“There is a positive outlook for the full year with earnings’ growth expected to continue and the cash-flow momentum expected to be maintained,” the company said.
Tongaat, which operates in six African countries including South Africa, Mozambique and Zimbabwe, reported a 39.8 percent boost in operating profits to R2.3 billion for the year to March. The company said this reflected an improvement in sugar revenue and operating profits under difficult conditions.
The company also swung to R1.27 billion in operating profits from a R15 million loss in the previous year. “This is reflective of more effective import protection dynamics, improved local market prices and higher prices realised for exports, especially into regional African markets and the European Union,” the company said.
Tongaat sugar production rose marginally with 1.05 million tons produced - up from 1.02 million tons last year.
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The company said the production volumes were impacted by low cane yields due to the KwaZulu-Natal drought and poor growing conditions, with low rainfall and restricted irrigation in Mozambique and Zimbabwe, as a result of low dam levels.
It said starch operations had been negatively impacted by maize costs that traded at import parity levels, as a result of the past season’s drought.
In terms of starch and glucose, operations recorded an operating profit of R510 million -down from R658 million in 2016.
“Margins were negatively impacted in the second half of the year by maize costs, which were at import parity levels following the drought of the past season and by lower co-product revenues,” the company said.
In its South African sugar operations, including various downstream activities, produced operating profits of R390 million compared to a loss of R85 million in 2016.
It said domestic sugar production started to recover and amounted to 353000 tons from 323000 tons last year. It said in Mozambique sugar operating profits also surged to a R308 million from a R25 million loss last year.
Sugar production had declined to 198000 tons from 232000 tons last year.
In Zimbabwe, sugar operating profits increased to R50 million from R9 million last year, and sugar production rose by 10 percent to 454000 tons from 412000 tons last year.
Wandile Sihlobo, an agricultural economist and head of agribusiness research at the Agricultural Business Chamber (Agbiz) in South Africa, said that Tongaat would need three years to recover from the severe drought.
Tongaat Hulett shares rose 2.16 percent on the JSE to close at R118.