Tongaat Hulett’s shares drop after company forecasts a loss this year

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    Sugarcane in farm with blue sky in Thailand

    By Raynold Mhotseka

    Harare – Sugar producer Tongaat Hulett said on Friday it is expecting to report a loss for the full year to March 31, which ultimately send its shares tumbling by over 14 percent as investors reacted to the negative profit forecasts.

    It reported a profit of 617 million rand ($44,03 million) the previous year.

    The company said it is expecting a loss in headline earnings per share (HEPS) in excess of 803 cents and a loss in earnings per share (EPS) in excess of 927 cents. That outlook reflects the impact of the sugar tax in South Africa and a currency crisis in Zimbabwe.

    “It has become clear that the business is facing more challenges and operational performance has continued to decline,” the Group said in a statement.

    Tongaat Hulett’s sugar operations in Zimbabwe comprise the wholly owned Triangle Sugar operation and its 50,3 percent holding in Hippo Valley Estates.

    The Triangle and Hippo Valley Estates sugar mills have a combined installed milling capacity to crush in excess of 4,8 million tons of cane annually and produce over 640 000 tons of sugar. Refining capacity is 140 000 per annum.

    The Zimbabwe operations reported a decline in operating performance in the first six months ended September 30, 2018 which ultimately fed into the Group’s lower performance in that same period.

    The Zimbabwe operations generated an operating profit of R537 million before cane revaluations, down from R580 million realised in the same period in 2017.

    Overall, Tongaat flagged a half year loss headlined by net debt which stood at R7,75 billion ($554 million). The company on Friday said that the high debt levels and interest costs had weighed on its earnings.

    In a trading update, the company said the demand for local sugar in Zimbabwe remains strong and is positioned to maintain the value of sugar in $US terms. In Mozambique, market sales have been impacted by high volumes of imported sugar in the local market while in South Africa local market sales remain under considerable pressure due to the overhang of excess sugar bought in prior to the price increase and a greater than expected impact of the sugar tax on local demand.

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