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Johannesburg - The results of Tongaat Hulett [JSE:TON] for the year ended March 31 2015 were attained in difficult conditions in the sugar industry and with a number of positive achievements in terms of cost reductions, securing local markets and future cane supplies, said CEO Peter Staude on Monday.
Revenue of R16 155 was up 2.8%, operating profit of R2 089bn was down 12% on the 2014 and headline earnings of R945m was down 14.6%.
The annual dividend of 380 cents per share is up 5.6% on the previous period.
According to Staude the starch operations again delivered a strong performance. Land conversion and development activities continue to unlock substantial value, although with operating profit recognised in the year being below that reported last year.
The benefit of cost reductions over the past two years, increased local market sales in Zimbabwe, together with the negative cane valuation effect recorded in the income statement last year not being repeated this year, were offset by a reduction in sugar production volumes and lower prices.
The South African sugar operations, including the agriculture, milling, refining and various downstream activities saw sugar production this season reduce to 541 000 tonnes due to low rainfall in KwaZulu-Natal (KZN).
The impact of the dry conditions has been partially mitigated by 11 554 hectares of new cane developments that were harvested for the first time this year.
Looking ahead
Tongaat Hulett has substantially enhanced its strategic positioning over the past few years and expects to continue to do so, focusing on multiple strategic thrusts, all with a positive impact on earnings and cash flow, according to Staude.
"The sustainability of farmers in the sugar industry throughout many parts of the world is under significant pressure at the low current world price and taking into account the substantial input cost increases over the past decade," said Staude.
"This, together with possible variable weather conditions, is likely to exert downward pressure on global sugar production levels. Global sugar consumption is predicted to continue to grow at a rate of some 2% per annum, with most of this growth coming from low per capita consumption developing countries."
There are predictions for sugar demand growth in southern and eastern Africa of some 30% over the next six years.
"The business is in a good position to benefit from multiple actions across all of its well-grounded strategic thrusts, with its footprint in six SADC countries, its ability to process both sugar cane and maize, electricity generation and ethanol opportunities and increased momentum in land conversion," said Staude.
