May 26, 2015
Sugaronline | http://goo.gl/smXJIW
Tongaat Hulett Ltd. and Illovo Sugar Ltd., Africa's two largest producers of the commodity, said a drought in South Africa and a low international sugar price caused earnings to drop in the last financial year, according to Bloomberg.
Tongaat's operating profit declined 12% to ZAR2.1 billion (US$176 million) in the year through March 31, it said in a statement Monday, while Illovo's earnings by that measure fell by the same margin to ZAR1.7 billion, it said.
Tongaat offset South Africa's worst drought since 1992 by boosting sales from its starch operations and continued selling land near Durban for residential development. Illovo said record sugar production in Zambia and Mozambique helped make up for the shortfall in the continent's second-largest economy.
Sugar has dropped 28% over the past year to US$0.12 a pound, which is 65% lower than its peak in 2011.
Farmers are "under pressure" from low prices, especially "taking into account the substantial input cost increases over the past decade," Tongaat said in the statement. "This, together with possible variable weather conditions, is likely to exert downward pressure on global sugar production levels."
Tongaat's headline earnings per share declined 17% to ZAR8.26 while Illovo's fell 7.7% to ZAR1.79.
Tongaat's final dividend is ZAR2.10 a share, matching last year's payout. Illovo declared a capital reduction distribution of ZAR0.53 a share.
Sugar output by Tongaat will climb to about 1.82 million tonnes in the year to March 2019 from 1.3 million tonnes now should weather conditions be normal, it said.
"Difficult market and production conditions" mean Illovo sees headline earnings falling as much as 45% in the year to March 2016, it said.