No dividend as Tongaat swings to a loss. While sugar prices remained under pressure over the six months to end-

September, they've since recovered due to increased duty protection.

Tongaat Hullett has had a tough first half on all fronts after land sales

failed to materialise and its sugar operations in South Africa and Mozambique

faced tough operating conditions. While lower maize costs benefited its start

and glucose operation, this wasn't enough to counter weakness elsewhere.

The group said its sugar operations reported a 13% decline in combined

operating profit to 1.14 rand billion before cane valuations. Although sugar

production increased by 12.5%, raw sugar prices were 22% lower on average over

the six months. It also took a higher charge of 796 rand million in respect of its

cane valuations. Its Zimbabwe sugar operations reported a 7.4% decline in

operating profit to 537 rand million.

Tongaat said local sugar prices were cut in July last year and March this year

by a cumulative 22% in response to competition from imports, resulting in

lower margins. After extensive engagement with the government and the

International Trade Administration Commission, the dollar-based reference

price, used in the calculation of the import duty, was increased in August to

$680 per ton from $566. Subsequent reviews and adjustments to the tariff have

also been implemented. This has resulted in a sharp decline in imported sugar

volumes and a return of local prices to pre-July 2017 levels.

Its starch and glucose operation grew operating profit by 25$ to 300 rand million,

helped by lower maize prices after a surplus crop.

Land conversion and development activities recorded an operating loss of 30 rand

million from a profit of 441 rand million last year. It said negotiations around

some transactions weren't concluded and substantial commercial engagements

were continuing with a number of prospects. It only generated revenue from the

sale of 0.6 developable hectares in Bridge City north of Durban. Last year, it

sold 68 developable hectares across various areas.

Revenue increased by 9% to 8.8 rand billion in the six months to end-September.

Operating profit fell 64% to 530 rand million. It reported a headline loss of 87 rand

million from earnings of 661 rand million last year and a headline loss per share

of 74.1c from earnings of 573.8c. It's not paying an interim dividend after

paying 100c a year ago.

Tongaat Hulett remains focussed on improving its financial performance,

notwithstanding the current operating environment, with progress on

establishing a platform for earnings growth beyond 2018/19," the group said.

Its shares declined 6.1% on Friday to close at 61.30 rand.

Tongaat terrible trading update but expected. Making a loss . Poor local

conditions and land sales that did not happen. Very difficult and volatile

industry

-- Wayne McCurrie (@WayneMcCurrie) November 9, 2018