Durban - Sugar farmers must be smiling. Solid results this week from Africa's heavyweight sugar producer Illovo Sugar and smaller, regional producer Crookes Brothers show a good crop generally sold at good prices.
The outlook, given the ever present and hard to predict variables like the weather and the world sugar price, also seems good.
Seems some of the bosses should be smiling too, but we couldn't find all of them. Illovo MD Don MacLeod and his side-kick were "away", an officious woman told us. Where, and could they be contacted, was met with "just away".
Interesting move by the MD of a company that released results the day before. But knowing MacLeod, one of the nicest and most forthcoming men in the industry, his absence had to be very important. The only fault was not briefing his staff on how to handle media inquiries in his absence.
What we wanted to ask MacLeod was, despite good financial results, whether he was having or did he expect pressure from the food inflation lobby.
Sugar is an important global soft commodity, even more so as major world producers like Brazil and India divert increasing proportions of their crops towards ethanol and synfuel production.
Sugar, like bread, must be a basic in most kitchens. Sharp price increases are likely to raise the ire of already-stretched consumers. What does Illovo plan to do? We'll find out and let you know.
What Illovo does expect on the sugar side is higher cane and sugar production this season. In the past season it produced 5.3 million tons of cane and 1.8 million tons of sugar.
That should result in growth in earnings this year.
Smaller Crookes strongly outpaced Illovo, growing revenue by 17% against Illovo's 8%, and operating profit by 41% versus Illovo's 3%. But these are very different groups and comparisons don't mean much.
Crookes says it expects headline earnings to be at a similar level, despite the anticipated higher crops (it also grows fruit and grain). MD Guy Clarke says this is because higher input costs, notably fertiliser and fuel, will offset a better sugar crop. "We're also receiving indications on the sugar price that are not positive," he says.
RMB Securities, the largest shareholder in Crookes that snaps up more of this illiquid counter whenever it can find stock on the market, has ambitious plans to convert some of Crookes' caneland at Renishaw on the KwaZulu-Natal south coast to residential property.
Crookes has discussed this with RMB, but says for the present the land will be used for sugar. "We've appointed various parties to look at developing the land, but if anything happens it will take a long time. Just re-zoning the land will take two years," Clarke says.
There's an interesting anomaly in the divisional breakdown. Among other things, Crookes also farms crocodiles and cattle. Revenue from crocodile farming/tourism and cattle has declined, but operating profit for both are up.
What's happening? Are the crocs escaping from the farms and eating cattle, maybe the odd tourist as well? That sort of show could certainly grow operating profit.
Nothing as exciting as that. Clarke says the animals have to be valued at year-end, so regardless of what happens after that it's the valuation that affects the bottom-line.
Crookes is under cautionary relating to the sale of some farms and the acquisition of a deciduous fruit farm in the Western Cape. But it also says negotiations are underway to possibly develop 4 000 hectares of sugar cane in the SADC.
Where? It must be a country with preferential quotas to the increasingly lucrative European Union market. Best bets, we would say, are Malawi or Mozambique.
- Fin24.com