Tongaat-Hulett Group unlocks value from investments

31 July 2002

The Group’s three internationally competitive businesses – starch & glucose sugar, and aluminium – have produced good earnings growth in the six months to the end of June 2002.

“The Group is unlocking substantial value from its recent major investments in African Products and Hulett Aluminium with strong operating earnings growths from both these divisions,” said Peter Staude, CEO of the Tongaat-Hulett Group.

Revenue from continuing operations rose 17 percent to R3 billion, and earnings were up 28 percent at R350 million after dividends from Triangle were received and net interest paid.;

As expected the strengthening of the rand to June this year has had an adverse effect on headline earnings, which nevertheless rose seven percent.

Had it not been for a loss of R57 million on the translation of £41 million in strategic cash resources, headline earnings would have risen by 34 percent.

On the other hand strong divisional cash flows enabled the Group to substantially reduce its net borrowings from R377 million to R161 million during the interim period.

In addition the board has decided to adjust the ratio between the interim and final dividends and has declared an increased interim dividend of 80 cents per share (2001: 62 cents).

African Products achieved a growth in revenue of 43 percent and in operating earnings of 83 percent.;

“Under pinning this performance was a strong 11 percent growth in the local market for starch & glucose products, which was partially driven by improved customer exports and import substitution, a doubling in export earnings boosted by a weaker rand, and the maintenance of the average maize input costs at well below the prevailing market prices,” said Staude.;

Sugar production from all operations is expected to rise by 13 percent to 1,25 million tons. South African operation’s contribution is expected to be 840 000 tons (last year actual production was 756 000 tons) while the higher cane and sugar production in Swaziland and Mozambique are increasingly contributing towards improved earnings.

Despite the deteriorating socio-economic conditions in Zimbabwe the operation there is expected to produce 280 000 tons of sugar, an increase of six percent on last year’s figure.

The Group has, to date, received R31 million in dividends from the Zimbabwe operation, however it cautions that the difficult economic and business environment may impact on receipts in the second half of the year.

Hulett Aluminium continued to produce outstanding results, increasing revenue by 20 percent to a record R1,5 billion, while earnings before interest and tax were R176 million up 52 percent compared to the corresponding period in 2001. The Group proportionally consolidates 50 percent of Hulett Aluminium.

These results were achieved despite difficult market conditions with international demand and margins in dollar terms being at their lowest level for many years.

” The business is steadily improving its sales mix as it moves up the product profitability curve, growing its capability to produce products with more challenging and stringent quality requirements. It continues to improve its market share in key targeted product groupings and geographic locations,” said Staude.

While the Group remains on track to deliver strong growth in volumes, revenue and operating earnings, it cautioned that headline earnings would be significantly influenced by the value of the Rand for the remainder of the year.