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Tongaat Sees Higher Sugar Revenue On Import-Protection Boost

Published on May 30 2016 9:40 AM in Supply Chain tagged: Sugar / South Africa / Tongaat

Tongaat Sees Higher Sugar Revenue On Import-Protection Boost

Tongaat Hulett Ltd. expects to benefit from higher sales and prices spurred by import-protection measures in countries it operates in as South Africa’s biggest sugar producer by market value plans to continue a cost-cutting drive after profit declined.

South Africa raised the dollar-based reference price of sugar, meaning importers pay tariffs on shipments, the company said in a statement on Monday. Protection measures were also implemented in Zimbabwe and Mozambique. While raw-sugar futures in Chicago have climbed 15 percent this year, they’re still down 18 percent since reaching a record in February 2011.

“The next year should see Tongaat Hulett benefit substantially from improved local sugar-market revenues following the import protection measures,” said the company, which has cut 1.39 billion rand ($88 million) in costs after inflation over the past three years. “Unit costs of sugar production will reduce further” as the producer cuts man-hours through attrition and examines expenses such as services, transport, marketing and wages.

Sugar-production volumes fell 22 percent to 1.02 million metric tons in the year ended March 31 from 12 months earlier because of the worst drought in more than a century in South Africa, as well as low rainfall and restricted irrigation in Mozambique and Zimbabwe. Tongaat forecast output will climb as much as 12 percent to 1.15 million tons in the year to March, even as dryness continues to affect harvests.

Headline earnings, which include one-time items, fell 17 percent to 783 million rand and the dividend dropped 40 percent to 2.30 rand a share.

The stock declined 0.2 percent to 112.84 rand at 9:39 a.m. in Johannesburg, giving the company a market value of 15.2 billion rand.

News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.

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