Tongaat Hulett suffers losses due to sugar production decline in Zimbabwe

Tongaat Hulett operates in Zimbabwe’s south east Lowveld, where it grows the crop and runs two mills at Triangle and Hippo Valley estates. It wholly owns the Triangle Sugar operation and holds 50,3% in Hippo Valley.

Sugar production, said the company in its latest financials for the year ended 31 March, declined to 204 000t, down from 228 000t in the 2014/2015 trading period. The company recorded a loss of US$8,5 million (R127,5 million), down from a profit of US$7,3 million (R109 million) last year.

"The results were attained at the back of a substantial reduction in sugar production volume as a result of poor growing conditions, further compounded by the nature of sugar milling and cane growing being such that there is a high proportion of fixed costs. The adverse economic conditions persisted in the period under review, characterised by deflationary pressures, weak aggregate demand compounded by severe liquidity challenges and declining global commodity prices," said the group said in a statement accompanying the financials.

During the season, Tongaat Hulett crushed 1 660 000t of cane compared to 1 746 000 last year. Production for the year under review was down by 11% because of a 15% drop in cane deliveries and a 6,4% decline in cane-to-sugar ratio resulting from poor cane quality amid the drought.

"The 2015/2016 cane plough out and replanting programme was suspended at the end of October 2015 after the company had ploughed out and replanted 2 592ha due to low dam levels and consequent inadequate water for irrigation. Furthermore, some 669ha of fallow land that was planned for replanting over the January to March period was left fallow due to poor rainfall during the 2015/16 season," said Tongaat Hulett.

Exports dropped by 45% from 179 000t in the 2014/14 season to 98 000t this season. This affected revenues as well. Of this season’s exports, 9 000t went to African markets, 74 000t to Europe and 15 000 to the US.

The company praised the government’s sugar import controls that have reduced competition and helped preserve jobs. “The domestic market remains the primary area of focus with increasing protection from government given the high rural job impact of the industry," said Tongaat Hulett.

Production in the forthcoming season will be affected by low water levels at dams given the poor rainfall in the 2015/2016 season, but the company is pinning its hopes on the completion, expected later this year, of what will be Zimbabwe’s largest dam, the Tokwe-Mukorsi in Masvingo.

The US$200 million (R3 billion) reservoir will hold 1, 8 billion cubic metres of water, much of which will be used to irrigate existing sugarcane plantations in Triangle and Hippo Valley and new ones to be established around the dam.