Tongaat Hulett expects large rise in production

Chief executive Peter Staude said the cane quantity and quality and the mill performances thus far underpinned the early season forecast of an increase in sugar production of about 114‚000 tons to take the total for the year to 1.368m tons.

However‚ the group said that downward pressure on sugar prices continued. "In real terms‚ the world price was at its lowest in many years. In regional markets‚ it was also experiencing a period of pressure on selling prices and from imports‚ as a result of the low world price," Staude said.

"The updated estimate of 1.368m tons is in line with our estimates for the current year‚ with the SA sugar business expected to contribute to the increased sugar production and also show a significant improvement in profitability‚" said Abdul Davids‚ head of research at Kagiso Asset Management.

"We expect the currency weakness to offset some of the declines in the world sugar price‚" he said.

In SA‚ the sugar industry had lodged an application to increase import duties and export pricing to date showed a reduction of about US$0.05 per pound compared with last year.

Staude said the price levels that the business was achieving from Mozambique and Zimbabwe through exports to the European Union were on average about US$0.06 per pound lower than the levels that had prevailed in the last two years.

"The business is currently focusing a great deal of attention on achieving the best possible sugar prices‚ combating import competition and establishing a mix of sugar flow destinations‚" he said.

The group said in the year to date exchange rates had helped its performance. The company said it was reviewing the goods and services it purchases‚ worth about R5bn a year, with a view to eliminating‚ reducing or postponing these costs‚ wherever possible.