Tongaat-Hulett has a proud history built on the ability to transform itself and capitalise on opportunities in changing business environments. It is doing so again by introducing black economic empowerment equity participation in both Tongaat-Hulett and Hulett Aluminium and simultaneously unbundling and listing Hulett Aluminium.
Tongaat-Hulett has invested in and strengthened its operating companies, all of which have strong competitive positions that cannot easily be replicated. Earnings are growing from the expanded asset base. The businesses are well positioned to take full advantage of attractive growth opportunities and deliver earnings growth.
Hulett Aluminium has established a reputation in the world market as a manufacturer of high value aluminium rolled products. In a global market dominated by a few large producers, Hulamin has carved out a space based on outstanding customer service, responsiveness and a wide range of high quality products. This, combined with rapidly improving operational performance, has laid the foundation for significant increases in profitability.
Hulamin’s business model focuses on significant positions in high value niche markets, including value added exports by South African customers. It is emerging as one of the most successful export based rolled products businesses in the world. This has necessitated the development of a new set of skills that adds value to customers and offers opportunities for the business to differentiate itself in the market.
The global rolled aluminium industry remains dominated by a few multinationals, which together control more than 70 percent of world capacity in higher value products. Hulamin competes directly with the world’s leading producers in the markets for high value, more profitable niche products. As a direct result of consolidation in the industry and customers’ reactions to the emergence of such dominant multinationals, opportunities arise for independent producers such as Hulamin to add value by offering premium quality alternative supply, more flexible service, single mill sourcing and direct contact with the manufacturing unit.
Hulamin manufactures technically demanding, world-class quality, high margin aluminium semi-fabricated products. These include heat treated plate, can end stock, closure sheet, bright treadplate, thin gauge foil, superior finish painted products and clad products for automotive heat exchangers. It delivers these products to more than 350 export customers in over 50 countries around the world, on flexible and demanding delivery schedules. The rolled products plant located in Pietermaritzburg constitutes the major activity and includes a number of hot and cold rolling mills, together with foil mills, remelt facilities, coating lines and other precision finishing equipment. Hulamin is also the leading producer of extruded aluminium products in Africa, with four plants supplying a wide range of markets and with a particular capability to produce large and complex extruded sections. It also owns a number of strategically positioned downstream operations involved in the distribution of aluminium products and the manufacture of a diverse range of products which include rigid foil containers, high pressure aluminium cylinders and cladding products for the building industry.
Hulamin has proved itself on the world stage as a South African manufacturing success by breaking into high value, difficult to manufacture products in previously well defended markets. This success is founded on an experienced technical and process competence, full capacity utilisation as an independent producer, the ability to focus on an attractive product mix and lower costs.
Established in 1919, African Products is the major producer of starch and glucose on the African continent. It has grown and become a critical supplier to a wide range of South African and African industries. Operating five wet-milling plants, including the ultra-modern Kliprivier facility, African Products converts some 600 000 tons of maize per annum into starch and starch-based products. It manufactures products of world-class quality and is a major beneficiator of one of South Africa's key agricultural products.
Starch, one of nature's most versatile raw materials, is the starting point for a wide variety of downstream products. African Products continues to focus on its established product range to capitalise on opportunities for further growth. Investment in expanding and improving the company’s ability to manufacture its base products is taking place. Many of these products, which range from unmodified corn starch to highly refined glucose products, are key ingredients for local manufacturers of foodstuffs, beverages and a variety of industrial products. The strong growth of the South African economy is positive for good volume growth of these products.
High oil prices have increased the appeal of starch as a raw material as many oil-based products can also be manufactured from starch, including ethanol. Worldwide research efforts currently focus on developing new and innovative products from this fascinating molecule. African Products continues to monitor many of these developments with a view to incorporating them in its product portfolio. As a result of this drive, a number of new products have been successfully introduced into the South African market and further developments are planned. The focus going forward is on opportunities to increase the range of higher value products, with good progress in adhesives and mining product initiatives.
African Products and Tongaat-Hulett Sugar continue to assess opportunities to capitalise on their joint agri-processing skills.
Tongaat-Hulett has been adding value in refined carbohydrates and through agricultural raw materials for more than a century. The starch and glucose and sugar businesses offer similar products in key overlapping market sectors. In many ways, what Tongaat-Hulett Sugar does to cane through beneficiation, African Products does to maize. There is increased awareness of the significant market sectors where Tongaat-Hulett can potentially manufacture complementary and substitute products.
Tongaat-Hulett Sugar and African Products produce almost half of the refined carbohydrates manufactured in South Africa. Tongaat-Hulett has established considerable expertise in adding value to agricultural products, an area which requires specific knowledge and skills. This provides a powerful base to harness its agri-processing abilities to expand activities into adding value to other agricultural crops.
Tongaat-Hulett Sugar is well positioned to capitalise on changing global sugar fundamentals. It has a history that stretches back to its beginnings in 1854. Today, it is a world leader in process design and technology and has built a powerful brand in Huletts®. Its operations now extend well beyond its origins in South Africa.
Tongaat-Hulett Sugar is well positioned in Southern Africa. In the KwaZulu-Natal north coast and Zululand region it has four sugar mills with installed capacity to crush 9 million tons of cane per annum. In an average rainfall year this region produces 12 million tons of cane and Tongaat-Hulett Sugar is strategically positioned to further leverage efficiencies and economies as sugar milling in the region moves to improve its cost competitiveness. The matching of milling capacity to available cane supplies remains a key driver of low cost sugar production. Triangle Sugar in Zimbabwe is well positioned to enter a growth phase once the conditions in Zimbabwe are conducive to further investment. In Mozambique, Tongaat-Hulett Sugar has two sugar mills in partnership with the Mozambique government with the capacity to crush 1,3 million tons of cane annually with further growth potential. It also has extensive irrigated cane estates in Mozambique. At Tambankulu Estates in Swaziland, Tongaat-Hulett Sugar produces in excess of 440 000 tons of cane per annum.
A key factor for future investment and profitability will be the effect on both preferential and world market prices of changes to subsidies (both domestic and export), market protection and preferential market access through liberalisation of world trade. The reform of the European Union (EU) sugar regime commencing in 2006 is a significant step in this direction. Furthermore, the expanding market for fuel ethanol produced from sugar cane as an environmentally friendly alternative to fossil fuels will underpin world sugar prices. Tongaat-Hulett is increasing its focus away from the narrow sugar definition to a much broader sweetener and bio-fuels approach.
With the long term trend of decreasing costs of sugar production internationally, Tongaat-Hulett Sugar is striving to maintain an internationally competitive cane growing and manufacturing base through the identification and elimination of all non-value adding processes and activities. A major review and analysis of the business in terms of its international competitiveness has been undertaken over the past few years as well as having assessed whether the business processes and organisational culture are conducive to the ‘high performance organisation’ needed to meet the challenges. A key to achieving this competitiveness has been the establishment of leaner and flatter structures where people at operating level have been empowered to assume greater responsibility and accountability for performance. Action plans and earnings enhancing initiatives have been put in place and have begun to bear fruit.
The management of existing and new sugar manufacturing technologies will facilitate the effective execution of the business objectives. Technology management is a key element of Tongaat-Hulett Sugar's lean manufacturing strategy and will stimulate, support and leverage the continuous improvement of its operations. Work on Tongaat-Hulett Sugar's ground breaking refining technology has shown further advances with the partial commissioning of a new technology plant at Felixton designed to draw off 15 percent of the Felixton sugar mill's capacity enabling, for the first time, white sugar production directly from raw cane juice. Commissioning will be completed at the start of the 2006 milling season.
One of the foundations of Tongaat-Hulett Sugar's success remains the powerful Huletts® brand. In 2005 it was voted by an independent survey as the second most admired food brand in South Africa, measured in terms of loyalty and weighted by awareness as well as trust and confidence. The brand offers a total sweetener solution including a range of high intensity sweeteners.
Tongaat-Hulett Sugar is increasingly seeing opportunities in environmentally sustainable energy generation from sugar cane. It continues to explore the co-generation of electricity and the expansion of ethanol production for use as a bio-fuel. These initiatives are certain to grow in significance given sugar cane's sustainable and renewable properties.
Having pioneered the production of bagasse and molasses-based animal feeds under the Voermol brand, this operation continues to be a leader with its range of energy and supplementary feeds, amongst others, as the cornerstone of its offerings to the livestock farming community.
Tongaat-Hulett owns 23 000 hectares of land in South Africa of which 11 600 hectares are under urban or tourism development demand. It has the expertise and competence to manage the dynamics of optimising cane supplies when conditions favour sugar production and unlocking substantial value from its land holdings when circumstances support property development. This value creation is currently occurring on the KwaZulu-Natal coast north of Durban, with Moreland's established position as a leading land developer being a key success factor.
The timing of the transition from sugar to property development is difficult to predict as it depends amongst other things on sugar prices, sugar regimes, exchange rates, interest rates, property market cycles and urbanisation pressures. There is also the opportunity to buy land for cane growing, with longer term property development potential. Tongaat-Hulett is able to proactively manage this dynamic process and position itself to optimise value.
Moreland’s established development platform is a key success factor in unlocking the potential of the KwaZulu-Natal north coastal strip, making Durban/Richards Bay one of Southern Africa's fastest growing development corridors. The coordinated and sustainable growth and development strategy balances the enhancement and unlocking of the value of Tongaat-Hulett's prime properties, the imperatives of economic growth, job creation, economic empowerment, social upliftment and the need to conserve the natural environment.
With access to prime land, Moreland has an exciting development pipeline and has the people and core competencies to unlock these developments. It is accelerating its programme of releasing new developments, benefiting from the buoyant property market in recent years and increasing interest from national and international investors.
Moreland is committed to sustainable development practices and places emphasis on finding the appropriate and responsible balance between economic, social and environmental imperatives. It is the first major South African land developer with ISO 14001 accreditation for environmental management systems and has a professional, multi-disciplinary team, supplemented by the effective management of outsourced property consultants and contractors.
Developments include residential, industrial, commercial and resort projects located in the KwaZulu-Natal coastal strip north of the Umgeni River in Durban. Moreland’s premier Southern African land developer brand is supported by its signature development brands such as the Zimbali Coastal Resort, RiverHorse Valley Business Estate, Umhlanga Ridge New Town Centre, La Lucia Ridge Office Estate, Mount Edgecombe Country Club Estates, and Umhlanga and La Lucia Ridge residential developments. In its central La Lucia and Umhlanga Ridge/Mount Edgecombe node, Moreland is developing a balanced community, providing places to live, work, learn, shop, play and pray, all within easy commuting distance. The result is substantial cross-portfolio synergies and the development of Southern Africa's most sought after, internationally benchmarked, quality of life environment.
Moreland has planned and developed almost 1 500 hectares of land since 1990. This has facilitated the construction by its customers of more than 100 office and factory buildings, 5 000 residential units, the 160 000+ square metre Umhlanga Gateway and Crescent shopping centres, the Sibaya Casino and Entertainment World, three hotels (with six more planned or under construction), Umhlanga Hospital, Crawford and Umhlanga Colleges and places of worship. This constitutes total investment by Moreland and its customers of approximately R15 billion and has seen the creation of more than 50 000 much needed new jobs in both the construction and enduser industries. Moreland’s partners in these developments have inter alia included the eThekwini Municipality.
Whilst continuing to realise the considerable future potential remaining in the current nodes, Moreland is focused on enhancing and unlocking the value of 11 600 hectares of Tongaat-Hulett’s prime property situated at Shongweni, Cornubia/Kindlewood at Mount Edgecombe, Umdloti/Sibaya, Tongaat/La Mercy, Tinley Manor and Nonoti/Zinkwazi/Thukela which are under urban and tourism expansion pressure. Once developed by Moreland, it is envisaged that these areas collectively would have an estimated land value in excess of R2 billion. Preliminary plans have been prepared for most of the nodes and, based on the current average annual rate of land take-up for development, subject to development approvals and installation of the necessary bulk services infrastructure, Moreland should be able to introduce developments to the market on a continuous basis for at least the next 25 years.
Tongaat-Hulett has a holistic approach to the achievement of a balanced and integrated economic, social and environmental performance, underpinned by strong corporate governance. It is committed to sustainable business development and realising value for all stakeholders. Momentum continues to build with its broad based black economic empowerment (BEE) and safety, health and environment achievements. Government relationships in the Southern African region continue to grow from strength to strength. Established in the nineteenth century, Tongaat-Hulett employs some 27 000 people in its substantial businesses throughout Southern Africa.