JSE-listed Tongaat Hulett expects its operating profit to decrease by some 12% for the year ended March 31 to about R2.089-billion from the R2.374-billion earned last year.

The agricultural and agroprocessing business, focused on sugarcane and maize, explained in a statement to shareholders late on Tuesday that it foresaw “strong cash flow” generated from operations of about R2.5-billion.

Headline earnings for the period under review were expected to be about R945-million for the year, down compared with the R1.106-billion earned in the previous year, reflecting a decrease of some 14.5%.

Both net profit a share and headline earnings per share (HEPS) were expected to drop by 16.5%.

Tongaat said net profit a share was likely to be about 865c a share, declining from the 1 034c a share reported for 2014, while HEPS for the year were expected to be about 826c a share, down on the 990c a share achieved a year-ago.

SUGAR
Operating profit from the various sugar operations was expected to decrease by 11% to R806-million for year ending March 31 from the R908-million reported for 2014.

“The benefit of cost reductions over the past two years together with the negative cane valuation effect recorded in the income statement last year not being repeated this year was offset by a reduction in sugar production volumes and lower prices,” Tongaat noted.

Revenue was particularly impacted by a substantial reduction in prices for exports to the European Union (EU) as a result of the changes to the EU agricultural markets.

Tongaat’s sugar production for the year was 1.314-million tons compared with 1.424-million tons in the prior year.

In South Africa, the company produced 541 000 t for the period under review, down from the 634 000 t produced in 2014, while Zimbabwe generated 445 000 t on 2014’s 488 000 t, Mozambique was up to 271 000 t compared with 249 000 t in 2014, and the raw sugar equivalent in Swaziland increased its output to 57 000 t from 53 000 t in 2014.

“This follows the dry conditions in South Africa and production in Zimbabwe in the 2014/15 year that did not yet benefit from the new and/or replanting of cane that started with the dam levels having recovered early in 2014,” Tongaat pointed out.

In Mozambique, the local market was impacted by substantial imports before the reference price increase, which was soon expected to be effective and protect against unfair import competition.

STARCH AND GLUCOSE
For the year ended March 31, Tongaat’s starch and glucose operation benefited from further improvements in the sales mix, coproduct recoveries, capacity use and plant efficiencies.

As such its operating profit from the operation was forecast to increase by some 16% to about R560-million compared with the R482-million of 2014.

LAND DEVELOPMENT AND CONVERSION
Tongaat sold 108 developable hectares in KwaZulu-Natal during the period under review through its land development and conversion activities and expected to declare operating profit of R828-million. This reflected a 23% reduction on the 259 developable hectares sold and R1.080-billion profit of 2014.

The company said momentum on larger land sales had continued, with a single sale of 19 developable hectares in Izinga and 27 developable hectares in a new area of Cornubia.

However, the sale of 42 developable hectares of highly valued land in Umhlanga Ridgeside, Precincts 1 and 2, which was not concluded by the end of the financial year was expected.

“Negotiations with four parties are at various stages; all aimed towards reaching an imminent conclusion. The development proposals received for Ridgeside are confirming the value that has previously been attributed to the land,” added Tongaat, which had a portfolio of about 8 100 developable hectares of land for conversion in KwaZulu-Natal.

The company would during a roadshow release further detail, providing increased insight into the composition of the portfolio, prospective use, growing market momentum and development themes, possible timing and values. The roadshow was scheduled to take place at the end of May, following the release of Tongaat’s annual results.

The financial information provided to stakeholders had yet to be reported on by Tongaat’s auditors.