Things are looking up for Tongaat’s operations in Zim
EARNINGS and volumes in Tongaat Hulett’s Zimbabwean listed unit, Hippo Valley, surged in the year to end March 2017, with operating profit doubling to $13.4 million (R171.88m) following an income surge that saw revenues rise from $117m to $148m.
Tongaat Hulett also has an interest in non-listed Triangle Sugar Corporation, another sugar producer in Zimbabwe.
The South African agro processing firm’s units in Zimbabwe are expecting further growth in the year to March 2018, following sufficient rains that have boosted prospects.
In the year to the end of March 2017, Hippo Valley saw profits for the year mount to $7.7m from a loss of $8.8m in the previous comparative period.
Sugar production surged to 229 000 tons against 204 000 tons the previous year.
“This is reflective of an improvement in both sugar production and sales volumes and the corresponding increase in revenue,” the company said yesterday.
Despite attributable profits for the period amounting to 4 cents per share compared to a loss of 4.6c per share in 2016, Hippo Valley did not declare a dividend for the period.
It cited “cash requirements for crop re-stablishment” and high levels of borrowings expected for the greater part of the year” for the decision not to declare a dividend.
The company closed the year with a net debt position of about $7.9m against average interest rates on its borrowings of about 7.5 percent.
About $4.4m in finance costs has been incurred during the year.
The improved earnings for the company stem from rising deliveries from private farmers as well as improved cane yields during the period.
About 701 000 tons of sugar were delivered by the private farmers against 631 000 tons in the prior year period.
“Cane plough out and replanting programmes which had been suspended in October 2015 due to low dam levels resumed in February 2017 after the industry dams had gained sufficient irrigation following good rainfall received.
“A total of 866 hectares have been replanted as at March 31, 2017. There has been a 6.8 percent improvement in the caneto-sugar ratio,” Hippo Valley said.
The company also benefited from declining low priced imports of sugar products after the government instituted import restrictions last year.
Hippo Valley sold as much as 301 000 tons of its sugar produce on the domestic market and this represented a 4 percent increase and also came against the backdrop of liquidity challenges in the country, executives said.
The export market has also been lucrative for Hippo Valley, with European and regional markets seeing a rise in both volumes and prices of about 20 percent.
“The favourable sales mix in the domestic market combined with the high prices realised on export sales resulted in an average price for the season of $578 per ton.
“The continued interventions by the government to protect the industry against unfair competition from imports has continued to yield positive results.”
Tongaat Hulett operations in Zimbabwe have had a surge in profit in the year to the end of March.