Tongaat Hulett's Profit Drops as Drought Hampers Sugar Crop

  • Zimbabwe output to exceed South Africa's for the first time
  • Rain will be very critical in the seven months to come: CEO

Tongaat Hulett Ltd., South Africa’s biggest sugar producer by market value, said first-half profit dropped 13 percent as the country’s worst drought in more than two decades cut output.

Headline earnings for the six months ended Sept. 30 was 673 million rand ($47 million) compared with 773 million rand a year earlier, the Tongaat, South Africa-based company said in a statement Monday. The producer maintained its interim dividend at 1.70 rand. It sees total 2015-16 sugar output in a range of 1.005 million metric tons to 1.09 million tons, from 1.3 million tons in the previous season.

South Africa’s worst drought since 1992, caused by the El Nino weather pattern, has cut production of crops including wheat and corn as well as sugar. The lower sugar output outweighed profit gains in Tongaat’s glucose operations and land-development program, which sells former agricultural areas near Durban, on South Africa’s east coast.

"In South Africa, we only have rain-fed cane, rather than irrigated cane," Chief Executive Officer Peter Staude said in an interview after the results were released. "The next seven months will be very critical in terms of what the rain will do."

Sugar production in Zimbabwe could range from 410,000 tons to 450,000 tons this season, exceeding the expected production of 310,000 tons to 350,000 tons in South Africa for the first time, Staude said.

Raw sugar has surged 45 percent since reaching a seven-year low on Aug. 24. Global production will fall short of demand in the 2015-16 season, according to the London-based International Sugar Organization. Heavy rainfall has started to hinder Brazil’s harvest, said Donald Keeney, a meteorologist with MDA Weather Services in Gaithersburg, Maryland.

The shares fell 5.3 percent to 104.22 rand at the close in Johannesburg, the lowest since May 2012. They dropped for a ninth day, matching the longest streak of declines since April 2005.

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