Tongaat grows after big year

2008-02-25 00:00

The giant KZN-based agri-processing group Tongaat Hulett continued to grow profit from its operations during a challenging and eventful 2007, recording a 15% rise in profit to R838 million (2006: R726 million).

Tongaat Hulett was involved in a number of major initiatives in 2007, including the conclusion of a partnership with Ayavuna Investments and Sangena Holdings, its Broad-Based Black Economic Empowerment (BBBEE) anchor partners and the completion of share buy-back transactions.

Pietermaritzburg-based exporter Hulamin was also unbundled and listed on the JSE in 2007.

"We’re obviously pleased with the results and at the same time we’re quite bullish about the prospects of all our businesses going forward," Peter Staude, Tongaat Hulett CEO,

told The Witness yesterday.

A final dividend of 160 cents per share was declared, bringing the total annual dividend to 310 cents per share for the "new" Tongaat Hulett.

Overall, attributable net profit totalled R3,4 billion, while headline earnings came in at R61 million.

While Tongaat’s development arm continued to boast impressive gains and is fast becoming a growing contributor to the group’s overall success, Staude stressed that the group sold about 83 ha of land last year (out of a potential 14 000 ha of prime development land possessed by the group).

"When one looks at land that has property development potential, one must realise that conversion [from agricultural land] is a long-term process."

Operating profit from property developments increased by 32% to R428 million (2006: R325 million) and the property arm realised a capital profit of R48 million (2006: R26 million).

Agriculture continued to come under some pressure, with profit from sugar operations coming in at R360 million (2006: R356 million), characterised by lower sugar production and a lower effective world sugar price.

Interestingly, the group’s five operations in Mozambique, Zimbabwe and Swaziland contributed more significantly to sugar profits than in previous years.

The non-South African operations contributed about 49% or R176 million (2006: 27% or R99 million) to profit from operations.

Staude expects the sugar business to perform better in the second half of 2008, given the fact that their sugar operations in South Africa are only running at about 65% of their capacity.

He noted that the company has many opportunities to expand sugar production over the next 12 to 18 months, adding that they will also take advantage of opportunities related to other products, such as molasses.

A reasonable 2008 sugar crop in South Africa and higher international sugar prices are also expected to lift the sugar business.

While profit from starch operations came in at R105 million in 2007 (2006: R96 million), margins remained under pressure.

However, Staude said the higher local maize price is expected to favour their starch operation during the second half of this year.

kavith@witness.co.za

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