Tongaat Hulett whacked by strong rand and low sugar prices

Johannesburg – Agriculture and agri-processing business Tongaat Hulett [JSE: TON] has recorded a 16.1% decrease in operating profits and a 37.2% decrease in headline earnings.

Tongaat Hulett released their results for the year ended March 31, 2018 on Monday morning.

Operating profits decreased from R2.3bn in 2017 to R1.9bn in 2018, a decrease the company attributed to the impact of stronger local currencies on exports and low international sugar prices.

Headline earnings dropped from R982m to R617m.

The company’s revenue also decreased by 5.2% to R16.9bn in 2018, compared to R17.9bn in the previous year. 

Sugar production had, however, partially recovered from the previous two seasons' drought conditions, Tongaat Hulett said. This contributed to an increase in total sugar production, from 1 056 000 tonnes in 2017 to 1 171 000 tonnes in 2018.

Nonetheless, the price of raw sugar in the world market remained under pressure during the year.

South African sugar operations experienced a significant decline in operating profit, one of two regions to do so. In 2017, operating profit stood at R390m, declining by R86m in 2018. This was despite increased production over the same period, to 513 000 tonnes.

"The recovery in production was negated by high volumes of imported sugar into the local market when, over several months, upward revisions to the import duty were not implemented timeously," Tongaat Hulett said.

Mozambican sugar operations’ operating profit also decreased by R149m, to R159m. 

"The strengthening of the Metical against the US dollar put pressure on local prices, and [this] contributed, together with low international prices, to reduced export realisation," Tongaat Hulett said.

Zimbabwean sugar operations managed to increase operating profits by R59m in 2018, to R563m.

The company sold 96 developable hectares in the year ending March 31, 2018, and increased its land conversion and development activities operating profit to R661m.

Tongaat Hulett shares were trading at R84.65 at 12:30 on Monday afternoon, down by 3.55%.

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