Sugar processor Tongaat’s profit tumbles 64% hurt by unconcluded land deals

SOUTH AFRICA – Tongaat Hulett, the South African agri-processing business focused on sugarcane and maize processing has posted a 64% decline in operating profit to US$36.86 million in its financial year, reports IOL Business.

Compared to last year when operating profit clicked US$102.2 million, the decline in the period was attributed to land transactions that were not concluded by the end of September.

“Furthermore, local market conditions in the South African and Mozambique sugar operations negatively impacted on both revenue and cane valuations, which reduced operating profit,” said the group.

Total sugar production was estimated to be between 1.31 million tons and 1.35 million tons in the year 2018/19 compared to the 1.17 million tons produced in 2017/18 season.

The company said sugar production is expected to increase even further in the 2019/20 season and is predicted to exceed 1.4 million tons, betting on normal summer rainfall.

Going forward it said the challenges facing the South African and Mozambique sugar operations were receiving urgent attention.

“Tongaat Hulett’s existing sugar-cane footprint, under normal growing conditions and on completion of foreseeable planting partnerships, has the potential to produce 1.60 million tons of sugar,” noted the group.

“All sugar operations continue to focus on reducing operating costs through increased production efficiency.”

During the period the sugar operations recorded a combined operating profit of US$79 million while the sugar production increased to 954 000 tons, up from 848 000 tons, including the raw sugar equivalent production in Swaziland.

In South Africa, the group is expecting the sugar production to increase in the 2019/20 season and give a boost to its financial results.

In 2019/20 season, it expects sugar industry’s normalised local sales to reach 1.65 million tonnes plus a reflection of higher margins from both growers and millers attributed to higher duty protection.

Tongaat also reported a headline loss of US$6.03 million compared to headline earnings of US$45.83 million compared to last year.