HARARE - Sugar producer Tongaat Hulett (Tongaat) says its Zimbabwean operation Hippo Valley (Hippo) recorded a $53 million operating profit in the half year to September 30, 2012 compared to $52 million same period prior year.

The Johannesburg Stock Exchange-listed group — whose main business is sugar production and milling, but also with interests in land management and property development — said Hippo experienced a surge in expenditure and supply costs, as the unit invested in increased future capacity during the period.

“Margin pressure is being experienced in the nexus of selling price movements and input cost increases, following the last 18 percent wage increase,” Tongaat said in a statement, adding that Hippo’s year-to-date sugar production stood at 341 000 tonnes up from 265 000 tonnes.

The group further said the weak Euro/US dollar exchange rate negatively impacted on the conversion of Hippo’s US dollar profits into Rand.

Hippo employs 18 000 people.  

Tongaat said the operation is in a recovery and expansion phase.

It said Hippo’s sugar production had increased from 259 000 tonnes in 2009/10 to an expected 460 000 to 490 000 tonnes this year.

“A central part of this recovery has been the re-establishment of cane growing by improving agricultural yield on Tongaat estates and substantially developing indigenous private cane farmers,” Tongaat said.

“As at October 2012, at least 670 active indigenous private farmers, farming some 11 000 hectares and employing more than 5 550 people, supply 722 000 tonnes of cane which generate $50 million in annual revenue.”

During the period under review, the group registered a 28 percent rise in profit, buoyed by higher sugar and industrial land sales.

The company said diluted headline earnings per share for the period totalled 593,1 cents, from 462,6c last year.

Its revenue for the half year surged 22,7 percent to R7,398 billion.

Tongaat has projected output for the full year to increase by eight percent to 15 percent.

It produced 1,15 million tonnes of sugar last year.

It declared a 150c per share interim dividend up from 120c per share last year. - Business Writer