NOTES (21-30) TO THE
FINANCIAL STATEMENTS

21.  TAX (Rmillion) Consolidated  Company 
    2017  2016 
Restated 
(note 35)		 2017  2016 
Restated 
(note 35)
           
  Tax on earnings before capital profits:         
  Current  542  287  17  14 
  Deferred  (128) 33  (47) (89)
  Prior years  1  3    2 
    415  323  (30) (73)
           
  Tax on capital profits:         
  Current    1     
  Deferred  13  2  13  2 
    13  3  13  2 
           
  Tax charge/(relief) for the year  428  326  (17) (71)
           
  Foreign tax included above  277  75  17  14 
           
  Reconciliation of statutory rate to effective rate:         
  Tax charge at normal rate of South African tax  426  277  283  37 
  Adjusted for:         
  Non-taxable amounts  (77) (37) (54) (48)
  Dividends received from subsidiaries      (287) (93)
  Assessed losses of foreign subsidiaries  11  9     
  Non-deductible expenditure  33  26  12  9 
  Foreign tax rate variations  (12) 22     
  Foreign withholding tax  11  10  9  7 
  Capital gains  35  16  20  15 
  Prior years  1  3    2 
  Tax charge/(relief) 428  326  (17) (71)
  Normal rate of South African tax  28,0%  28,0%  28,0%  28,0% 
  Adjusted for:         
  Non-taxable amounts  (5,1) (3,7) (5,3) (36,3)
  Dividends received from subsidiaries      (28,4) (70,4)
  Assessed losses of foreign subsidiaries  0,7  0,9     
  Non-deductible expenditure  2,2  2,7  1,2  6,9 
  Foreign tax rate variations  (0,8) 2,2     
  Foreign withholding tax  0,7  1,0  0,9  5,4 
  Capital gains  2,3  1,6  1,9  11,4 
  Prior years  0,1  0,3    1,6 
  Effective rate of tax  28,1%  33,0%  (1,7%) (53,4%)
           
  Normal tax losses of R3 151 million (2016: R2 496 million) have been utilised to reduce deferred tax. Management considers that there will be sufficient future profits to utilise these tax losses. No deferred tax asset has been raised in respect of tax losses of foreign subsidiaries of R110 million (2016: R227 million) that may not be utilised in the short term or may expire in terms of applicable tax legislation. 
 
         
22.  HEADLINE EARNINGS (Rmillion) Consolidated     
    2017  2016 Restated (note 35)    
           
  Profit attributable to shareholders  983  716     
           
  Less after tax effect of:  (1) (37)    
  Capital profit on disposal of land, cane roots and buildings  (12) (42)    
  (Surplus)/loss on disposal of property, plant and equipment  (4) 4     
    (16) (38)    
  Minority (non-controlling) interest  1  (1)    
  Tax on capital profit on sale of land, cane roots and buildings  13  3     
  Tax on disposal of other fixed assets  1  (1)    
           
  Headline earnings  982  679     
           
  Headline earnings per share (cents)        
  Basic  852,7  588,0     
  Diluted  852,7  588,0     
 
           
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 115 158 241 (2016: 115 471 378). 
 
 
           
24.  DIVIDENDS (Rmillion) Consolidated  Company 
    2017  2016  2017  2016 
           
  Ordinary share capital         
  Final for previous year, paid 30 June 2016: 60 cents
(2016: 210 cents)		 81  283  81  283 
  Interim for current year, paid 2 February 2017: 100 cents (2016: 170 cents) 135  229  135  229 
           
    216  512  216  512 
  Less dividends relating to BEE SPV consolidation shares  (40) (95)    
    176  417  216  512 
           
  The final ordinary dividend for the year ended 31 March 2017 of 200 cents per share declared on 25 May 2017 and payable on 29 June 2017 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 
      2017  2016  2017  2016 
             
  Financial assets           
  Derivative instruments in designated hedge accounting relationships    60    60 
  Unlisted shares    28  26     
  Loans and receivables at amortised cost  4 689  5 242  1 532  1 467 
  Cash and cash equivalents  2 741  1 877  58  100 
      7 458  7 205  1 590  1 627 
             
  Financial liabilities           
  Derivative instruments in designated hedge accounting relationships  9  1  9  1 
  Financial liabilities at amortised cost  11 075  10 788  9 317  8 517 
  Non-recourse equity-settled BEE borrowings  623  605     
      11 707  11 394  9 326  8 518 
             
  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 
    2017  2016  2017  2016 
           
  Less than 1 month  366  77  63  30 
  Between 1 to 2 months  36  15  10  2 
  Between 2 to 3 months  17  12  1  2 
  Greater than 3 months  98  266  6  4 
  Total past due  517  370  80  38 
           
  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  36  25  4  2 
  Currency alignment  (4) 3     
  Amounts written-off  (3) (2) (2) (2)
  Increase in allowance recognised in profit or loss  17  10  6  4 
  Balance at end of year  46  36  8  4 
           
  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 
  Average 
contract 
rate 		 Commitment 
Rmillion 		 2017 
Fair value 
of FEC 
Rmillion 		 2016 
Fair value 
of FEC 
Rmillion 
 
 
         
Imports         
US Dollar  13,47  21     
         
Exports         
US Dollar  13,77  24    6 
Net total        6 
 
Company 
Average 
contract 
rate 		 Commitment 
Rmillion 		 2017 
Fair value 
of FEC 
Rmillion 		 2015 
Fair value 
of FEC 
Rmillion 
       
       
13,47  21     
       
       
13,77  24    6 
      6 

 

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.

 
Consolidated 
  Average 
contract 
rate 		 Commitment 
Rmillion 		 2017 
Fair value 
of FEC 
Rmillion 		 2016  
Fair value 
of FEC 
Rmillion 
 
 
Imports         
US Dollar  12,86  1    (1)
UK Pound  16,27  1     
         
Exports         
US Dollar        2 
         
Net total        1 
 
Company 
Average 
contract 
rate 		 Commitment 
Rmillion 		 2017 
Fair value 
of FEC 
Rmillion 		 2016  
Fair value 
of FEC 
Rmillion 
       
12,86  1    (1)
16,27  1     
       
       
      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 		 2017 
Rmillion 		 2016 
Rmillion 
 
 
Australian Dollar  8  82  68 
US Dollar    3   
New Zealand Dollar      7 
    85  75 
 
Company 
Foreign 
amount 
million 		 2017 
Rmillion 		 2016 
Rmillion 
7  77  68 
  3   
    7 
  80  75 
       
  The impact of a 10% strengthening or weakening of the Rand on the uncovered Australian dollar receivable will have a
R8 million (2016: R7 million) impact on profit before tax and a R6 million (2016: R5 million) impact on equity. The impact of a 10% strengthening or weakening of the Rand on the uncovered US dollar receivable will have a R0,3 million (2016: R1 million) impact on profit before tax and a R0,2 million (2016: R1 million) 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 2017 and a significant portion of its requirements for the period to 31 May 2018 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 
  Tons  Contract 
value 
Rmillion 		 2017 
Fair 
value 
Rmillion 		 2016 
Fair 
value 
Rmillion 
 
 
Futures - hedge accounted:         
Maize futures sold  28 700  55  (10) 67 
Maize futures purchased  23 200  46  1  (15)
      (9) 52 
         
Period when cash flow is expected to occur  2017/18  2016/17 
When expected to affect profit or loss  2017/18  2016/17 
Gain recognised in equity during the year    7 
Gain transferred from equity and recognised in profit or loss  5   
 
Company 
Tons  Contract 
value 
Rmillion 		 2017 
Fair 
value 
Rmillion		 2016 
Fair 
value 
Rmillion 
       
28 700  55  (10) 67 
23 200  46  1  (15)
    (9) 52 
       
    2017/18  2016/17 
    2017/18  2016/17 
      7 
    5   
       
  Growing crops fair value measurement           
  Growing crops, comprising standing cane, is 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 standing cane is determined by estimating 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 as at 31 March 2017. Changes in the fair value are included in profit or loss, with a benefit of R143 million (2016: R141 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 8. 
   
  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 and prices. The consolidated yield is 76 tons per hectare (2016: 73 tons per hectare) and for the company it is 60 tons per hectare (2016: 50 tons per hectare). For commercial reasons, selling prices cannot be disclosed. A change in yield of one ton per hectare would result in a R35 million (2016: R37 million) change in fair value for the consolidated results and R12 million (2016: R9 million) for the company. A change of one percent in the cane price would result in a R32 million (2016: R33 million) change in fair value for the consolidated results and R9,7 million (2016: R6,5 million) for the company. 
             
  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 R26 million (2016: R27 million) effect on profit before tax and a R19 million (2016: R20 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 R3,06 billion (2016: R2,43 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 
                 
  2017               
  Bank loans  9,4  3 165 *  1 984  3 110  775  (1 606) 7 428 
  Foreign loans  10,5    46  57    (12) 91 
  Other borrowings  8,8  531        (22) 509 
  Financial lease liability  11,5  1  1  1    (1) 2 
  Other non-interest bearing liabilities  3 045          3 045 
  Net settled derivatives    9          9 
  Total for Tongaat Hulett    6 751  2 031  3 168  775  (1 641) 11 084 
  Non-recourse equity-settled BEE borrowings  642        (19) 623 
  Total including SPV debt  7 393  2 031  3 168  775  (1 660) 11 707 
                 
  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          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 
                 
  * 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 
      2017  2016  2017  2016 
             
 

Tongaat Hulett Starch (Pty) Ltd 

 Wet maize milling, starch & glucose manufacturing operation  15  15  59  56 
             
  Tongaat Hulett Developments (Pty) Ltd  Land & property development activities  6    (231) (792)
  Tongaat Hulett Estates (Pty) Ltd           
             
  Tongaat Hulett Sugar SA Limited    5 396  4 238  (90) 968 
  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%)          
  Tongaat Hulett (Botswana) (Pty) Limited (Botswana) (50,1%)          
  Tongaat Hulett (Namibia) (Pty) Limited (Namibia) (51%)          
             
  The Tongaat Group Limited    54  54  (59) (59)
      5 471  4 307  (321) 173 
             
  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. 
  Loans between companies within the group are unsecured with no fixed date for repayment. 
  Tongaat Hulett's proportionate share of the assets, liabilities and post-acquisition reserves of its joint operation, Effingham Development (33%) is included in the consolidated financial statements. The proportionate share of profit after tax for the year was R9 million (2016: R3 million). This joint operation is a property development partnership which operates in KwaZulu-Natal, South Africa. 
             
  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:  2017  2016 
Restated 		    
           
  Non-current assets  2 915  3 354     
  Current assets  1 466  1 856     
  Non-current liabilities  (1 195) (1 681)    
  Current liabilities  (261) (386)    
  Equity attributable to Tongaat Hulett  (1 472) (1 582)    
  Non-controlling interests  1 453  1 561     
           
  Revenue  2 092  1 614     
           
  Profit/(loss) attributable to Tongaat Hulett  48  (68)    
  Profit/(loss) attributable to non-controlling interests  47  (67)    
  Profit/(loss) for the year  95  (135)    
    2017  2016 
Restated 		    
           
  Other comprehensive income attributable to Tongaat Hulett  (158) 293     
  Other comprehensive income attributable to non-controlling interests  (156) 289     
  Other comprehensive income for the year  (314) 582     
           
  Total comprehensive income attributable to Tongaat Hulett  (110) 225     
  Total comprehensive income attributable to non-controlling interests  (109) 222     
  Total comprehensive income for the year  (219) 447     
           
  Net cash flow from operating activities  427  102     
  Net cash outflow from investing activities  (33) (226)    
  Net cash flow from financing activities  (368) (137)    
  Net cash inflow/(outflow) for the year  26  (261)    
 
           
27. GUARANTEES AND CONTINGENT LIABILITIES (Rmillion) Consolidated  Company 
    2017  2016  2017  2016 
           
  Guarantees in respect of obligations of Tongaat Hulett and third parties  96  101  3  53 
 
 
28.  LEASES (Rmillion) Consolidated  Company 
    2017  2016  2017  2016 
           
  Amounts payable under finance leases         
  Minimum lease payments due:         
  Not later than one year  1  2  1  2 
  Later than one year and not later than five years  2  2  2  2 
    3  4  3  4 
  Less future finance charges  (1) (1) (1) (1)
  Present value of lease obligations  2  3  2  3 
           
  Payable:         
  Not later than one year  1  1  1  1 
  Later than one year and not later than five years  1  2  1  2 
    2  3  2  3 
           
  Operating lease commitments, amounts due:         
  Not later than one year  38  36  33  33 
  Later than one year and not later than five years  22  39  18  38 
    60  75  51  71 
  In respect of:         
  Property  35  36  26  33 
  Vehicles and office equipment  25  39  25  38 
    60  75  51  71 
 
 
29.  CAPITAL EXPENDITURE COMMITMENTS (Rmillion) Consolidated  Company 
    2017  2016  2017  2016 
           
  Contracted  104  196  38  83 
  Approved but not contracted  250  213  201  153 
    354  409  239  236 
           
  These commitments relate to expenditure on property, plant, equipment and intangible assets. 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 
    2017  2016  2017  2016 
           
  Goods and services:         
  Between the company and its subsidiaries      874  519 
           
  Administration fees and other income:         
  Between the company and its subsidiaries      109  111 
  Transacted with/between joint operations within Tongaat Hulett  8  3     
  Paid to external related parties  6  5     
           
  Interest received/paid:         
  Paid by the company to its subsidiaries      60  101 
  Transacted with/between joint operations within Tongaat Hulett  2  4     
           
  Sales of fixed assets:         
  Between the company and its subsidiaries      149  140 
           
  Loan balances:         
  Between the company and its subsidiaries      321  173 
  Pension Fund loan  93  85  93  85 
           
  Dividends:         
  Between the company and its subsidiaries      1 024  333 
           
  Other related party information:         
  Total dividends paid - refer to note 24     
  Executive directors/key management personnel - refer here, here and here of the Remuneration Report 
  Non-executive directors - refer 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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