Tongaat Hullett is an agriculture business focused on sugar cane and maize, with a substantial land portfolio in KwaZulu-Natal, as well as sizeable animal feeds facilities and ethanol and electricity generation. The group also has operations in Zimbabwe, Swaziland, Mozambique, Namibia and Botswana.

The company’s history stems back to the mid-1800s, and the business as it stands today was formed through the merger of the Tongaat Group and the Huletts Corporation. Tongaat Hulett shares have a primary listing on the Johannesburg Stock Exchange (JSE) and a secondary listing on the London Stock Exchange.

The group produces a number of carbohydrate products for sale, many of which are interchangeable. Tongaat Hulett recorded revenue of R16.6 billion in 2016 and has a JSE market cap of more than R17 billion.

Apart from its extensive agricultural operations and processing facilities, the group also seeks to convert land in the portfolio by responding to key demand drivers and identifying optimal end use.

The 2016 year saw a record performance from starch operations and land conversion and development activities, but the group’s financial data and Tongaat Huletts share price were negatively impacted by a significant decrease in sugar production as a result of poor growing conditions due to the ongoing drought in South Africa.

The starch and glucose division increased operating profit from R561 million to R658 million, as the company sought to buy into an improvement of the sales mix through value-added products. The business also benefitted from competitive maize costs, improvement in operational efficiencies, co-product recoveries and cost control. Land conversion and development operations increased operating profit from R829 million to R1.1 billion, through the sale of 121 hectares of land.

Sugar operations were drastically affected, with operating profit decreasing from R806 million to R124 million. Production volumes fell by 291 000 tonnes, whilst export revenue was affected by a lower international sugar price. This resulted in an overall group operating profit of R1.8 billion, dropping by 13.5% from 2015.

The group has forecast more favourable international sugar prices going forward, while aiming to re-establish the growth of sugar operations in domestic markets through improved growing conditions and benefits gleaned from new import protection measures. The company has said it will buy into a number of strategic thrusts to positively influence earnings and cash flow, and to gear the business for the cyclical nature of its operations.

Tongaat Hulett share price took a major dip on the live online stocks chart between 2015 and 2016, declining from a high of R173 to R83.50. Investors who decided to buy the shares at that low price have since seen good gains, with Tongaat Hulett share price climbing back up to just over R130 by November 2016. With improved growing conditions and better import controls likely to benefit the company, Tongaat Hulett shares should experience further growth and are a good buy.

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