Tongaat Hulett Limited · JSE:TON
Tongaat Hulett — H1 2022 Earnings Presentation
51 slides from Tongaat Hulett's earnings presentation, December 2021
Slide 1: Interim Results Presentation for the Six Months Ended 30 September 2021
INTERIM RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2021
Slide 2: A little Huletts sweetness goes a long way
A little Huletts sweetness goes a long way
Slide 3: Welcome
WELCOME #TOGETHER REIMAGINING A SWEET TOMORROW OPERATIONAL REVIEW 01 Gavin Hudson FINANCIAL RESULTS AND DEBT POSITION 02 Rob Aitken STRATEGIC UPDATE AND OUTLOOK 03 Gavin Hudson, Dave Howells, Aiden Mhere, Lukas Van Deventer and Dan Marokane RIGHTS OFFER 04 Gavin Hudson and Rob Aitken Q&A 05 Gavin Hu
Slide 4: We acknowledge and value your ongoing support
WE ACKNOWLEDGE AND VALUE YOUR ONGOING SUPPORT Growers, customers Employees and suppliers Government and The board communities Shareholders Lenders 4
Slide 5: Operational Review
m TongaatHulett ry #TOGETHER REIMAGINING A SWEET TOMORROW
Slide 6: Progress on key initiatives
PROGRESS ON KEY INITIATIVES HEADWINDS COMPLETED GAINING MOMENTUM Cyclone Eloise – Mozambique 41% debt reduction; refinance completed Asset Care Strategy and plan initiated COVID-19 impact on operations R450m Escrow held from sale of starch Improved employee capability and received in ful
Slide 7: Operational highlights
OPERATIONAL HIGHLIGHTS ZA MZ South Africa Sugar Mozambique Sugar Strong improvement in free cashflow 11% local market sales growth Improved industry sales mix – Masterplan 3.2% yield improvements (despite floods) Recovery of refinery performance 2% Improvement in refinery utili
Slide 8: Operational highlights
OPERATIONAL HIGHLIGHTS ZW Zimbabwe Sugar Property 23% local market sales growth R106m of deals transferred and completed R140m dividend and management fees R145m deals in the pipeline ~500ha outgrower crops replanted R37m - Cashflow positive Major dams near to capacity
Slide 9: We remain steadfast on our ESG journey
WE REMAIN STEADFAST ON OUR ESG JOURNEY Governance • Proactive risk management and compliance program implemented • Fraud risk management strategy showing positive results • Governance structures enhanced • Stakeholder engagement – 3rd party assessment shows improvement • PwC report findings being ac
Slide 10: Salient financial features
SALIENT FINANCIAL FEATURES* Revenue up 5% Operating profit down 23% Cash flow from operations down 13% (up 10% excl disposals) (down 10% excl disposals) 10 2 1,5 1.3 8.1 8.5 1.7 1.2 1.3 1,0 R billion R billion R billion 0,5 5 1 0,0 -0,5 0 0 -1,0 (0.6) Sep 20 Sep 21 Sep 20 Sep 21 Sep 19 Sep 20 Sep 21
Slide 11: Financial Results
FINANCIAL RESULTS
Slide 12: A complex set of results
A COMPLEX SET OF RESULTS • Contribution from disposals (not defined as discontinued) in comparative financial information • Restatement of prior period financial information • Impact of hyperinflation and currency dynamics in Zimbabwe • Civil unrest losses; impact on sugar production and land sales
Slide 13: Zimbabwe hyperinflation impact on results
ZIMBABWE HYPERINFLATION IMPACT ON RESULTS • Inflation rate reduced from 838% peak to 52% (Nov 21: 58%) As reported Sensitivity (Official FX (Unofficial FX • Widening premium on unofficial exchange rates Rm rate) rate) Difference • Hyperinflation and currency dynamics resulted in: Exchange rate (vs U
Slide 14: Restatements to consider
RESTATEMENTS TO CONSIDER Timing Errors Sept 2020 Sept 2020 1. Sugar work in progress at 30 September 2020 not assigned a value – Rm Restated Previous Difference R42m increase in operating profit Revenue 8 121 8 248 (127) 2. Export proceeds not treated as income received in advance and Operating prof
Slide 15: Statement of profit and loss
STATEMENT OF PROFIT AND LOSS Commentary • Gross profit margin reduced from 35% to 33%: Sept 2021 Sept 2020 Reviewed Restated Sept 2020 35.5 Rm FV Cane 6.7 Revenue 8 502 8 121 Zimbabwe (5.2) Sugar industry equalisation (84) (125) Mozambique 1.3 Cost of sales (5 615) (5 114) SA Sugar (3.4) Gross profi
Slide 16: Revenue by segment
REVENUE BY SEGMENT* Sept 2021 Sept 2020 % change % change Rm Reviewed Restated ex. Disposals Revenue 8 502 8 121 5 10 Sept 2020 8 121 Sugar 8 419 8 068 4 10 Zimbabwe 3 725 3 075 21 Other SADC (Disposals) (402) Mozambique 1 334 1 214 10 South Africa 3 380 3 404 (1) Sept 2020 (ex. Disposals) 7 719 Oth
Slide 17: Adjusted EBITDA by segment
ADJUSTED EBITDA BY SEGMENT* Sept 2021 Sept 2020 % change % change Rm Reviewed Restated ex. Disposals Adjusted EBITDA 1 538 2 303 (33) (30) Sept 2020 2 303 Sugar 1 653 2 517 (34) (32) Zimbabwe 959 1 621 (41) Other SADC (Disposals) (99) Mozambique 513 342 50 South Africa 174 404 (57) Sept 2020 (ex. Di
Slide 18: Operating profit by segment
OPERATING PROFIT BY SEGMENT* Sept 2021 Sept 2020 % change % change Rm Reviewed Restated ex. Disposals Operating Profit 1 294 1 670 (23) (10) Sept 2020 1 670 Sugar 1 410 1 886 (25) (15) Zimbabwe 1 043 1 227 (15) Other SADC (Disposals) (230) Mozambique 259 59 339 South Africa 102 319 (68) Sept 2020 (e
Slide 19: Statement of cash flows
STATEMENT OF CASH FLOWS Commentary Sept 2021 Sept 2020 • Investment in working capital reduced substantially Rm Reviewed Restated • Disposal of starch, low prepayments in Zimbabwe, abnormally Operating cash flows before working capital 1 501 2 596 low stock in SA, normalisation of payables in Mozamb
Slide 20: Cash flows by segment
CASH FLOWS BY SEGMENT Sept 2021 Sept 2020 % change % change Rm Reviewed Restated ex. Disposals Segment cash flows 958 1 368 (30) (25) Sept 2020 1 368 Sugar 1 028 1 746 (41) (38) Zimbabwe 311 781 (60) Other SADC (Disposals) (91) Mozambique 452 600 (25) South Africa 252 217 16 Sept 2020 (ex. Disposals
Slide 21: Rebuilding the balance sheet and unlocking long-term value
REBUILDING THE BALANCE SHEET AND UNLOCKING LONG-TERM VALUE
Slide 22: A significant reduction in debt levels
A SIGNIFICANT REDUCTION IN DEBT LEVELS Gross Borrowings (Rm) Commentary • SA debt refinance concluded 6 December 2021 with R5.85bn utilisation 12 586 11 303 11 438 • Debt reduction transactions concluded to date of R6.57bn 9 955 7 199 • Gross borrowings at 30 September 2021 were R6.93bn, a further r
Slide 23: South African debt refinance finalised
SOUTH AFRICAN DEBT REFINANCE FINALISED Rm Salient terms of new facilities 6 342 6 342 Repayment Initial Facility 300 300 5 850 Facility Date Interest Amount 600 8 1 400 1 200 Senior Facility A 30 June 2024 JIBAR R1 050m Term Loan +5.05% 2 200 1 592 1 592 Senior Facility B 30 June 2024 JIBAR R1 400m
Slide 24: Mozambique debt refinance
MOZAMBIQUE DEBT REFINANCE Rm Salient terms of new facilities 1 123 1123 Repayment Initial Facility 80 80 Facility Date Interest Amount 836 Facility A 30 July 2022 Moz. Prime R570m 371 35 Term Loan -0.25% 473 231 Senior Facility B 30 July 2022 Moz. Prime R473m Seasonal -0.50% 672 Working Capital 30 J
Slide 25: Strategic Update
LL <= fa a 5 oO Gy nt fe mh. REIMAGINING A SWEET TOMORROW
Slide 26: Rebuilding Tongaat Hulett
REBUILDING TONGAAT HULETT Turnaround advanced • Strengthened governance at all levels • 41% debt reduction • ESG & Climate Change report completed • Asset care and investment programs implemented • Cash flow improvements informing budgets • Extensive categorisation of infrastructure obligations • At
Slide 27: Sugar demand supported by African population and economic growth trends
SUGAR DEMAND SUPPORTED BY AFRICAN POPULATION AND ECONOMIC GROWTH TRENDS “…If it continues at its current growth rate, like Nigeria, “…Sub-Saharan Africa … holds the greatest potential for sugar consumption Africa’s population will double by 2050. That growth of any global region, … potential for div
Slide 28: Leveraging positive market conditions
LEVERAGING POSITIVE MARKET CONDITIONS African sugar consumption expected to grow, with PCC* opportunities 1.9m tons of sugar opportunities in regional deficit markets & growing PCC kg/annum Market deficit tons (000’s) 28,7 481 453 441 388 23,5 22,8 21,5 Direct customer 360 350 329 20,0 300 Africa gr
Slide 29: A major regional agri-business
A MAJOR REGIONAL AGRI-BUSINESS Material asset base Societal Contribution Commercial Opportunities 59k ha own-cane farmland ~28 000 employees Strong local demand in all markets (sugar and animal feeds) Access to 118k ha 3rd party cane ~500 000 value chain dependents (mostly rural) SA Suga
Slide 30: Our strategy has evolved
OUR STRATEGY HAS EVOLVED Vision – to be the most trusted partner in all that we do Mission – build our future by creating sustainable value for all our stakeholders Growing cane Milling cane / Refining sugar Commercialising assets Agricultural excellence Technical excellence Enhance cashflow g
Slide 31: Business units outlook – unlocking long term growth
BUSINESS UNITS OUTLOOK – UNLOCKING LONG TERM GROWTH
Slide 32: Dave Howells, MD South Africa
Dave Howells MD South Africa
Slide 33: Boosting sugar and animal feeds production in SA
BOOSTING SUGAR AND ANIMAL FEEDS PRODUCTION IN SA Cane Crushed (tons) • Crush all available cane by returning raw mills to optimal performance • Increase raw and refined sugar produced by focusing on mill reliability 6.0 5.4 and recoveries 5.0 • Strengthening technical resources throughout our factor
Slide 34: Aiden Mhere, MD Zimbabwe
m TongaatHulett Aiden Mhere ~ s ee a = ~ MD Zimbabwe #TOGETHER-REIMAGINING A SWEET TOMORROW
Slide 35: Increasing feedstock in Zimbabwe
INCREASING FEEDSTOCK IN ZIMBABWE Cane Crushed (‘m tons) • Increase cane feedstock 4.8 • 10% replant per annum 4.5 • Increase varieties from 2 to ~6 (resilience and yield) 3.5 • Outsourced land preparation to specialists 3.5 3.3 • Improved maintenance of cane (irrigation and pest control) PY LE Range
Slide 36: Lukas van Deventer, MD Mozambique
Lukas van Deventer MD Mozambique
Slide 37: Utilise Mozambique capacity
UTILISE MOZAMBIQUE CAPACITY Cane Crushed (‘m tons) • Increase cane feedstock • 10% replant per annum 2.7 2.1 • Outsourced land preparation to specialists 1.8 • Improved maintenance of cane (irrigation and pest control) 1.7 1.7 • Plant an incremental 1 625 hectares PY LE Range • Increased feedstock i
Slide 38: Dan Marokane, Chief Transformation Officer
DanMarokane Dan Marokane ChiefTransformation Chief Transformation Officer Officer
Slide 39: Property – measured approach to realising value
PROPERTY – MEASURED APPROACH TO REALISING VALUE • Market engagement with 75 development players • Covid-19 induced growth in e-commerce THE BEST OF • Demand for industrial parks and estate living for safety KWAZULU-NATAL • Shift from speculative development • Risk averse bank lending criteria • Infr
Slide 40: Clear medium-term objectives
CLEAR MEDIUM-TERM OBJECTIVES Cane Crushed (‘m tons) Raw Sugar (‘m tons) Refined Sugar (‘000 tons) 13.5 1.5 750 1.4 12.1 670 1.2 10.5 580 10 1.1 1.1 549 9.4 510 PY LE Range PY LE Range PY LE Range Ethanol (‘m litres) Animal Feeds (‘000 tons) Land Sales (Rm) 40 39 400 400 480 33 350 350 31 29 315 285
Slide 41: Rights Offer
. . aad Tongaat = ac ~ # TOGETHER REIMAGINING A SWEET TOMORROW
Slide 42: Initiate rights offer or dispose of strategic assets
INITIATE RIGHTS OFFER OR DISPOSE OF STRATEGIC ASSETS • Sens announcement of 7 December 2021 - unsustainable debt levels amount to approximately R3.6bn, represented by two PIK instruments, at rates of approximately 6% above JIBAR. The interest rates will increase should a minimum Rights Offer of R2bn
Slide 43: Benefits of Magister as strategic underwriter
BENEFITS OF MAGISTER AS STRATEGIC UNDERWRITER • Essential to have underwritten Rights Offer to benefit all stakeholders Magister • Aligned in intent to create long-term value Regional commodity trading and • Magister agreed to protect liquidity post transaction: agriculture investment company • In
Slide 44: Size of the Rights Offer
— Tongaat ORROW IMAGINING
Slide 45: Rights offer size considerations
RIGHTS OFFER SIZE CONSIDERATIONS • Minimum R2bn required to meet refinancing obligations - settles Equity / Strategic Asset PIK, not Property PIK - Asset disposals as an alternative, would result in more value dilution - Selling cash generating assets impairs ability to achieve sustainable debt • Pr
Slide 46: Rights offer impact on net SA debt
RIGHTS OFFER IMPACT ON NET SA DEBT Debt facilities pre Rights Offer R2.0bn Rights Offer R3.825bn Rights Offer 7 000 700 6 342 6 468 Net RO amount, post RO expenses, used to settle 630 6 000 A R3.8bn RO would settle all 600 majority of the equity PIK PIK facilities and deliver a Annual Interest Savin
Slide 47: South African debt refinance – PIK facilities
SOUTH AFRICAN DEBT REFINANCE – PIK FACILITIES Senior Facility C Equity 31 Jan 21 28 Feb 22 20 Mar 22 20 Mar 22 31 Mar 22 (PIK Facility) Raise EGM Share Placing / Resolution Rights Offer Required Circular Underwriting Passed & Circular Closure Binding Term Required Agreement Lodged Sheet Signed Closu
Slide 48: Unlocking long-term growth
UNLOCKING LONG-TERM GROWTH 48
Slide 49: Tongaat Hulett: unlocking long-term growth and shareholder value
TONGAAT HULETT: UNLOCKING LONG-TERM GROWTH AND SHAREHOLDER VALUE • We remain optimistic about the future of Tongaat and its growth potential • Keeping the group intact enables us to exploit the extensive regional asset base and create shared value • Management must concentrate on growth and sharehol
Slide 50: 50
50
Slide 51: Questions and Answers
QUESTIONS AND ANSWERS