Tongaat sells more sugar, for more cash

Nompumelelo Magwaza

Tongaat Hulett grew total profit from its combined operations by 11 percent to R2.1 billion as a result of an increase in sugar production, it said on Friday when it reported results for the year to March.

The group posted a 19 percent jump in revenue to R14.4bn on increased sugar output, sales and prices. Headline earnings of R1.058bn came in 18.7 percent higher than in the previous year.

The sugar producer declared an annual dividend of R3.40 a share, which was 17.2 percent higher than the previous year’s R2.90.

Total sugar production increased by 104 000 tons, or 9 percent, to 1.25 million tons. The amount of cane supplied to sugar mills grew to 10.3 million tons amid “ongoing cane supply initiatives”.

“The advantage of higher overall sugar production volumes, with related benefits in the unit costs of production, was offset partially by continued general margin pressure in the relationship of selling price movements versus higher input costs,” chief executive Peter Staude said.

Tongaat Hulett, which has property development interests, sold 65ha of land in KwaZulu-Natal, including Cornubia Industrial and Zimbali. This resulted in operating profits from land conversion and development increasing to R350 million from R215m a year earlier.

However, local sugar production of 486 000 tons remained flat compared with the previous year. Local market sales were 3 percent below last year and lower-value export sales increased accordingly.

“With increased cost pressures, margins were under pressure. Production was impacted by the national transport strike, followed by unusually heavy rains in the last three months of the crushing season,” Staude said.

Operating profit from South African sugar operations fell from R354m to R308m, with operating profit in the sugar milling and refining operations declining from R93m to R52m.

In Swaziland, the Tambankulu sugar estate’s operating profit increased to R76m from R51m as a result of EU trade factors.

In Zimbabwe, where Tongaat Hulett is facing uncertainty over indigenisation laws, sugar production leapt 28 percent to 475 000 tons. This pushed operating profits to R630m from R621m.

Production rose in Zimbabwe because cane deliveries from private and third-party farmers grew substantially.

The group said it would continue to develop its socio-economic impact on the country. “These operations employ 18 000 people and are in an important recovery, growth and expansion phase, which should create sustainable value for all stakeholders,” it said.

Tongaat Hulett added that the central part of this recovery was the substantial development of indigenous private farmers, cultivating about 11 200ha and employing more than 5 600 people.

These farmers supplied 850 000 tons of cane, which generated about $56m (R536m) in annual revenue for themselves.

“Zimbabwe, with Tongaat Hulett as a partner, has the potential to further develop indigenous private cane farmers substantially,” it said.

The company said the early season forecast was for total sugar production to grow by 110 000 tons this year.

Most growth was expected to come from South Africa, because dam levels were low in Zimbabwe.

World sugar prices were at their lowest point in three years and the market was over-supplied.

Tongaat Hulett shares added 0.42 percent to close at R129.09 on the JSE on Friday, in line with the general market.