May 28 (Bloomberg) -- Illovo Sugar Ltd. and Tongaat Hulett Ltd. rose as Africa’s biggest producers of the sweetener by market value both reported profit that beat expectations.
Illovo increased 1.4 percent, the most on a closing basis since May 17, to 26.27 rand by the close in Johannesburg. Tongaat climbed for the first time in seven days, adding 0.1 percent to 109.38 rand.
Illovo said today earnings per share excluding one-time items increased 18 percent to 1.33 rand ($0.16) in the year through March, beating the median estimate by seven analysts for profit of 1.23 rand. Tongaat’s so-called headline earnings rose 10 percent to 8.39 rand in the year same period, versus a median estimate of 7.32 rand a share by six analysts.
“Illovo and Tongaat received higher prices from the European Union,” Brendan Grundlingh, an analyst at a Johannesburg-based SBG Securities (Pty) Ltd. said by phone.
White sugar prices in the EU averaged 711 euros ($891) a metric ton in March, the highest level since at least July 2006, the European Commission said in a report published on its website on May 3.
Tongaat’s sugar production increased 14 percent to 1.15 million tons, with output rising 42 percent in Mozambique and 12 percent in Zimbabwe, it said. Illovo’s sugar output fell 7 percent to 1.53 million tons as drought in the KwaZulu-Natal province and lower production in Zambia and Tanzania curbed yields. Profit increased because of cost control, it said.
Tongaat, whose dividend advanced 16 percent to 2.90 rand a share, expects output will rise as much as 25 percent in the 2012-13 season.
“The strategy to increase cane supply in South Africa is focused on commercial farmers, small-scale farmers and increasing Tongaat Hulett’s influence in cane development through leasing additional land and collaborating with the government to rehabilitate cane supply on land-reform farms that have gone out of cane,” it said.
The government’s land-redistribution policy aims to compensate black South Africans for the seizure of their property under white-minority rule, which ended in 1994. South Africa plans to distribute 30 percent of farmland to black farmers by 2014.
Illovo said the 2012-13 cane crop should be a record for the company and sugar production is expected to rise.
The company ended its involvement in the Markala sugar project in Mali because of a deteriorating security situation and the country’s uncertain political future following a March 22 coup. Illovo wrote off 173.5 million rand relating to the Markala project, which was expected to produce 200,000 tons of sugar and supply surplus power to the nation’s electricity grid.
Illovo will distribute 43 cents of capital for every share held instead of paying a dividend, it said.
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