Tongaat-Hulett group: Highlights, Salient Features and Results

HIGHLIGHTS, SALIENT FEATURES AND RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006;

• Headline earnings increased by 51% to R703 million (2005: R466 million)
• Operating profit increased by 40% to R1,02 billion (2005: R730 million)
• Annual dividend up 38% to 550 cents per share (2005: 400 cents per share)
• Unbundling and listing of Hulett Aluminium
• BEE equity participation in Tongaat-Hulett and Hulett Aluminium

Tongaat-Hulett Group CEO Peter Staude said “I am pleased to report another successful year, with an increase of 51% in headline earnings. The fundamental profit drivers for our operations remain soundly in place. We are pleased with the progress made in the unbundling and listing of Hulett Aluminium (Hulamin) and the introduction of broad based Black Economic Empowerment partners in both Tongaat-Hulett and Hulamin.”

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Fundamentals in place

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Staude says that the Tongaat-Hulett Group continues to follow a focused investment approach that has resulted in the implementation of projects that have provided attractive returns and generated earnings growth. The Group, as demonstrated in the rolled products expansion at Hulett Aluminium, has developed the competence and expertise to implement projects of a critical scale. The past investments in its operations have established a solid asset and business base, ensuring it is well placed to take advantage of an improving global environment.

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Tongaat-Hulett is well positioned to take advantage of being a low cost sugar producer with preferential market access and to benefit from the global drive to renewable energy through bio-fuels and electricity cogeneration. The imminent R1,3 billion expansion of the Mozambique operations and the recent completion of the Muda dam near Mafambisse are indicative of Tongaat-Hulett being poised to capitalise on growth opportunities. The recent acquisition of 50,35% of Hippo Valley Estates increases the ability to capitalise on the synergies with Triangle Sugar, particularly when the socio-economic environment in Zimbabwe improves.

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As an agri-processor in Southern Africa, the significance to Tongaat-Hulett of agriculture and land is increasing rapidly. Land management strategies have been implemented to ensure that land values and the synergies between sugar and maize processing operations and property development are optimised. Tongaat-Hulett has the expertise and competence to manage the dynamics of optimising cane supplies, while conditions favour sugar production, and to unlock substantial value from its land holdings when circumstances support property development. In line with a global escalation in coastal land values and the continued growth of the economy in the Durban to Richards Bay development corridor, there is ongoing demand and development pressure on Tongaat-Hulett’s land. The prime quality, location and value of Tongaat-Hulett’s land are widely acknowledged and Moreland has continued to capitalise on the strength of the property market and its development expertise in unlocking this value at an escalating pace.

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Alan Fourie, MD of Hulett Aluminium said “Hulamin continues to experience strong demand, particularly in the high value niche markets that it is targeting. It expects to continue growing its volumes which, coupled with further improvements in its product mix and operating costs, will enable it to continue the growth momentum in operating earnings.”

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Outlook – Creating shareholder value and introducing broad based Black Economic Empowerment

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Peter Staude explained that the Group, like many South African entities, was a diversified industrial business with interests in aluminium, building materials, consumer foods, cotton, edible oils, industrial and commercial catering, mushrooms, sugar and agricultural land development, starch and glucose, textiles and transport. Since the early nineties the Group has systematically divested from a number of these businesses and refocused its operations, leveraging the synergies that exist between its agri-processing operations and prime agricultural land holdings. Capitalising on the investments in its operations and a solid platform of earnings growth, a strategic review of the Group’s operations saw the announcement in 2006 of the proposed unbundling and listing of Hulett Aluminium to create two separately listed, focused entities.

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A detailed cautionary announcement was made on 14 December 2006, which provided the proposed transaction framework to further enhance shareholder value, leading towards the creation in 2007 of two separately listed, focused companies:

• Tongaat-Hulett, an agri-processing business which includes integrated components of land management, property development and agriculture; and
• Hulett Aluminium (Hulamin), an independent niche producer of aluminium rolled, extruded and other semi-fabricated and finished products.
  

This will be achieved by the listing of Hulamin on the JSE followed immediately by the unbundling of Hulamin by Tongaat-Hulett to its shareholders. It will be accompanied by the simultaneous introduction of broad based Black Economic Empowerment (BEE) equity participation in both Tongaat-Hulett and Hulamin. The capital structures of both businesses will be optimised, including facilitating the BEE equity participation, a R500 million share buy-back and retaining the balance sheet capacity to take advantage of growth opportunities.

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The unbundling and listing of Hulett Aluminium has created the opportunity for the introduction into Tongaat-Hulett of BEE equity partners representing disadvantaged communities surrounding its property developments and the small scale cane grower communities supplying the four South African sugar mills. Similarly, the BEE partners in Hulamin include broad based groupings, mainly representing the communities in Pietermaritzburg.

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These transactions will have a considerable impact on the headline earnings to be reported in 2007. Once the requisite agreements have been signed, the financial effects have been finalised and the date of unbundling and listing Hulamin established, a final announcement will be made and the circular and pre-listing documents posted to shareholders, which is anticipated to be in May 2007.

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The fundamental profit drivers remain in place in both Tongaat-Hulett and Hulamin. Profit from operations of both these entities is expected to grow in the year ahead.

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COMMENTARY ON 2006 ANNUAL RESULTS

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Headline earnings increased by 51% to R703 million in 2006, compared to R466 million in 2005. This increase was due to a 40% growth in operating profit to R1,02 billion (2005: R730 million), a reduction in finance costs and an improvement in the result from the Xinavane mill, in Mozambique, which is equity accounted as an associate.

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Sugar

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Tongaat-Hulett Sugar’s operating profit increased by 42% to R356 million (2005: R251 million), including dividends from Triangle Sugar in Zimbabwe. An increase in domestic and export realisations more than offset lower sales volumes. In South Africa, domestic sales were 469 264 tons (2005: 474 387 tons) with raw sugar export volumes at 316 104 tons (2005: 386 876 tons) as a consequence of lower production. The 2006 South African crop was the second lowest in 10 years, mainly due to adverse growing conditions impacting on cane yields and quality. This resulted in utilisation of only 72% of installed cane crushing capacity. The 2006 results include an effective world sugar price for exports of 12,8 US cents per pound at an average R6,56/US dollar (2005: 9,0 US cents per pound at R6,58/US dollar). The drive to reduce manufacturing and overhead costs is ongoing, as are additional cane procurement initiatives. Dividends of R61 million (2005: R19 million) were received from Triangle Sugar in Zimbabwe.

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Total sugar production in 2006 was 1,067 million tons, which was 8% below the 1,160 million tons produced in 2005. Production in South Africa was 666 000 tons (2005: 753 000 tons). In Swaziland, Tambankulu Estates produced the raw sugar equivalent of 55 000 tons (2005: 56 000 tons). Triangle’s sugar production increased 1,7% to 240 000 tons despite the difficulties of operating in Zimbabwe. In Mozambique sugar production at Xinavane increased to 65 000 tons (2005: 61 000 tons) while Mafambisse decreased to 41 000 tons (2005: 54 000 tons) due to extreme drought conditions placing pressure on irrigation.

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Property

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Moreland achieved operating profit of R325 million (2005: R231 million) which was an increase of 41%. Tongaat-Hulett’s prime land, the well-established property development platform and continuing solid market demand are being capitalised upon. Significant contributions were achieved from the commercial, industrial and resorts portfolios, including RiverHorse Valley Business Estate, Umhlanga Ridge Town Centre, the Marriott International 5-star Hotel site in the Umhlanga Triangle and Zimbali Coastal Resort. Development approvals have been secured for Izinga and Kindlewood residential developments. Other new phases and developments likely to be launched in 2007 include Zimbali Lakes, Sibaya at Umdloti, Umhlanga Triangle Ridgeside commercial precincts, Umhlanga Ridge Town Centre residential precincts, Bridge City, Kindlewood at Mt Edgecombe South and Shongweni.

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Starch and glucose

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African Products’ operating profit reduced to R96 million in 2006 (2005: R112 million) under difficult trading conditions. Starch and glucose selling prices were under pressure from imports and maize input costs were higher, resulting in depressed trading margins. Maize costs rose towards import parity levels as a result of the smaller 2005/6 crop. Sales volumes in the domestic market increased by 3,7% with growth in excess of 13,5% being achieved in value added spray dried glucose. Overhead cost increases were contained to levels below inflation for the third consecutive year, as the benefits of the organisational restructuring process were achieved. World starch and glucose markets saw significant changes in the last quarter of 2006 with international prices increasing by over 30% in certain instances driven by a 60% increase in world corn prices. The effect of these changes combined with a move in the South African 2006/7 season maize price towards export parity levels should benefit African Products during the second half of 2007. African Products has priced 35% of its maize requirements for 2007, following its back-to-back pricing model.

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Aluminium

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Hulett Aluminium grew its operating profit by 32% to R422 million (2005: R319 million), with the Group’s share being 50% thereof. Sales revenue exceeded R5 billion for the first time. Sales volume growth continued and record annual rolled products sales of 183 000 tons (2005: 173 000 tons) were achieved. Local market sales of both extrusions and rolled products grew firmly, with increases of 15% and 11% respectively. Strong sales into the distributor, automotive and transport sectors were achieved. The higher LME price of aluminium continued throughout 2006, resulting in reductions in rolling margins while benefits accrued from the metal price lag effect on cost of sales. Manufacturing costs increased due to sharp rises in metal and energy costs, and from spot purchases of LP Gas during the SAPREF supply disruptions, which also had a significant negative impact on volumes in 2006. Benefits are expected in 2007 from further volume growth, improved product mix and cost controlling actions. In October 2006, a R950 million rolled products expansion project was approved, to grow annual capacity to 250 000 tons and increase output of high margin products, including light gauge foil and heat-treated plate. Project contracts totalling R63 million have been concluded.

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Peter Staude

Chief Executive Officer

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Amanzimnyama, Tongaat

19 February 2007

Tongaat-Hulett Group to expand sugar production in Mozambique for the EU market

The Tongaat-Hulett Group (THG) has approved a R1,3 billion expansion of its sugar milling and cane growing activities at its Xinavane and Mafambisse sugar mills in Mozambique. This follows the announcement of a R950 million rolled aluminium products expansion in October 2006, the acquisition of a 50,35% stake in Hippo Valley Estates in Zimbabwe and THG’s announcement on 14 December 2006 providing details of its plans to unbundle and list Hulett Aluminium (Hulamin), the simultaneous introduction of broad based Black Economic Empowerment (BEE) equity participation in both Hulamin and TH and a return of capital of R500 million to THG shareholders by way of a share buy-back.

THG will change its name to Tongaat-Hulett (TH) and will be repositioned as a focussed agri-processing business, which includes the integrated components of land management, agriculture and property development activities.

Tongaat-Hulett CEO Peter Staude said, “The expansion of Xinavane and Mafambisse is directly aligned to a key element of TH’s strategy, namely of growing earnings through expansion of sugar production in low cost regions that have superior market realizations. A solid platform has been established in Mozambique over the past six years. We will use this base to expand low cost sugar production at our two factories from 115 000 tons in 2005 to over 270 000 tons at the time when the EU markets open up to LDC sugar producers. The EU delivered price will remain fixed from 2009 until 2015 at the equivalent of 19.6 US c/lb. Our targeted cash cost for producing sugar in Mozambique of some 8.5 US c/lb compares favourably with Brazil.”

“The R1,163 billion Xinavane expansion will see sugar production increasing from 61 000 tons in 2005 to 180 000 by the 2009 season. The mill infrastructure will be refurbished and/or upgraded, with new equipment being installed to increase the design crush rate from 150 to 380 tons cane per hour, achieving globally competitive economies of scale. Commissioning of the expanded factory will take place in April 2009. Cane growing activities will be expanded by the planting up in 2007 and 2008 of an additional 6 500 hectares under irrigated cane taking the annual cane crush from 509 000 tons in 2005 to 1,5 million tons. The additional sugar production of 119 000 tons will be sold partially in the domestic Mozambican market with the balance being exported into the European Union (EU) in terms of Mozambique’s duty and quota free access from 2009 under the Everything-But-Arms (EBA) initiative for Least Developed Countries (LDC) countries”, said Staude

“ The expansion will be funded by a combination of equity and debt financing from within Xinavane. Agreement has been reached with the Government of Mozambique in terms of which TH’s stake in Xinavane’s milling activities will rise from 49% to 88%. The expanded agricultural operations will remain 100% owned by TH”, he confirmed.

Staude indicated that “the Mafambisse expansion entails the planting of a further 2 100 hectares under cane. This cane will be irrigated from the recently constructed Muda dam near Mafambisse and will increase production at the mill to 82 000 tons per annum over the next two years.”

The two expansions will have a positive socio-economic impact on the region with the creation of 6 638 and 2 145 new jobs in Xinavane and Mafambisse respectively.

Plans are well advanced for a further 34 000 tons expansion at Mafambisse, which will result in total production rising to 116 000 tons per annum.

Total sugar production capacity across all of TH’s regional sugar businesses is expected to rise to some 1,9 million tons by 2009. TH’s total sugar production was 1,160 million tons in 2005.

The Xinavane project is subject to:

• A favourable outcome to the EIA process currently underway,
• South African Reserve Bank Approval.

25 January 2007;
Tongaat

Sponsor:;
Investec Bank Limited

Announcement regarding the proposed unbundling and listing on the JSE

Print or download the final terms of the proposed listing on the JSE Limited of Hulamin Limited (“Hulamin”) and unbundling of THG’s 50% interest in Hulamin.

• In A4 paper size ;;[14 pages – 113KB]

Tongaat-Hulett acquires Hippo Valley Estates

Tongaat-Hulett to extract the synergistic benefits available from the operations of two large world-class sugar enterprises in Zimbabwe

Tongaat-Hulett announced today that Triangle Sugar Corporation Limited (Triangle) had acquired Anglo American’s 50,35% stake in the Zimbabwe Stock Exchange listed Hippo Valley Estates Limited for US$ 36 million.

Peter Staude, the CEO of Tongaat-Hulett said, “We are delighted to have acquired a majority shareholding in Hippo Valley. It adds a new dimension to our asset base and strengthens our position as a leading sugar producer in SADC. Together with our expansion plans in Mozambique, Tongaat-Hulett is set for exciting times capitalising on our strong regional competitive positioning in the emerging world sugar dynamics. It is part of the strategy of investing in the business to create further value.”

“Tongaat-Hulett’s existing sugar business in Zimbabwe, Triangle, is capable of producing in excess of 300 000 tons of sugar per annum. The acquisition of Hippo Valley will almost double Tongaat-Hulett’s production in Zimbabwe and will lift Tongaat-Hulett’s overall regional sugar capacities by a further 300 000 tons to 1,5 million tons per annum. This acquisition provides the opportunity to extract the synergistic benefits available from the operations of these two large world-class sugar enterprises with the two sugar factories being only 30 kms apart and the cane estates practically side-by-side” Staude said. “The lowveld in Zimbabwe was recognised as the lowest cost producer in the region if not the world with the potential to move from its current annual sugar production capacity to one million tons. This acquisition takes us a step closer to realising this potential ” Staude indicated.

“World sugar markets are presenting exciting growth opportunities for Tongaat-Hulett. The already announced EU Sugar reforms, in particular the WTO ruling with regard to EU exports that will result in EU exports reducing from 5-7 million tons to a maximum of 1,4 million tons as from next year, the increasing use of sugar cane for ethanol production and the fact that the world sugar consumption growth rate is 2% per annum are all contributing factors” Staude said. “The next few years would offer major opportunities for further expansion of the company’s low cost production. We are already benefiting from the changing global sugar fundamentals,” he commented.

“The Zimbabwe lowveld has ideal sugar cane growing conditions, with excellent topography, climate and established water storage and conveyance infrastructures for irrigation. This results in some of the best sugar cane yields worldwide”, said Staude.

As a consequence of Tongaat-Hulett’s Zimbabwe operations not being consolidated into its financial results, the transaction will at this stage not have a significant impact on Tongaat-Hulett’s earnings.

As a reorganisation of Anglo American’s sugar interests in Zimbabwe, the acquisition will not trigger an offer to Hippo Valley’s minorities.

Issued by: Tongaat-Hulett
07 December 2006

NOTE TO EDITORS

The Tongaat-Hulett Group (“THG”) is separating into Tongaat-Hulett (“TH”) and Hulamin during the 2nd quarter of 2007. This follows the previous disposals of non-core businesses, investment in core businesses and actions to enhance earnings. The transactions will result in the unbundling by THG of its 50% interest in Hulett Aluminium to its shareholders and the listing of Hulamin on the JSE Limited (”JSE”) by its shareholders with Sustainable Black Economic Empowerment (“BEE”) equity transactions at both Hulamin and Tongaat-Hulett. As a consequence two separately listed and focused companies will emerge:

• Tongaat-Hulett will be an agri-processing business with significant integrated land management, agriculture and property development activities.
• Hulamin an independent aluminium rolled products and extrusion business;

Tongaat-Hulett has been adding value in refined carbohydrates and through agricultural raw materials for more than a century. Tongaat-Hulett produces almost half of the refined carbohydrates manufactured in South Africa. It has established considerable expertise in adding value to agricultural products, an area that requires specific knowledge and skills. Listed on the JSE with a market capitalisation of some R11 billion it employs 27 000 people.

Hulett-Aluminium to expand capacity for high value products

Tongaat-Hulett, Anglo American and the Industrial Development Corporation have given approval to proceed with a R950 million expansion project at Hulett Aluminium. This follows Tongaat-Hulett’s announcement earlier this year of its plans to unbundle and list Hulett Aluminium on the Johannesburg Stock Exchange, thereby establishing two attractive, focused investment vehicles and creating the opportunity for BEE shareholding in both entities. BEE shareholding is expected to be introduced at the level of 25% in Tongaat-Hulett and 15% in Hulett Aluminium when the unbundling and listing takes place in 2007.

Tongaat-Hulett CEO Peter Staude said, “The expansion of Hulett Aluminium reflects the confidence of its shareholders that further value can be unlocked from the current base. This investment follows the R2,4 billion (US dollar 550 million) Rolled Products Expansion Project that came on stream in November 2000. This enabled Hulett Aluminium to grow its Rolled Products annual sales volumes from a position of some 50 000 tons, exporting less than 10% of its capacity to 3 countries to one where in the month of August its annualised sales exceeded 200 000 tons. Hulett Aluminium now exports in excess of 70% of its output to more than 50 countries. The company has achieved recognition in establishing itself as a leading global producer of high margin, technologically demanding products, inter alia winning the overall State President’s Award for Export Achievement and the MTN/Business Day Technology Top 100 Award.”

“This project is another major milestone in the growth of our business,” says Alan Fourie, Managing Director of Hulett Aluminium. “The expansion of the Pietermaritzburg facility will increase rolled products capacity by 20% to 250 000 tons per annum. The project entails the installation of additional state of the art foil rolling and plate equipment, continuous casters and upgrades to existing rolling mills. The project focuses on further enhancing the product mix, where 58% of the capital will be spent. This will result in increased sales of high margin products, especially light gauge foil and heat treated plate. Hulett Aluminium expects to maintain its profitable growth from existing operations over the next two years, followed by the benefits of the project coming on stream in 2009. This will enable Hulett Aluminium to continue unlocking value by further enhancing sales mix, growing volumes and reducing unit costs.”

Issued by: Tongaat-Hulett
12 October 2006

Tongaat-Hulett has regularly submitted employment equity reports to the Department of Labour

According to reports in the press today, the Minister of Labour, Minister Membathisi Mdladlana, released the names of 13 JSE-listed companies that have allegedly not submitted Employment Equity Reports for 2005 as required by law. Tongaat-Hulett has been identified as one of the companies on the list.

Tongaat-Hulett submitted Employment Equity Reports in 2005 covering all its activities by the October deadline. It has done so annually since the introduction of the relevant legislation in 2000.

Peter Staude, the CEO of Tongaat-Hulett said, “We are taken aback and have been embarrassed by the perception that has been created that Tongaat-Hulett has not submitted reports in 2005. We have made significant progress in transforming Tongaat-Hulett with 48,9% of management and 81,0% of skilled and supervisory staff being black. In the latest Financial Mail Top Empowerment Companies Survey, Tongaat-Hulett is ranked sixth overall for employment equity out of South Africa’s top 200 JSE-listed companies.”

Issued by: Tongaat-Hulett
12 September 2006

Interim results for the half-year ended 30 June 2006

View the Tongaat-Hulett Group’s Interim Results for the half-year ended 30 June 2006

Highlights of the results for the year to December 2005

• Revenue of R6,9 billion (2004: R6,3 billion)
• Operating profit of R730 million (2004: R358 million)
• Headline earnings of R466 million (2004: R206 million)
• Annual dividend of 400 cents per share (2004: 170 cents per share)
• Unbundling and listing of Hulett Aluminium and introducing BEE equity participation in Tongaat-Hulett and Hulett Aluminium.

COMMENTARY

Headline earnings increased by 126% to R466 million in 2005, compared to R206;million in 2004. The benefits of the multiple management actions underway are increasingly reflected in the financial results. The past three years have seen the businesses adapting to a stronger Rand. The Group’s operating profit in 2005 increased to R730 million (2004: R358 million).

African Products continued its earnings recovery with operating profit improving to R112 million (2004: R61 million). This was achieved through an increase in domestic volumes and lower maize prices, offset by low co-product prices. Domestic sales volumes were 3,9% above those of 2004 due to growth in the local market and the successful recovery of business previously lost to imports. Export sales volumes were 5,5% above those of 2004. An organisational restructuring was undertaken during the year, as part of the ongoing process to ensure operations are able to respond to the competitive environment, the benefits of which will be realised from 2006. The maize price, after reaching low levels early in 2005, rose strongly to levels close to import parity late in the year. Continuing with its back-to-back pricing model, African Products has priced 33% of its maize requirements for 2006.

Tongaat-Hulett Sugar’s operating profit increased by 183% to R232 million (2004: R82 million), before dividends from Triangle Sugar in Zimbabwe. Sales volumes in South Africa increased to 474 000 tons (2004: 464 000 tons) and raw sugar export volumes grew by 33% to 387 000 tons (2004: 292 000 tons). The improved sales volumes, higher export realisations and lower costs per ton led to increased margins. The 2005 results include an effective world sugar price of 8,98 US c/lb (2004: 7,27 US c/lb), which is well below the current price of 17 US;c/lb. The benefits of actions taken to enhance earnings are increasingly being realised. These include optimisation of milling capacity, reduction in milling costs, cane procurement initiatives, head office closure, the new white sugar milling technology, leveraging the Huletts brand and other refining value chain initiatives. A dividend of R19 million (2004: R51 million) was received from Triangle Sugar in Zimbabwe, which continues to operate profitably in a difficult environment.

The South African crop harvested in 2005 was larger than the 2004 crop although still below the longer-term average. Production from the South African operations increased to 753 000 tons (2004: 723 000 tons). In Swaziland, Tambankulu produced a record raw sugar equivalent of 56 000 tons (2004: 50 000 tons). Triangle Sugar in Zimbabwe produced 236 000 tons (2004: 222;000;tons). In Mozambique, the rehabilitation and expansion of the sugar estates continued with production rising by 35% to 115 000 tons (2004: 85;000;tons). Total sugar production for the 2005 year thus improved to 1,160 million tons from 1,080 million tons in 2004.

Moreland continued to accelerate its development of the Group’s prime land holdings, capitalising on its platform comprising resort, residential, commercial and industrial portfolios, in a favourable property market. Operating profit increased by 28% to R231 million (2004: R181 million). Strong contributions were achieved from developments at Zimbali Coastal Resort, RiverHorse Valley Business Estate, La Lucia Ridge residential and the Umhlanga Ridge New Town Centre. Substantial progress has been made towards securing approvals for several key developments, which are expected to be launched in 2006, including Sibaya at Umdloti, Umhlanga Triangle, Izinga, Umhlanga Ridge New Town Centre residential precincts, Cornubia at Mount Edgecombe North, Kindlewood at Mount Edgecombe South and Shongweni.

Hulett Aluminium (Hulamin) more than doubled its operating profit to R319 million (2004: R148 million), with 50% thereof being the Group’s share. The rolled products operation succeeded in growing volumes, improving product mix and reducing unit costs. Sales volumes of rolled products increased by 20% to 173 000 tons, despite disruptions in the supply of rolling ingot in the second half of the year. Output of more than 180 000 tons annualised was attained for several periods of 2005. Rolled product conversion costs per ton were reduced by 8%. Sales mix improvements included increased local market sales and growth in exports of Treadbright and Can End Stock of 27% and 33% respectively. The plate plant expansion, which will increase high margin heat-treated plate capacity by 50%, is progressing well and will come on stream in the second half of 2006. The extrusion operation again performed well. Local market growth in both extruded and rolled products was driven by increased local consumption and customers’ exports.

The Board has declared a final dividend of 280 cents per share, which brings the total annual dividend to 400 cents per share (2004: 170 cents per share).

A POSITIVE OUTLOOK

Considerable earnings growth is expected in the year ahead. Earnings enhancing actions are underway throughout Tongaat-Hulett. The changing global sugar fundamentals and the rising world sugar price are positive developments. Continued growth is expected in aluminium rolled product volumes, together with sales mix optimisation and conversion cost per ton reductions.

UNLOCKING FURTHER VALUE FOR SHAREHOLDERS

An extensive strategic review to further enhance shareholder value, building on the achievements of the last two years and the ongoing actions to increase earnings in all operating companies, has been completed. This resulted in a Board decision to embark on the unbundling of the Group’s 50% interest in Hulamin to Tongaat-Hulett shareholders, the listing of Hulamin and the simultaneous introduction of Black Economic Empowerment equity participation in both Tongaat-Hulett and Hulamin.

Tongaat-Hulett has made significant strides in the areas of employment equity, preferential procurement, skills development, enterprise development and community involvement. The unbundling will create the opportunity to attract value-add BEE equity partners into Tongaat-Hulett and Hulamin.

The unbundling of Hulamin will increase Tongaat-Hulett’s focus on its core businesses, thereby creating further opportunities to enhance operating performance, increase benefits from the overlaps and synergies, improve delivery on growth opportunities and taking advantage of the changing global sugar dynamics. Tongaat-Hulett has developed the Hulamin business over the past 30 years, transforming it into a successful independent niche aluminium rolled products and extrusion company. The business now has the requisite critical mass to prosper on a focused, stand-alone basis, with numerous growth opportunities. The unbundling will provide direct access to two attractive investment vehicles, with clear information on these two entities and their prospects.

Significant preparatory work, including the relevant approvals and regulatory compliance, will be required to implement the aforementioned initiatives. Further announcements with progress in this regard will be made in due course.

Peter Staude
Chief Executive Officer
Amanzimnyama, Tongaat
17 February 2006

Progress report on earnings enhancing actions 2004

A distinguishing feature of the Group is the existence of substantial opportunities to proactively increase earnings performance from its current base. Consequently, the focus on unlocking and accelerating earnings growth from the existing platform is common to all four of the Group’s operating companies, regardless of the direction in which external factors move.

On the first page of last year’s Annual Report, we clearly set out our comprehensive action plan and it is pleasing to report on our progress against those targets. The benefits of these actions have only just started to be reflected in the current financial results and they will realise further considerable value from the established asset and business base, as the Group moves forward.

TONGAAT-HULETT SUGAR

Move to a leaner and more decentralised management approach and reduce head office overheads by at least 50 percent

• Flatter management structure achieved throughout the organisation, with levels of management removed.
• Closure of the sugar head office completed.
• The small Tongaat-Hulett Sugar leadership team joined the Amanzimnyama offices in Tongaat, following the closure and restructure of the 180 people sugar head office in 2004 and following the 50 percent staff reduction at the Group’s head office in 2003.
• Downsizing of centralised services completed.
• Maputo office costs eliminated.
• Restructure costs of R29 million in 2004.
• Benefits of R26 million per annum going forward.
• The sale of the La Lucia building to happen in 2005.

Milling costs targeted to be reduced by 10 percent

• Reorganisation of the South African milling operations from five mill structures to two regional business units completed.
• Service and operating functions rationalised.
• Cost reduction of 6 percent achieved in 2004.
• Action taken that will lead to expected savings of 10 percent in 2005.

Increase benefits from refining value chain

• Benchmarking exercise concluded and action plans developed.
• Multiple manufacturing improvement projects currently underway.
• More value out of the Huletts brand and value-added products such as Equisweet.
• Restructure of central refinery to take place in the first half of 2005.
• Future benefits of up to R80 million per annum targeted.

Leverage technology base and improve its commercial capabilities, focusing on future growth opportunities

• New refining technology plant approved for installation at Felixton mill with expected benefits of R14 million per annum.
• Pilot plant successfully deployed for trials in Brazil with marketing efforts underway to generate significant royalties from the sale of this new refining technology.

Optimise capacity utilisation at all mills through cane supply initiatives in South Africa

• Closure of the Entumeni mill with the diversion of cane to the Amatikulu mill completed.
• Additional cane supplies of 618 000 tons contracted for future years.
• Further cane supplies of 214 000 tons under consideration for 2005.
• Investigating further cane supply initiatives going forward.

Achieve a turnaround in Mozambique, with a positive contribution in 2004

• Positive contribution of R23 million to headline earnings achieved.
• Reorganisation of funding structures successfully completed.
• Targeted production of 100 000 tons sugar set for 2005, towards full capacity of 156 000 tons by 2008.

Proactively manage Triangle in Zimbabwe

• Dividends of R51 million remitted during 2004.
• Operations continue to remain profitable in difficult circumstances.

AFRICAN PRODUCTS

Implement new maize procurement/product pricing model

• The move to a new back-to-back maize procurement and product pricing model is complete.
• The maize valuation adjustments requiring to be charged to the income statement have been eliminated.
• The maize from the previous procurement approach was utilised by the end of October 2004.
• African Products is no longer exposed to mark-to-market volatility in its profits due to movements in the maize price.
• The business is likely to benefit as maize prices move to export parity.

Reduce costs

• Fixed costs, excluding depreciation, have been held at below 2002 and 2003 levels.
• Record production volumes achieved at the Bellville mill, thereby reducing transhipment costs.
• Major exercise currently underway to look at appropriate manning structures and skills profiles.
• Further cost reductions of R10 million targeted for 2005.

Grow volumes

• A significant proportion of the volumes lost to direct imports as a result of the strengthening currency have been regained.
• Strong local demand provides the opportunity for future growth.
• New value-added products introduced during the year, with further growth to come.

HULETT ALUMINIUM

Grow volumes

• Volumes up 10 percent, despite disruptions which adversely affected output by 7 percent.
• Promising fourth quarter 2004 with annualised rolled products output of 160 000 tons.
• Record December output of 165 000 tons annualised.
• Target output of 175 000 tons for 2005, projected to reach 200 000 tons beyond 2006.
• Plans being investigated to grow volumes beyond 200 000 tons.

Enhance sales mix

• Increased value-added exports by customers contributed to the local market sales growing by 11 percent.
• Increased sales of high value, high margin products.
• Can end stock export sales almost trebled over the last two years and are expected to double over the next 2 years.
• Clad sales almost trebled in 2004 and are expected to more than quadruple over the next 3 years.
• Exports of building and painted products up 34 percent and are expected to grow by 20 percent in 2005.

Reduce costs

• Conversion costs per ton down 4,9 percent in nominal terms and 9,2 percent in real terms. Further conversion cost per ton reductions of 9,5 percent planned for 2005.
• Metal premium and recycling costs per ton reduced by 11,7 percent.
• Total energy cost increases limited to 4,4 percent despite increased volume.

MORELAND

Capitalise on solid platform

• Another milestone performance with revenue up 86 percent and earnings up 103 percent.
• Resorts: Moreland-IFA joint venture surging ahead.
• Residential projects at Izinga and Ilala Ridges yielded good sales.
• Successful opening of Moreland project-directed uShaka Marine World and Afrisun’s Sibaya Casino and Entertainment Kingdom: major economic growth drivers in Durban.
• Firmly established, with most of the Group’s land in areas having high potential for development and growth into the future.

Unlock project pipeline to sustain earnings

• Three major road developments have opened up new development nodes for future growth.
• Achieved increase in development pace from a historical average of 100 hectares to 250 hectares per annum in 2004.
• Increase in momentum of unlocking of new projects achieved.
• Investigating international customer expansion.
• Target to unlock the Sibaya area between Umhlanga and Umdloti in 2006.
• IFA’s investment in a 200 room, 5-star hotel and the second golf course at Zimbali Lakes expected to be completed in 2007.

Expand business model

• 4,5 percent equity investment in Afrisun KZN taken up.
• Business plans being developed for IFA joint venture downstream opportunities; Zimbali estate agency already established.
• Several joint ventures with other partners being explored.

Peter
Chief Executive Officer

Amanzimnyama,
18 February 2005

Tongaat-Hulett building earnings momentum

HIGHLIGHTS AND SALIENT FEATURES OF RESULTS FOR THE 2004 YEAR

• The Grouprecorded headline earnings of R214 million, generated off revenue of R6,3billion (2003: R6,6 billion) in a year when the Randstrengthened against the US dollar by 15%. These earnings show an improvementof R307 million from the headline loss in 2003. This is in line with theongoing Tongaat-Hulett strategy of unlocking the earnings improvementopportunities that exist in the balanced group of four sizeable, strategicallypositioned and focused operating companies.
• Managementactions continue throughout the Group to improve profitability. Early benefitsof these actions are reflected in the 2004 results. The proactive optimisationof capacity utilisation, enhancement of sales mix, improvement of raw materialprocurement, growth of volumes and reduction of costs will realise furtherconsiderable value from the Group’s strong asset and business base.
• The Grouphas a strong balance sheet with net debt to equity at 13,2%.
• Annualdividend up 42% at 170 cents per share.

EARNINGS ENHANCING ACTIONS

“The past year was focused on actions to grow earnings. Tongaat-Hulett is rapidly adjusting to the stronger currency and is building earnings momentum,” said Peter Staude, Chief Executive of Tongaat-Hulett.

Management’s profit improvement actions across the Group, which have started taking effect, largely offset the effects of factors such as the strengthening Rand, high priced maize and the small sugar crops harvested in 2003 and 2004. In 2004, the Group’s total operating profit improved to
R364 million from R80 million in 2003. The mix of businesses in the Group was again a strength in 2004.

Staude continued, “By the end of 2004, solid progress had been made with the new business model and African Products is poised for a turnaround in 2005. Maize pricing is now in tandem with customer pricing.”

African Products experienced a year of transition, with a move to a new maize procurement and product pricing model, and the commencement of a profit recovery. Operating profit improved to R63 million (2003: loss of
R104 million) despite the pressure of the exchange rate on local pricing and export contributions, together with the high priced maize procured under the previous business model. Domestic sales volumes of prime products were 2% below those of 2003 as a result of the pressure from imports of starch and glucose in African Products’ markets and imports of finished products in its customers’ markets. A large proportion of the volumes lost to direct imports were regained during the last quarter of 2004. The maize priced under the previous procurement approach was utilised by the end of October. The maize for all sales thereafter was priced when product prices and volumes were agreed with customers. Using this approach, more than 35% of the maize required for 2005 has been priced against product prices with margins that will contribute to a return to an acceptable level of profitability for African Products. Fixed cash costs were again held below the 2002 levels, with ongoing focus on procurement practices and manning structures.

“The improved results in the Group’s aluminium business, Hulett Aluminium, have been achieved notwithstanding the impact of the strengthening of the currency. The established base enables the remaining 25 percent of rolled products production capacity to be utilised at significantly higher levels of profitability,” said Staude.

Hulett Aluminium improved its operating profit to R150 million (2003: R5 million), with the Group’s share being 50% thereof. The focus remains on increasing volumes, improving product mix and reducing unit costs. These factors have together generated financial benefits approaching R450 million in the past two years, and have largely offset the effects of the strengthening Rand. Hulett Aluminium started benefiting late in 2004 from rising US dollar rolling margins, especially in North America and Asia. As one of the few independent rolled products producers that are able to manufacture high quality, higher margin and technically demanding niche products, the business continues to experience strong demand. Total sales volumes of rolled products grew by 10% to 144 000 tons. Local market sales grew by 11%, particularly in the transport, automotive and packaging sectors. Export sales growth was limited to 10% by the increased local demand and the available production output. Production was hampered by a fire on the Camps Drift hot mill in May 2004 and a four week strike in the second half of the year. The average output of rolled products in the last quarter increased to 160 000 tons annualised. The rolled products target for 2005 is 175 000 tons, moving towards 200 000 tons in the years thereafter. Conversion costs per ton decreased by 5% in 2004 as a result of the volume growth and cost savings, particularly in metal recycling. The aluminium extrusion operation grew local market sales by 13% and increased profitability, as did the commercial products businesses.

Staude commented, “The visibility of the value of the Group’s land is increasing. Moreland has made good use of its development expertise, combined with the buoyant property market, to unlock value at an increased pace.”

Moreland’s platform of prime property developments established over the past decade has enabled it to capitalise on the favourable resorts and residential property market and post a record operating profit of
R182 million (2003: R90 million). New projects were launched during the year, with outstanding performances achieved in the Zimbali resort and the Ilala and Izinga Ridge residential projects in La Lucia and Umhlanga respectively. Increased sales have been achieved in the Umhlanga Ridge New Town Centre including sites for apartments and offices. Several large transactions were concluded at RiverHorse Valley Business Estate, a partnership with the eThekweni Municipality (Durban), and Briardene Industrial Park. The three new major road developments in areas where Moreland operates are opening-up new development nodes for substantial future growth. A number of environmental impact studies and planning programmes are due to be completed in 2005 to maintain Moreland’s current momentum.

“Tongaat-Hulett Sugar has successfully undertaken many earnings enhancing actions in this challenging time. These have already started to take effect and, together with additional initiatives that have been identified, place the business in the ideal position to benefit in the years ahead,” said Staude.

Tongaat-Hulett Sugar’s profit from operations, before interest, totalled
R184 million (2003: R202 million). This includes dividends from Triangle, the equity accounted share of operating profit at Xinavane in Mozambique and is before restructuring costs. The relatively low sugar crop for the second year in a row, together with the decrease in the South African domestic sugar price late in 2003 and the strengthening Rand’s effect on export realisations, depressed margins in 2004. Sales volumes in South Africa were 464 365 tons with raw sugar export volumes at 291 922 tons. The recent increase in the international sugar price has not yet impacted the financial results.

Sugar production for the 2004 year grew by 2,8% to 1,081 million tons. Production from the South African operations increased by 11% to 724 000 tons while that of Mozambique rose to 85 000 tons. In Swaziland, Tambankulu produced the raw sugar equivalent of 50 000 tons. Triangle Sugar in Zimbabwe produced 222 000 tons.

Actions completed this year by Tongaat-Hulett Sugar include the closure of the Entumeni mill with the diversion of cane to the Amatikulu mill, the closure of the sugar head office, downsizing of centralised services and the reorganisation of the South African milling operations from five mill structures to two regional business units. Restructuring costs of R29 million were incurred in 2004. The Mozambique operations achieved a turnaround with a positive contribution to earnings. Triangle Sugar continues to operate profitably in the difficult Zimbabwean economic and business environment.

LOOKING AHEAD – A POSITIVE OUTLOOK

Staude said, “Tongaat-Hulett is an established group of four strategically positioned and focused businesses, with an effective balance of expertise, size, diversity and growth opportunities. A change process is underway, having a positive impact both on how the businesses operate and how Group wide issues are dealt with. The Group has strengthened and invested in its operating companies, all of which have unique competitive positions that cannot easily be replicated. The platform that has been established with these businesses has resulted in the Group now being in an ideal position to deliver substantial earnings growth. This, together with its significant growth opportunities, sees the Group well positioned to deliver value for stakeholders well into the future.”

Tongaat-Hulett is well placed to increase the returns in its businesses and there are signs of improving economic conditions in the areas where it operates. The benefits of the actions being taken across the Group to grow earnings will increasingly be reflected in future financial results. Considerable earnings growth is expected in the year ahead.

Peter
Chief Executive Officer

Amanzimnyama,
18 February 2005

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