Tongaat Hulett thrives in difficult times

While 2008 was a shocking year for cane farmers and the world economy, agriprocessing company Tongaat Hulett’s profits held up well.

Read more

- Advertisement -

Operating profit for the year ending 31 December 2008 was up 35% to R1,1 billion, compared to R838 million in 2007. Revenue increased 11% to R7,1 billion, while nett debt increased to R2,36 billion, due to significant capital expenditure mainly on investment in sugar cane. In 2007 it was R991 million.
CEO Peter Staude said the company had the advantage of trading in market sectors which remained relatively stable during world turbulence, as demand was driven by population growth and not economic wealth. The weaker rand was also in their favour.
A segmental analysis of contribution to profit shows starch operations contributed R240 million (2007: R105 million), land and property developments contributed R263 million (2007: R428 million), centrally accounted and consolidation items amounted to R23 million and sugar operations generated R606 million (2007: R360 million).
South African agriculture, milling and refining contributed R73 million to profit (2007: R46 million) through 644 000t sugar (2007: 604 000t). Export volumes from South Africa were 210 000t (2007: 245 000t).
The average sugar price Tongaat Hulett was able to extract was US,12/pound (R1,25) at an average exchange rate of R8,05/US (2007: R7,12/US).
In Swaziland, operating profits for Tambankulu Estates increased by 26% to R44 million. Dividends of R35 million (2007: R53 million) were received from Triangle Sugar in Zimbabwe under extremely difficult circumstances. Sugar production in Zimbabwe was down to 298 000t from 349 000t in 2007, way off the peak potential of 600 000t/year of sugar. The Mozambique operations’ contribution to profit increased to R250 million (2007: R88 million).
On the maize side, the group’s South African crop increased to 12 million tons (2007: 7 million tons), with the larger area planted and good weather conditions resulting in local maize prices trading close to world prices from April 2008.
Profit from the starch and glucose operations grew to R240 million (2007: R105 million), with international prices improving as demand for agricultural commodities increased with changing dietary habits.
Profit from property deals was considerably down, but the group still has a substantial portfolio. Sales in the short term are expected to come from the growth corridor north of Durban, due to the anticipated addition of La Mercy International Airport, inland of Umhlanga and Umdloti.
The downstream sugar value-added activities contributed R204 million to profit (2007: R138 million). Voermol, the downstream animal feeds operation, increased profits with improved margins.
Generating power from bagasse remained a key opportunity for the group. Last year in August it announced Tongaat Hulett’s intention to spend about R7 billion on developing cogeneration projects at four mills, three on the KwaZulu-Natal North Coast and one in Xinavane in Mozambique. These would generate up to 266MW of power.
The environmental impact assessment for the first cogeneration plant at Felixton Mill (KZN) is expected to be completed by July and Tongaat Hulett hopes it will be linked to the national grid by 2010.
Meanwhile sugar farmers, who had a tough 2008, feel they should benefit from the products produced downstream from cane like ethanol and fibre. Currently, the only product the miller buys from the farmer is sugar. – Robyn Joubert