TSB Investor site visit presentation - Malalane 17 September 2014
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TSB
Investor site visit presentation - Malalane
17 September 2014
1
Agenda Item Presenter Time Allocation Welcome Miles Dally 09:30 – 09:45 Introduction to TSB John du Plessis 09:45 – 10:45 Break 10:45 – 11:00 Site orientation Clinton Vermeulen 11:00 – 11:15 Mill Visit Clinton Vermeulen 11:15 – 12:45 - Mill Logan Govender - Packaging Mike Ngcobo / Prem Sahadeo - Molatek Fanie du Plessis Lunch 13:00 – 13:45 Contract grower presentation Dawie van Rooy 13:45 – 14:15 Closure John du Plessis 14:15 – 14:45
Overview of TSB
and key
investment
highlights
3
Operational overview (South Africa)
• Market leader in sugar cane agriculture, production,
marketing, sales and distribution
• Strategically located in the "northern irrigated" region of
the South African sugar industry
− Head office is located at Malalane, ± 60 km east of Nelspruit
− Main production takes place in the Nkomazi area (Malalane and Komati) on
the Mozambican corridor and in close proximity to Swaziland
− Pongola Mill is situated in the north of KwaZulu-Natal, close to the southern
border of Swaziland
• Operates 3 mills: Malalane, Komati and Pongola
− Malalane and Pongola each have a refinery and a packaging plant
• Total production capacity of approximately 700 000 tons
of sugar per annum
• Strong portfolio of market leading brands
− Quality Sugars (majority-owned subsidiary) markets sugar under the Selati
brand
− Molatek, produces animal feeds from by-products of the sugar manufacturing
• Employs c.3800 permanent staff, making a substantial
contribution to the economies of the areas within which it
operates 4
Source: TSB
Company history
1965 TSB is founded. Central Sugar Board allocates 11 518 hectares of land for cane cultivation
1966 Quality Sugars is formed to act as marketing distribution agents for TSB
1967 TSB's Malalane Mill receives its first cane and commences sugar production
1982 A transport fleet is established, mainly for the conveyance of cane from TSB estates to the mill
1985 Molatek Animal Feed factory is commissioned
1988 Remgro acquires TSB.
1993 TSB purchases Quality Sugars
2004 TSB acquires Booker Tate
2005 TSB acquires a shareholding in RSSC and establishes Mananga Sugar Packers (MSP) in partnership with RSSC
2007 TSB sells 6 000 hectares of its agricultural land to communities to settle the Tenbosch land claim. The settlement results
in the formation of Libuyile and Mgubho farming companies, which are jointly owned by TSB and the communities, to continue
farming operations. TSB also forms Akwandze Agricultural Finance in partnership with cane growers to finance sugar cane
farmers
2008 TSB starts marketing its own refined sugar on the international market
2009 TSB acquires Pongola Sugar Mill
2011 Quality Sugars assumes responsibility for marketing sugar on behalf of TSB and Mananga Sugar Packers. Molatek Block
Plant commissioned
2012 Establishment of Sivonuseftu, a joint venture company to resolve the Matsamo land claim
2014 TSB is acquired by RCL Foods
Source: TSB
5
Group structure
RCL Foods
100%
Akwandze 50% TSB RSA
Financial Services 100%
51%
TSB International Massingir
Agro Industrial
27% 100%
75%
Royal Swazi Sugar
Agriculture 100% Shubombo Quality Sugars 25% Booker Tate
Corporation Technical Services
Cane Operations Agricultural Services Sugar Marketing Mhlume Mill Management
Simunye Mill
50%
Manufacturing
Malalane Mill 50%
Komati Mill Sivonuseft
Pongola Mill Libuyile Mgubho TsGro Mananga
Animal Feeds Farming Farming
u Farming
50%
Services Services Farming Services Sugar Packers
Services Sugar Packing
Supply Chain
Packaging, Warehousing
Transport
Sales, Operational Planning
Source: TSB 6
Key investment highlights
2 Produces
approximately 30%
1 Selati is the of South Africa's total
#1 sugar sugar output
brand in 3 Operates three mills
South Africa in South Africa, in
close proximity to
Mozambique with
capacity to produce
700 000 tonnes of
6 sugar p.a.
Significant
growth potential
into Africa
4 Produces animal feed from by-
products of the sugar
manufacturing process - produced
5 The lowest-cost sugar c.300 000 tonnes of animal feed
producer in the South during FY2014
African sugar industry
Source: TSB
7
High level overview of TSB’s business
Manufacturing &
Cane Supply Marketing
Supply Chain
Outbound Distributor
SSG’s • Cane Volume Molatek
Supply Chain 300 000 (t)
0.4 m (t) • Cane Quality
• Daily Supply
Wholesale
160 000 (t)
CGs Inbound Outbound Retail
Raw Mill Refinery
3.2 m (t) Supply Chain Supply Chain 190 000(t)
Industrial
196 000 (t)
Cane Ops Outbound Export
1.3 m (t) Supply Chain 137 000 (t)
Source: TSB
Electricity to Grid
47 (GW/hrs)
8
Permanent staff headcount
Staff headcount
3900
3807
3800
3694
3700
3600
3500
3400
3300 3229
3221
3200
3100
3000
2900
2011 2012 2013 2014
9
Market
environment
10Overview of the South African sugar
market
With the tariff • The South African Customs Union (“SACU”) provides the basis for the domestic
imposed on market for the sale of sugar by South African sugar millers
imports, the
− Approximately 80% of sales are white refined sugar and the remainder is brown sugar
industry is
moving to − 44% of sales are in the industrial market, 45% into the direct market and 11% of sales are to
normality, packers in Botswana, Lesotho, Namibia and Swaziland
producers are
basing • Sugar consumption growth historically has been c. 2% per annum
investment
decisions on the • Industry players initiated a number of measures to combat imports – lobbying
sustainability of government on the impact of imports (particularly on small scale growers) and
tariff protection. application to increase the current ineffective protection on imports
• The South African government has recently announced a new sugar import tariff
of R132c/kg. This is predicted to improve local producers profitability
• Growth in South Africa continues to lag behind the rest of Africa, however, with
the tariff protection sugar consumption is expected to increase at similar levels.
Source: TSB
11South African sugar industry
Location of key industry players Structure of industry
Growers Millers
• Tongaat Hulett (4 Mills)
• Illovo (4 Mills)
• TSB (3 Mills)
13 local growers • UCL Company (1 Mill)
councils • Umfolozi Sugar Mill (1
Mill)
• Gledhow Sugar (1 Mill)
SA Cane Growers’ SA Sugar Millers’
Association Association
Key mills
TSB Malalane, Pongola, Komati
SA SUGAR COUNCIL
Illovo Eston, Noodsberg, Umzimkulu, Gledhow ASSOCIATION
Tongaat Felixton, Maidstone, Darnall, Amatikulu
Hulett
Source: SASA
12Divisions of proceeds – F2014 season
Local market Export market
Sugar sales Sugar sales
Molasses sales
Total industrial proceeds
Deduct industrial costs and rebates
Equals net divisible proceeds
Fixed division
Grower share Miller share
64.37% 35.63%
Distributed by individual
Price per ton millers according to production
Growers share “Rand” divided by RV tons
share
Source: TSB
13Imposition of import tariffs
Successful in mitigating the threat from imports
Imports (Duty Paid) 2012/2013 & 2013/2014
462 081
Cumulative
433 149
418 500
480 000
460 000
440 000
420 000
337 612
400 000
380 000
360 000
340 000
255 993
320 000
300 000
224 788
280 000
204 151
260 000
183 070
173 417
Tons
240 000
165 037
220 000
144 187
142 739
200 000
122 520
180 000
103 370
99 393
160 000 85 756
140 000
74 221
65 274
120 000
61 281
42 462
100 000
40 500
38725
28 390
80 000
20 306
16 126
60 000
9871
3025
2695
2212
40 000
20 000
0
2012/2013 2013/2014 2014/2015
Source: ITAC media release, April 2014 and SASA
14Agriculture
15Agriculture
Cane farming
• TSB supports approximately 1 800 commercial and small-scale growers who supply 80% of the sugar cane to its
factories from 55 000 hectares of irrigated land
• Collectively the total area under cane amounts to 69 000 hectares of which:
− Malalane Mill area is 24 000 hectares
− Komati Mill area is 27 000 hectares
− Pongola Mill area is 18 000 hectares
• Commercial growers account for 64% of the land under cane, Small-Scale Growers 15% and the balance (21%) is
TSB cane land
• Land reform beneficiaries account for 62% of the area under cane in Nkomazi region and 49% across the three
mills
− The Government of South Africa embarked upon a process to create an equitable and sustainable land dispensation that results in
social and economic development by providing land rights to all South Africans, with a particular emphasis on black people
− Land reform projects that have so far been implemented by TSB in partnership with the Department of Land Affairs and bears
testimony to TSB's commitment to see the transfer of land rights to black people
− TSB's support to newly settled growers includes credit finance and technical services to ensure the transfer of the critical skills
required to underpin their success as emerging farming entrepreneurs
Source: TSB
16Agriculture
Cane farming – supporting local communities
Farm management support
Broad-based Black empowerment:
• TSB offers Farm management support to the farming ventures Agricultural land reform
created through the land restitution process Freehold
Area under cane
• TSB's involvement in these joint ventures is aimed at ensuring the (85% of Total)
sustainability of cane faming operations and contributing to White growers 72%
development, empowerment and skills transfer to claimant
Black growers 21%
beneficiaries
Miller-cum-planter 7%
• The joint ventures have collectively paid millions of Rand in rent
and dividends to the respective communities over the past few Total growers 100%
years
Note: Including communally owned land, 38,8% of land is
under black ownership
Grower support
• TSB provides a full range of cane support services to all its
growers
• As the miller and grower are inextricably linked, grower support
50% 100% 100%
aims at ensuring a sustainable grower base
Shubombo
• Services include: Sivunosetfu Agricultural
Services
TSGro
− extension advice on all aspects of cane husbandry
50% 50%
− engineering support
Mgubho Libuyile
Farming Farming
− training in commercial skills Services Services
− pump and irrigation service is also available to small growers
Source: SASA
17Agriculture
Akwandze Agricultural Finance (AAF)
• A development finance organisation that provides TSB sugarcane growers with
financial services:
− Production finance and irrigation infrastructure for growers
− Working capital for contractors
• AAF sources, negotiates and manages development finance funds for its
shareholders’ benefit (Liguguletfu Co-op & TSB Sugar RSA)
• FY2014 – loan books of R118 million
Source: TSB
18Operational
overview –
Manufacturing &
Supply Chain
19Manufacturing
Nkomazi Mills
Region Mill Established Tons sugar Notes
produced per
year
Malalane 1968 189 000 Nkomazi produce approximately
Nkomazi 490 000 tons of sugar per year.
Komati 1993 250 000
Pongola produce approximately
135 000 tons of sugar per year.
Pongola Pongola 1954 163 000 Adding Pongola to Nkomazi, TSB
currently produces 27% of the total SA
production
Malalane Mill
Source: TSB
20Logistics
21Operational overview
TSB transport
• Overview
• TSB transports sugar cane from TSB owned and managed
estates and independent sugar cane growers (especially small
scale and emerging cane farmers who have contracts with the
company) to its mills
• TSB's Transport division holds about 40% of the transport market
in the cane production areas of Mpumalanga
• The division also transports sugar from TSB's mills to the market
• The division undertakes fleet management, vehicle maintenance
support and oversees the management of group transport
• Warehousing
contracts capacity
• Bulk raw warehouses
• Malalane – 60 000
tons
• Komati – 49 000 tons
• Packed sugar warehouses
• Malalane – 48 000
tons
Source: TSB
22Operational
Review - Molatek
23Molatek animal feed
• Manufactures and markets an extensive range of animal feeds
(energy feeds, fattening and dairy concentrates, lick supplements
and molasses)
• 2 manufacturing facilities: Komati (to move to Pongola) and
Malalane
• Established in 1985 and has grown over the past 26 years as a
major role player in the feeds and livestock industry
• Products are developed in line with latest scientific research and
are used with tremendous success by farmers in South Africa,
Namibia, Botswana, Mozambique and Swaziland
• Molatek's molasses-based concentrates ensure palatability,
nutritional care and prevention of dusty feeds
• Molatek sell c.300 000 tons of manufactured product
• Products are sold in bulk bags (40kg and 50kg bags)
• Quality control is fundamental to the animal feed industry
− Molatek is ISO 9001: 2008 accredited ensuring strict
adherence to procedures and systems
• Meticulous quality control in Molatek's own laboratory ensures
that products of outstanding quality are produced
Source: TSB
24Operational
Review -
Marketing
25Marketing
Quality Sugars and the Selati brand
• Majority-owned subsidiary of TSB and is the
logistics and marketing arm of the business
• Quality Sugars adds value to the Selati brand
through strategised and targeted advertising using
national media.
• Selati has become one of the top ten most
recognised household names in South Africa
• Supplier of both Selati and house brands to most
of the nation's leading food retailers and other bulk
sugar buyers
• Subject to a series of customer and regulator
quality control audits on an ongoing basis.
Source: TSB
26Market Shares As At July 2014
July 2013 July 2014 July 2013 July 2014
(12MMA) (12MMA)
Total TSB 50.1 49.9 48.6 49.4
Selati 32.5 31.8 33.2 30.6
Huletts 29.9 27.1 32.5 29.0
Illovo 3.1 3.4 3.1 3.2
Savemore 1.9 1.4 2.2 1.1
House Brands
*1 Spar 7.8 8.5 7.4 8.5
*2 No Name / PnP 6.8 6.2 5.6 7.2
*3 Rite Brand / Shoprite) 6.4 7.6 5.5 6.6
All other, i.e. Imports / Checkers, Rhino,
11.5 14.0 10.4 13.6
Boxer, WW
House Brands – packed by TSB and sold by Quality Sugars
*1 Spar Brand – 100% ex TSB/QS
*2 No Name / PnP – 90% ex TSB/QS (WC is Brazil)
*3 Ritebrand / Shoprite – 60% ex TSB/QS (KZN/WC is Brazil)Market shares as at July 2014
Subsidiaries and
associates
29Booker Tate
30Booker Tate overview
• Booker Tate provides development, management and technical services to sugar and agribusiness industries
throughout the world
• Founded in 1988 from the amalgamation of Booker Agriculture International (BAI) and Tate & Lyle Agribusiness
(TLA) with a sugar history stretching back to the 18th century
• Booker Tate has successfully completed over 1 500 assignments in 120 countries over 50 years
• Booker Tate has recently worked in Belize, Burkina Faso, Colombia, Dominican Republic, Guyana, Indonesia,
Kenya, Mozambique, Nigeria, Papua New Guinea, Peru, Sierra Leone, South Africa, Sri Lanka, Sudan, Suriname,
Swaziland and USA
Global reach With emerging market exposure
Source: TSB
31RSSC
32Royal Swaziland Sugar Corporation (RSSC)
• Located in the north-eastern Lowveld of Swaziland and is one of the largest companies in the country
• Employs over 3 500 people and produces two-thirds of the country’s sugar and a significant quantity of ethanol
• Listed on the Swaziland Stock Exchange, the majority shareholder being Tibiyo Taka Ngwane with 53.1%, followed
by TSB with 27%.
• Manages more than 20 000ha of irrigated sugar cane which delivers approximately 2.3MT of cane per season to
the company’s two sugar mills
• These two mills currently produces in excess of 450 000t of sugar per season.
• RSSC also operates a sugar refinery at the Mhlume mill with a capacity of 170 000t of refined sugar. It also has a
32Ml capacity ethanol plant which is adjacent to the Simunye mill.
• Plays a significant role in the development of rural Swaziland, with over 2 500 families currently involved in sugar
cane production as small-scale farmers who deliver to the two mills. From a land area measuring more than 11
000ha, they produce more than 1.3Mt of sugar cane and supply 52.0% of the Mhlume mill’s total cane and 25.0% of
the Simunye mill’s total cane
RSSC
Inyoni Yami Mhlume
Managa Sugar Royal Swazi Quality
Swaziland (Swaziland) Simunye Plaza
Packers (Pty) Distiller (Pty) Sugars (Pty)
Irrigation Sugar (Pty) Ltd
Ltd Ltd Ltd
Scheme Company Ltd
Simunye mill
100 100
50% 50% 25% 25%
% %
Source: TSB
33Mananga Sugar
Packers
34Mananga Sugar Packers (MSP)
Overview
• MSP, a joint venture between RSSC and TSB, was established
to pack sugar in Swaziland and, pursuant to a quota granted by
the Swaziland Sugar Association, to sell packed sugar to the
SACU
• The plant packs about 96,000 tons of sugar in a season, making
it the largest packaging operation of its type in the Swaziland
sugar industry
• TSB holds an effective interest of 63.7% - a direct interest of
50% and an effective 13.7% indirect interest through RSSC
• Marketing by Quality Sugars
Shareholding structure
27.42%
50% 50%
Source: TSB
35Massingir
36Massingir
High-level project overview Current Status
• Best green field site in sub Saharan Africa • Incorporated MAI a newly established company.
• Excellent natural resources TSB Sugar International holds 51% of the
shares and the balance is held by SIAL
• 8 hours average sunshine per day
• Investment approval granted by Council of
• 400 mm annual rainfall – 280 day crop Ministers
• Red free draining soils • Land use permit (DUAT) granted
• Large storage dam • MOU for water permit with 50% abstraction from
• No human resettlement – a unique feature the dam signed with the Mozambique Water
Authority
• Located in South Western Mozambique –
Gaza Province • Feasibility study substantially completed
• Below Massingir Dam on Olifants river • Equity capital raising, debt arranging and off-
approximately 400km from Malalane taker processes in progress
• Original scope 37500 hectares, US$1.2bn • First replant of locally grown seed cane and trial
project value food security crops under way
• Alternatives to the project scope / phasing are
currently being considered
• The Board will make a final decision in the
coming months 37
Source: MAI feasibility studyTSB Summary
38TSB Summary
1 Market Leading Positions
2 Strong operating assets – lowest cost producer
3 Growth supported by fundamentals and well considered expansion
4 Vertically integrated platform
5 Well run assets with strong and experienced management teams
39Site Orientation
40What happens in a sugar mill?
41What happens in a sugar mill?
42Thank You
TSB Sugar RSA (Pty) Ltd PO Box 47 Malalane 1320 T +27 13 791 1000 www.tsb.co.za
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