Disappointing results knocks Hulett shares

Operating profit declined by 64 percent

TONGAAT Hulett’s share price tumbled by more than 8 percent on the JSE after the group released a disappointing set of results, negatively impacted by its failure to conclude land transactions within the first six months of its financial year.

The failure had a negative impact on the group’s results for the six months to end September, as operating profit declined by 64 percent to R530 million, down from R1.47 billion compared to last year. The decline in operating profit is largely attributable to land transactions that were not concluded by the end of September.

“Furthermore, local market conditions in the South African and Mozambique sugar operations negatively impacted on both revenue and cane valuations, which reduced operating profit,” the group added.

Going forward it said the challenges facing the South African and Mozambique sugar operations were receiving urgent attention.

“Tongaat Hulett’s existing sugar-cane footprint, under normal growing conditions and on completion of foreseeable planting partnerships, has the potential to produce 1.60 million tons of sugar,” the group said.

The total sugar production in 2018/19 is estimated to be between 1.31 million tons and 1.35 million tons, compared to the 1.17 million tons produced in 2017/18 season. The sugar production is expected to increase even further in the 2019/20 season and is predicted to exceed 1.4 million tons, underpinned by the prospect of normal summer rainfall.

“All sugar operations continue to focus on reducing operating costs through increased production efficiency,” the group said. During the period the sugar operations recorded a combined operating profit of R1.14bn, up from R1.31bn, before cane valuations, while the sugar production increased to 954 000 tons, up from 848 000 tons, including the raw sugar equivalent production in Swaziland.

In South Africa, the group is expecting the sugar production to increase in the 2019/20 season and give a boost to its financial results. It said the sugar industry’s normalised local sales levels of 1.65 million tons is expected in the 2019/20 season.

“The higher duty protection will assist in rebuilding margins of both growers and millers, the full benefit of which, together with further growth in sugar production, will be reflected in the 2019/20 financial results.

In the results, Tongaat also reported a headline loss of R87m compared to headline earnings of R661m compared to last year. Headline loss per share was 74 cents a share, a decline of 113 percent and a loss per share was 94c, a reduction of 115 percent compared to last year. The company did not declare an interim dividend.

Tongaat Hulett shares closed 6.10 percent lower at R61.30 on the JSE on Friday