Tongaat Hulett yesterday said it expects its total sugar production for the 2017-18 season to show an increase, benefiting from good rainfall. Photo: Supplied
JOHANNESBURG - JSE- listed Tongaat Hulett said yesterday that it expected its total sugar production for the 2017-18 season to show an increase of between 14.85percent and 19.8percent, benefiting from the good rainfalls experienced in the country during the 2016-17 summer season.

As a result, the group expects total sugar production to be between 1.16million tons and 1.21million tons in the 2017-18 season, up from 1.01 million tons recorded in the 2016-17 period. Chief executive Peter Staude said the increased hectares under irrigation and power reliability would also make for a positive contribution in the future.

“The existing sugar cane footprint, the agricultural improvement programmes and the completion of the few new planting partnership initiatives currently under way are likely to result in future production of more than 1.6million tons of sugar, given regular growing conditions,” he said. He added that Tongaat Hulett’s intention was to continue to initiate all cane-related opportunities so as to fully utilise its installed milling capacity of more than 2million tons a year.

The recovery was already evident in the group’s results for the six months to end September. The operating profit for the period was up by 9percent to R1.47billion, up from R1.35bn, while revenue of R8.12bn was down by 4.5percent as compared to R8.5bn. Headline earnings per share was 573.8cents a share, up from 546.7c.

The South African sugar operations produced operating profit of R211million, down from R306m as compared to last year. The company is expected to increase its share of total industry production to some 26percent in 2017-18, up from 22percent as compared to the prior season.

During the period, the group reported an operating cash flow, before working capital movements, of R2.45bn compared to R2.32bn. Capital expenditure and root planting costs totalled R818m, up from R677m. The group said its net debt was R6.5bn, up from R5.5bn, while finance costs came in at R413m.

Headline earnings were slightly up to R661m as compared to last year’s R631m and the group declared an interim dividend of 100c a share.

Tongaat Hulett has the leading sugar brands in South Africa, Zimbabwe, Botswana and Namibia. Outside of South Africa and where the group has operations in Zimbabwe and Mozambique, it said the 2017-18 crop in those countries would continue to be impacted by the reduced irrigation and limited replanting that was necessary during 2016.

During the period, the Zimbabwe sugar operating profit increased to R358m, up R251m, while the Mozambique sugar operating profit improved to R232m from R219m reported a year earlier. In Mozambique a 90000-ton sugar refinery is under construction at the Xinavane sugar mill for commissioning in the second half of 2018.

Tongaat Hulett shares dropped 0.88percent on the JSE yesterday to close at R112.

- BUSINESS REPORT