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Zambia Sugar FY 2014 financial results presentation

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Zambia Sugar Plc Listed on the Lusaka Stock Exchange has released its Full Year Results. Check out …

Zambia Sugar Plc Listed on the Lusaka Stock Exchange has released its Full Year Results. Check out
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  • 1. FINANCIAL RESULTS 31 MARCH 2014
  • 2. 01 Group Managing Director, Gavin Dalgleish 2 High-value, niche-market downstream products Illovo operating footprint Countries where Illovo markets sugar Invest in the African growth story Maximise existing asset utilisation & productivity Reduce costs & improve margins Build on growing demand for sugar in Africa 3 GROUP OVERVIEW & STRATEGY Africa’s leading sugar & downstream producer 16 operations across 6 African countries Sustainability focus – both social & environment Strong domestic, regional & preferential sugar markets Downstream investment to diversify revenue Strong financial position to lever growth 12 972 permanent & 22 183 seasonal employees
  • 3. 02 Financial Revenue increases 20% – R13 190m Headline earnings per share – 194 cents (Ï 4.3%) Operating profit in line with prior year under challenging market conditions – R1 887m Strong cash generation & balance sheet Total distribution per share – 97 cents (Ï 2.1%) Operating margin decreases from 17.2% to 14.3% Unfavourable fair value adjustment to growing cane Return on net assets reduces from 19.6% to 16.1% Physical Sugar production increases to 1 830kt (Ï 4.8%) Record production from current installed capacity Excellent growing conditions & cane supply initiatives increase South Africa’s production 17% Swaziland factory achieves 250kt production record Record ethanol production, increased furfural production & higher electricity co-generation Disappointing factory performance & unseasonably wet weather reduces Tanzania’s sugar production Zambia, Malawi & Mozambique cane yields decline Markets Sales volumes increase to 1 832kt (Ï 8.2%) Domestic sales volumes grow in Malawi & Zambia Strong demand in EU for Malawi’s speciality sugars Improved pricing & weaker exchange rates benefit downstream business EU pricing falls sharply as major EU producers position themselves for 2017 abolition of quotas Low-cost, duty-free sugar imports impact domestic markets in Tanzania & South Africa Growth South Africa’s distribution centre providing meaningful storage & logistics benefits Potable alcohol distillery in Tanzania successfully commissioned in August 2013 Continuous improvement programme to increase efficiency & reduce cost base Opportunities for footprint expansion to be evaluated Diversify revenue through investment in downstream Potential for ethanol distillery, refined sugar expansion & furfural expansions progressing SALIENT FEATURES 4 • Achieved 7th position in the 2013 EY Excellence in Integrated Reporting Awards • Included for the 7th consecutive year in the JSE’s Socially Responsible Investment (SRI) Index • Among the six companies who met JSE’s 2013 SRI Index “Best Performer” threshold • Reports in terms of the Global Reporting Initiative (GRI) Sustainability Reporting Framework • “A” rating for governance from GES Invest (an international firm of investment advisors) GovernanceAdvocacy • International Trade Administration Commission (ITAC) in South Africa increased the dollar-based reference price for imported sugar from $358 / ton to $556 / ton with effect from 4 April 2014, resulting in a tariff equivalent of R1 320 / ton • Government of Tanzania committed to support the sugar industry & curb imported sugar • Ensure domestic markets continue to be protected against dumped world sugars • Establish preferential access into the EU for South Africa • Work towards establishing a preferential market for African sugar in Africa • Collaborate with all stakeholders to address the complex issue of sugar consumption & obesity GOVERNANCE & ADVOCACY 5
  • 4. 03 9 9 9 9 Kilombero (Agriculture) Dwangwa (Agriculture) Maragra (Factory) Eston (Agriculture) Eston (Factory) Eston (Syrup Plant) Umzimkulu (Agriculture) Umzimkulu (Factory) Merebank Glendale Health & Safety • Disabling Injury Frequency Rate (DIFR) reduces 31% across the group • “Target Zero” campaign in South Africa improves DIFR by 71% • Steady reduction in Total Injury Frequency Rate • Regrettably, 5 fatalities in the past year (3 Illovo employees & 2 external contractors) • Full review of health & safety systems in Malawi • The following operations achieved ZERO disabling injuries for greater than 12 months: • Environmental strategy developed & approved • Disclosure under the Carbon Disclosure Protocol • Renewable energy usage increases to 90% of total energy consumption • Implementing water footprint strategy to optimise use of water • Revised Green House Gas Protocol adopted to increase consistency & transparency of reporting HEALTH, SAFETY & ENVIRONMENT Environment 6 Group Finance Director, Mohammed Abdool-Samad FINANCIAL OVERVIEW 7
  • 5. 04 Translation Rates (Average) 2012/13 2013/14 Change (%) Profit Impact Rand / US Dollar 8.51 10.12 19% © Rand / Euro 10.97 13.58 24% © Zambia Kwacha / Rand 0.609 0.544 11% © Malawi Kwacha / Rand 34.53 37.52 (9%) ª Tanzania Shilling / Rand 187.48 160.41 14% © Mozambique Metical / Rand 3.42 3.01 12% © Malawi Kwacha continues to devalue but is considerably more stable than prior year Impact of translation on profits in 2013/14 is largely neutral GROUP PARAMETERS 8 The following exchange rates were used to translate the Group results: 156 Headline Earnings Per Share (cents) 2012/13 vs 2013/14 (% change) R’ million 2012/13 Restated 2013/14 Actual Revenue 10 981 13 190 Operating profit 1 887 1 887 Net financing costs 295 336 Profit before tax 1 604 1 605 Headline earnings 856 894 Analysis 2012/13 Restated 2013/14 Actual Operating margin (%) 17.2% 14.3% Interest cover (times) 6.4 5.6 Effective tax rate (%) 31.7% 31.3% EPS (cents) 186.9 199.0 HEPS (cents) 186.0 194.0 EBITDA 2 149 2 201 Return On Net Assets (%) 19.6% 16.1% Debt : Equity 27 28 Gearing (%) 21% 22% 194.0186.0 0 50 100 150 200 +4.3% 2013/142012/13 -14 20 -20 -10 0 10 20 30 0 Revenue Profit before tax Operating profit 0 Finance costs GROUP KEY FINANCIAL METRICS 9
  • 6. 05 8% 48%25% 8% 6% 5% Geographic Segment 2012/13 Restated R’m 2013/14 Actual R’m Operating Profit 1 887 1 887 899 48% 762 39% 479 25% 558 30% 150 8% 266 14% 156 8% 257 14% 109 6% 33 2% 94 5% 11 1% 14% 2013/14 43% 2012/13 Business Segment 2012/13 Restated R’m 2013/14 Actual R’m Operating Profit 1 887 1 887 761 40% 389 21% 1 035 55% 1 320 70% 91 5% 178 9% 10%6% 34% Mozambique Tanzania Swaziland Zambia Malawi South Africa %%%%%%%%%%% 666%%%%%%%% 55% 5% 40% Downstream & Co-gen Cane Sugar 10% 70% 9% 21% 1111111111 %%%%14444%%%%%%%%%%%%%%%%%%%%11111111 14% 39%30% 14% 1% 2% OPERATING PROFIT BY SEGMENT 10 1 887 1 887 47 643 304 909 83 2 1 400 1 700 2 000 2 300 2 600 2 900 March2013 (Final) Volume Price Costs FairValue Movements Downstream& Co-generation TranslationGain March2014 (Final) Favourable domestic prices in Malawi & Zambia, good export pricing in Swaziland & weaker exchange rates benefitting exports offset pressure on pricing from low-cost imports in South Africa & Tanzania. Volume growth predominantly in low margin world market (149 kt). R’millions Malawi Kwacha relatively more stable than prior year & lower EU pricing forecast. Higher furfural & ethanol production. Benefit of weaker exchange rate. GROUP OPERATING PROFIT BRIDGE 11 High inflation in Malawi & above inflation wage demands across the group. Material savings realised from continuous improvement programme, most notably the benefit of the new distribution warehouse.
  • 7. 06 Significant improvement in the conversion of operating profit into cash 2012/13 Restated R’m 2013/14 Actual R’m Operating profit 1 887 1 887 Material items 5 24 Operating income 1 892 1 911 Add back: Depreciation & amortisation 262 314 Change in fair value of cane roots (195) (198) Change in fair value of growing cane (391) (68) Gain on disposal of assets & investments (7) (8) Insurance claim - (19) Amortisation of deferred income (9) (10) Cash operating profit 1 552 1 922 Cash conversion ratio 82% 102% CASH GENERATION & PROFITABILITY 12 Growing Cane Growing cane represents the estimated sucrose content valued at the estimated sucrose price for the 2014/15 season, adjusted for the cost of harvesting & transporting the cane to the mill. Cane roots represents the cost of replanting the area under cane in each year, escalated for the impact of inflation & adjusted for the expected remaining life of the roots. Unfavourable fair value movement as devaluation of Malawi Kwacha stabilises relative to prior year, depreciating 29% against the US Dollar (2012/13: 83%) 2012/13 Actual R’m 2013/14 Actual R’m Change R’m South Africa 14 4 (10) Malawi 305 77 (228) Zambia 56 24 (32) Swaziland 3 (6) (9) Tanzania 4 (16) (20) Mozambique 9 (15) (24) Total 391 68 (323) Cane Roots 2012/13 Actual R’m 2013/14 Actual R’m Change R’m South Africa 11 16 5 Malawi 131 141 10 Zambia (6) 1 7 Swaziland 13 9 (4) Tanzania 31 12 (19) Mozambique 15 19 4 Total 195 198 3 FAIR VALUE MOVEMENTS 13
  • 8. 07 Results - as reported Devaluation of the Malawi Kwacha has significantly impacted growing cane & profits Results - excluding fair value of growing cane FAIR VALUE MOVEMENTS – IMPACT ON PROFITS 1,342 1,8871,887 0 1,000 2,000 2013/142011/12 2012/13 Operating Profit (R’ million) 41% 0% 14.3% 17.2% 14.8% 0 10 20 2013/142012/132011/12 12.4% 2.9% Operating Margin (%) 194.0186.0 132.6 0 100 200 2012/13 2013/142011/12 Headline Earnings Per Share (cents) 40% 14% 1,818 1,496 1,198 0 1,000 2,000 2013/142011/12 2012/13 Operating Profit (R’ million) 25% 13.8%13.6%13.2% 0 10 20 2013/142012/132011/12 10.2% Operating Margin (%) 185.3 137.3 115.8 0 100 200 2013/142011/12 2012/13 Headline Earnings Per Share (cents) 22% 1 0.4% 35% 19% 14 R ’m Opening net debt – March 2013 (1 873) Operating cash flows 840 Cash operating profit 1 922 Working capital 105 Inventory (41) Receivables 119 Payables 27 Interest paid (331) Taxation paid (299) Shareholder distributions (557) Investment cash flows (705) Expansion capital (379) Replacement capital (343) Other movements 17 Issue of shares 1 Translation loss (349) Closing net debt – March 2014 (2 086) Gearing (%) 21% 22% Improved working capital management despite higher stocks in Tanzania due to competition from imported sugar h 201 Potable alcohol distillery (Tanzania), packed sugar warehouse (Malawi) & Eston packing station (South Africa) 2,086 1,873 March 2014March 2013 NET DEBT RECONCILIATION Net Debt Balances (R’ million) 15
  • 9. 08 17 34 22 336 295 240 260 280 300 320 340 March 2014 TranslationGroupMozambique 9 7 TanzaniaSouth Africa 5 Malawi 4 Zambia 5 SwazilandMarch 2013 1. Swaziland & Mozambique Interest savings from the prior year restructuring of external debt with internal funds 2. Zambia Interest savings from the current year restructuring of external with internal funds. The full-year benefit will be realised next year 3. Malawi Impact of higher interest rates was partially offset by benefit of export financing initiatives 4. South Africa Higher average sugar stocks with slower sales due to competition from imported sugar R‘million FINANCE COSTS ANALYSIS 16 1 3 4 1 2 5 6 7 5. Tanzania Finance costs ceased being capitalised on completion of the potable alcohol distillery Higher average sugar stocks with slower sales due to competition from imported sugar 6. Group Full-year impact of funding the new distribution warehouse 7. Translation Translation losses arise as a stronger Zambia Kwacha & Tanzania Shilling offsets the benefit of a stronger US Dollar and a weaker Malawi Kwacha 64 72 12 2723 104104 15 69 13316 77 0 30 60 90 120 150 180 210 240 96 Mozambique 27 GroupTanzania 139 6 Swaziland 23 Zambia 80 Malawi 176 South Africa 181 Ongoing Expansion R‘million CAPITAL CASH FLOW Capital expenditure on fixed assets, intangible assets & cane developments totalled R722 million 17 Eston packing station & Noodsberg boiler upgrade Nchalo packed sugar warehouse Diversification project evaluation Potable alcohol distillery Final central warehouse costs & project evaluations
  • 10. 09 MARKET UPDATE 18 GLOBAL & AFRICAN SUGAR DEMAND Annual sugar consumption 2000-2030 (million tons) 194 2010 169 2005 148 2000 130 2,3% 2030 257 2025 237 2020 217 2015 Rest of WorldAfrica 24 18 12 4 6 2020 Demand Per Capita Growth 2 Population Growth 2012 Demand Increase2000 Demand Sub Saharan Africa sugar demand growth to 2020 (million tons) 19 Global sugar demand • High growth in emerging markets but demand stagnation in western countries • Excludes any non-sugar demand for cane • Forecast demand: African sugar demand • Demand growth is real: 3.5% CAGR since 2000 • Young continent (average age 18) but a low life expectancy (55 years) • Good growth potential for agriculture development: 27% of world’s total arable land & 60% of uncultivated arable land is in Africa 2013 – 2030 2025 – 2030 Global 2.0% 1.6% Africa 3.3% 3.0% Source: Czanikow
  • 11. 10 0 5 10 15 20 25 30 35 40 No11.RawSugarPrice–UScents/lb No. 11 - Raw Sugar US cents/lb • World market prices continue to trend upwards over time as sugar demand increases • Prices are cyclical driven by changing supply and demand balances Source: AB Sugar Global deficit period & high prices encouraged additional production (both through investment in existing assets & new builds). Weaker Brazilian Real incentivising exports & expectations of a fourth consecutive year of a world sugar surplus have driven prices lower. • Any pricing support of a lower crop in Brazil (drought & threat of El Niño) is limited by a higher crop in Thailand (Government pressure to diversify away from rice) & an Indian sugar export subsidy • The potential for a shift from sugar to ethanol production may support higher pricing later in the year January Average: US15.4 cents / lb February Average: US16.2 cents / lb March Average: US17.5 cents / lb WORLD SUGAR MARKET UPDATE 20 • In the past, lower imports from preferential countries resulted in sugar shortages & high prices in EU • Additional measures were adopted by EU Commission to improve uncomfortably low stock levels • Prices under pressure as additional sources of supply available to refiners • Refined sugar prices, which peaked at €738 / ton in January 2013, were €604 / ton in February 2014 • Major EU sugar producers position themselves for the removal of production quotas in 2017 by competing in new markets • Additional competition in Illovo’s specific markets expected to further reduce pricing EUROPEAN SUGAR MARKET UPDATE 21 Source: EU Commission € 622 € 551 € 486 € 633 € 738 € 709 € 627 € 604 € 400 € 500 € 600 € 700 € 800 Jul 06 Aug 07 Sep 08 Oct 09 Nov 10 Dec 11 Jan 13 Feb 14 Average ex-works pricing for bulk refined sugar reported in EU
  • 12. 11 Current regime Until Sept 2015 Post regime Oct 2017 onwards Regime extension Additional 2 years • Preferential access varies: LDC unlimited, ACP with signed EPA & no SA quota • Supply agreements of value compared to spot • EU pricing likely to remain stable and relatively high • Increasing competition from new FTAs • ACP/LDC access unchanged, hopeful of SA quota • EU buyers uncertain of demand so no existing supply agreements • SSA able to export sugar to EU • EU pricing expected to follow world market • Competition to further increase • EU structural deficit expected to diminish • Forecasting large domestic EU sugar stock at change over • SSA sugar surplus to continue with exports going to best returning markets • EU pricing expected to drop along with volumes Forecast supply from SSA to EU (kt) 18/19 19/2017/1816/1715/1614/1513/14 Source: Illovo Key: • ACP African, Caribbean & Pacific • EPA Economic Partnership Agreements • EU European Union • FTA Free Trade Agreements • LDC Least Developed Countries • SA South Africa • SSA Sub Sahara Africa DEMAND IMPLICATIONS OF EUROPEAN CHANGES 22 5% 8% ‘000 tons 2012/13 Actual 2013/14 Actual 1 072 63% 1 057 58% 395 23% 414 23% 16 1% 10 - 150 9% 142 8% 60 4% 209 11% Total Sales 1 693 1 832 • South Africa’s domestic sales decrease due to an unprecedented level of imports, but strong industrial customer base offers some non-tariff protection • Low-cost / duty-free imports in Tanzania negatively impact pricing but sales volumes increase to generate cash flow • Regional sales decrease following lower production in Malawi & Zambia • Demand for premium speciality sugars in EU grows • Continued focus on supplying increasing domestic & regional markets • Adjust export product mix to enhance value (e.g. specialty sugars) • Develop new markets for changes to the EU sugar regime post 2017 World Regional USA EU Domestic 2020 Sales Volume WorldRegionalUSAEU (Specials) EU (Bulk) Domestic2014 Sales Volume SUGAR SALES & MARKETS 23 Focus on supplying domestic, regional & speciality sugar markets Segment Mix OutlookSegment Mix Developments tons
  • 13. 12 Domestic Markets ª 15kt • Unprecedented level of imports reduce South Africa’s domestic volumes • Growth in domestic volumes in Zambia, Swaziland & Malawi • Strong share of the domestic markets in which we operate • Highest ex-mill returns • Imports reduce prices in Tanzania • Economic growth in Mozambique did not translate to higher domestic sales • Focus on cost to serve to streamline logistic costs Regional Markets ª 8kt • Volumes decline due to lower production in Zambia & Malawi • Geographic advantage to supply customer demand • Pricing & volumes held- up well during the year despite bearish market conditions • Abundant low-cost world sugar begins to depress pricing • Benefit of weaker currencies against the US$ • Markets supplied: • Democratic Republic of Congo • Great Lakes Area • Kenya • Zimbabwe Preferential Markets © 13kt • Access to EU & US markets • Increased EU bulk sales to meet contracted volumes • Demand for premium speciality sugars in EU increases with record volumes being supplied • EU pricing falls sharply as major EU producers position themselves for 2017 abolition of quotas • Focus on growing niche speciality sugar markets to diversify away from bulk sugar sales World Markets © 149kt • Only South Africa has direct exposure to world market • Competition from imports in South Africa results in reallocation of domestic-designated sugar to the world market • Exposure increases to 11% of total sales volumes • Pricing by SASA with input from Illovo • Volatility risk • Average pricing achieved US18.1 cents/lb (2013: US 22.9 cents/lb) ILLOVO SUGAR MARKETS 24 OPERATIONAL REVIEWOPERATIONAL REVIEW 25
  • 14. 13 GROUP SUGAR PRODUCTION BRIDGE 1 746 078 1 830 356 10 481 10 599 13 242 2 580 102 630 18 550 1 700 000 1 750 000 1 800 000 1 850 000 March 2013 (Actual) South Africa Malawi Zambia Swaziland Tanzania Mozambique March 2014 (Actual) TonsSugar Variance + 102 630 - 10 481 - 10 599 + 18 550 - 13 242 - 2 580 + 84 278 Cane + 89 769 - 6 144 - 11 578 + 6 852 - 11 032 - 5 084 + 62 783 Sucrose + 14 966 - 383 - 2 103 + 4 271 + 170 + 34 + 16 955 Recovery - 2 105 - 3 954 + 3 082 +7 427 - 2 380 + 2 470 + 4 540 26 Group sugar production increases by 84 278 tons 2011/12 Actual 2012/13 Actual 2013/14 Actual Own Cane (tons) 242 184 311 108 371 230 Yield – Own Cane (tons/hectare) 58.2 71.0 71.8 Sucrose Content – Own Cane (%) 12.19 13.64 13.97 Tons cane per hour –TCH * 915 1 049 1 170 Capacity Utilisation (%) * 72.5 65.8 74.5 Sugar Production (tons) 440 642 595 711 698 341 Excellent growing conditions, the benefit of cane supply initiatives & efficient factory performance increase sugar production Downstream Production Furfural (tons) 19 220 17 593 19 695 Furfuryl alcohol (tons) 10 989 10 100 9 338 Alcohol (kl) 49 673 50 105 50 555 SOUTH AFRICA 27 * Umzimkulu mill closed for the season
  • 15. 14 87% 10% 1% 2% Sugar Production (‘000 tons) Sugar Sales (‘000 tons) By market – 2012/13 441 596 698 2011/12 2013/142012/13 74 147117 113 147 2013/14 313 19 2012/13 * 222 35 2011/12 * 108 -34 25 DownstreamSugarCane Regional USA World Local • Excellent growing conditions & benefit of cane supply initiatives • Eston, Sezela & Umzimkulu factories performed well • Low-cost imported sugar results in high volumes of domestic- designated sugar being sold onto the low-margin world market • Strong industrial customer base offers some non-tariff protection • International Trade Administration Commission (ITAC) increased import protection in April 2014 • Storage & logistic savings realised from new distribution warehouse • Downstream operations performed exceptionally well with record ethanol production, higher furfural production & improved pricing SOUTH AFRICA 67% 30% 2% 1% By market – 2013/14 Industry share 30.4% Industry share 29.7% Operating Profit # (R ‘millions) Overview 28 * Restated # Excludes the allocation of Group costs Margin: 4% 5% 7% 2011/12 Actual 2012/13 Actual 2013/14 Actual Own Cane (tons) 2 065 262 2 102 002 1 984 382 Yield – Own Cane (tons/hectare) 105.2 104.2 101.4 Sucrose Content – Own Cane (%) 13.90 14.20 14.22 Tons cane per hour –TCH 500 502 485 Capacity Utilisation (%) 78.6 83.2 76.7 Sugar Production (tons) 283 487 299 494 289 013 Heavy rainfall & lower cane yields at Nchalo offsets good factory performance at Dwangwa, reducing overall sugar production MALAWI 29
  • 16. 15 58% 10% 1% 31% 55% 13% 2% 30% Sugar Production (‘000 tons) Sugar Sales (‘000 tons) By market – 2012/13 283 299 289 2012/132011/12 2013/14 7.2 13.6 17.04.8 18.9 11.6 2013/14 28.6 2012/13 32.5 2011/12 12.0 Cane Sugar • Tough economic climate with devaluing currency & high inflation • Yields at Nchalo decline as power interruptions limit irrigation • Heavy rainfall contributes to poor Nchalo factory performance • Dwangwa factory achieves record sugar production • Domestic price increases offset inflationary pressure on costs • Domestic market growth & strong demand in EU & USA speciality sugar markets improves price realisations • Unfavourable fair value movement arises from the stability of the Malawi Kwacha relative to prior year & lower EU pricing forecast MALAWI By market – 2013/14 Operating Profit # (MWK ‘billions) Overview 30 USA Regional EU Local # Excludes the allocation of Group costs Margin: 33% 51% 33% 2011/12 Actual 2012/13 Actual 2013/14 Actual Own Cane (tons) 1 886 926 1 942 435 1 863 300 Yield – Own Cane (tons/hectare) 112.8 122.0 111.2 Sucrose Content – Own Cane (%) 14.16 14.67 14.61 Tons cane per hour –TCH 645 646 628 Capacity Utilisation (%) 89.0 85.1 87.7 Sugar Production (tons) 373 637 403 867 393 268 Prior-season turbo alternator failure & heavy rainfall combine to reduce crop, negating good factory performance ZAMBIA 31
  • 17. 16 41% 25% 34% 41% 27% 32% Sugar Production (‘000 tons) Sugar Sales (‘000 tons) By market – 2012/13 374 404 393 2013/142012/132011/12 259 231 241 78 6947 2013/14 310 2012/13 309 2011/12 306 SugarCane • Yields decline as the prior-season turbo alternator failure limits irrigation – the loss was covered substantially by insurance • Unusually heavy rainfall in January 2013 further reduces yields • Good factory performance with record refined sugar production • Favourable economic fundamentals continue to drive growth in domestic demand • Abundant low-cost world sugar has begun to impact the regional market, particularly in the Great Lakes Area (GLA) • Unfavourable change in sales mix as sales to the EU increase to meet contractual commitments, while EU prices decline • Export proceeds benefit from a weaker exchange rate ZAMBIA By market – 2013/14 Operating Profit # (ZMW ‘millions) Overview 32 Regional EU Local # Excludes the allocation of Group costs Margin: 21% 20% 17% 2011/12 Actual 2012/13 Actual 2013/14 Actual Own Cane (tons) 812 846 861 307 780 115 Yield – Own Cane (tons/hectare) 105.4 103.9 95.9 Sucrose Content – Own Cane (%) 13.45 13.27 13.50 Tons cane per hour –TCH 432 434 467 Capacity Utilisation (%) 67.9 68.5 78.5 Sugar Production (tons) 224 175 232 723 251 273 Expanded factory exceeds 250 000 ton sugar production milestone despite a decline in cane yields SWAZILAND 33 Co-generation Production GWHrs generated (external) 37.8 40.5 48.4
  • 18. 17 52% 48%48% 1% 51% Sugar Production (‘000 tons) Sugar Sales (‘000 tons) By market – 2012/13 224 233 251 2013/142012/132011/12 78 181 71 77 60 2011/12 91 25 -5 2013/14 268 27 2012/13 177 22 Co-genSugarCane • Lower Usuthu Smallholder Irrigation Project (LUSIP) development increases cane deliveries from growers • Cane yields decline as the extended 2012/13 season lowers the average age of cane • Good factory performance in line with expanded capacity • Domestic demand for sugar increases local sales, but pricing affected by presence of imports in the SACU market • Export pricing benefitted from a weaker exchange rate • Co-generation contributed to earnings with additional power exports to the national grid SWAZILAND By market – 2013/14 Operating Profit # (SZL ‘millions) Overview 34 Regional EU Local # Excludes the allocation of Group costs Margin: 9% 13% 17% 2011/12 Actual 2012/13 Actual 2013/14 Actual Own Cane (tons) 660 179 725 671 677 023 Yield – Own Cane (tons/hectare) 81.7 78.3 83.7 Sucrose Content – Own Cane (%) 11.94 12.18 12.14 Tons cane per hour –TCH 244 253 255 Capacity Utilisation (%) 78.0 85.7 77.2 Sugar Production (tons) 113 100 129 737 116 495 Potable alcohol distillery successfully commissioned, but disappointing factory performance & unseasonably wet weather reduces sugar production TANZANIA 35 Downstream Production Alcohol (kl) n/a n/a 5 400
  • 19. 18 86% 1% 13% 85% 1% 14% Sugar Production (‘000 tons) Sugar Sales (‘000 tons) By market – 2012/13 113 130 116 2013/142012/132011/12 -17 25 19 29 2013/14 3 1 2012/13 20 -5 2011/12 32 3 DownstreamSugarCane • Unseasonal rainfall & poor factory performance reduces sugar production • Significant tonnage of cane carried over into 2014/15 season • High volumes of low-cost imported sugar, resulting in an oversupply in the domestic market • Domestic pricing under severe pressure with sugar sold below prior year levels to generate cash flow • Tight control over expenditure & focus on delivering benefits from continuous improvement initiatives • Potable alcohol distillery successfully commissioned, but contribution to earnings limited by factory performance TANZANIA By market – 2013/14 Operating Profit # (TZS ‘billions) Overview 36 Regional EU Local # Excludes the allocation of Group costs Margin: 21% 15% 2% 2011/12 Actual 2012/13 Actual 2013/14 Actual Own Cane (tons) 534 905 532 561 462 671 Yield – Own Cane (tons/hectare) 99.1 90.7 80.4 Sucrose Content – Own Cane (%) 13.60 13.83 13.82 Tons cane per hour –TCH 217 194 215 Capacity Utilisation (%) 67.7 64.4 77.7 Sugar Production (tons) 90 694 84 546 81 966 Expanded factory operating at design capacity but cane yields decline MOZAMBIQUE 37
  • 20. 19 39% 61% 39% 61% Sugar Production (‘000 tons) Sugar Sales (‘000 tons) By market – 2012/13 91 85 82 2013/142012/132011/12 138 178 85 100 208 106 2013/14 21 2012/13 386 2011/12 238 Cane Sugar • Late season cane yields decline following damage caused by flooding in January 2013 reducing own cane supply & sugar production • Maragra-assisted cane developments increase cane supply from growers • Improved factory performance as mechanical inefficiencies are resolved • Economic growth in Mozambique did not translate into higher domestic sales • Significant exposure to the EU market with lower pricing in the second half of the year negatively impacting profits • Unfavourable fair value movement arises from lower EU pricing forecast MOZAMBIQUE By market – 2013/14 Operating Profit # (MZN ‘millions) Overview 38 EU Local # Excludes the allocation of Group costs Margin: 14% 21% 6% 39 FUTURE GROWTH
  • 21. 20 • Project was successfully commissioned within budget • Extra-neutral alcohol (ENA) first produced in August 2013 • Total project took 1 889 901 man-hours without a single major or lost time incident • First available samples exceed quality requirements & product quality has remained robust • Daily & weekly production records well in excess of installed capacity have been set • Throughput constraints due to energy interruptions from the integrated sugar mill has limited the contribution to earnings in the current year • Leverage existing commercial relationships with potential to replicate technical knowledge across the group • Project cost – R309 million TANZANIA – POTABLE ALCOHOL DISTILLERY 40 Sezela Coal & Energy Efficiency Furfural Development Maragra Cane Development Eston Packing Station Ubombo Energy Efficiency Nchalo Cane Development Nchalo Expansion Asset Realignment Ubombo Cane Development Nchalo Warehouse Project Speciality Sugar Potable Alcohol Distillery Nakambala Expansion II Distribution Warehouse Illovo Training Academy Size of the bubble represents the relative scale of capital 41 Appraise Select Define Execute Operate Mozambique Group / UnallocatedTanzaniaSwazilandSouth AfricaZambiaMalawi GROUP PROJECT PIPELINE Capital Hurdle Rates Internal rate of return: > 20% EBIT / Capital: > 20% Payback: > 7 years
  • 22. 21 Production • Factories expected to build on the solid performance base of the 2013/14 season • Good weather conditions & expanding outgrower area bode well for a good crop in Zambia • Dry weather in South Africa has impacted negatively on cane growth which will result in lower sugar production • Overall, a small increase in sugar production is anticipated for 2014/15 season • Downstream earnings benefit from the first full-year of operation for the new potable alcohol distillery in Tanzania Markets • Declining market fundamentals are expected to prevail in the short to medium term • World raw sugar price remains under negative pressure with a fourth year of global surplus production • Positioning of major EU sugar producers prior to the 2017 removal of quotas continues to depress EU pricing • Abundance of world sugar & opportunistic trading will sustain the generally soft regional African market prices • Higher dollar based reference price in South Africa expected to reduce imports & improve local market demand • Government of Tanzania’s commitment to curb imports will improve trading conditions in that country Financial • Continuous improvement programme will continue to drive cost reduction & margin improvement • Financing costs are expected to reduce as strong cash flows continue to reduce debt • Effective tax rate should normalise at 30% PROSPECTS 42 Difficult market conditions ahead, but Group positioning itself for future growth with a strong balance sheet & operating cash flow

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