HIPPO Valley Estates, a unit of South Africa-based Tongaat Hulett after tax profit declined 47,3% to $5,8 million for the half-year ended September 30, 2013 due to pressure from low international sugar prices and a surge in sugar imports on the domestic market.
Revenue was 42,7% to $52 million for the half-year ended September 30, 2013 compared to $90, 7 million in 2012.
According to a statement accompanying the group’s unaudited interim results, Tongaat Hulett chairperson Murray Munro said the business experienced severe pressure from significantly lower international sugar prices and a surge in sugar imports onto the domestic market which significantly reduced domestic sales volumes.
“With the changing dynamics in the European Union, the price levels that the business is achieving for sales into the EU this season are averaging some 6 cents per pound lower than the levels in the last two years,” Munro said.
“Cane valuations have been impacted by lower prices and the effect of curtailed root replanting as a consequence of the current water dynamics.”
In the period under review operating profit declined by 36,8% to $11 million from $17,4 million in 2012.
Munro said the industry’s domestic and export sales volumes for the period to September 30, 2013 declined by 22,3% to 192 542 tonnes from 247741 tonnes in 2012, while the company’s share amounted to 84 990 tonnes from 117 532 tonnes in 2012 due to lower local market sales and a timing difference on export shipments.
“The trading environment has added impetus to the drive to reduce costs of sugar production, with substantial reductions being achieved in the current season,” Munro said.
During the period under review, operating cash flow before working capital amounted to $28,9 million as compared to $27,8 million in 2012.
Munro said the industry was targeting to produce between 460 000 and 478 000 tonnes of sugar for the 2013-2014 seasonwhile 475 000 tonnes were produced during the 2012-2013 season.
He said the company’s share of sugar production for the current season was expected to be between 226 000 and 235 000 tonnes while for the 2012 to 2013 season it was 228 000 tonnes.