INTERIM RESULTS for the six months ended 30 September 2015 GROUP - PowerPoint PPT Presentation

INTERIM RESULTS for the six months ended 30 September 2015

GROUP OVERVIEW Gavin Dalgleish, Managing Director

SALIENT FEATURES – SIX MONTHS TO SEPTEMBER 2015 Sugar production down 10% to 1.16 million tons – Operating profit decreased by 37% regional drought conditions, particularly South Africa Headline earnings per share down 58% – full year Early season flood damage impacts Mozambique remains between 25% and 45% below the prior year Physicals Financial production Higher interest rates and working capital funding Good factory performances across the Group with an improvement at Nchalo Closure of USA furfural-based nematicide business Distillery in Tanzania operated consistently above Downstream earnings up 15% to R160m – design capacity, producing a high quality product highlighting benefit of diversification strategy Strong ethanol production and electricity co- Continuous improvement culture embedded further generation Domestic sales growth in Zambia and Swaziland, Zambia refinery expansion and product alignment together with increased regional sales project on schedule for commissioning in 2016/17 Improved market conditions in Tanzania Two further downstream investments under review – Markets Growth Reduced demand and below inflationary price Zambia distillery and Swaziland furfural development increases in Malawi – affordability concerns Structural cost reduction to bring meaningful benefits Downstream operating profit up R68m to R130m Sustained pressure on export sugar prices – weaker to the group in the short to medium-term Euro and world sugar prices reach seven year lows Long-term African sugar fundamentals remain strong Continued sales mix improvement via diversion of with improved medium-term prospects volumes sales from EU into regional Interim Results 30 September 2015 3

SUGAR PRODUCTION Group sugar production decreased by 123 584 tons Good harvest, Improved Nchalo Late start-up; dry Dec 14 to Jan 15 Improved factory Extended higher sucrose and performance offset weather and aphid floods cause performance; non- drought improved factory by low rainfall and infestation affect area and yields repeat of strike conditions performance late start-up cane yields/quality loss offsets low rainfall 1 500 000 Tons Sugar (tons) 1 400 000 14 933 9 526 10 101 10 794 13 063 1 300 000 142 747 1 200 000 1 284 174 1 100 000 1 160 590 1 000 000 September Tanzania Malawi Zambia Mozambique Swaziland South Africa September 2014 2015 Variance + 13 063 + 14 933 - 9 526 - 10 101 + 10 794 - 142 747 -123 584 Cane + 1 226 + 11 321 - 8 134 - 5 596 + 15 523 - 98 122 - 83 782 Sucrose + 5 535 + 1 818 - 2 732 - 551 - 6 440 - 37 891 - 40 261 Recovery + 6 302 + 1 794 + 1 340 - 3 954 + 1 711 - 6 734 + 459 Interim Results 30 September 2015 4

REGIONAL DROUGHT CONDITIONS Lake Kariba (main basin) from Wild Heritage Resort • Prolonged dry period across Southern Africa • Severe drought in South Africa impacts non- August 2014 August 2015 irrigated cane supply • Irrigation mitigates c.60% of rainfall risk – reliance on summer rainfall at irrigated estates • Limited availability of hydro electricity supply in Zambia and Malawi reduces ability to irrigate • Stressed cane more susceptible to pest and disease infestation (e.g. yellow aphids) Rainfall at Sezela mill (98 seasons) Rainfall Forecast Above Normal Rainfall Below Normal Rainfall (January to March) (January to March) 14/15 season rainfall as poor as 03/04 and 10/11 Interim Results 30 September 2015 5

FINANCIAL OVERVIEW Mohammed Abdool-Samad, Group Finance Director

GROUP KEY FINANCIAL METRICS Sept 2014 Sept 2015 Operating Profit (R’m) R’ million 6 months 6 months -37% Revenue 5 932 5 489 1 393 1,500 Operating profit 1 393 881 881 1,000 Cash operating profit 1 529 1 236 Net financing costs 142 228 500 Profit before tax 1 264 450 0 Headline earnings 788 331 Sept 2014 Sept 2015 Sept 2014 Sept 2015 6 months 6 months Analysis 6 months 6 months Headline Earnings Per Share (cents) Operating margin (%) 23.5 16.1 Interest cover (times) 9.8 3.9 -58% 200 171.1 Effective tax rate (%) 25.6 33.0 150 EPS (cents) 171.3 30.8 100 HEPS (cents) 171.1 71.7 71.7 Cash conversion ratio (%) 109.8 140.2 50 Debt : Equity 41.2 82.0 0 Sept 2014 Sept 2015 Gearing (%) 29.2 45.1 6 months 6 months Interim Results 30 September 2015 7

GROUP EXCHANGE RATES Weaker Zambia Kwacha was the main driver of the overall R36 million loss on translation Translation Sept 2014 Sept 2015 Change Profit Translation rates* (%) 6 months 6 months (Average) Impact  Zambia Kwacha / Rand 0.589 0.629 7%  Malawi Kwacha / Rand 37.26 38.14 2%  Tanzania Shilling / Rand 156.04 166.62 7%  Mozambique Metical / Rand 2.93 3.07 5%  Rand / US Dollar 10.63 12.51 18% * used to translate the Group’s earnings Interim Results 30 September 2015 8

GROUP EXCHANGE RATES Sharp devaluation of Zambia Kwacha Malawi Kwacha stronger than expected 14.5 600 MWK:USD ZMK:USD 12.33 MWK:USD (Expected Trend) 12.5 525 10.5 450 8.5 375 6.5 4.5 300 Apr 13 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15 Apr 13 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15 • Low copper prices and slowdown of Chinese • Malawi obtained US$250m loan that strengthened economy trigger unprecedented devaluation – 59% currency beyond levels suggested by historic trends between April and September • Negative impact on informal regional trade flows – • Central bank intervention increases interest rates inflow of sugar to compete against local production • Inflationary pressure on costs and FX exposure • Devaluation of 33% since July 2015 as USD liquidity reduces to fund first loan repayment of • Benefit for uncovered export revenues US$70m due in October 2015 Interim Results 30 September 2015 9

GROUP EXCHANGE RATES Weaker Rand benefits downstream exports Weaker Euro impacts exports realisations 14.5 1.50 ZAR:USD EUR:USD 13.5 1.40 12.5 1.30 11.5 10.5 1.20 9.5 1.10 8.5 7.5 1.00 Apr 13 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15 Apr 13 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15 • Rand weakens on expectation that the US Federal • Eurozone economy remains fragile – high levels of Reserve will increase interest rates leading to an government debt; bailout of Greece and slowdown outflow of foreign capital from emerging markets of growth in economies trading with China • Benefit for export revenue from downstream • Currency supported by monetary stimulus from operations in South Africa and sugar in Swaziland central bank • Lower realisations from EU sugar exports Interim Results 30 September 2015 10

OPERATING PROFIT BY SEGMENT Sept 2014 Sept 2015 2015 2014 6 months 6 months Var Business segment Business segment R’m R’m R’m Business segment  512 Operating Profit 1 393 881  Sugar  255 692 437 32%  286 41%  Cane 571 285 50% 50%  29  Downstream & Co-gen 130 159 18% 9% Sept 2014 Sept 2015 6 months 6 months Var 2014 2015 R’m R’m Geographic segment R’m Geographic segment Geographic segment  512 Operating Profit 1 393 881  Malawi  320 560 240 31% 23%  Mozambique  75 27% 110 35 41%  84  South Africa 170 86 12% 4% -1%  86  Swaziland 124 210 9% 10%  Tanzania  115 (9) 106 12% 24% 8%  Zambia  234 438 204 Interim Results 30 September 2015 11

GROUP OPERATING PROFIT BRIDGE - Inflationary increases + Year on year domestic price increase, - Impact of weaker Zambia Kwacha on foreign- albeit below inflation due to weak economy denominated costs - Lower export realisations with declining EU + Cost savings from Continuous Improvement and regional prices and weak Euro program - Stronger than expected Malawi Kwacha + Inflationary increases in domestic markets - High underlying inflation (24%) + Diversion of volumes from EU to the region - Treatment of yellow aphid infestation - Low world and EU sugar prices - Implementation of performance improvement - Weaker Euro plan at Nchalo + Weaker domestic currencies + Tanzanian distillery operating - Production decrease: 123 584 tons - Impact of weaker consistently above design capacity - Sales decrease: 99 946 tons Malawian domestic + Furfural production efficiencies market & stronger + Rand weakness (export proceeds) Kwacha 1 700 + Additional power exports from Swaziland 361 427 R’ millions 94 172 1 300 229 205 32 1 393 62 900 36 881 500 September Volume Price (Excl. Costs (Excl. Movements Downstream Operations September and Co-Gen Malawi Price Malawi Costs Translation Fair Value Malawi) Malawi) Group 2014 2015 Interim Results 30 September 2015 12

FINANCE COST ANALYSIS - Higher interest rate environment + Lower interest rate environment (average T-bill increased from 9.4% in + Improved domestic sales and prices 2014 to 14.4% in 2015 for 6 months) - Deferred EU sales and regional sales − Impact of weaker Zambian Kwacha and Malawian Kwacha on intercompany financing transactions within the Group - Lower domestic sales and below inflation pricing due to weak economy + Weaker Zambia Kwacha impacting cashflow + Stronger US Dollar 250 21 43 16 3 40 200 R’ millions 40 150 3 228 100 142 50 0 September South Africa Malawi Zambia Swaziland Tanzania Mozambique Group Translation September 2014 2015 Interim Results 30 September 2015 13