Sugar operations under pressure

Operating profit from Tongaat Hulett’s various sugar operations dropped to R684 million from R967 million in the half-year to September, weighed down by increased sugar imports into Southern Africa and lower international sugar prices.

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However, a record performance from the company’s land developments and starch operations helped the business lift overall revenue by 6% to R7,854 billion and operating profit by 7% to R1,381 billion.

Tongaat Hulett CEO Peter Staude said at the release of the company’s half-year results that imports into SA in October 2013 were equivalent to the production of approximately three sugar mills – a fact which threatened rural communities and emerging farmers.

The company’s drive to cut costs to counteract lower sugar prices was gathering momentum. Costs in Zimbabwe were expected to be R290 million lower than last year and R49 million lower in Mozambique.

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“In SA, with production volumes increasing by some 25%, milling costs alone are expected to be R24 million below last year. Unit costs of sugar production will also continue to benefit from further growth in volumes and better yields, as milling costs and many of the agricultural costs per hectare are mostly fixed,” said Staude.