Progress report on earnings enhancing actions 2004

18 February 2005

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