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Marketing & Media news

Tongaat Hulett faces pressure from Zimbabwe

Tongaat Hulett's biggest increase in sugar production in the six months to September was from Zimbabwe where the government is trying to enforce its indigenisation policy on the group.
Business Day reported this week that the Zimbabwe government gave Tongaat's operations 14 days to comply with indigenisation laws or risk being kicked out. Tongaat has declined to comment.

Tongaat's Zimbabwe operations produced 372‚000 tons of sugar in the year to March‚ contributing 19% of group revenue and 32% of profit from operations. The operations comprise the Triangle Sugar subsidiary and its 50.3% stake in Hippo Valley Estates.

Kagiso Asset Management head of research Abdul Davids said the indigenisation issue was a concern. He said Kagiso's investment valuation of Tongaat remained "compelling" in spite of a discount on the Zimbabwe businesses.

Davids said the expected 30.5% increase in headline earnings for Tongaat for the six months to September was slightly better than he expected.

The sugar and starch‚ land-management and property development group said in a trading statement on Wednesday headline earnings were expected to rise to R654m in the six months compared with R501m the same period last year.

Earnings growth was largely attributed to surging property and land development sales and better income from sugar operations. The full results are expected to be released later this month.

Headline earnings per share were expected to rise by 27.4% to 604c per share versus 474c a share in the six months to September last year. Revenue was expected to increase by 23% to R7.4bn.

Profit from operations was expected to rise by 25% to R1.3bn compared with R1.045bn the previous half-year.

Profit from land conversion and development operations increased robustly to R244m from R62m‚ with stronger sales mainly in the Cornubia industrial and Umhlanga Ridge areas‚ north of Durban.

Sugar operations were expected to generate operating profit of R969m compared with R857m last year.

The group was benefiting from higher sugar production volumes that also had the effect of lowering unit costs of production. The increase in production in Zimbabwe followed the 42% increase in sugar production in Mozambique the previous season.

Profit from the starch operations came to R147m‚ slightly below R167m last year.


SOURCE

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