Sugar producer Tongaat Hulett says it has managed to grow sugar revenue and operating profit under difficult circumstances.
On Monday, the company said revenue for the 6 months to September gained 11.7 percent to R8.5 billion, while operating profit gained to R1.35 billion, an increase of 5.8 percent.
Headline earnings of R631 million were up 4 percent, while operating cash flow, after working capital, was R1 billion, up from R266 million a year ago. The company, however, declared an interim dividend of 100 cents per share, down from 170c last year.
Tongaat says its results show an improvement in sugar revenue and operating profit under difficult conditions. The starch operations delivered a strong performance.
However, sales concluded in land conversion and developments in these six months were lower than in recent periods.
The starch and glucose operation again increased operating profit, this time to R306 million from R281 million thanks to a better sales mix.
The sugar producer added land conversion and development activities recorded operating profit of R269 million, down from R576 million.
Its various sugar operations generated operating profit of R825 million, up from R477 million, which Tongaat says reflects improved local market prices, more effective import protection dynamics in the countries where Tongaat Hulett produces sugar and higher international prices, including for exports into regional African markets and the EU.
However, overall volumes are still being impacted by lower cane yields due to the severe drought in KwaZulu-Natal and poor growing conditions with low rainfall and restricted irrigation levels in Mozambique and Zimbabwe as a result of low dam levels, it says.
The South African sugar operations, including agriculture, milling, refining and various downstream activities produced operating profit of R306 million, up from R123 million.
“Sugar production is starting to recover and Tongaat Hulett has increased its share of the total industry production …and local market sales. The local market has seen more effective import protection and better pricing dynamics.”
Mozambique and Zimbabwe also reported gains in the sugar production units.
The sugar producer expects to continue to benefit substantially from improved local sugar market revenues and will continue to reduce costs.