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PARTNERSHIP TO CREATE EXCELLENCE IN AGRICULTURAL EDUCATION

Government through the National Development Plan Vision 2030 (NDP) has emphasised on the importance of building an inclusive and integrated rural economy where local government, rural communities and business create partnerships to drive local economic development and maintain sustainability. Tongaat Hulett believes that business is a significant contributor to the planning and implementation of the NDP.

“The company is cognisant of the instrumental role it can play in creating an environment in which local economic development can be effectively delivered,” said Bongani Gumede, Tongaat Hulett Land Policy Executive.

In 2012, Tongaat Hulett signed a Collaboration Agreement with the Department of Agriculture and Rural Development in KwaZulu-Natal. It focused on the concept of sustainable rural development, with an emphasis on education and training, food security and capacity building.

The Department of Agriculture and uThungulu District Municipality endorsed a partnership between Owen Sitole College of Agriculture and Tongaat Hulett, which aims to transform the College into a Centre of Excellence in sustainable agriculture in accordance with the standards of Agricultural Training Institutions. The partnership looks to harness the potential of agriculture in the surrounding rural areas, focusing on:

Accelerating the establishment of experimentation plots to ensure that the students obtain hands-on experience in various aspects of sugarcane agriculture. This resulted to a 20 hectare plot being allocated specifically towards this project.

Capacity building of the academic staff with the aim to strengthen the College’s capacity to develop and provide quality and relevant educational programmes, practicals and research that will support the local socio-economic agenda. A total of five lecturers received support to attend a five week Senior Certificate Course in Sugarcane Agriculture. In addition, 20 lecturers were supported to attend a week-long course in moderation.

Promoting the crosspollination of information through company-led expert lectures. These lectures help to bridge the gap between what is being taught in lecture halls and its application in the workplace. A total of 142 students have attended these expert lectures.

Awarding 18 bursaries to high potential students from historically disadvantaged backgrounds with a passion for agriculture.

Gumede concluded, “In partnership with government and society Tongaat Hulett strives to create value for all stakeholders in an all inclusive approach to growth and development, by making company business relevant to the complementary interests of local communities. The company will continue to look for opportunities partner with government to foster sustainable development”

RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 MARCH 2015

• Revenue of R16,155 billion (2014: R15,716 billion) +2,8%

• Operating profit of R2,089 billion (2014: R2,374 billion) -12,0%

• Cash flow from Operations of R2,533 billion (2014: R2,173 billion) +16,6%

• Headline earnings of R945 million (2014: R1,106 billion) -14,6%

• Annual Dividend of 380 cents per share (2014: 360 cents per share) +5,6%

Commentary by Peter Staude, CEO of Tongaat Hulett:

The results for the year ended 31 March 2015 were attained in difficult conditions in the sugar industry and with a number of positive achievements by Tongaat Hulett in terms of cost reductions, securing local markets and future cane supplies. The starch operations again delivered a strong performance. Land conversion and development activities continue to unlock substantial value, albeit with operating profit recognised in the year being below that reported last year. Overall, with revenue of more than R16 billion, operating profit of R2,089 billion was earned, reflecting a 12% reduction compared to the previous best of R2,374 billion earned last year.

Operating profit from the various sugar operations totalled R806 million (2014: R908 million). The benefit of cost reductions over the past two years, increased local market sales in Zimbabwe, together with the negative cane valuation effect recorded in the income statement last year not being repeated this year, were offset by a reduction in sugar production volumes and lower prices. Sales volumes included the sale of sugar from previous season stocks in Zimbabwe. Revenue in Mozambique and Zimbabwe was impacted by a further substantial reduction in prices (4,7 US cents per pound, with a total impact of some R390 million) for exports into the EU. World sugar prices declined further, with global stock levels having increased following favourable weather conditions in many sugar production regions of the world. The overall cane valuation impact in the income statement was a positive R96 million this year (driven mainly by the increased areas under cane and new/replanting of roots), compared to a negative R153 million last year (when there was a large negative impact of sugar price reductions). Tongaat Hulett’s sugar production for the year totalled 1,314 million tons compared to 1,424 million tons in the prior year.

The South African sugar operations, including the agriculture, milling, refining and various downstream activities recorded operating profit of R261 million (2014: R340 million). These operations, which previously increased sugar production substantially to 634 000 tons, saw sugar production this season reduce to 541 000 tons due to low rainfall in KwaZulu-Natal (KZN). The impact of the dry conditions has been partially mitigated by 11 554 hectares of new cane developments that were harvested for the first time this year. Local sales were below prior years, with various pressures in the market. Cost reduction actions have limited the cost of goods, services, transport, marketing, salaries and wages to an increase of 4% this year.

The Zimbabwe sugar operations’ operating profit for the year amounted to R386 million (US$35 million) compared to the R330 million (US$33 million) last year. Local market sales volumes recovered significantly, with improved local market protection (tariffs and import licences) implemented earlier in the year and progress being made with distribution and marketing initiatives. The local market remains suppressed by the macro-economic conditions. Sugar production for the year was 445 000 tons (2014: 488 000 tons) as a consequence of no cane being diverted from the independent ethanol plant at Chisumbanje (39 000 tons sugar equivalent in the prior year) and after experiencing the impact of low dam levels for irrigation at the end of 2013, which only recovered in early 2014. The conversion of US dollar profits into Rands on consolidation was positively impacted by exchange rate movements. The cost of bought-in goods and services, salaries and wages was US$11 million lower than the prior year and US$51 million lower than two years ago, after absorbing input price, salary and wage increases.

The Mozambique sugar operations recorded operating profit of R130 million (2014: R168 million). Sugar production for the year increased to 271 000 tons (2014: 249 000 tons). The local market was significantly impacted by additional imports and this necessitated increased exports by local producers at lower prices, with a negative R77 million profit impact on Tongaat Hulett. The cost of goods and services, salaries and wages was lower than two years ago by an amount of Mt165 million, which was the Rand equivalent of some R58 million, after absorbing price increases and substantial salary and wage increases. Sugar production has grown by 15% over the same period.

The Swaziland sugar operations reported operating profit of R29 million (2014: R70 million) as a result of the lower sucrose price as a consequence of a reduction in export prices into the EU. The Swaziland estates produced the raw sugar equivalent of 57 000 tons (2014: 53 000 tons).

The starch operation increased operating profit to R561 million (2014: R482 million), with improvements in the sales mix, co-product recoveries, capacity utilisation and plant efficiencies. Domestic sales volumes grew by 4%, with increases in the coffee/creamer, confectionary and paper making sectors. Working together with customers, success has been achieved in increasing sales of products where demand is growing (locally and exporting into the rest of Africa) and recovering local market from imports. Starch and glucose processing margins were in line with the prior year.

Land conversion and development activities generated profit of R829 million from the sale of 108 developable hectares (2014: profit of R1 080 million from sales of 259 developable hectares). Sales came largely from Cornubia (industrial, business and retail) with an average profit of R8,2 million per developable hectare and Izinga/Kindlewood with average profit of R6,3 million per developable hectare. Profit in Umhlanga Ridge Town Centre exceeded R25 million per developable hectare. The momentum on larger land sales has continued, with a single sale of 19 developable hectares in Izinga and a sale of 27 developable hectares in a new area of Cornubia. The sale of 42 developable hectares of highly valued land in Umhlanga Ridgeside, precincts 1 and 2, which was previously expected to be finalised by the end of March 2015, was not concluded in this financial year. Negotiations with four parties are at various stages, aimed towards reaching an imminent conclusion. The development proposals received for Ridgeside are confirming the value that has previously been attributed to the land.

Cash flow from operations generated R2,533 billion (2014: R2,173 billion), an improvement of some R360 million, with a reduced cash absorption in working capital. Net debt at the end of the year reduced to R3,992 billion with a R419 million positive cash flow after dividend payments.

Total net profit before the deduction of minority interests was R1,047 billion (2014: R1,227 billion) and headline earnings attributable to Tongaat Hulett shareholders amounted to R945 million compared to R1,106 billion last year. A final dividend of 210 cents per share has been declared, bringing the annual dividend to 380 cents per share (2014: 360 cents per share).

LOOKING AHEAD

Tongaat Hulett has substantially enhanced its strategic positioning over the past few years and expects to continue to do so, focusing on multiple strategic thrusts, all with a positive impact on earnings and cash flow.

More Favourable Sugar Markets in Coming Years

The sustainability of farmers in the sugar industry throughout many parts of the world is under significant pressure at the low current world price and taking into account the substantial input cost increases over the past decade. This, together with possible variable weather conditions, is likely to exert downward pressure on global sugar production levels. Global sugar consumption is predicted to continue to grow at a rate of some 2% per annum, with most of this growth coming from low per capita consumption developing countries. There are predictions for sugar demand growth in southern and eastern Africa of some 30% over the next six years. The current surplus global stock levels have also been putting pressure on local and regional prices, as well as the EU market, amplified by the EU market reforms. Tongaat Hulett is steadily shifting export sales from the EU to regional deficit markets. Attention is focused on capturing and growing local market sales. In South Africa, the reference price used to calculate import duty levels does not yet fully provide adequate and appropriate protection for this socio-economically important rural industry. In Mozambique, the imminent substantial increase in the reference price should provide such assistance.

Further Cost Reductions

The sustainable cost reductions achieved over the past two years, while having to absorb input price increases, provide a good base for the next steps in the concerted cost reduction process in the sugar operations. Unit costs of sugar production will benefit substantially from growth in volumes and better yields, as milling costs and many of the agricultural costs per hectare are mostly fixed. The marginal cost of additional sugar production from existing hectares under cane is typically 4 to 6 US cents per pound.

Growing Sugar Production

The crop size in the coming season in South Africa is uncertain and is likely to be at the lowest level for many years, while Zimbabwe and Mozambique are likely to show modest growth in sugar production.

Good progress continues to be made in growing the number of hectares under cane and it is expected that by 2018/19 an additional 22 800 hectares will be harvested, of which 9 074 hectares have already been planted. Agricultural improvement programs aimed at improving yields and sucrose content are proceeding well. Tongaat Hulett has more than 2,1 million tons of sugar milling capacity. Sugar production is targeted to grow from the 1,314 million tons in 2014/15 to some 1,821 million tons in 2018/19, under normal weather conditions. Of this growth, 37% is expected to come from a return to normal weather conditions, 30% from additional hectares under cane and 33% from yield and sugar extraction improvements.

Creating Value For All Stakeholders

Tongaat Hulett continues to focus on value creation for all stakeholders through an all-inclusive approach to growth and development. In KZN there are established collaborations with Provincial and Local authorities in the inextricably linked areas of sugar and cane activities, the development of urban areas (including Cornubia) and maximising the future benefit of renewable energy. The planting of 28 687 hectares in the past four years has created some 7 175 direct jobs in rural areas and the 12 000 hectare project currently underway for cane development and job creation in rural KZN includes a Jobs Fund grant for R150 million allocated over some three years, with the first R50 million already received. In Zimbabwe, Tongaat Hulett, the Government and Local communities are working together on socio-economic initiatives in the south-eastern Lowveld region of the country. One of the key focus areas remains the on-going orderly development of sustainable private sugar cane farmers and at the end of the 2014/15 season, some 857 active indigenous private farmers, farming some 15 880 hectares, employing more than 7 300 people, generated US$70 million in annual revenue. Current initiatives should increase this, by the 2017/18 season, to some 1 023 private farmers supplying more than 1 900 000 tons of cane harvested from 19 270 farmed hectares, with further job creation in rural communities. In Mozambique, 415 000 tons of cane were delivered from 4 370 hectares in the 2014/15 season, supporting 2 018 indigenous private farmers.

Growing Starch and Glucose

The starch and glucose operation, which is the only wet-miller in Sub-Saharan Africa, is well positioned strategically, focused on growing its sales volume, with an enhanced product mix and customer growth prospects into Africa. This is underpinned by improving use of its available capacity and the efficiency of its operations. Dry weather conditions in the new season have resulted in maize prices trading above international levels and the starch operations current exposure to these higher prices comprises approximately 15% of the coming year’s maize requirements.

Momentum in Land Development

The momentum in unlocking value and cash flow from land conversion and development continues, with a portfolio of 8 091 developable hectares in KZN ultimately earmarked for development. The value achieved per hectare of land sold is increasingly reflecting the steadily improving land conversion platform and varies based on usage and location. A progressively larger area is benefitting from planning activities and infrastructural investment at key points. Tongaat Hulett continues to work together with Government, related organisations and key stakeholders in the property industry to capture the synergy of each other’s unique capabilities and to maximise value for all stakeholders. This has a positive impact on economic development, ranging from industrial and commercial to tourism and all levels of residential development and the affordable housing backlog, in the Durban/Northern KZN area and complements the simultaneous rural development taking place around new agricultural cane developments. Over the next 5 years, sales are expected to come primarily out of 3 801 developable hectares in key focus areas comprising the urban expansion north of Durban in the Umhlanga and Cornubia areas, coastal lifestyle areas of Zimbali and Sibaya, business and residential development around the airport, coastal development north of Ballito in Tinley Manor and in the Ntshongweni area west of Durban. Further detail on the land portfolio (including prospective usage, market momentum, development themes, possible timing and values) is available on the www.tongaat.com website.

Financial Prospects for the Year Ahead

The financial results for the year ahead will be influenced by a number of varying dynamics, the magnitude and impact of which are difficult to predict at this stage. It is likely that the sugar operations will remain under pressure, particularly in South Africa. Land development could have a record year. Starch volumes, mix, cost and exchange rate dynamics are likely to counter maize prices being closer to import parity.

The business is in a good position to benefit from multiple actions across all of its well-grounded strategic thrusts, with its footprint in six SADC countries, its ability to process both sugar cane and maize, electricity generation and ethanol opportunities and increased momentum in land conversion.

Peter Staude

Chief Executive Officer

About Tongaat Hulett

Agriculture and agri-processing is a fundamental element of socio-economic development in Africa – particularly in the development of rural communities, farming activities, food security and water management, housing and land conversion to development as urban areas expand. This is also linked to the socio-political dynamics of the region. Tongaat Hulett is well positioned in the nexus of these dynamics.

Tongaat Hulett is an agriculture and agri-processing business, focusing on the complementary feedstocks of sugarcane and maize. Its ongoing activities in agriculture have resulted in the company having a substantial land portfolio within the primary growth corridors of KwaZulu-Natal with strong policy support for conversion at the appropriate time. A core element of Tongaat Hulett’s strategic vision is to maximise the value generated by optimum utilisation of land in the portfolio through its conversion to the most productive land use thereby optimising total real estate investment on the land. Through its sugar and starch operations, Tongaat Hulett produces a range of refined carbohydrate products from sugarcane and maize, with a number of products being interchangeable. Global sweetener markets continue to be dynamic and the business seeks to optimise its various market positions, leveraging off its current base to maximise revenue from these products. The business’s sugar operations are well placed to benefit from evolving dynamics of renewable electricity and ethanol in South Africa, and the Southern African Development Community (SADC) region.

Amanzimnyama

Tongaat, KwaZulu-Natal

25 May 2015

ENDS

Issued by: Tongaat Hulett

Michelle Jean-Louis

Communications Executive

Telephone: 083 386 3846

TONGAAT HULETT PARTNERS WITH LAND OWNERS

Courtesy of: The North Coast Courier 26-12-2104

Imagine you have 370 hectares of land but no way to make it profitable. That was the situation that Makhosikhosi Communal Property Trust was facing until they signed a lease agreement with Tongaat Hulett in 2013. The two organisations celebrated the success of their partnership on Wednesday December 17 at the Makhosikhosi Farm in Upper Tongaat.

View the full article here.

TONGAAT HULETT PARTNERS WITH BEE CONSORTIUM THROUGH THE SALE OF PRIME LAND AS UMHLANGA EXPANDS INTO CORNUBIA

Tongaat Hulett’s 12-hectare, 85,000 m2 first phase of the westward expansion of Umhlanga Ridge into Cornubia, which was launched in late August, has sold out. The sale, which was concluded during September, sold five subdivisions to two purchasers, with 68 000m2 going to a local black-owned company.

Michael Deighton, Tongaat Hulett’s property executive said that this was the company’s first major empowerment deal in a key area in Umhlanga. “We are confident that it is the first of many such empowerment deals,” he said, emphasizing that there were several opportunities in future phases of the expansion of Umhlanga Ridge into Cornubia to further reinforce the organisation’s intention to make space for black developers in this key growth and investment corridor north of eThekwini.

“We believe that this represents up to a R3 billion investment opportunity for these entities who could construct suitable facilities for a range of end users,” Deighton explained.

Speaking on behalf of the BEE consortium, the principal shareholder, Paulos Ngcobo, commented, “We look forward to partnering with Tongaat Hulett to maximise the potential of this prime location. As a catalyst for economic development, Cornubia has the potential to create employment and improve the lives of thousands of people.”

The bulk earthworks contract for the site has already commenced and is expected to be completed in mid-2015. Construction of internal services such as roads, telecommunications, water, sewerage and electricity will follow. Construction of top structures could commence as early as next year with trading likely to begin in 2017. Deighton believes that the value of the investment will be fully unlocked by 2017/8 after the opening of the Cornubia Shopping Centre, which is already under construction by Investec, and the completion of major infrastructure upgrades that include the Flanders Drive interchange on the M41.

The site forms part of the greater Cornubia development, a multi-billion rand collaboration between the eThekwini Municipality and Tongaat Hulett. The first of its kind in KwaZulu-Natal, Cornubia is a fully integrated human settlement. When the residential element of Cornubia is complete, there will be 24 000 homes, accommodating close to 100 000 people, many of whom will work, shop and seek entertainment in the precinct.

In conclusion, Deighton confirmed that, “Tongaat Hulett will work with the empowerment partners to maximise the value of the development. Through the purchase of this property, the new BBBEE entity is expected to evolve into a major player within the commercial property market to the north of the city.”

Amanzimnyama

Tongaat, KwaZulu-Natal

7 November 2014

ENDS

Issued by: Tongaat Hulett

Key contacts

Shirley Williams and Associates – Shirley Williams

Telephone: 031 564 7700 or 083 303 1663

Michelle Jean-Louis – Communications Executive

Telephone: 032 439 4101

INTERNATIONAL LAUNCH OF SIBAYA MEGA PROPERTY

Tongaat Hulett has embarked on a new chapter in its land conversion activities with the appointment of Savills (UK) in association with 5th Avenue and the Pam Golding Properties Group to launch Sibaya Nodes 1 and 5 real estate opportunities to an international market.

While a total of five nodes make up the first phases of the mixed-use Sibaya development, nodes 1 and 5 are being prepared for marketing within the next few months. Node One consists of 50 developable hectares and is located east of the M4 and Sibaya Casino. Node Five comprises 76 developable hectares and is situated immediately north of Node One and bordered by the M4, the M37 to the north and the coastal town of Umdloti to the east.

The appointment of international real estate services provider, Savills, to market the two properties highlights the potential that this unique landholding offers. With global headquarters in London, LSE-listed Savills, together with 5th Avenue and Pam Golding, offers a leading, global platform for the launch of this unique property.

In the fast-growing and well-established northern development corridor of Durban, boasting 180° sea views, a backdrop to extensive natural coastal forests and within easy reach of the King Shaka International Airport, the development possibilities for these two Sibaya nodes include major new resorts in conjunction with lifestyle residential accommodation, upmarket offices and developments suited to the leisure and hospitality industry. Hotels, conference and entertainment facilities, retail and recreation facilities would complete the picture.

“Tongaat Hulett envisages Sibaya as a unique play-live-work lifestyle that is based on bringing together the best of both urban and natural environments. These opportunities lend themselves to organisations possessing global expertise and bold vision to maximise their enormous potential,” notes Mike Deighton, Tongaat Hulett’s executive responsible for property development.

“Durban has seen tremendous expansion in recent years, with the construction of the new international airport and Dube Trade Port being real statements of intent from the Government and Local Authority to attract international investment to the region.” commented Daniel von Barloewen, head of Savills International Development Consultancy

“The Sibaya site provides an opportunity to deliver a new destination for Durban to attract international investors, hotel operators and businesses. Savills are delighted and privileged to be partnering with Tongaat Hulett in helping shape the future of the region and attract global investors,” he said.

“Found in the rapidly-expanding North Coast, a mere 8km north of Umhlanga and 25km from the Durban city centre, these properties are expected to attract significant investment into the region,” states Zamo Gwala of Trade & Investment KwaZulu-Natal, “and TIKZN would be available to provide assistance and resources to any new entrants to the market.”

Mike Deighton concludes, “The Sibaya precinct presents a powerful proposition for a catalytic impact on the region. Situated within an emerging Aerotropolis, there is an appreciation of the vast socio-economic needs within this broader region and Tongaat Hulett believes that new international investment into Sibaya will provide a substantial boost to the development necessary to address these challenges, enhancing the region’s global presence and branding.”

Amanzimnyama

Tongaat, KwaZulu-Natal

7 November 2014

ENDS

Issued by: Tongaat Hulett

Key contacts

Shirley Williams and Associates

Telephone: 031 564 7700 or 083 303 1663

Michelle Jean-Louis -Communications Executive

Telephone: 032 439 4101

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2014

Revenue of R8,073 billion (2013: R7,854 billion) +2,8%
Operating profit of R1,510 billion (2013: R1,381 billion) +9,3%
Operating cash flow of R2,413 billion (2013: R2,402 billion) +0,5%
Headline earnings of R773 million (2013: R663 million) +16,6%
Interim dividend of 170 cents per share (2013: 150 cents per share) +13,3%

Commentary by Peter Staude, CEO of Tongaat Hulett:

The encouraging results for the half-year ended 30 September 2014 were achieved with various improvements in the sugar operations at a time when revenue is being negatively affected by lower international sugar prices. The starch operations delivered a strong performance. Land conversion and development activities continue to unlock substantial value, albeit with operating profit recognised in this half-year being below that reported in the same period last year. Overall, revenue increased by 3% to more than R8 billion and operating profit reflected a 9% increase to exceed R1,5 billion.

The starch operation increased operating profit to R264 million (2013: R232 million). Domestic sales volumes grew 5%, with increases in the coffee/creamer, confectionary and paper making sectors. Starch and glucose processing margins were in line with the prior year as the operation continued to benefit from competitive local maize costs and good co-product recoveries. Improved operational efficiencies and a focus on costs have remained key drivers.

Operating profit from the various sugar operations totalled R864 million (2013: R684 million). As expected, there has been less of an impact of lower cane valuations at this half-year compared to last year. Operating profit before cane valuations was at a similar level to that of the same period last year. Total sugar revenue increased by 3%, while sugar production is below last year – a year in which there was a substantial increase. Sugar producers worldwide that are exposed to the current low world price are under pressure when one considers the substantial input cost increases over the past decade. The various protection measures implemented in each country of operation to improve local market sales volumes are starting to produce some benefits. The business experienced the impact on revenue of lower international prices, particularly for exports into the European Union (EU). At the same time, there has been a continued drive to reduce the costs of sugar production across all the operations, retaining the substantial reductions achieved in the 2013/14 year, including off-crop expenditure, while having to absorb input price increases.

The South African sugar operations, including the agriculture, milling, refining and various downstream activities recorded operating profit of R259 million (2013: R248 million). These operations, which grew sugar production substantially last year to 634 000 tons, are expecting sugar production this season to be between 525 000 tons and 595 000 tons due to low rainfall in KwaZulu-Natal (KZN). Production for the season is still expected to be well above the level of two seasons prior. The impact of the dry conditions has been partially mitigated by 11 554 hectares of new cane developments that are being harvested for the first time this year. The overall increase in the reference price used in the import duty calculation, to protect the local market against unfair import competition, has had a limited impact over the last six months. Local market sales were depressed by an estimated 120 000 tons of sugar that were imported before the adjustment to the reference price in April 2014. The two week industry-wide strike impacted on export sales volumes in the first half of the year. All the available cane is expected to be milled by the end of the season.

The Zimbabwe sugar operations’ operating profit for the half-year amounted to R344 million (US$32 million) compared to the R232 million (US$23 million) in the same period last year. This period has seen higher sales volumes, mainly due to improved local market protection (tariffs and import licences) implemented in April 2014. Export prices into the EU are lower than those earned last year. The negative effect of cane valuations at the half-year was lower than that experienced last year. The movement in the Rand/US dollar exchange rate impacted positively on the conversion of US dollar profits into Rands on consolidation. The Zimbabwe sugar operations are expecting a decrease in sugar production to between 440 000 tons and 475 000 tons for the full year (prior year: 488 000 tons) mainly as a consequence of no cane being diverted from the independent ethanol plant at Chisumbanje (39 000 tons sugar equivalent in the prior year) and after experiencing the impact of low dam levels for irrigation at the end of 2013, which only recovered in early 2014.

The Mozambique sugar operations grew operating profit to R226 million (2013: R151 million). An increase in sugar production is expected for the full year to between 265 000 tons and 280 000 tons (prior year: 249 000 tons). In the half-year, sales volumes increased by 5% while average selling prices have remained constant year on year, with improved local market prices and reductions in export prices to the EU. The movement in the Rand/Metical exchange rate had a positive impact on the consolidation of the Mozambique profits into Rands. The negative effect of cane valuations at the half-year was lower than that experienced last year.

The Swaziland sugar operations reported operating profit of R35 million (2013: R53 million) as a result of the lower sucrose price as a consequence of a reduction in export prices into the EU.

Land conversion and development activities generated operating profit of R435 million (2013: R512 million) from the sale of 49 developable hectares. Sales came largely from Cornubia (industrial, business and retail) with an average profit of R9,0 million per developable hectare. Sales in Izinga/Kindlewood averaged profit of R6,7 million per developable hectare and Umhlanga Ridge Town Centre averaged R29,4 million per developable hectare.

The centrally accounted and consolidation items amounted to R42 million (2013: R37 million). Finance costs amounted to R297 million (2013: R298 million) and were commensurate with the lower borrowing levels and higher interest rates.

Operating cash flow generated was R2,4 billion for the six months. Cash flow from operations after working capital was R576 million, an improvement of some R250 million compared to the same period last year. The cash absorbed in working capital was some R1,8 billion (2013: R2,1 billion) at the half-year, being the middle of the sugar season when sugar stocks and debtor levels are usually higher than at the end of the year. Net debt at the end of September has reduced to R4,9 billion (2013: R5,4 billion).

Headline earnings for the half-year grew by 17% to R773 million (2013: R663 million). An interim dividend of 170 cents per share has been declared (2013: 150 cents per share).

OUTLOOK

The momentum in unlocking value from land conversion and development continues, with 8 150 developable hectares ultimately earmarked for development. Over the next 5 years, sales are expected to come primarily out of 3 661 developable hectares prioritised in key focus areas comprising the urban expansion north of Durban in the Umhlanga and Cornubia areas, coastal lifestyle areas of Zimbali and Sibaya, business and residential development around the airport, coastal development north of Ballito in Tinley Manor and in the Ntshongweni area west of Durban. An increasingly larger area is benefitting from planning activities and infrastructural investment at key points. Tongaat Hulett continues to work together with Government, related organisations and key stakeholders in the property industry to capture the synergy of each other’s unique capabilities and to maximise the value for all stakeholders that can be derived from the region. Global markets will be further assessed through the international launch of Sibaya during the second half of the 2014/15 year. The development of urban residential areas for lower income earners is being accelerated. The potential sale of 42 developable hectares of the prime land in Ridgeside is progressing well. Further sales in the second half of the 2014/15 year are likely to come from Cornubia, Izinga/Kindlewood, Umhlanga Ridge Town Centre and possibly from Sibaya, Compensation and land adjacent to the airport.

The starch operations are well positioned to continue to perform strongly, with sales volume growth underpinned by improved capacity utilisation, enhanced product mix and customer growth prospects into Africa. The business will benefit from the recent large maize crop harvested in South Africa.

Sugar prices remain under pressure with the current low world price. In South Africa, Zimbabwe and Mozambique there is an increasing understanding, up to senior Government levels, of the importance to better protect local markets (especially to secure rural jobs) against imports from other surplus sugar producing countries, confirmed by the upcoming reforms to the EU sugar market. Better import protection would lead to lower exports.

The likely dynamics in the EU market beyond the October 2017 reforms remain uncertain. The average sugar prices earned by the business in 2014/15 for exports into the EU market are expected to be some Euro 25 per ton below those earned in 2013/14, during which year there was a reduction of Euro 155 per ton in the prices achieved.

Tongaat Hulett’s sugar production is targeted to grow by some 400 000 tons over the next 4 years. Agricultural improvement programs are now well entrenched and these programs, together with better weather conditions, should lead to higher cane yields and higher sucrose content in the cane, with the marginal cost of this sugar production being some 30% of the current low world sugar price. In South Africa, a 12 000 hectare project for cane development and job creation in rural KZN is an integral part of the growth and development of cane farming in Tongaat Hulett’s cane supply areas. The financing of this project includes a Jobs Fund grant for R150 million allocated over some three years, with the first R40 million already received.

Encouraging progress is being made towards establishing regulatory frameworks to turn a portion of South Africa’s export sugar into ethanol and to generate more electricity from the fibre component of sugar cane.

Further substantial reductions in the cost of sugar production are targeted for 2015/16, after the consolidation in the current season, which follows the reductions in cost per ton achieved in 2013/14 of 14% in Mozambique, 16% in South Africa and 23% in Zimbabwe.

Tongaat Hulett continues to focus on value creation for all stakeholders through an all-inclusive approach to growth and development. In KZN there are established collaborations with Provincial and Local authorities in the inextricably linked areas of sugar and cane activities (the planting of 24 979 hectares in the previous three years has created some 6 250 direct jobs in rural areas), the development of urban areas (including Cornubia) and maximising the future benefit of renewable energy. In Zimbabwe, Tongaat Hulett, the Government and Local communities are working together on socio-economic initiatives in the south-eastern Lowveld region of the country. One of the key focus areas remains the on-going orderly development of sustainable private sugar cane farmers and at the end of the 2013/14 season, some 813 active indigenous private farmers, farming some 14 000 hectares, employing more than 6 700 people, generated US$58 million in annual revenue. In Mozambique, an estimated 381 000 tons of cane will be delivered from 4 170 hectares in the 2014/15 season, supporting 1 898 indigenous private farmers.

Profits and cash flows for the full year are expected to reflect further growth over the 2013/14 year.

Peter Staude
Chief Executive Officer

About Tongaat Hulett
Tongaat Hulett is an agriculture and agri-processing business, focusing on the complementary feedstocks of sugarcane and maize. Its ongoing activities in agriculture have resulted in the company having a substantial land portfolio. Tongaat Hulett’s unique skill and competence in the conversion of agricultural land to development, is a key driver of the fundamental shift in the pace and value unlock from the company’s land conversion activities and property portfolio. Through its sugar and starch operations, Tongaat Hulett produces a range of refined carbohydrate products from sugarcane and maize, with a number of products being interchangeable. Global sweetener markets continue to be dynamic and the business seeks to optimise its various market positions, leveraging off its current base to maximise revenue from these products. The business’s sugar operations are well placed to benefit from evolving dynamics of renewable electricity and ethanol in South Africa, and the Southern African Development Community (SADC) region.

Amanzimnyama
Tongaat, KwaZulu-Natal

10 November 2014

ENDS

Issued by: Tongaat Hulett
Michelle Jean-Louis
IR and Communication Executive
Telephone: 083 386 3846

TONGAAT HULETT – SOUTH AFRICAN SUGAR OPERATIONS

Rainfallin the South African cane catchment areas has been well below the long-termmean and this topic has received substantial coverage over the past few months.

Giventhe lower rainfall during the season, it is projected that sugar production, bythe Tongaat Hulett South African sugar operations will be below that of the2013/14 year of 634 000 tons, which was a very good sugar production year. The latest estimate shows a drop in sugarproduction ranging between 5 and 17 percent compared to last year’s sugar production.Tongaat Hulett’s 4 South African sugar mills will commence the annual off-cropshut down at the end of the normal milling season.

Thepoor rainfall season, has been mitigated by an additional 11 554 hectaresof newly planted cane which has been harvested for the first time thisyear. While there is a drop in sugarproduction this is still well above the two seasons prior to 2013/14 when sugarproduction levels were 486 000tons.

Therainy season has commenced and good summer rains, accompanied by normalsunshine levels will contribute to yields returning to normal levels for the2015/16 season. The business will benefit from a further 4 738 hectares ofnewly planted cane which will be harvested for the first time.

TheSouth African Sugar industry’s 2014/15 season estimate (in August 2014) oftotal sugar production is 2,222 million tons compared to 2,344 million tons inthe 2013/14 season, a 5 percent drop off in production. Further updates will be madeby the industry in due course. The drop in production will result in reducedexposure of the industry to the World market.

Measuresto protect the local market against unfair import competition remain importantand the overall increase in the reference price used in the import dutycalculation over the last 6 months has been beneficial.

Thefocus in Tongaat Hulett on achieving substantial cost reductions has continued.

Amanzimnyama
Tongaat, KwaZulu-Natal

10 October 2014
ENDS

Issued by: Tongaat Hulett
Michelle Jean-Louis
Communications Executive
Telephone: 032 4394101

AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2014

Revenue of R15,716 billion (2013: R14,373 billion) +9
Operating profit of R2,374 billion (2013: R2,131 billion) +11
Operating cash flow of R2,934 billion (2013: R2,182 billion) +34
Headline earnings of R1,106 billion (2013: R1,067 billion) +4
Headline earnings of R1,106 billion (2013: R1,067 billion) +4

Commentary by Peter Staude, CEO of Tongaat Hulett:

The results for the year ended 31 March 2014 were achieved with significantly increased momentum and value in land conversion and development activities, together with a strong performance from the starch operations, at the same time as the sugar operations’ profit being negatively affected by severe market dynamics impacting revenue and cane valuations, partially off-set by substantial cost reductions and volume growth.

The starch operation grew operating profit to R482 million (2013: R388 million). Starch and glucose processing margins benefitted from local maize that was competitive with international prices, favourable exchange rates and good co-product realisations. Total sales volumes grew by 4 , driven by increased exports and growth in the coffee/creamer sectors which offset declines in other local sectors.

Land conversion activities generated operating profit of R1,080 billion from sales of 259 developable hectares, with a further 8 200 developable hectares still available and earmarked for development. In the past year, 63 developable hectares were sold at an average profit of some R7,6 million per developable hectare in the Umhlanga Ridgeside, Izinga/Kindlewood, Cornubia Industrial and Business areas, as well as a site for a major retail facility that links Cornubia to Umhlanga Ridge. The sale of an entire precinct of 6 developable hectares to a single developer in Umhlanga Ridge Town Centre was concluded that will yield some 1 500 affordable rental homes over time and represented profit of R24 million per developable hectare. Tongaat Hulett continues to work together with Government and related organisations to capture the synergy of each other’s unique capabilities and to maximise the value for all stakeholders that can be derived from the region between Durban and Ballito. The past year has seen two transactions for the sale of 190 developable hectares to Dube TradePort that, while not yet shovel ready, adjoins the international airport and is of strategic importance to the KZN Provincial Government’s medium term growth plans.

Operating profit from the various sugar operations totalled R908 million (2013: R1,4 billion). The world sugar price has been at its lowest level in many years. In the regional markets, substantial local market sales were lost to imports as a result of inadequate protection during this period of world surplus, leading to increased export volumes. Exports from Zimbabwe and Mozambique to the EU averaged some 8 US cents per pound lower than the levels in the last two years. Overall, revenue earned and cane valuations were negatively impacted by some R1,5 billion compared to last year, with the cane valuation charge in the income statement being a non-cash item. The sugar operations’ total operating profit before the impact of cane valuations was R1,061 billion compared to R962 million in the prior year, as the negative impact on revenue of pricing and the mix of local/export sales was more than offset by the benefit of volume growth and cost savings, together with favourable exchange rates.

Tongaat Hulett’s total sugar production grew by 170 000 tons to 1,424 million tons, compared to the low point of 1,006 million tons in 2010/11. South Africa produced 634 000 tons (2013: 486 000 tons), Mozambique 249 000 tons (2013: 235 000 tons), Swaziland 53 000 tons of raw sugar equivalent (2013: 58 000 tons) and Zimbabwe produced 488 000 tons of sugar (2013: 475 000 tons).

The past year has seen considerable increases in wage rates, particularly at the lower levels where the majority of man hours are worked, as well as price increases for bought-in goods and services. Notwithstanding this, significant success has been achieved to reduce the cost of sugar production in respect of goods, services, transport, marketing, salaries and wages. The unit cost of production in South Africa reflected the benefit of volume growth with limited cost increases.

In Zimbabwe, revenue in US dollars was 25 lower than the prior year, as a result of lower local market sales (mainly due to substantially increased imports in the market) with the resultant additional lower priced exports. Cane valuations were impacted by lower prices and the effect of curtailed root replanting as a consequence of the water dynamics during the year – reflecting a US$33 million negative change in the income statement compared to last year. The dams have now recovered, following good rains, to the extent that new root replanting has now resumed. The cost of bought-in goods and services, salaries and wages was US$40 million lower than the prior year. The operating profit from the Zimbabwe sugar operations amounted to US$33 million (R330 million) compared to the last year of US$74 million (R625 million).

Mozambique experienced the same dynamics, with an 11 reduction in Metical (Mt) revenue mainly as a result of lower export prices. There was also a negative cane valuation impact in the income statement – amounting to a change of Mt676 million (equivalent of R229 million) compared to last year. The cost of goods and services, salaries and wages was lower than the prior year by an amount of Mt267 million, which was the Rand equivalent of R91 million. Taking all these factors into account, operating profit from the Mozambique sugar operations reduced to R168 million (2013: R421 million).

The South African sugar operations, including the agriculture, milling, refining and various downstream activities recorded operating profit of R340 million (2013: R308 million). The benefit of substantial growth in sugar production was partially offset by the pressure on revenue of lower local market volumes and net prices as a result of import competition, lower export prices and the reduced benefit of cane valuations compared to the prior year. The 30 volume growth was achieved with the total increase in the cost of goods, services, transport, marketing, salaries and wages being limited to 10 .

The Swaziland sugar cane growing operations reported operating profit of R70 million (2013: R76 million).

The centrally accounted and consolidation items together with lower BEE IFRS 2 charges amounted to R97 million (2013: R53 million). A pension fund recognition benefit in the prior year was not repeated in the current year. Finance costs amounted to R609 million (2013: R560 million) and were commensurate with the borrowing levels earlier in the year.

Operating cash flow improved by R750 million to R2,93 billion (2013: R2,18 billion) before working capital. Operating cash flow exceeded operating profit as the latter includes the non-cash reduction in the fair value of sugar cane. The higher working capital cash absorption in the current period is particularly as a consequence of higher sugar stock levels at year-end in Zimbabwe and increased debtor levels in the South African developments operation following the higher level of land sales. Net cash flow for the year, after dividends, was a positive R300 million, a R480 million improvement over last year. Net debt at the end of the year was R4,32 billion which is lower than the last two years (2013: R4,64 billion and 2012: R4,40 billion).

Total net profit before the deduction of minority interests was R1,227 billion (2013: R1,179 billion) and headline earnings attributable to Tongaat Hulett shareholders amounted to R1,106 billion compared to R1,067 billion last year. A final dividend of 210 cents per share has been declared, bringing the annual dividend to 360 cents per share (2013: 340 cents per share).

OUTLOOK

Earnings are expected to increase in the full year ahead, driven by continuing growth in operating profit and cash flow.

Sugar prices are expected to stabilise, at least. Better import protection should lead to lower exports being necessary. The value of standing cane has undergone a write-down in the 2013/14 year, to reflect the current low sugar prices. As yields increase and the hectares under cane grow, a cane valuation gain would be expected.

The sustainable cost reductions of the past year provide a good base for the next steps in the ongoing cost reduction process and unit costs of sugar production will also continue to benefit from further growth in volumes and better yields, as milling costs and many of the agricultural costs per hectare are mostly fixed.

Tongaat Hulett is in the fortunate position of having more than 700 000 tons per annum of existing unutilised sugar milling capacity (a R13 billion replacement value) and increasingly good electricity and ethanol prospects. The incremental / marginal profit from each extra ton of sugar is attractive. Sugar production is expected to increase from 1,424 million tons in the past year to more than 1,800 million tons over the next four years, with the focus on increasing cane supplies continuing.

A period of unsustainably low international prices has been experienced following two seasons of exceptionally good weather conditions for sugar cane growing globally, high stock levels and low Government controlled ethanol prices in Brazil. The changes in the EU are ongoing, with some fundamentals remaining in place, including duty free access for Mozambique, Zimbabwe and Swaziland. At present, the EU market position seems to have stabilised at the current lower levels, in anticipation of reform in 2017.

Recently instituted measures in Zimbabwe to protect the local market against unfair import competition are expected to yield benefits. South Africa will benefit from the recently increased reference price used in the import duty calculation, particularly if the exchange rate remains at current levels.

The starch operations are well positioned to continue to perform strongly. The latest maize crop estimates are for a larger crop and competitive maize costs are expected.

The current momentum in unlocking value from land conversion and development is expected to continue. Over the next 5 years, sales will come from the urban expansion north of Durban in the Umhlanga and Cornubia areas, coastal lifestyle areas of Zimbali and Sibaya, business and residential development around the airport, coastal development north of Ballito in Tinley Manor and in the Ntshongweni area west of Durban. Sales of between 1 000 and 1 500 developable hectares are expected to be achieved over the 5 year period, based on current economic conditions. Good progress is being made with the targeted sale of 42 developable hectares of some of the remaining prime land in Umhlanga Ridgeside, the area where a net cash profit of R34 million per developable hectare has been achieved. The majority of the land conversion profits for 2014/15 are expected to be reported in the second half of the year while cash flow in the first half of the year will benefit from the land sales concluded towards the end of 2013/14.

Tongaat Hulett’s positive socio-economic profile in the southern African region continues to grow. In KwaZulu-Natal there are established collaborations with Provincial and Local authorities in the inextricably linked areas of sugar and cane activities (the planting of 24 979 hectares in the last three years has created some 6 250 direct jobs in rural areas), the development of urban areas (including Cornubia) and maximising the future benefit of renewable energy. The situation in Zimbabwe is in a constructive phase, with Tongaat Hulett, the Government and local communities working together on socio-economic initiatives in the south-eastern Lowveld region of the country. This was again demonstrated by the proactive response of the authorities to the recent illegal attempt at land invasion. One of the key focus areas remains the orderly development of sustainable private sugar cane farmers. At the end of the 2013/14 season, some 813 active indigenous private farmers, farming on some 14 000 hectares and employing more than 6 700 people, supplied 1 017 000 tons of cane at a cane yield of 74 tons cane per hectare harvested, generating US$58 million in annual revenue. Current initiatives will increase this, by the 2017/18 season, to some 1 022 private farmers supplying more than 1 800 000 tons of cane at a cane yield above 100 tons cane per hectare harvested from 18 880 farmed hectares.

The business is in a good position to benefit from multiple actions taken across a wide front, with its footprint in six SADC countries, its ability to process both sugar cane and maize, renewable energy opportunities and increased momentum in land conversion.

Peter Staude
Chief Executive Officer

About Tongaat Hulett

Tongaat Hulett is an agricultural and agri-processing business which includes integrated components of land management and property development. Through its sugar and starch operations, Tongaat Hulett produces a range of refined carbohydrate products from sugarcane and maize. Renewable energy, in the form of biofuel production and electricity generation, is of increasing importance to the business. The water-food-energy nexus is an evolving dynamic as the world contends with the growing impact of climate change. Tongaat Hulett balances the operational requirement for sugarcane supplies to its cane processing operations with other priority uses of agricultural land and its transition to higher value uses at the appropriate times. The current focus prioritises the business leveraging its asset base in six Southern African Development Community (SADC) countries.

Amanzimnyama
Tongaat, KwaZulu-Natal

26 May 2014

ENDS

Issued by: Tongaat Hulett
Michelle Jean-Louis
Communications Executive
Telephone: 083 386 3846

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013

Revenue of R7,854 billion (2012: R7,398 billion) +6,2
Operating profit of R1,381 billion (2012: R1,290 billion) +7,1
Headline earnings of R663 million (2012: R655 million) +1,2
Interim dividend of 150 cents per share (2012: 150 cents per share)

Commentary by Peter Staude, CEO of Tongaat Hulett:

Revenue increased by 6 to R7,854 billion and operating profit grew by 7 to R1,381 billion for the half-year to September 2013. The results reflect the combination of a number of factors with differing impacts. These six months have seen a record performance from both the land conversion and starch operations. Land conversion and developments generated sales from 174 developable hectares and the starch operation benefitted from competitive maize costs and favourable co-product realisations. The sugar operations are experiencing the pressure of significantly lower international sugar prices, particularly for exports into the European Union, as well as experiencing the impact of increased imports into Southern African markets, impacting adversely on both revenue earned and the valuation of standing cane. The pricing pressures have added impetus to the drive to reduce costs of sugar production, with substantial reductions being achieved in the current season. Unit costs of production are further benefitting from volume growth. Tongaat Hulett’s overall sugar production is continuing to increase this season and is expected to be at the highest level in the past 10 years.

Operating profit in the first half of the year from the various sugar operations totalled R684 million (2012: R967 million). Tongaat Hulett’s total sugar production is well on track to increase from 1,254 million tons (raw sugar equivalent) last year to between 1,366 and 1,408 million tons this season, with the increase this year coming from South Africa. Downward pressure on sugar prices is being experienced internationally. In real terms, the world sugar price has been at its lowest level in many years. In the regional markets, local market sales are being lost to imports as a result of the current low world price, leading to increased export volumes at lower prices.

The South African agriculture, sugar milling and refining operations recorded operating profit of R133 million (2012: R99 million). The benefit of substantially increased sugar production has been offset by the current revenue dynamics and the impact of imports. The various downstream sugar value added activities contributed R115 million (2012: R122 million), with lower local volumes as a result of imports. In total, operating profit from the SA sugar operations including the downstream sugar value added activities amounted to R248 million (2012: R221 million) for the half-year.

With the changing dynamics in the European Union, the price levels that the business is achieving for sales from Mozambique and Zimbabwe into the EU this season, from its multiple commercial arrangements and channels, are averaging some 6 US cents per pound lower than the levels in the last two years. Operating profit from the Mozambique sugar operations reduced to R151 million (2012: R270 million) for the half-year. In Zimbabwe, the first six months have seen lower sales invoicing levels (193 000 tons) than the first half of last year (248 000 tons), which is a result of lower local market sales (mainly due to substantially increased imports in the market) and a timing difference on export shipments. Cane valuations have been impacted by lower prices and the effect of curtailed root replanting as a consequence of the current water dynamics. The operating profit from the Zimbabwe sugar operations for the half-year amounted to R232 million (US$23 million) compared to the same period last year of R435 million (US$53 million).

The Swaziland sugar cane growing operations have reported increased operating profit of R53 million (2012: R41 million) as a result of an improved sucrose price in the current season compared to the lower export pricing levels contracted by the Swaziland industry in the prior year.

The starch operation grew operating profit to R232 million (2012: R147 million). Starch and glucose processing margins were favourably influenced by local maize costs that were close to international prices, favourable exchange rates and good co-product realisations. Total sales volumes grew by 5 , driven by increased exports and growth in the coffee/creamer and alcoholic beverage sectors which offset declines in other local sectors. Manufacturing plant performance has continued to improve.

Land conversion and developments generated profit of R512 million (2012: R246 million). A total of 174 developable hectares was sold in the half-year. A sale to Dube Tradeport was concluded of 151 developable hectares that is not yet shovel ready, near the international airport, north of Durban, generating a profit of R350 million. Tongaat Hulett and Dube Tradeport are working together to capture the synergy of each other’s unique capabilities. Sales in the Umhlanga area featured a transaction with the highest price thus far per square meter, equating to net cash profit of R34 million per developable hectare in Umhlanga Ridgeside. Sales were also concluded in the Umhlanga Ridge Town Centre, Izinga, Kindlewood and Cornubia areas.

The centrally accounted and consolidation items together with lower BEE IFRS2 charges amounted to R47 million (2012: R70 million). Finance costs amounted to R298 million (2012: R281 million) and were commensurate with the borrowing levels.

Operating cash flow improved to R2,4 billion (2012: R1,8 billion) before working capital. Operating cash flow exceeded operating profit as the latter includes the non-cash reduction in the fair value of sugar cane in the half-year to September 2013. The higher working capital cash absorption in the current period is particularly as a consequence of higher sugar stock levels in Zimbabwe and South Africa. The cash absorbed in working capital was some R2,1 billion (2012: R1,4 billion) at the half-year, being the middle of the sugar season when inventories and debtor levels are usually higher than at the end of the year. Capital expenditure has been consciously restricted in the past six months. In total for the half-year, net cash out flow before dividends was R450 million, which is similar to last year. Net debt at the end of September amounted to R5,4 billion (2012: R5,1 billion).

Total net profit before the deduction of minority interests was R764 million (2012: R735 million) for the half-year and headline earnings attributable to Tongaat Hulett shareholders amounted to R663 million compared to R655 million in the same period last year.

An interim dividend of 150 cents per share has been declared (2012: 150 cents per share) in the form of a scrip distribution with a cash alternative.

OUTLOOK

Tongaat Hulett is in a good position to benefit from multiple actions taken across a wide front, with its footprint in six SADC countries, its ability to process both sugar cane and maize, renewable energy opportunities and increased momentum in land conversion.

Sugar Operations

A period of unsustainably low international prices has been experienced following two seasons of exceptionally good weather conditions for sugar cane growing globally and low Government controlled ethanol prices in Brazil. The changes in the EU are on-going, with some fundamentals remaining in place, including duty free access for Mozambique, Zimbabwe and Swaziland. At present, this benefit is being eroded by the EU allowing additional imports at reduced duty and the low world price. The business is focusing a great deal of attention in multiple areas on achieving the best possible outcome in terms of sugar prices, the mix of sugar flow destinations and combatting unfair import competition. The sugar industries in both Mozambique and Zimbabwe are in a receptive engagement with their Governments to restrict imports. In South Africa, the current duty application is to increase the price level below which duty applies. Taking the SA sugar industry as a whole, imports into South Africa in October 2013 were equivalent, on an annualised basis, to the production of approximately three sugar mills. Generally, the most vulnerable to these dynamics are rural communities and emerging farmers.

The drive to reduce costs is gathering momentum. Initially, action is being taken to eliminate, reduce or postpone costs wherever possible, to be followed by a structured review of “quantum”, “value add”, “in house or outsource” and possible longer term procurement arrangements. Cost reduction actions are yielding substantial savings this year. The season’s total costs, excluding off-crop expenditure in the mills, in Zimbabwe are expected to be R290 million (US$29 million) lower than last year and in Mozambique, R49 million lower, after absorbing annual cost increases. In South Africa, with production volumes increasing by some 25 , milling costs alone are expected to be R24 million below last year. Unit costs of sugar production will also continue to benefit from further growth in volumes and better yields, as milling costs and many of the agricultural costs per hectare are mostly fixed.

Tongaat Hulett is in the fortunate position, in a world of sugar consumption growth of 2 per annum, new sugar milling capacity being costly and very few new mills being constructed, to still have more than 700 000 tons per annum of existing unutilised sugar milling capacity, with good electricity and ethanol prospects, after the growth of sugar production of between 9 and 12 expected in the current year and 14 and 9 in the past two years respectively.

The on-going strategy to increase cane supply in South Africa is focused on improving yields and getting more hectares under cane. The greatest potential for additional hectares lies with community / small scale farmers, with support from Government. A co-operation agreement is in place with the Ingonyama Trust, which covers some 2,7 million hectares of land in KwaZulu-Natal. Tongaat Hulett is making good progress to facilitate attractive funding for community / small scale growers. An additional 8 000 hectares of new cane land supplying Tongaat Hulett’s mills are expected to be planted in the current year.

In Zimbabwe, with the low dam levels and the corresponding mitigating actions related to irrigation to protect the substantial current investment in sugar cane roots, cane expansion and root replanting for both private growers and own estates have been curtailed, to be resumed once the dam levels recover. For the first time in many years, the rainfall forecast in the catchment area of the dams is for La Nina (wetter weather pattern) compared to the dry El Nino of the past number of years. Should the water inflow in the coming summer be similar to the lower inflow periods during the last 8 years then it would necessitate a reduction of irrigation to some 50 of normal levels, which would substantially reduce cane yields and sugar production.

Tongaat Hulett’s two operations in Zimbabwe continue to develop their positive socio-economic impact on the country. These operations employ 18 000 people and are in an important recovery, growth and expansion phase, which should create sustainable value for all stakeholders. A central part of this recovery is the development of indigenous private cane farmers. As at the end of the 2012/13 season, at least 670 active indigenous private farmers, farming some 11 200 hectares and employing more than 5 600 people, supplied 850 000 tons of cane which generated US$56 million in annual revenue for them. Zimbabwe, with Tongaat Hulett as a partner, has the potential to further develop indigenous private cane farmers substantially. This potential is linked to how much annual production can be achieved from the existing sugar mills. Based on Tongaat Hulett’s view of its existing mills, a further 600 farmers on 12 700 hectares could supply an additional 1,4 million tons of cane per annum. As part of its on-going objective to economically empower communities around its operations in Zimbabwe, Tongaat Hulett is on a socio-economic upliftment drive to create value for relevant entrepreneurs, by developing sustainable new business enterprises and outsourced services within its value chain, with particular focus on employment creation for the youth.

The drive to optimise revenue earned from sugar cane is one of the most important strategic positioning issues. It is pleasing that a “Request for Information and Registration (RFIR)”, issued by the SA Department of Energy, was completed and submitted in June 2013 to register Tongaat Hulett’s position relating to new electricity generation. Tongaat Hulett now awaits the opportunity to submit a bid for the first 80MW power station following the Ministerial Determination for 800MW issued in December 2012. Planning for the project, including the environmental impact assessments and plant construction contracting processes, is well advanced.

Starch Operation

The starch operation is currently well positioned with the large majority of its maize priced for the current year and margins are expected to remain at levels in line with those achieved in the last year. New season maize prices are trading close to international prices with initial planting intentions being slightly below the prior season. An increasing proportion of local market volumes is being sold on long term contracting principles. Starch and glucose volumes are expected to show growth with local market demand being driven by increased volumes in the coffee/creamer and alcoholic beverage sectors and good growth in export volumes. Continued improvements in manufacturing performance are expected.

Land Conversion Activities

In South Africa, Tongaat Hulett is building on its good progress to date to accelerate land conversion and is targeting a further 8 300 developable hectares (13 100 gross hectares) for development. There are on-going processes on most of the targeted land to enhance its usage and value to all stakeholders. The extent and pace of planning, in collaboration with Government, has increased substantially and infrastructure investment is unfolding rapidly. The next two year period should be rewarding in unlocking value from Tongaat Hulett’s land holdings. Currently, active developments available for sale total 467 developable hectares, which is three times the level that existed in 2005. They should realise net cash profits in excess of R3 billion. A further 1 387 developable hectares are well advanced towards becoming shovel ready. Land conversion to housing development for poorer communities is also gaining momentum.

Demand for the upmarket housing sites in Izinga is high. In the Cornubia industrial area, with 33 developable hectares remaining available for sale, interest is high and offers were turned down in the first half of the year as negotiations are continuing. At the same time, the Cornubia retail / town centre sites are rapidly evolving as an extension of the Umhlanga / Gateway area. In Umhlanga, Ridgeside – precinct 2 and the unsold remainder of precinct 1 – comprising 42 developable hectares (485 000 square meters of bulk) is arguably the best real estate opportunity in South Africa at present. The above ground developments in this Ridgeside area are expected to exceed R12 billion over a period of time. Over the next few weeks, a wide spread campaign will elicit expressions of interest from all prospective purchasers of this 42 hectare piece of real estate. Interest in land that is not yet shovel ready is at an all-time high and is continuing to increase.

Peter Staude

Chief Executive Officer

About Tongaat Hulett

Tongaat Hulett is an agricultural and agri-processing business which includes integrated components of land management and property development. Through its sugar and starch operations, Tongaat Hulett produces a range of refined carbohydrate products from sugar cane and maize. Renewable energy, in the form of biofuel production and electricity generation, is of increasing importance to the business. The water-food-energy nexus is an evolving dynamic as the world contends with the growing impact of climate change. Tongaat Hulett balances the operational requirement for sugar cane supplies to its cane processing operations with other priority uses of agricultural land and its transition to higher value uses at the appropriate times. The current focus prioritises the business leveraging its asset base in six Southern African Development Community (SADC) countries. Tongaat Hulett is well placed to capitalise on the company’s unconstrained access to sugar markets and its independent position and established business platform and size.

Amanzimnyama

Tongaat, KwaZulu-Natal

11 November 2013

ENDS

Issued by: Tongaat Hulett

Michelle Jean-Louis

IR and Communication Executive

Telephone: 083 386 3846

GOOD HOUSEKEEPING MAGAZINE CELEBRITY BAKE STARS EVENT

Huletts was proud to be a sponsor of the Good Housekeeping Celebrity Bake Star reader event held in Cape Town on the 20th of August. Guests enjoyed a morning of great company and a selection of both local and international celebrities’’ favourite baked recipes.

Two well known local celebrity chefs delighted guests with hands on demonstrations. Jenny Morris baked her old time favourite carrot cake and also shared baking tips while making her recipe. Roxanne Floquet shared her tips and tricks on how to decorate cakes and biscuits using Huletts Icing Sugar.

During the event, Huletts demonstrated its extensive product offering by showcasing delectable high tea cakes and treats, and a beautiful three-tier cake, for all the guests to enjoy.