Sugar output sours, decline projected

December 1, 2015 

THE sugar industry is projecting a decline in output due to lower cane yields by both the sugar milling estates and private farmers.

BY VICTORIA MTOMBA

Hippo Valley Estates Limited chairperson, Murray Munro, said lower consumer spending, compounded by tighter liquidity challenges, high unemployment levels, coupled with depressed sugar prices in the export markets negatively impacted the company.

“The sugar industry is forecasting a decrease in sugar production of between 410 000 tonnes and 445 000 tonnes for the full year (2014: 445 000 tonnes), as a results of lower cane yields by both the sugar milling estates and the private farmers.
Production levels in 2016/17 will largely depend on the extent of rainfall received in the catchment area of the industry’s supply dams. The quantum of irrigation is being reduced as a mitigation measure against potential poor rainfall in the coming months,” he said.

The company posted a $2,3 million profit after tax for the six months ended September 30, 2015, a decline from $9m recorded same period last year due to a difficult trading conditions.

“Government interventions aimed at protecting the sugar industry from illegal imports of sugar at dumped world market prices, together with the company’s continued cost reduction drive helped in mitigating the full impact of these negative factors,” he said.

Revenue for the period under review stood at $70,2m compared to $82,5m same period last year.

During the period under review, cane deliveries for the company were 754 254 tonnes an increase of 4% from 723 158 tonnes due to an early start to the milling season compared to the previous season.

Operating profit for the half year stood at $6m, lower than $15,2m recorded same period last year.

“Domestic market sales volume levels have been maintained despite the challenges local economic conditions. This was more than off-set by lower export volumes, due to the timing of shipments between the first and second halves of the year and lower export prices into the European Union,” Munro said.

Total cane deliveries to the mill amounted to 1 303 899 tonnes compared to 1 293 083 tonnes delivered in the same period last year, an increase of 1%. 

Sugar production for the six-month period amounted to 157 877 tonnes compared to 167 425 tonnes for the same period last year, indicating a 6% decline due to low mill recovery ratios as a consequences of harvesting relatively young cane below the optimal age of 12 months.