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.
The total South African maize harvest in 2010 is projected to be above 13 million tons, the largest crop in 29 years. The price of maize in South Africa through to July 2011 is trading close to the world price, which contributes significantly to the competitiveness of the starch operation. Sales volumes of starch and glucose in the last three months have continued to show evidence of the contraction in consumer spending, particularly in the prepared foods, confectionary and canning sectors.
Increasing sugar production from the 957 000 tons milled in the 2009/10 season to the installed sugar milling capacity of 1,9 million tons per annum, with a simultaneous reduction in the unit cost of production, is one of Tongaat Hulett’s key focus areas.
Tongaat Hulett’s sugar production for the 2010/11 season in Zimbabwe is expected to be between 330 000 and 350 000 tons (from 259 000 tons in 2009/10) and in Mozambique to be between 230 000 and 250 000 tons (from 134 000 tons in 2009/10). Sugar production started later than expected due to unseasonal rain in Mozambique and extensive rehabilitation work on the Hippo Valley mill in Zimbabwe. Consistent mill throughput rates close to capacity, without substantial disruptions, are now required to crush the available cane crop and conclude the sugar sales by the end of the season.
In South Africa, rainfall in the KwaZulu-Natal north coast region during the sugar cane growing months of January to June 2010 was 252 millimetres compared to a long-term mean of 491 millimetres. Tongaat Hulett’s sugar production in South Africa is now expected to be slightly below that of 2009/10 notwithstanding the hectares under cane supplying Tongaat Hulett’s mills increasing by some 2 000 hectares.
Tongaat Hulett’s financial results remain sensitive to movements in the Rand, US dollar, Euro and Mozambique Metical. These impact on the revenue streams, costs incurred and the conversion of profits into Rands. Exchange rate movements over the past few months have not been in Tongaat Hulett’s favour. The Rand is currently 16% stronger against the Euro than it was for the 2009/10 reporting period.
Tongaat Hulett’s land and property development activity is currently focused on value creation for all stakeholders in the growth corridor north of Durban. The new international air platform at King Shaka and the development of an aerotropolis present particular opportunities for land conversion at the appropriate time and value. In the current economic climate, with the sale of development land across most other sectors being depressed, few hectares are being converted to development in the higher value prime locations on the coastline and to the west of Durban.
Tongaat Hulett remains well positioned to benefit from the favourable global fundamentals of increasing demand for agricultural products, food, renewable energy and land usage.
27 July 2010