Tongaat’s shares rise 40% on forecast
TONGAAT Hulett shares rose nearly 4 percent on Friday after the company said its anticipated sugar production would improve in the next two years following good summer rains.
It said that it expected maize crop production to increase 78.21 percent to 13.9 million tons this year, compared to the last season following a difficult period characterised by the worst drought to hit southern Africa in decades. The shares closed 3.8 percent higher on the JSE at R127.99.
The group said good rains that fell between May and August had boosted its harvest expectation. “Tongaat Hulett’s sugar production is expected to grow significantly over the next two years, in the recovery from drought conditions of the past two years,” the company said. “The starch operations will benefit from the recovery in the South African maize crop, which is currently estimated at 13.9 million tons compared to the previous crop of 7.8 million tons.”
The group said the production estimates were in line with the expectations presented in November 2016. It said sugar production for 2017/18 would increase between 500 000 and 600 000 tons, up from 353 000 tons reported in 2016/17 season, although the figure would be lower than the 634 000 tons recorded during the peak season of 2013/14.
Tongaat see the increased availability of maize would contribute to a softening of co-product prices and margin impact in the first quarter of the next financial year.
“However, the strengthening exchange rate will partially offset some of the benefit of lower priced maize on the non-formula based customers.”
The group said it expected its starch and glucose operation to benefit from lower maize prices from the second quarter in the next financial year. The price of white maize has recovered 58.87 percent from R3 209 a ton reported a year ago to R2 020 a ton on Friday’s price levels.
Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, said the production was good as it would allow South Africa to export maize again.
“With South Africa’s maize production set to reach 13.92 million tons, the country could regain its status as a net exporter in the 2017/18 marketing season,” he said.
Sihlobo said the total maize export was forecast at 2.5 million tons, more than double the previous season’s export volume.