Durban - In spite of massive land conversions from sugar cane production to property development and cheap sugar imports, JSE-listed sugar giant Tongaat Hulett Group is continuing to increase its sugar production in KwaZulu-Natal.
In fact, chief executive Peter Staude said in the company’s interim financial report released yesterday that overall sugar production for this season was expected to be at its highest level in 10 years.
“Tongaat Hulett’s total sugar production is well on track to increase from 1.254 million tons of raw sugar last year to between 1.366 and 1.408 million tons this season, with the increase this year coming from South Africa,” he said.
The company has operations in South Africa, Mozambique, Zimbabwe and Swaziland.
The benefit of substantially increased sugar production had been “offset by the current revenue dynamics and the impact of imports”.
Staude said downward pressure on sugar prices was still being experienced internationally, which had seen the world sugar price at its lowest level in many years.
“In the regional markets, local market sales are being lost to imports as a result of the current low world price, leading to increased export volumes at lower prices,” he said.
Staude said that Tongaat Hulett’s strategy to increase cane supply in South Africa was focused on improving yields and getting more hectares under cane.
He said the greatest potential for additional hectares under sugar cane was through community and small-scale farmers, with support from the government.
“A co-operation agreement is in place with the Ingonyama Trust, which covers about 2.7 million hectares of land in KwaZulu-Natal. Tongaat Hulett is making good progress to facilitate attractive funding for community and small-scale growers. An additional 8 000ha of new cane land supplying Tongaat Hulett’s mills are expected to be planted in the current year,” he said.
The company reported a 6 percent increase in revenue of R7.854 billion and operating profit growth of 7 percent to R1.381bn for the half-year to September. It said that in the six-month period, the company had seen a record performance from the land conversion and its starch operations.
“Land conversion and developments generated sales from 174 developable hectares and the starch operation benefitted from competitive maize costs and favourable co-product realisations,” said Staude.
The company had more than doubled profit generated by land conversions through its Tongaat Hulett Developments division for the period, from R246m in 2012 to R512m this year. Of the 174 developable hectares sold, 151ha were purchased by Dube Tradeport, near King Shaka International Airport for R350m.
Staude said while the land was not yet “shovel ready”, Tongaat Hulett and Dube Tradeport were working together to “capture the synergy of each other’s unique capabilities” to develop the land around the airport.
”The next two years should be rewarding in unlocking value from Tongaat Hulett’s land holdings. Active developments available for sale total 467 developable hectares, which is three times the level that existed in 2005. They should realise net cash profits in excess of R3 billion,” Staude added.
He said there was high demand for industrial land in the Cornubia development node. About 42ha were also still to be developed in the burgeoning Ridgeside precinct, in front of Gateway shopping centre. - The Mercury