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Property sweetens Tongaat's results

By unknown | Feb 12, 2008 | COMMENTS [ 0 ]

Property was sweeter than sugar for Tongaat Hulett last year.

Property was sweeter than sugar for Tongaat Hulett last year.

More than half of its profit came from property development. Its core sugar business only contributed less than a third, the sugar producer said in a trading update yesterday.

Tongaat Hulett is likely to report a 15percent profit growth to R838million when its results for the year that ended on December 31 are published on February 25.

Its rival JSE-listed sugar producer, Illovo, recently issued a trading update warning shareholders that its revenue would only be marginally above last year.

Both Illovo and Tongaat's sugar crop suffered from unseasonable winter rain during the harvesting period.

Tongaat managed to compensate for the bad weather with R428million profit gained by developing former cane fields.

The trading update said that increased profit was generated from land and property developments in which 83 hectares of prime land were sold in multiple transactions, including sales in Umhlanga Ridge Town Centre, Izinga, Kindle-wood, Riverhorse Valley Business Estate, Zimbali Coastal Resort and Umhlanga Ridgeside.

Both sugar groups could be major beneficiaries of the government's recently announced policy of encouraging private sector "co-generation" to alleviate South Africa's electricity crisis.

The chief executive, Peter Staude, said Tongaat Hulett could potentially generate 600MW from sugar cane.

"While the sugar mills are running during the crushing season we supply 9MW to the national grid.

"The potential electricity that we would be able to generate, assuming co-generation projects at four South African sugar mills and two starch plants was initially indicated as 209 MW.

"If all the biomass of cane and the emerging technologies were used, it could increase to about 600MW," Staude said.

He estimated the local sugar industry could supply 2percent of South Africa's power needs.

Both sugar producers are considering following their Brazilian counterparts by investing in synfuel plants.

The final decision depends on the government's biofuels policy.

Tongaat Hulett currently produces ethanol in Zimbabwe.

Like Illovo, it produces ethanol from molasses to make cane spirits and other alcoholic beverages.


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