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Send  Print  Share  RSS  Twitter  15 Nov 2010

JSE Results: Tongaat Hulett

Johannesburg, Nov 15 (I-Net Bridge) - Agriculture processing and land development group Tongaat Hulett (TON) on Monday announced diluted headline earnings per share of 468.9 cents for the six months ended September 2010 from 430.6 cents previously.

Diluted earnings per share rose to 472.6 cents from 440.1 cents earlier.

An interim dividend of 110 cents per share was declared.

Revenue increased to 4.724 billion rand from 4.011 billion rand previously, while profit from operations increased to 963 million rand from 873 million rand in 2009.

The group said that the past six months had been characterised by counteractive factors. It said it was starting to benefit from the targeted sugar production growth in Mozambique and Zimbabwe.

"Sugar production in South Africa has been affected by the severe drought in the current season. Sugar realisations in this period have not yet reflected the benefits of the recent surge in world sugar prices brought about by supply and demand dynamics. Exchange rates have been less favourable than in the corresponding six months in 2009," Tongaat Hulett said.

In the current economic climate, the sale of development land remained depressed, the group added.

It said that a third consecutive year of favourable agricultural conditions in South Africa yielded a large maize crop in 2009/10 of 13 million tons from 12 million tons previously, and resulted in local maize prices trading close to world prices. The margin benefit of lower maize costs was partially offset by lower co-product prices and the effect of a firmer rand.

Starch and glucose sales volumes in the local market were similar to the corresponding prior period. Volumes in the alcoholic beverage, coffee creamer and confectionary sectors started recovering while the canning and prepared food sectors reflected lower volumes, Tongaat Hulett said.

The profit from sugar operations in Zimbabwe was 303 million rand in the first half of the financial year, compared to 326 million rand in 2009.

In Mozambique, profit from the sugar operations increased to 163 million rand from 79 million rand previously, the group said.

It said that the South African sugar milling, refining and agriculture operations contributed 47 million rand to profit from 77 million rand earlier.

"The drought conditions in KwaZulu-Natal have led to a reduction in the current sugar crop and higher costs per ton of sugar produced. Sales volumes in the first half of the year grew by 7% together with higher local and export sales realisations.

Almost all of Tongaat Hulett's sugar production is effectively sold in the local market under the Huletts brand," it said.

Tongaat Hulett's land and property development activity is currently focused on value creation for all stakeholders in the growth corridor north of Durban, including the new international air platform at King Shaka, targeting land conversion at the appropriate time and value.

"In the current economic climate, with the sale of development land across most sectors being depressed, few hectares are being converted to development in the higher value prime locations on the coastline and to the west of Durban. Tongaat Hulett owns 13,807 gross hectares for development in South Africa," the group said.

Operating profit from land conversion and development amounted to 97 million rand from 72 million rand with a further 4 million rand in capital profits (2009: R2 million) being realised. During this period, 39 developable hectares (56 gross hectares) were sold in the area north of Durban, it said.

Looking ahead, the group pointed out that regional sugar prices were starting to rise in response to the higher world prices. The demand for raw sugar into the European Union is intensifying.

"Sugar available for export from the current season's production is limited. The drought experienced in South Africa has brought forward the closure of the sugar mills for the 2010/11 season. The mills in Zimbabwe and Mozambique are likely to close in December for start-up in April and May for the 2011/12 season," it said.

"Tongaat Hulett expects to make further progress in growing sugar production towards the target of doubling the 2009/10 production, utilising the available milling capacity, with a simultaneous reduction in unit costs.

"Zimbabwe sugar production in the 2010/11 season is expected to be between 330,000 and 350,000 tons (2009/10: 259,000 tons). In the 2011/12 season, production is expected to increase to between 380,000 and 400,000 tons of sugar, with better cane age and yields on a similar number of hectares being harvested, as well as improved sugar extraction in the mills," said Peter Staude, CEO of Tongaat Hulett.

He said that in Mozambique, sugar production in the 2010/11 season is expected to be between 185,000 and 205,000 tons. In order to improve the ongoing profile and age of the crop, some sugar cane originally targeted for milling in the 2010/11 season will now be milled early in the 2011/12 season.

Production in the 2011/12 season is projected to be between 270,000 and 290,000 tons of sugar, with an increase in hectares harvested, higher cane yields and improved sugar extraction in the mills, the CEO said.

The group said that the drought in KwaZulu-Natal had resulted in the current season's South African sugar production being more than 100,000 tons below the 564,000 tons produced in the 2009/10 season, notwithstanding the additional 2,000 hectares under cane supplying Tongaat Hulett's mills. An additional 6,000 hectares of new cane land is currently being planted.

"Tongaat Hulett's financial results remain sensitive to movements in the Rand, US dollar, Euro and Mozambique Metical. These impact on the revenue streams, costs incurred and the conversion of profits into rands," the group said.


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