TONGAAT HULETT ANNUAL RESULTS For the year ended 31 March 2020
Presenters Gavin Hudson Chief Executive Officer Rob Aitken Chief Financial Officer
Agenda Introduction and strategic update 1 Gavin Hudson 2 Financial results Rob Aitken 3 Divisional performance Rob Aitken 4 Outlook Gavin Hudson 5 Q & A
Acknowledgements The Board Recent appointments: Ms Louisa Stephens and Mr David Noko Our Shareholders Our Lenders Customers and Suppliers 4
Experienced team leading and executing our strategy Management Team Gavin Hudson Rob Aitken Dan Marokane Chief Executive Officer Chief Financial Officer Strategy, Property and Business Transformation Executive February 2019 March 2019 April 2019 Tongaat Hulett employee since 2018 Tongaat Hulett employee since 2018 Garth Macpherson Simon Harvey Bongani Gumede MD Starch MD Sugar Corporate Affairs Executive August 2010 April 2019 July 2020 Tongaat Hulett employee since Tongaat Hulett employee since 1994 1996 Michelle Jean-Louis Johan van Rooyen Sashir Milne Business Assurance Company Secretary Human Resources Executive January 2020 January 2020 July 2020 Tongaat Hulett employee since 2001 5
Tongaat Hulett: a leading player in the sectors in which we operate 4 R4.2bn >850k Group Starch Plants Tons of maize per annum In FY20 Revenue Highlights processing capacity Leading agri-business in 13 R15.2bn ~45k Africa Production facilities (1) In FY20 Revenue Hectares farmed (2) Sugar 1.7m 40m ~400k A Leader in the Starch and Glucose, Sugar, Tons per annum in sugar Litres per annum in Tons per annum in animal Ethanol, Cattle and production capacity (3) ethanol capacity (3) feed capacity (3) Animal Feeds markets ~19k ~R11bn >R35bn Property One of the largest Developed value of land (5) Of which 11.7k Hectares Indicative fair value of portfolios of premier developable land (4) are of prime commercial commercial land in land (4) KZN/SA Notes: Unless otherwise indicated, operational data and company estimates as at December 2019. (1) Including Eswatini. (2) Including Miller-cum-planter (MCP). (3) Based on management estimates as at December 2019. (4) Independent Valuation Report issued on 23 August 2019, valued as at 1 June 2019. (5) Developable value of land once infrastructure is in place 6
In the last 12 months, we have seen significant improvements Board and Governance Management Business Financial Strengthened Improved transformation Improved Health and Enhanced our cash governance and at Board and Exco Safety in our workspaces: position • financial control Fatalities: 1 vs 5 FY19 • Total Injury Frequency Rate (TIFR): 1.63 vs 2.04 FY1 9 Strengthened internal Deepened relationships Repositioned and Met our debt reduction audit, discipline and with stakeholders revitalised our assets milestones to date assurance Improved decision Strengthened Step changed all our Improved our financial making implementation of policies operational metrics metrics and procedures Improved compliance to Anchored and improved Improved and better King IV our people processes positioned our human capital Launched values 7 *TIFR: Total Injury Frequency Rate
PwC forensic investigation – 8 Key findings Early recognition of revenue Overstatement of cane root Overstatement of value: capital Overstatement of from land sales and standing cane valuations work in progress, plant and sugar sales in Zimbabwe machinery Capitalisation of Incorrect apportionment of Provision of cash collateral in Overstatement of projected infrastructure costs revenue between land sales relation to land sales revenue and infrastructure Progress to date 1 2 3 4 • Criminal investigation • Fixed and improved • Co-operating with in SA well advanced – corporate governance regulators in SA, NPA decision expected Mozambique and • Implemented • Civil claims against within the next 3-6 Zimbabwe to assist comprehensive ethics former executives are months with investigations governance imminent • Criminal investigation • Regulators in contact • Restated historic in Zimbabwe well with former directors financials advanced 8
Our strategy remains fit for purpose… Drive Rightsize and Create a Build efficiencies fix the platform for capability in within our fundamentals sustainable our people business to of our profitable and truly leverage business growth processes our asset base … is delivering the desired results 9
Some operational highlights • White sugar market in SA share to • Mozambique refinery to >60 000 tons above 35%, overall sugar to > 27% • Milling costs in SA down by 31% • Strong sales growth in Mozambique • SA Refining costs down by 24% • Improving power generation revenue • Refinery and Ethanol output in opportunities Zimbabwe up by 11% and 30% • Diversification projects well advanced respectively • SA sugar farming is being optimised • Reduced headcount by > 10 000 • Leveraging internal talent and key people appointments • Mafambisse mill in Mozambique from • Driving our ambition to become an R100m loss to break even employer of choice • Cane supply to increase by • Strengthening performance management 4 000 hectares from Project Kilimanjaro and accountability in Zimbabwe • Driving our change • The Zimbabwe US$ loan significantly management programs reduced plus dividends being extracted 10
Progress on debt reduction initiatives … R6.4 bn Core and non-core asset disposals : R512 million 1. Pension fund R109 million 2. Namibia R101 million 3. Ongoing land sales R372 million 4. Tambankulu Estates (Eswatini) 5. Starch R5,350 million • MAC Key dates: ➢ 1st submissions: Barloworld – 18 Jul; Tongaat – 3 Aug ➢ 2nd submissions: Barloworld – 10 Aug; Tongaat – 17 Aug ➢ Oral Presentations: 22 Aug ➢ Final and binding ruling: 21 Sept Tongaat remains optimistic 11
Cash flow improvement to deliver R3 bn over 2 years FY20 R1.57 bn achieved against R1 bn target Working Capital Improvement R320m Cost Reduction ~R1.250 bn FY21 target R1.5 bn: - Cost reduction - Working capital improvement - Interest savings 12
Financial highlights – FY20 Revenue Adj. EBITDA* Up 18% Up 397% to R15.4 bn to R3.0 bn Cash flow from Sugar: R2.7 bn (2019: R395m) operating activities Starch: R729m (2019: R777m) Up 62% Property: R660m (2019: R279m) to R2.1 bn Operating Profit Up 491% Headline loss to R3.3 bn Improved 79% Sugar: R3.0 bn (2019: R346m) to R(285)m Starch: R616m (2019: R656m) Property: R658m (2019: R273m) 13
Humthem Video
Financial Results 15
Improved financial results in a weak market Substantial recovery in Strong progress in Significant improvement financial results turnaround strategy in all Sugar operations Solid performance in Recovery countered by Starch Hyperinflationary effects net finance cost and RECLASSIFIED AS in Zimbabwe hyperinflationary DISCONTINUED monetary loss Group financial EPS HEPS results Improved 109% Improved 111% No dividend declared to 89 cents to 90 cents 2019: loss of 948 cents 2019: loss of 823 cents No material COVID-19 impact on these financial results 16
Salient financial features (Continuing operations – excl starch) Revenue Adjusted EBITDA* Operating Up 18% Up 397% profit to R15.4 bn to R3.0 bn Up 491% Net monetary loss Headline loss to R3.3 bn R1.3 bn Improved 79% Effect of hyperinflation to -R285m Operating profit excl Zimbabwe Cash flow from HLPS operating activities Up R1 bn Improved 83% Up 62% to -211 cents to R2.1 bn Tongaat Hulett utilises the concept of adjusted EBITDA that removes any fair value adjustments to biological assets 17
Zimbabwe hyperinflation inflates financial results • Application of IAS 29 Financial Zimbabwe only March 2020 Reporting in Hyperinflationary Economies As reported: Sensitivity: Official inflation rate: 676% (March) • Hyperinflation + Hyperinflation % R million official rate + unofficial change • Group comparatives not restated (closing) rate (closing) • Fair value movements in biological assets especially susceptible to hyperinflation Revenue (external) 6,126 3,978 -35% • Net monetary loss arises from local currency cash balances that are losing Profit from operations 2,882 1,872 -35% purchasing power Net asset value 3,857 2,505 -35% • An unofficial rate was evident within the country for informal trading • New auction system is aligning rates with official rate moving from ZWL 25 to ZWL 82 to US$1 (at 13 August 2020) 18
Statement of Profit or Loss(Continuing operations – excl starch) 12 months ended 12 months ended Strong operational 31 March 31 March progress, impact of 2020 2019 hyperinflation, land deals included R ‘millions (Audited) (Audited) Repricing of debt, Revenue 15,382 13,061 impact of applying Cost of sales (8,591) (9,394) IFRS 16, early cash Gross profit 6,791 3,667 outflows to normalise creditors Operating profit 3,257 551 Net finance costs (1,620) (1,331) Net monetary loss (1,296) - Hyperinflation, erosion Profit / (loss) before taxation 365 (778) of purchasing power of Taxation (228) (459) monetary assets Profit / (loss) from continuing 137 (1,237) operations Profit from discontinued operations 393 445 Profit/(loss)for the year 530 (792) Basic and diluted loss per share (cents) (212) (1,352) from continuing operations 19
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