Tongaat Hulett targets increase in export volumes

SUGAR processor, Tongaat Hulett, says it is targeting to increase export volumes into the region and internationally this year by 52,8 percent to 136 000 tonnes compared to 89 000 tonnes achieved last year.

In a quarterly trading update for the period ended June 30, demand for sugar in the domestic market remained relatively firm with consumers stocking up ahead of winter and as a precaution in light of Covid-19.

Speculative trading by some traders capitalising on pricing distortions on account of exchange rate differentials also resulted in sugar being diverted from traditional retail chains to the informal market.

“The industry has since taken measures to minimise speculative trade with expectations that the new currency auction system will stabilise the situation.

“Total local industry sales volumes for the quarter amounted to 66 492 tonnes compared to 60 054 tonnes sold during the same period last year,” said the company.

“Export sales to date of 32 080 tonnes were achieved during the quarter compared to 14 587 tonnes over the same period in prior year, benefitting from increased sales into Kenya.

“A season total of 136 000 tonnes (prior year 89 000 tonnes) has been allocated to the export market of which 58 percent has already been contracted to date. A significant volume of 97 500 tonnes will be exported to Kenya and 18 198 tonnes to the United States (inclusive of a prior year reallocation of 4 672 tons).”

It said the recent moves by Government to allow trading in foreign currency in the local market and the return to a market driven exchange rate regime are positive and welcome developments that would enhance economic stability and business viability.

Turning to the impact of Covid-19, Tongaat Hulett said so far, there have been minimal interruptions to its operations resulting from the pandemic during the quarter as the company remains classified as an essential service.

In addition, the sugar producer said it has in place a robust business continuity plan to mitigate potential negative impacts of the pandemic.

“Regrettably, the company recorded its first Covid-19 case on 20 July 2020. All established Covid-19 protocols were implemented including contact tracing and disinfection of premises. The company’s main priority, as always, remains the health and wellbeing of its employees and all stakeholders in our immediate communities, as well as those visiting the operations at all relevant times,” said the firm.

In May, Tongaat Hulett announced that it was channelling $13 million towards fighting Covid-19 in the workplace while 150 000 litres of ethanol worth $4 million was donated to the State for production of sanitisers.

A total of $6 million was also extended to Masvingo Province towards the fight against Covid-19.

In the outlook, the company said the 2019/20 rainfall season was yet another poor one with very minimal in flows into the industry’s water supply dams, presenting a key risk to the industry.

“Although the industry has sufficient irrigation water to cover the current season, water conservation initiatives including reduced water application rates to levels that are not a deterrent to normal crop growth have been instituted as a precautionary measure.

“Total industry sugar production for the current year is set to be between 445 000 and 455 000 tonnes exceeding prior year production of 441 000 tonnes, with the company’s share of production estimated at 50 percent,” it said.

Tongaat Hulett said regarding its application for a 99-year lease, authorities have assured them that the matter was being attended to with urgency providing and thus raising further confidence and stability to the firm’s operations.

“Work on the 4 000 hectares out grower cane development project in partnership with Government and local banks (Project Kilimanjaro) is on-going with a total of 2 700 hectares of virgin land having been cleared and ripped, 466 hectares of which have been planted to sugarcane.

“During the first quarter ended 30 June 2020, work on the project has been slowed down by delays in obtaining adequate funding from financial institutions due to the prevailing adverse economic environment.

“Alternative funding structures for the project are under consideration in consultation with Government, which will result in the project being progressed on a phased approach,” it said.

On completion, the Kilimanjaro project will contribute significantly to the industry target of full utilisation of installed milling capacity of 600 000 tonnes of sugar by 2023/24, positioning the country to be one of the most competitive sugar producers in the region and globally.

“The company remains optimistic that notwithstanding the Covid-19 pandemic and the current economic challenges, the Zimbabwe sugar industry is well positioned to be one of the most competitive in the region by 2023 on the back of increased production and operating efficiencies,” it said.–

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