Source: Tongaat banks on Tokwe-Mukorsi Dam – DailyNews Live

BUSINESS WRITER      31 May 2017

HARARE – Zimbabwe’s largest sugar producer, Tongaat Hulett (Tongaat), is
banking on the newly-completed Tokwe-Mukorsi Dam to increase production.

“The recent completion in Zimbabwe of the Tokwe-Mukorsi Dam….will
diversify the water catchment area and provide increased stability in
future water supply,” the company said.

The $300 million dam – with a capacity to hold 1,8 billion cubic meters of
water – was early this month commissioned by President Robert Mugabe.

Tokwe-Mukorsi Dam, Zimbabwe’s largest inland water body, is also expected
to create thousands of jobs in upstream and downstream of the agriculture
sector.

Meanwhile, Tongaat’s profit from local operations increased to $38 million
in the full year to March 2017 compared to $692 307 registered in the
prior comparable period.

In the period under review, the group’s sugar production in Zimbabwe
jumped 10 percent from 412 000 tonnes in 2016 to 454 000 tonnes this year.

“Local market sales volumes and mix improved due to there being lower
imports into the market. Exports increased on the back of higher
production prices realised into the European Union and regional markets
were some 20 percent above the previous year,” Tongaat said.

The South Africa-headquartered firm further indicated that it made upward
adjustments to the milling portion with the commensurate recovery for
sugar milling.

“There is a positive outlook for the full year with earnings’ growth
expected to continue and the cash-flow momentum expected to be
maintained,” the company said.

Tongaat, which operates in six African countries including South Africa,
Mozambique and Zimbabwe, reported a 39,8 percent boost in operating
profits to R2,3 billion for the year to March.

The company said this reflected an improvement in sugar revenue and
operating profits under difficult conditions.

The company also swung to R1,27 billion in operating profits from a R15
million loss in the previous year.

“This is reflective of more effective import protection dynamics, improved
local market prices and higher prices realised for exports, especially
into regional African markets and the European Union,” the company said.

The group’s sugar production rose marginally with 1,05 million tonnes
produced – up from 1,02 million tonnes last year.

Tongaat said the production volumes were impacted by low cane yields due
to the KwaZulu-Natal drought and poor growing conditions, with low
rainfall and restricted irrigation in Mozambique and Zimbabwe, as a result
of low dam levels.

It said starch operations had been negatively impacted by maize costs that
traded at import parity levels, as a result of the past season’s drought.

In terms of starch and glucose, operations recorded an operating profit of
R510 million – down from R658 million in 2016.

“Margins were negatively impacted in the second half of the year by maize
costs, which were at import parity levels following the drought of the
past season and by lower co-product revenues,” the company said.

In its South African sugar operations, including various downstream
activities, produced operating profits of R390 million compared to a loss
of R85 million in 2016.

It said South African sugar production started to recover and amounted to
353 000 tonnes from 323 000 tonnes last year.

The company noted that in Mozambique sugar operating profits also surged
to a R308 million from a R25 million loss last year.

Sugar production had declined to 198 000 tonnes from 232 000 tonnes last
year.