Tongaat pins hope on economic recovery

Source: Tongaat pins hope on economic recovery – DailyNews Live January 12, 2017

HARARE – Tongaat Hulett (Tongaat) is pinning hopes on Zimbabwe’s economic
recovery to boost its operations in the impoverished southern African
country.

The group’s chief executive Peter Staude said improved economic activities
in the country will result in increased sugar consumption.

“Growth is expected in consumption per capita, off a low base,
particularly in Mozambique and partly in Zimbabwe, supported by
distribution, industrialisation and marketing initiatives,” he said.

This comes as the company’s production and sales volumes in the first half
of 2016 were relatively consistent with the prior year, notwithstanding a
later start to the current season and a higher proportion of production
expected in the second half of the current year.

Staude noted that the first half of the current year has also seen a
higher level of out-grower cane payments compared to the first half of
last year.

“In addition, the division of proceeds in favour of the growers is out of
line with the region, not taking cognisance of the full capital employed
in the milling operations and is not sustainable,” he added.

The South Africa-headquartered sugar producer, with operations in
Botswana, Namibia Mozambique, Swaziland and Zimbabwe, is expecting to
benefit substantially from improved local sugar market revenues with the
improved import protection measures and better export revenues. Actions to
reduce costs continue.

Staude said total sugar production in 2016/17 would continue to be
impacted by the effects of the drought in KwaZulu-Natal and irrigation
having been reduced as a mitigation measure against poor rainfall and low
dam levels in Zimbabwe, Mozambique and Swaziland.

“The estimate for sugar production in total for 2016/17 is between 1 000
000 and 1 100 000 tonnes, compared to 1 023 000 tonnes last year,” he
said, adding that the weather forecast for the coming summer in the key
growing and catchment areas was for average to above average rainfall.

The Tongaat boss noted that given ongoing average to above average
rainfall and a recovery of key dam levels, total sugar production is
expected to recover over two years, to between some 1 200 000 and 1 300
000 tonnes in 2017/18 and to between some 1 500 000 and 1 600 000 tonnes
in 2018/19.

“Tongaat Hulett’s marginal cost of additional sugar production is
typically $110 per tonne from own cane and $340 per tonne from third party
cane. Realisations, ex-mill, based on current regional and EU market
dynamics are above $420 per tonne,” Staude said.