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February 24, 2009

South African agro-processor to expand investments in Mozambique

by Thabang Mokopanele

South African agricultural processing and land management group Tongaat Hulett, which recently posted a sound set of results for the year to December 2008, plans to invest R470m to complete projects in Mozambique.

CEO Peter Staude said Mozambique offered the group opportunities to export to Europe . It expected revenue of R800m in the second half of this year.

Staude said 8150ha had been planted in the Mozambique expansion . "The Xinavane mill expansion is far advanced, with project activities taking place simultaneously with the ongoing sugar production processes," he said.

At Xinavane, sugar production totalled 63000 tons last year compared with 67000 tons in 2007. In addition, 64000 tons of cane, representing about 8000 tons of sugar, was used as seed cane in the planting process.

At Mafambisse, after the completion of the agriculture expansion , Tongaat Hulett's shareholding increased from 75% to 85%. At both Mafambisse and Xinavane, as the plant-up areas of the agriculture expansion reached completion, shareholder loans had been converted to equity, and the benefit of currency gains realised.

The Mozambique operations' contribution to profit increased to R250m from R88m in 2007.

The group's overall revenue increased 11% to R7,1bn last year and profit from operations grew 35% to R1,1bn. Headline earnings, which were affected by corporate restructuring transactions, improved to R583m from R61m.

Profit from the starch and glucose operations grew to R240m from R105m, as margins recovered in improved market conditions.

South African agriculture, sugar milling and refining operations contributed R73m to profit compared with R46m in 2007. Last year, 644000 tons of sugar were produced compared with 604000 tons the previous year.

The group said the low crops in 2007 and last year resulted in lower raw sugar exports and continued upward pressure on costs per ton.

Export volumes from SA were 210000 tons compared with 245000 tons in 2007. Operating profit from agricultural land conversion and developments amounted to R263m from R428m, with a further R22m in capital profit being realised. The group said the shortage of established industrial logistics, support and service locations continued to delay development north of Durban.

Profit from the various sugar operations increased to R606m from R360m in 2007, with the Zimbabwean operations being accounted for on a dividend-received basis.

"Tongaat Hulett has the advantage, in the prevailing global economic turbulence, of operating in a number of less affected market sectors, having specific opportunities in its operations and being favoured by a weaker rand," Staude said.

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