INTEGRATED ANNUAL REPORT - Tongaat Hulett

1 INTEGRATED ANNUAL REPORT 2017. VALUE CREATION FOR ALL STAKEHOLDERS THROUGH AN. ALL-INCLUSIVE APPROACH TO GROWTH AND DEVELOPMENT. 01. 2017. CONTENTS. 02 INTRODUCTION At a glance 2. Salient financial features 3. Investment case 4. Business model 6. Geographic footprint 7. Tongaat Hulett Profile 8. 14 CHIEF EXECUTIVE'S REVIEW Strategic positioning and success drivers 14. Financial review 31. Looking ahead 33. Acknowledgements and conclusion 36. 38 SUSTAINABILITY ELEMENTS Human resources 38. 12. Stakeholder relationships 46. CHAIRMAN'S STATEMENT 12 (including Safety, Health and Environment). Intellectual property 54. Environment 56. ABOUT THIS REPORT . Tongaat Hulett endorses the principles of transparency and accountability, the company's ability to create value in the short, medium and long term were and particularly the concomitant commitment to REPORT on the business's considered material. performance, strategy and prospects in a manner that is meaningful to all stakeholders.

2 ASSURANCE AND APPROVAL. Tongaat Hulett has adopted a combined assurance strategy and framework to This INTEGRATED ANNUAL REPORT is Tongaat Hulett 's primary communication to provide assurance to the Board on the company's performance in the context shareholders, investors and analysts, farmers, government authorities and of material matters in its operating environment. The Audit and Compliance, regulators, local communities, employees, customers, suppliers and service Risk, SHE and Social and Ethics Committees consider all material matters facing providers. It provides an overview of Tongaat Hulett 's financial and non-financial the company to ensure that these are adequately managed and that internal performance for the 12 months ended 31 March 2017, with comparative data for assurance activities are INTEGRATED and co-ordinated efficiently and proficiently. the prior period. The following service providers provided external assurance of various elements of the INTEGRATED ANNUAL REPORT : MATERIALITY PROCESS.

3 The content of the INTEGRATED ANNUAL REPORT was developed by considering ANNUAL financial statements - Deloitte & Touche regulatory requirements, guidelines, previous reports and a combination of Review of internal controls and risk review - KPMG. feedback from internal subject matter experts, stakeholder expectations and Sustainability - Environmental Resources Management (ERM). analysis of the external environment, as well as a materiality determination B-BBEE contributor level - AQRate Verification Services process that included a diverse group of stakeholders. The principles embodied in the King REPORT on Governance for South Africa and the King Code on This REPORT is the product of several iterative processes of approval and refinement, Governance Principles 2009 (King III), the International INTEGRATED Reporting with oversight at executive level. It was approved by the Board for release to Framework and the Global Reporting Initiative's (GRI) Standards contributed to shareholders on 25 May 2017.

4 The compilation of this REPORT . Matters that have a high likelihood of impacting 02. 2017. 62 DIRECTORATE 62. 64 CORPORATE GOVERNANCE REPORT 64. Remuneration REPORT 73. 85 FINANCIAL REPORTING Segmental Analysis 85. 86. ANNUAL Financial Statements 88. Five year review 135. 137 SHAREHOLDER INFORMATION Notice of ANNUAL General Meeting 139. Form of Proxy 143. Glossary of terms 145. CAPITALS OF VALUE CREATION REQUEST FOR FEEDBACK. Tongaat Hulett 's impact on and contributions to the six capitals of value creation Tongaat Hulett would like to hear from all stakeholders on their views of the 2017. described in the International INTEGRATED Reporting Framework are addressed in INTEGRATED ANNUAL REPORT , including the accessibility of the information provided an INTEGRATED manner throughout this REPORT . and opportunities to expand and improve the company's future reporting. The following table provides an overview of how the capitals are indicated in the Please contact Corporate Communications, Tongaat Hulett , PO Box 3, Tongaat , 4400, South Africa (email: / telephone +27 32 439 4365).

5 REPORT and where the bulk of the commentary pertaining to each can be found: MANUFACTURED Tongaat Hulett profile Page 8 FURTHER DETAILS. CAPITAL This icon indicates where more details can be accessed online Financial and FINANCIAL CAPITAL operations review Page 31 This icon indicates where more details can be accessed elsewhere in this REPORT HUMAN CAPITAL Human resources Page 38 The electronic version of this 2017 INTEGRATED ANNUAL REPORT and other relevant Stakeholder relationships Page 46. documents are available at SOCIAL AND Stakeholder relationships Page 46. RELATIONSHIP CAPITAL. INTELLECTUAL Intellectual property Page 54 CAPITAL. NATURAL CAPITAL Environment Page 56. Tongaat Hulett 's GRI Index provides a thorough breakdown of the financial and non-financial information which the company has reported and is available for download at 01. 2017. AT A GLANCE. AGRICULTURE AND AGRI-PROCESSING (SUGARCANE/SUGAR. Agriculture and agri-processing AND MAIZE/STARCH) WITH RENEWABLE ENERGY OPPORTUNITIES.

6 Is a fundamental element of (ELECTRICITY GENERATION AND ETHANOL PRODUCTION). socio-economic development in Africa - particularly in the PORTFOLIO OF LAND FOR CONVERSION (UNIQUE PORTFOLIO AND. development of rural communities, WELL-ESTABLISHED DEVELOPMENT PLATFORM IN KWAZULU-NATAL). farming activities, food security and water management, housing and OPERATIONS LOCATED IN SIX COUNTRIES IN SUB-SAHARAN AFRICA. land conversion to development as urban areas expand. This is also LARGEST PRIVATE SECTOR EMPLOYER IN. linked to the socio-political BOTH MOZAMBIQUE AND ZIMBABWE. dynamics of the region. Tongaat Hulett is well positioned APPROXIMATELY ONE MILLION PEOPLE IN SOUTH AFRICA ARE. in the nexus of these dynamics. DIRECTLY IMPACTED BY THE SOUTH AFRICAN SUGAR INDUSTRY. Tongaat Hulett CREATES VALUE FOR ALL STAKEHOLDERS THROUGH AN. ALL-INCLUSIVE APPROACH TO GROWTH AND DEVELOPMENT, WHICH FOLLOWS. THE INTERCONNECTED NATURE OF ITS ACTIVITIES. STARCH OPERATIONS SUGAR OPERATIONS LAND CONVERSION AND.

7 DEVELOPMENT ACTIVITIES. 630 000 tons of maize converted 201 153 hectares (own and third- 7 709 hectares of developable to starch and glucose per annum party) of sugarcane supplying eight land identified for conversion Tongaat Hulett sugar mills Available wet-milling capacity and Act 70 of 1970 approvals (release enhanced product mix Intensive agricultural improvement from agriculture for development). programmes to grow cane yields on some 3 582 developable hectares Only wet-miller of maize in Africa and increase sugar production south of Egypt 1 314 developable hectares in the Low-cost incremental sugar portfolio have EIA approval, while a production from existing 2 million further 1 100 developable hectares tons milling capacity are well advanced in EIA processes CONSTRUCTIVE INTERFACE WITH GOVERNMENTS AND SOCIETY. 02. 2017. SALIENT FINANCIAL. FEATURES 2016/17. REVENUE OPERATING HEADLINE CASH FLOW ANNUAL DIVIDEND. PROFIT EARNINGS FROM OPERATIONS. 300 CENTS.

8 R17,915 BILLION R2,333 BILLION R982 MILLION R3,176 BILLION PER SHARE. +7,4% +39,8% +44,6% +70,5% +30,4%. (2016: R16,676 BILLION ) (2016: R1,669 BILLION ) (2016: R679 MILLION ) (2016: R1,863 BILLION ) (2016: 230C / SHARE). SUGAR OPERATIONS. THE RESULTS FOR Operating profit of R1,271 billion (2016: loss of R15 million). THE YEAR ENDED Sugar production totaled 1 056 000 tons (2016: 1 023 000 tons). 31 MARCH 2017 SHOW Volumes impacted by low cane yields due to drought and poor growing conditions an improvement in sugar revenue and operating profit under difficult conditions STARCH OPERATIONS. Operating profit of R510 million (2016: R658 million). starch operations negatively impacted Margins negatively impacted in the second half of the year by maize costs by maize costs that traded at import parity which were at import parity levels levels as a result of the past season's Improved sales mix achieved by replacement of imported volumes with local drought production and ongoing market development, offset by lower volumes as the sales concluded in land conversion and prevailing economic climate led to lower consumer demand developments lower than the prior year operating cash flow, after working LAND CONVERSION AND DEVELOPMENT ACTIVITIES.

9 Capital movements, advanced The sale of 75 developable hectares resulted in operating profit of R641 million substantially (2016: R1,115 billion from the sale of 121 developable hectares). Negotiations on some 233 developable hectares are underway, representing profit potential of around R1,58 billion OPERATING PROFIT. 2 500. 2 374 2 333. 2 089. 2 131. 2 000 1 879. R M IL L ION. 1 669 . 1 604. 1 535. 1 500. 1 172. 1 000. 838. 726. 550. 500 323. 2004 2005 2006 2007# 2008 2009/10* 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17. # 2007 and prior: profit from Tongaat Hulett operations within the old Tongaat - Hulett Group * Change in financial year end from December to March Restated for revised international financial reporting standards on accounting for sugarcane roots (IAS 41 and IAS 16). 03. 2017. INVESTMENT. CASE. Tongaat Hulett strives to be a proactive and resilient organisation working in collaboration with all its stakeholders in a focused, constructive, mutual value-adding and developmental manner.

10 It has operations in six countries in the Southern African Development Community (SADC), significant sugarcane and maize processing facilities, a unique land conversion platform, a sizeable animal feeds thrust and possibilities to further grow ethanol and electricity generation. Tongaat Hulett 'S. STRATEGIC POSITIONING AND. OBJECTIVES FOCUS ON THE. FOLLOWING KEY POINTS: INCREASING RETURNS FROM THE SUGAR ASSET. BASE - RECOVERING CANE YIELDS, GROWING SUGAR. PRODUCTION, USING EXISTING CAPACITY, WITH LOW. INCREMENTAL COSTS. The primary focus is on increasing cane supplies through The decrease in costs achieved over the previous four years higher yields from existing hectares under cane, which (equivalent to some R1,45 billion in real terms) provides benefit when there are better growing conditions. It further good momentum for ongoing cost reduction in the sugar entails improving sugar content/extraction, leading to operations. Unit costs of sugar production will benefit additional sugar production which typically has a low substantially from future volume increases.