By Robert Laing

Property was sweeter than sugar for Tongaat Hulett last year.

More than half of its profit came from property development while its core sugar business only contributed 43 percent, the sugar producer said in a trading update yesterday.

Tongaat Hulett is likely to report a 15 percent profit growth to R838-million when its results for the year to end December 31 are published on February 25.

Rival JSE-listed sugar producer Illovo recently issued a trading update warning shareholders that its revenue would only be marginally above last year’s.

Both Illovo’s and Tongaat’s sugar crop suffered from unseasonable winter rain during the harvesting season.

Tongaat managed to compensate through a R428-million profit gained by developing cane fields.

The trading update said: “Increased profit was generated from land and property developments where a total of 83ha were sold in multiple transactions, including sales in Umhlanga Ridge town centre, Izinga, Kindlewood, Riverhorse Valley Business Estate, Zimbali Coastal Resort and Umhlanga Ridgeside.

Both sugar groups could be major beneficiaries of the government’s recently announced policy of encouraging private sector “co-generation” to alleviate South Africa’s electricity crisis.

Chief executive Peter Staude said Tongaat Hulett could potentially generate 600MW from sugar cane.

“While the sugar mills are running during the crushing season we supply 9MW to the national grid. I f all the biomass of cane and the emerging technologies were used, it could increase to about 600MW,” Staude said.

He estimated the local sugar industry could supply 2 percent of South Africa’s power needs.

Both sugar producers are considering following Brazil by investing in synfuel plants.

The final decision depends on the government’s biofuels policy.

Tongaat Hulett currently produces ethanol in Zimbabwe. Like Illovo, it produces ethanol from molasses to make cane spirits and other beverages.

Source: The Times