| Fri 29 Jul 2011, 9:22 | | TON - Tongaat Hulett - AGM - Update by the CEO of Tongaat Hulett |
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TON - Tongaat Hulett - AGM - Update by the CEO of Tongaat Hulett
Tongaat Hulett Limited
Registration number (1892/000610/06)
Share code: TON
ISIN ZAE000096541
Annual General Meeting - Update by the CEO of Tongaat Hulett
At today`s Annual General Meeting, Tongaat Hulett`s Chief Executive Officer,
Peter Staude, gave the following update on the operations and trading
conditions:
"One of Tongaat Hulett`s key objectives is to fully utilise its installed
milling capacity of some 2 million tons of sugar with a simultaneous reduction
in unit costs. In recent years, sugar production has averaged some 1 million
tons. We continue to make good progress towards this target, in all three
countries where we produce sugar.
The strategy to increase cane supply in South Africa is focused on increasing
Tongaat Hulett`s influence in cane development through leasing additional land
and collaborating with the government to rehabilitate cane supply on its land
and land reform farms that have gone out of cane. The recent rains are
encouraging for the spring plantings and the preparations needed to have more
than 8 000 hectares of additional cane planted in this season in the catchment
area of Tongaat Hulett`s South African mills are well advanced. This follows the
additional 9 696 hectares planted over the past two years. As anticipated, the
season thus far has seen cane with relatively high fibre and low sucrose
content, mainly as a result of the variable growing conditions during the last
summer. Some 1 400 hectares out of the 19 000 hectares that Tongaat Hulett farms
directly have been identified as requiring replanting as a result of the severe
drought in 2010. The results from the season thus far have confirmed our
expectation that sugar production in South Africa will be higher than last year.
The current sugar milling season in Mozambique is presently some 40% complete.
The Mafambisse sugar mill, west of Beira, is currently ahead of expectations in
terms of agriculture and milling performance. At Xinavane, the quantity of cane
is in line with expectations. The sucrose content in the cane and the sugar
extracted thus far is below expectation, albeit 12% better than last year.
Overall, expectations remain that sugar production in Mozambique for the year
will increase by some 50% over last year.
In Zimbabwe, overall sugar production for the year is expected to be some 10%
above the production level of last year, with the increase coming from Hippo
Valley. Key stakeholders in Zimbabwe are generally aligned that the central
theme for both indigenisation and the target of increasing sugar production to
full milling capacity of 600 000 tons per annum is the substantial advancement
of indigenous Zimbabwean cane farmers. Currently, approximately 600 indigenous
farmers actively farm some 9 000 hectares with some 16 000 hectares being
available in total. In this season, these farmers are expected to deliver
approximately 465 000 tons of cane. All parties are actively involved in working
together to uplift this to over 1,4 million tons of cane from the available
hectares.
Pricing of raw sugar sold by Tongaat Hulett into the European Union continues to
be at levels significantly above the current world sugar price of 30 USc/lb and
is reflective of demand exceeding supply. Regional sugar prices, in line with
current global sugar dynamics, are above those of last year.
Sales volumes of starch and glucose in the first quarter reflected a net growth
of 1,1% with increased demand in the paper making, confectionery and coffee
creamer sectors offset by a decline in sales to the alcoholic beverage sector.
Sales in export markets have increased by 32% off a low prior year first
quarter, supported by competitive local maize prices. Higher international
starch prices are countering the impact of the exchange rate. Production costs
continued to improve with further efficiency gains of R4,4 million achieved in
the first quarter of this financial year. The surplus from the South African
maize harvest in 2011 and the high maize stock levels from the previous three
seasons should maintain local maize prices close to world prices for some time.
In the current economic climate, traditional land conversion sales remain
suppressed, with take up rates below those of last year. Tongaat Hulett is
exploring a number of significant bulk land sales - the exact timing and scale
remain uncertain. Opportunistic offers for smaller scale bulk land sales have
been received and turned down as they did not meet our value criteria. The
Durban eThekwini Municipality has adopted well-conceived local area plans for
the northern and outer west urban development corridors, supporting Tongaat
Hulett`s own land conversion plans. Regular and productive interactions are
taking place between Tongaat Hulett, Local, Provincial and National Government.
Key areas of focus have been the aerotropolis potential of the new King Shaka
International Airport / Dube Tradeport and the integrated human settlement /
city building potential of the greater Cornubia. It is pleasing that all parties
have accelerated planning and rights processes, with a number of applications
nearing completion. We expect final permission to sell on Sibaya node 1 within
the next 2 months. A short term priority of all partners has been serviced
industrial land to satisfy the shortage in Durban that is limiting economic
growth.
Tongaat Hulett`s financial results remain sensitive to movements in exchange
rates. These impact particularly on export realisations and the conversion of
profits from Zimbabwe and Mozambique into Rands. The Rand has strengthened some
10% against the US dollar since this time last year.
Tongaat Hulett continues to interface with Government towards establishing an
appropriate regulatory framework for both electricity generation and ethanol
production from sugar cane. Tongaat Hulett expects a resolution soon on the
pricing for electricity generated from sugar cane fibre, notwithstanding the
current uncertainty around the implementation of renewable energy in terms of
the REFIT/COFIT process."
Tongaat
29 July 2011
Sponsor: Investec Bank limited
Date: 29/07/2011 09:22:26 Produced by the JSE SENS Department.
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