Banele Ginindza
SOUTH Africa’s largest sugar producer Tongaat Hullet is on the cusp of entering the electricity generation industry as it expects a “request for proposal” to come through this week for a 20-year commercial licence.
This is as the company makes further inroads into coffee creamer and glucose manufacturing in addition to land conversion which has again given its financial results a much needed boost with the moderate showing of their traditional business, sugarcane production.
Revenue
The company results for March 2015 released yesterday indicated the sugar giant had revenue of R16.155 billion, up 2.8 percent from the R15.716bn realised in 2014.
Operating profit of R2.089bn was 12 percent lower than last year’s R2.374bn.
Higher sales at Tongaat’s starch unit helped counter the effect of the drought.
The company also sold land near Durban for residential development, according to a statement.
Land development “could have a record year” in the next 12 months, it said.
The company announced a final dividend of R2.10 a share, matching last year’s payout as cash flow from operations reached a record R2.5bn.
In an interview with Business Report, chief executive Peter Staude clarified that Tongaat had not been tied in with the programme of individual farmer Charl Senekal, whose plans to build an R800 million, 16.5 megawatt renewable energy plant on his farm were hampered by a community land claim.
Staude said for its part, Tongaat would want to sign a 20-year contract and that commercial process has taken sometime to get through.
“There is a good chance that this week there will be a request for proposal that will involve us as an industry in terms of electricity generation,” he said.
He said more focus would be given to the manufacturing of coffee creamers for which Tongaat had an advantage in that 77 percent of the product is manufactured from a product the company already made out of maize.
In the results summary, Staude said the results for the year were attained in difficult conditions in the sugar industry and with a number of positive achievements by Tongaat Hulett in terms of cost reductions, securing local markets and future cane supplies.
Land conversion and development activities continue to unlock substantial value, albeit with operating profit recognised in the year being below that reported last year.
Price reduction
“Overall, with revenue of more than R16bn, operating profit of R2.089bn was earned, reflecting a 12 percent reduction compared to the previous best of R2.374bn earned last year,” he said.
Revenue in Mozambique and Zimbabwe was impacted by a further substantial reduction in prices (4.7 US cents per pound, with a total impact of some R390m) for exports into the EU.
“World sugar prices declined further, with global stock levels having increased following favourable weather conditions in many sugar production regions of the world,” he said.
Tongaat fell 0.77 percent to R130.13 in Johannesburg trading yesterday. - Additional reporting by Bloomberg