Late rain to help Tongaat Hulett
CURRENT heavy rains that are pounding Zimbabwe have breathed fresh impetus into Tongaat Hulett’s Zimbabwe operations, although the benefits will only likely accrue to start next year.
Tongaat Hulett controls Zimbabwe Stock Exchange (ZSE) listed Hippo Valley and also has a significant stake in Triangle Sugar Corporation, also in Zimbabwe.
In the interim period to the end of September 2016, Tongaat Hulett said operating profit from its Zimbabwe operations amounted to R251 million, with production and sales volumes “relatively consistent with the prior year”.
Executives at the company are now expecting “a higher proportion of production” in the second half period to the end of March this year. They said that “the focus for 2017 is to recover from the recent drought”.
“Sugar cane requires at least 12 months to mature and as such the full benefits of the current rains will be realised in the 2018/19 harvest season,” Adelaide Chikunguru, the corporate affairs executive for Tongaat Hulett’s Zimbabwe operations said.
Hippo Valley and Triangle had been badly affected by dry weather that hit the region in the past year. While the rains have wreaked havoc for other crop growers such as maize – with the army worm destroying crops – it has been a boon for Tongaat, officials confirmed.
“The major dams supplying irrigation water to the sugar industry continue to receive significant inflows on the back of the current rainfall conditions. This development has significantly increased the security of water required by the industry,” said Chikunguru.
Hippo Valley is one of the resilient and attractive stocks on the ZSE and it also exports into the EU under shipment quotas.
In a bid to shore up its irrigation capacity, Hippo Valley had availed about $6.6 million (R89.5m) to help with completion of the Tokwe Mukorsi Dam last year. Completion of the dam will provide future certainty regarding irrigation for the sugar estates.
Hippo Valley managing director, Sydney Mtsambiwa, said: “Tongaat Hulett availed foreign currency from its export proceeds to enable a critical stage of the dam construction to be completed.”
Zimbabwe and Mozambique have moved to impose import restrictions on sugar. However, Tongaat Hulett is facing challenges with the sweetened sugar tax that could lead to suppressed demand for sugar products.