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04 August 2000
FOODTONGAAT-HULETT
By Tammy Lloyd
Market value R3bn 12-month high, 5 250c; Low, 2 840c | |||||
| **1997 | 2,37 | 346 | 367 | 242,7 | 62 |
| +1998 | 2,34 | 341 | 344 | 250,1 | - |
| 1999 | 2,09 | 195 | 237 | *251,4 | 62 |
| 2000 | 2,51 | 249 | 280 | *221,2 | 62 |
| % chge | 20 | 27 | 18 | -12 | - |
| Trading vol 12-month average: 3,2m/month | © Financial Mail | ||||
| *Including tax rate adjustment +Pro forma ** September 30. | |||||
It wasn't a sumptuous first half for Tongaat. Despite respectable turnover growth driven by good sugar volumes, last year's R51m credit from an adjustment to deferred tax sapped EPS. Investments in aluminium inflated working capital and dampened cash flow. Debt has increased to R786m after four years of expansion.
In May, Anglo said it would sell its 51% stake in Tongaat with other noncore assets. Due to the holding's size, Tongaat's investment programme and its drag on earnings, CE Cedric Savage expects the disposal to be "later rather than sooner" for Anglo to realise a good price. "Financial performance from the major projects is 12-18 months away," he says. An analyst forecasts 17% growth in EPS in 2002, followed by about 12%. ING Barings analyst John Thompson believes Tongaat could be broken up, with Anglo or Norsk Hydro (Hulamin's other JV partner) purchasing its 45% stake in Maritzburg Aluminium and its starch and glucose division being bought out also. Building materials and textiles will be sold, leaving sugar and R250m worth of property in the listed company. Tongaat lacks a natural buyer in its current form. "The group has three large assets. Even broken up, its dependence on commodities is a detraction," says one analyst. Short-term, focus won't be refined.
Full-year earnings for the group probably won't excite. Growing financing costs will absorb benefits of improving exports and better sugar prices. Long-term prospects are better. Its R1bn bid for the assets of Transvaal Sugar (TSB) could bring it 450 000 t of low-cost production. Analysts think Illovo's 45%-50% market share, no collusion on prices and TSB's separate distribution could persuade the Competition Commission to allow the merger. Sentiment may be helped if Savage named his successor well before stepping down as CEO next May.
04August2000