Tongaat Hulett

Tongaat Hulett is in the favourable position of being able to capitalise on the changing global sugar fundamentals, using the business’s SADC based sugar operations and its preferential market access. The company’s leading sugar brands and existing distribution networks will enable Tongaat Hulett to benefit from the growing per capita consumption of sugar in the SADC region.

The business continues to focus on increasing the supply of sugarcane to its operations in Mozambique, South Africa and Zimbabwe as it progresses its strategic objective of producing more than 2 million tons of raw sugar per annum using its existing milling capacity. The acquisition of the Mozambique operations followed the end of two civil wars, and in 2009/10 the company completed a R1,5 billion investment through the expansion of its Xinavane operation. Cane supply to the South African operations had previously, been adversely affected by the less favourable global sugar revenue dynamics that existed. In addition, inadequate investments in root replanting, over an extended period of time, and the severe drought in the 2010/11 season had substantially impacted on the supply of cane to the South African mills. In Zimbabwe, Tongaat Hulett acquired its shareholding in the 320 000 ton per annum, Hippo Valley Estate, in December 2006. The turbulent macro-economic fundamentals in the country up to the end of 2009 had a significant impact on both private farmer and company operations. Tongaat Hulett has made substantial investments in the refurbishment of its Zimbabwean milling and agricultural operations.

Against the background of a more favourable revenue expectation, and the question as to where the world will source more sugar, Tongaat Hulett’s strategy is to expedite an increase in sugarcane supplies in order to increase its existing sugar production of 1,15 million tons in the 2011/12 year, to some 1,73 million tons sugar by the 2014/15 year, and subsequently grow its sugar production to its installed milling capacity of more than 2 million tons sugar per annum. With the high fixed cost element of milling costs and the fact that some 78 percent of farming costs are linked to the number of hectares planted, this growth in sugar production will lead to a substantial reduction in the unit cost of production. Numerous cane supply initiatives that include the development of indigenous sugarcane farmers are underway in all the sugar operations.

Tongaat Hulett’s South African sugar milling, refining and agricultural operations are located on the north coast of KwaZulu-Natal. The sugar mills at Maidstone, Darnall, Amatikulu and Felixton have an installed capacity to produce more than 1 million tons of raw sugar and a central refinery in Durban produces in excess of 600 000 tons of refined sugar per annum. The South African sugar product range offers a total sweetener solution including a range of high intensity sweeteners. The company’s Huletts® brand has consistently been acknowledged as the leading sugar brand.

The company’s animal feeds operation, Voermol Feeds, is located at the Maidstone mill and the business manufactures and markets a range of energy and supplementary feeds to the livestock farming community through its Voermol® brand. Through cost effective production and marketing of high quality products over the past 50 years, combined with the development of long-term relationships with farmers, agricultural companies and suppliers, Voermol Feeds has become the market leader in the molasses based animal feed industry in South Africa.

The Mozambique sugar operations consist of the expanded sugar mills and estates surrounding Xinavane and Mafambisse. As at 31 March 2013, 22 072 hectares of Tongaat Hulett miller cum planter was farmed under sugarcane with 5 752 hectares under private grower and community-based schemes. Sugar production capacity at the Xinavane mill has increased to more than 230 000 tons in a 32 week crushing season. Together with the existing 92 000 tons of sugar production capacity at the Mafambisse mill, the Mozambique operations have the installed milling capacity to produce in excess of 330 000 tons sugar per annum. The sugar estates are irrigated and are located in areas with ideal growing conditions, resulting in high cane and sucrose yields. These favourable agricultural conditions, combined with the sugar mills’ close proximity to the ports, the technology availability and support from South Africa, ensure that the Mozambique operations are well positioned for strong growth in the future.