Harare – Tongaat Hullet’s Zimbabwe’s operations have reported a decline in operating performance in the first six months of the year, recorded in its calender year as half year 2018.
The underperformance feeds into broader group’s lower performance for the half which has caused some adverse investor reaction on the JSE.
In its half year results published recently Tongaat Hullet said its Zimbabwe sugar operations generated an operating profit of R537 million before cane revaluations for the six months ended September 30, 2018 which compared to an operating profit of R580 million realised in 2017.
Tongaat did not shed more light on the operation’s performance decline. Hippo which is listed on the ZSE is due to release its results and more light is likely to be shed then.
Tongaat Hulett’s sugar operations in Zimbabwe comprise the wholly owned Triangle Sugar operation and its 50.3 percent holding in Hippo Valley Estates.
Tongaat said increased water availability and the accelerated sugarcane root replanting programme have improved cane yields and resulted in sugar production of 306 000 tons compared to 280 000 tons the prior year.
It said strong growth in local market sugar sales continued. Liquidity constraints in the local market have resulted in considerable cost-push inflationary pressure. After adjusting for cane valuations, operating profit was R319 million compared to R358 million last year.”
Elsewhere the Group said it encountered significant challenges during the six months ended 30 September 2018.
Operating profit for the period of R530 million was 64 percent below the R1.71 billion earned in the six months ended 30 September 2017.
Tongaat said a dividend payment of R114 million was received from Triangle in Zimbabwe, bringing the total dividend received since the beginning of September 2017 to R372 million and a process to remit a further dividend from Zimbabwe is currently underway.
Going forward the Group said, the Tokwe-Mukosi dam has secured the availability of bulk water for irrigation for the next two years.
“The additional production will support higher export sales into regional deficit markets at premium prices. Recently, a favourable outcome was reached with the government providing Tongaat Hulett with security of tenure over its assets in Zimbabwe and outlook on operations remains positive.”
In the period under review, the Company said operating profit from the starch and glucose operation benefitted from lower maize costs.
Additionally, Tongaat said the difficult local market conditions experienced by the sugar operations in South Africa and Mozambique during the second half of 2017/18 continued into the first half of 2018/19, with a resultant negative impact on both revenue and cane valuations.
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