Tongaat Hulett’s sugar profits fall to US$65.55m in full-year results

SOUTH AFRICA – The sugar and agri-processing company Tongaat Hulett’s operating profit from various sugar operations fell from US$82.7 million to US$65.55 million in the full-year ended March 2018, reported the Herald.

Profit calculations involved all of its operations including in neighbouring countries Zimbabwe, Mozambique and Swaziland.

The sugar producer blamed the slump in performance on import duties which were inappropriately applied by authorities forcing it to export excess production.

However, export earnings were dipped by lower international sugar prices and the stronger rand and the company expects the trend to continue into the rest of the year.

In a trading update, the company said its full-year headline earnings would drop more than one-third, as lower sugar prices, a stronger rand and higher imports weighed on the firm.

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As South Africa continue to recede from the 2015/16 drought, manufacturers are slowly witnessing improved margins affected by diminished traded volumes in the commodity markets.

As a result, sugar output increased marginally to 1.171million tonnes in the year, from 1.056-million tonnes a year-earlier.

The starch and glucose operation realised an operating profit of US$44.79 million, which was slightly higher than the US$39.94 million in the matching period a year ago and benefiting from a more competitive maize cost.

In Zimbabwe, sugar operations benefited from growth in local demand, and improvement in sugarcane crop harvested while South Africa’s earnings were weighed down by high volumes of imported sugar in the local market, upwards revisions of import duty were not revised and there was a period during which zero duty was erroneously applied.

“The displaced locally-produced sugar was exported in the latter part of the year and was impacted by lower world sugar prices and a stronger rand,” Tongaat said in a statement.

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“The South African sugar industry has taken measures to regain its local market share by ensuring local prices are more responsive to international markets and by applying for an increase in the US dollar-based referent priced used to calculate the tariff.”

Sugar market in Mozambique was affected by the strengthening of the Metical against the US dollar limiting the ability of the industry to increase local prices, also limited by lower international prices that affected exports, said the company.

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