being hedged. The overall risk strategy remains unchanged from previous years. 
           
  Capital risk management         
  Tongaat Hulett's overall strategy around capital structure remains unchanged from previous years and is continually reviewed in budgeting and business planning processes. Tongaat Hulett manages its capital to ensure that its operations are able to continue as a going concern while maximising the return to stakeholders through an appropriate debt and equity balance. The capital structure of Tongaat Hulett consists of debt, which includes borrowings (long-term and short-term bank debt and bonds issued in the debt capital market), cash and cash equivalents and equity. 
           
  Credit risk         
  Financial instruments do not represent a concentration of credit risk because Tongaat Hulett deals with a variety of major banks, and its accounts receivable and loans are spread among a number of major industries, customers and geographic areas. The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies. In addition, appropriate credit committees review significant credit transactions before consummation. Where considered appropriate, use is made of credit guarantee insurance. A suitable provision is made for doubtful debts. Financial guarantee contracts are accounted for as insurance arrangements. The gross carrying amounts of financial assets best represent the maximum exposure to credit risk. 

  Past due trade receivables           
  Included in trade receivables are debtors which are past the expected collection date (past due) at the reporting date and no provision has been made as there has not been a significant change in credit quality and the amounts are still considered recoverable. No collateral is held over these balances other than in respect of the land conversion activities where legal ownership of the underlying land asset is usually only transferred to the purchaser on receipt of the full proceeds. A summarised age analysis of past due debtors is set out below. 
             
      Consolidated  Company 
      2016  2015  2016  2015 
             
  Less than 1 month    77  41  30  25 
  Between 1 to 2 months    15  13  2  2 
  Between 2 to 3 months    12  6  2   
  Greater than 3 months    266  319  4  3 
  Total past due    370  379  38  30 
             
  Provision for doubtful debts           
  Set out below is a summary of the movement in the provision for         
  doubtful debts for the year:           
  Balance at beginning of year    25  21  2  1 
  Currency alignment    3  2     
  Amounts written-off    (2)   (2)  
  Increase in allowance recognised in profit or loss    10  2  4  1 
  Balance at end of year    36  25  4  2 
             
  Foreign currency risk           
  In the normal course of business, Tongaat Hulett enters into transactions denominated in foreign currencies. As a result, Tongaat Hulett is subject to transaction and translation exposure from fluctuations in foreign currency exchange rates. A variety of instruments are used to minimise foreign currency exchange rate risk in terms of the risk management policy. In principle, it is the policy to cover foreign currency exposure in respect of liabilities and purchase commitments and an appropriate portion of foreign currency exposure on receivables. There were no speculative positions in foreign currencies at year end. All foreign exchange contracts are supported by underlying transactions. Tongaat Hulett is not reliant on imported raw materials to any significant extent. The fair values of the forward exchange contracts were established by reference to quoted prices and are categorised as Level 1 under the fair value hierarchy and are accounted for as cash flow hedges. 
             
  Forward exchange contracts that constitute designated hedges of currency risk at year end are summarised as follows: 
   
 
  Consolidated 
      2016  2015 
  Average contract rate  Commitment (Rmillion) Fair value of FEC (Rmillion) Fair value of FEC (Rmillion)
 
 
         
Imports         
US Dollar  15,51  1    1 
Euro  17,33  1     
         
Exports         
US Dollar  15,78  10  6  (4)
Net total      6  (3)
Company 
    2016  2015 
Average

contract rate 		 Commitment

(Rmillion)		 Fair value

of FEC (Rmillion)		 Fair value

of FEC (Rmillion)
       
       
15,51  1    1 
17,33  1     
       
       
15,78  10  6  (4)
    6  (3)
 

The hedges in respect of imports and exports are expected to mature within approximately one year.

The fair value is the estimated amount that would be paid or received to terminate the forward exchange contracts in arm's length transactions at the date of the statement of financial position.
   
  Forward exchange contracts that do not constitute designated hedges of currency risk at year end are summarised as follows: 
   
 
Consolidated 
      2016  2015 
  Average contract rate  Commitment (Rmillion) Fair value of FEC (Rmillion) Fair value of FEC (Rmillion)
 
 
         
Imports         
US Dollar  16,10  1  (1)  
Euro  15,42  1     
UK Pound  22,16  4     
         
Exports         
US Dollar  15,64  45  2   
         
Net total      1   
Company 
    2016  2015 
Average contract rate  Commitment (Rmillion) Fair value of FEC (Rmillion) Fair value of FEC (Rmillion)
       
       
16,10  1  (1)  
15,42  1     
22,16  4     
       
       
15,64  45  2   
       
    1   
   
  Although not designated as a hedge for accounting purposes, these forward exchange contracts represent cover of existing foreign currency exposure. 

Tongaat Hulett has the following uncovered foreign receivables: 
   
 
Consolidated 
  Foreign amount (million) 2016 (Rmillion) 2015 (Rmillion)
 
 
       
Australian Dollar  6  68  42 
New Zealand Dollar  1  7  3 
US Dollar      8 
    75  53 
Company 
Foreign
amount 
(million)		 2016 (Rmillion) 2015 (Rmillion)
     
6  68  42 
1  7   
    8 
  75  50 
   
  The impact of a 10% strengthening or weakening of the Rand on the uncovered Australian Dollar receivable will have a
R7 million (2015: R4 million) impact on profit before tax and a R5 million (2015: R3 million) impact on equity. The impact of a 10% strengthening or weakening of the Rand on the uncovered New Zealand Dollar receivable will have a R1 million (2015: nil) impact on profit before tax and a R1 million (2015: nil) impact on equity. 

Commodity price risk 
Commodity price risk arises from the risk of an adverse effect on current or future earnings resulting from fluctuations in the prices of commodities. To hedge prices for Tongaat Hulett's substantial commodity requirements, commodity futures and options are used, including fixed and spot-defined forward sales contracts and call and put options. 

Tongaat Hulett Starch has secured its maize requirements for the current maize season to 31 May 2016 and a significant portion of its requirements for the period to 31 May 2017 by using a combination of unpriced procurement contracts and purchases and sales of maize futures. 

The fair value of the commodity futures contracts, which are set out below, were established by reference to quoted prices and are categorised as Level 1 under the fair value hierarchy. 
   
 
  Consolidated 
      2016  2015 
  Tons  Contract value (Rmillion) Fair value (Rmillion) Fair value (Rmillion)
 
 
Futures - hedge accounted:         
Maize futures sold  49 400  217  67  (32)
Maize futures purchased  42 800  137  (15) 8 
      52  (24)
         
Period when cash flow is expected to occur  2016/17  2015/16 
When expected to affect profit or loss  2016/17  2015/16 
Gain/(loss) recognised in equity during the year  7  (2)
Company 
    2016  2015 
Tons  Contract

value (Rmillion)		 Fair

value (Rmillion)		 Fair

value (Rmillion)
       
49 400  217  67  (32)
42 800  137  (15) 8 
    52  (24)
       
    2016/17  2015/16 
    2016/17  2015/16 
    7  (2)

  Growing crops fair value measurement           
  Growing crops, comprising roots and standing cane, are measured at fair value which is determined using unobservable inputs and is categorised as Level 3 under the fair value hierarchy. The fair value of roots is determined on a current amortised cost basis, which is adjusted for cost increases, and the amortisation takes place over the life of the roots (between 6 and 12 years). The fair value of standing cane is determined by the growth of the cane, an estimate of the yield of the standing cane, sucrose content, selling prices, less costs to harvest and transport, over-the-weighbridge costs and costs into the market. Changes in the fair value are included in profit or loss, with a benefit of R237 million (2015: R96 million) being recognised in profit or loss in the current year. A reconciliation of the change in fair value for the year is included in note 2. 
             
  The effect of an increase in yield or in selling prices will result in an increase in the fair value of the standing cane. The key unobservable inputs, used in determining fair value and which are not interrelated, are yield of the standing cane of 73 tons per hectare (2015: 83 tons per hectare), and prices. For commercial reasons, selling prices cannot be disclosed. A change in yield of one ton per hectare would result in a R37 million (2015: R25 million) change in fair value while a change of one percent in the cane price would result in a R33 million (2015: R26 million) change in fair value.  
             
  Interest rate risk 
  Tongaat Hulett is exposed to interest rate risk on its fixed rate loan liabilities and accounts receivable and payable, which can impact on the fair value of these instruments. Tongaat Hulett is also exposed to interest rate cash flow risk in respect of its variable rate loans and short-term cash investments, which can impact on the cash flows of these instruments. The exposure to interest rate risk is managed through the cash management system, which enables Tongaat Hulett to maximise returns while minimising risks. The impact of a 50 basis point move in interest rates will have a R27 million (2015: R21 million) effect on profit before tax and a R20 million (2015: R15 million) impact on equity. 
   
  Liquidity risk 
  Tongaat Hulett manages its liquidity risk by monitoring forecast cash flows on a weekly basis. There are unutilised established banking facilities of R2,43 billion (2015: R2,55 billion). Tongaat Hulett continues to meet the covenants associated with its long-term unsecured South African debt facilities. 
   
  Maturity profile of borrowings inclusive of interest projected at current interest rates: 

  Consolidated  Weighted average 
effective interest rate 		 Due within 1 year    1 to 2 years  2 to 5 years  After
5 years 		 Interest adjustment  Total 
                   
  2016                 
  Bank loans  9,1%  3 451  *  1 993  2 162    (998) 6 608 
  Foreign loans  9,8%  236    63  125    (59) 365 
  Other borrowings  8,7%  392          (16) 376 
  Financial lease liability  11,5%  2    1  1    (1) 3 
  Other non-interest bearing liabilities    3 433        3    3 436 
  Net settled derivatives    1             
  Total for Tongaat Hulett  7 515    2 057  2 288  3  (1 074) 10 789 
                   
  Non-recourse equity-settled BEE borrowings  623          (18) 605 
  Total including SPV debt  8 138    2 057  2 288  3  (1 092) 11 394 
                   
  2015                 
  Bank loans  8,0%  1 699    1 749  2 754    (1 023) 5 179 
  Foreign loans  10,1%  303    61  182    (73) 473 
  Other borrowings  7,4%  255          (9) 246 
  Financial lease liability  9,2%  2    1  2    (1) 4 
  Other non-interest bearing liabilities  2 782        4    2 786 
  Net settled derivatives    28            28 
  Total for Tongaat Hulett    5 069    1 811  2 938  4  (1 106) 8 716 
                   
  Non-recourse equity-settled BEE borrowings  666          (12) 654 
  Total including SPV debt  5 735    1 811  2 938  4  (1 118) 9 370 
                   
  * Comprises mainly ongoing short-term loans subject to 365-day notice, which has not been served and therefore unlikely to become due in the next year. 
 

26.  PRINCIPAL SUBSIDIARY COMPANIES AND JOINT OPERATIONS (Rmillion)
       
      Interest of holding company 
  Name  Principal activity  Equity  Indebtedness 
      2016  2015  2016  2015 
             
  Tongaat Hulett Starch (Pty) Ltd  Wet maize milling, starch & glucose manufacturing operation  15  15  56  35 
             
  Tongaat Hulett Developments (Pty) Ltd  Land & property development activities      (792) (922)
  Tongaat Hulett Estates (Pty) Ltd           
             
  Tongaat Hulett Sugar SA Limited    4 238  4 238  968  646 
  Tambankulu Estates Limited (Swaziland)          
  Tongaat Hulett Acucareira de Mocambique, SA (Mozambique) (85%) Agriculture, raw sugar production, refining, packaging and production of liquid and
dry speciality sugars 		        
  Tongaat Hulett Acucareira de Xinavane, SA (Mozambique) (88%)        
  Tongaat Hulett Acucar Limitada (Mozambique)        
  Triangle Sugar Corporation Limited (Zimbabwe)        
  Triangle Limited (Zimbabwe)          
  Hippo Valley Estates Limited (Zimbabwe) (50,3%)          
             
  The Tongaat Group Limited    54  54  (59) (59)
      4 307  4 307  173  (300)
             
  Except where otherwise indicated, principal country of business is South Africa and effective participation is 100 percent. 
  A full list of all subsidiaries and joint operations is available from the company secretary on request. 
             
  Non-wholly owned subsidiary with material non-controlling interests: Hippo Valley Estates Limited (Zimbabwe)
   
  Hippo Valley Estates Limited is listed on the Zimbabwe Stock Exchange. It is engaged in the growing and milling of sugarcane and other farming operations. 

    Consolidated 
  Summarised financial information as consolidated in Tongaat Hulett’s financial statements:  2016  2015 
       
  Non-current assets  4 001  3 378 
  Current assets  1 214  1 260 
  Non-current liabilities  (1 682) (1 672)
  Current liabilities  (386) (231)
  Equity attributable to Tongaat Hulett  (1 584) (1 356)
  Non-controlling interests  1 563  1 379 
       
       
  Revenue  1 614  1 621 
       
  (Loss)/profit attributable to Tongaat Hulett  (66) 37 
  (Loss)/profit attributable to non-controlling interests  (65) 36 
  (Loss)/profit for the year  (131) 73 

    Consolidated    
    2016  2015     
           
  Other comprehensive income attributable to Tongaat Hulett  293  178     
  Other comprehensive income attributable to non-controlling interests  289  176     
  Other comprehensive income for the year  582  354     
           
  Total comprehensive income attributable to Tongaat Hulett  227  215     
  Total comprehensive income attributable to non-controlling interests  224  212     
  Total comprehensive income for the year  451  427     
           
  Net cash flow from operating activities  (52) 389     
  Net cash flow from investing activities  (72) (406)    
  Net cash flow from financing activities  (137) 24     
  Net cash (outflow)/inflow for the year  (261) 7     
 
         
27.  GUARANTEES AND CONTINGENT LIABILITIES (Rmillion) Consolidated  Company 
    2016  2015  2016  2015 
           
  Guarantees in respect of obligations of Tongaat Hulett and third parties  101  33  53  6 
 

28.  LEASES (Rmillion) Consolidated  Company 
    2016  2015  2016  2015 
           
  Amounts payable under finance leases         
  Minimum lease payments due:         
  Not later than one year  2  2  2  2 
  Later than one year and not later than five years  2  3  2  3 
    4  5  4  5 
  Less future finance charges  (1) (1) (1) (1)
  Present value of lease obligations  3  4  3  4 
           
  Payable:         
  Not later than one year  1  1  1  1 
  Later than one year and not later than five years  2  3  2  3 
    3  4  3  4 
           
  Operating lease commitments, amounts due:         
  Not later than one year  36  30  33  27 
  Later than one year and not later than five years  39  52  38  48 
    75  82  71  75 
  In respect of:         
  Property  36  39  33  33 
  Plant and machinery    3    4 
  Other  39  40  38  38 
    75  82  71  75 
 

29.  CAPITAL EXPENDITURE COMMITMENTS (Rmillion) Consolidated  Company 
    2016  2015  2016  2015 
           
  Contracted  196  163  83  74 
  Approved but not contracted  213  478  153  388 
    409  641  236  462 
           
  These commitments relate to expenditure on property, plant, equipment and intangible assets (SAP ERP). Funds to meet future capital expenditure will be provided from retained net cash flows and debt financing. 
 
 

30.  RELATED PARTY TRANSACTIONS (Rmillion)
           
  During the year, Tongaat Hulett, in the ordinary course of business, entered into various related party sales, purchases and investment transactions. These transactions occurred under terms that are no less favourable than those arranged with third parties. Intra-group transactions are eliminated on consolidation. 
    Consolidated  Company 
    2016  2015  2016  2015 
           
  Goods and services:         
  Between the company and its subsidiaries      519  605 
           
  Administration fees and other income:         
  Between the company and its subsidiaries      111  188 
  Transacted with/between joint operations within Tongaat Hulett  3  2     
  Paid to external related parties  5  5     
           
  Interest received/paid:         
  Paid by the company to its subsidiaries      101  113 
  Transacted with/between joint operations within Tongaat Hulett  4  4     
           
  Sales of fixed assets:         
  Between the company and its subsidiaries      140  93 
           
  Loan balances:         
  Between the company and its subsidiaries      173  300 
  Pension Fund loan  85  79  85  79 
           
  Dividends received:         
  Between the company and its subsidiaries      333  425 
           
  Other related party information:         
  Total dividends paid - refer to note 24    
  Executive directors/key management personnel - refer to here, here and here of the Remuneration Report 
  Non-executive directors - refer to here and here of the Remuneration Report 
  Tongaat Hulett Developments is a guarantor on Tongaat Hulett Limited's South African long-term unsecured loan facility - refer to note 14
 

 

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