Power lines supplying electricity by stated owned Eskom run through sugar cane fields on a Tongaat Hulett farm in Shongweni
JOHANNESBURG - JSE-Llisted agriculture and agro-processing group Tongaat Hulett said yesterday that its headline earnings for the year to end March were negatively impacted by imports, low international sugar prices and a stronger rand as it reported a 37.2percent decline.

In the year under review, the group's headline earnings decreased to R617million from R982m compared to last year.

However, the group was confident that in the next financial year of the 2018/19 season, it would be able to reverse the results by increasing improved earnings, as it was coming off a low base.

Chief executive Peter Staude said the group was well-positioned to benefit, and be a key development partner, as agriculture and agro-processing in sub-Saharan Africa developed from a low base. “The organisation is focused on driving improved performance within its areas of influence and using its experience to navigate influences outside its control.

"Earnings and cash flows are expected to exceed those of the 2017/18 year,” Staude said.

The group said operating for the period also declined by 16.1percent to R1.96billion, down from R2.33bn, while operating profit for various sugar operations was down by 34.15percent to R837m, down from R1.27bn.

Basic headline earnings per share declined to 534.8cents a share, down from 852c as compared to last year.

However, the group reported improved performance in other operations, with the starch and glucose operations recording 12.16percent increase in operating profit to R572m, up from R510m, as a result of higher sales volumes arising from the initiative to replace customers’ imported volumes with local production, new business development and growth in export markets.

The group's land conversion and development activities delivered operating profit of R661m as compared to last year's R641m and was 3.12percent higher than the previous period, resulting from the sale of 96 developable hectares.

Tongaat Hulett has sugar operations in about 20 locations in six countries, which include South Africa, Botswana, Namibia, Swaziland, Mozambique and Zimbabwe.

The South African sugar operations, including downstream activities, recorded operating profit of R86m as compared to R390m last year.

“Improved rainfall in the coastal areas of KwaZulu-Natal saw production increase to 513000 tons, up from 353000 tons. The recovery in production was negated by high volumes of imported sugar into the local market when over several months upward revisions to the import duty were not implemented timeously,” Staude said.

The Zimbabwe sugar operations generated operating profit of R563m, up from R504m, as local market sales continued to grow, assisted by the refinery optimisation project that increased the availability of refined sugar for the industrial market.

The group’s operating cash flow after working capital was R2.28bn, down from R3.18bn, and the group said improved operating cash flows generated by the starch and glucose operation provided some mitigation for the cash impact of lower profits from the sugar operations.

Capital expenditure during the period totalled R2.17bn, up from R1.21bn, with the commencement of the refinery project in Mozambique and the considerable investment in sugar cane root replanting after the drought.

The group said that finance costs of R878m were commensurate with the borrowings levels. Tongaat Hulett’s net debt at the end of the period rose to R6.46bn, compared to R4.78bn as compared to last year.

The group declared a final dividend of 60c a share, bringing the annual dividend to 160c.

This was down from 300c declared last year.

Tongaat shares closed 2.75percent lower at R85.36 on the JSE yesterday.

- BUSINESS REPORT