Troubled South African-headquartered sugar producer, Tongaat Hulett, said it got a dividend of US$2 million from its Zimbabwean operations in June 2020.
Tongaat’s operations in Zimbabwe comprise wholly owned Triangle operation and a 50.3 percent holding in Zimbabwe Stock Exchange listed Hippo Valley Estates.
The Zimbabwe operations also used surplus export proceeds to reduce foreign-denominated borrowings, which decreased to US$6,9 million from US$17 million at March 2019, according to a trading update released by the company on Wednesday.
The dividend payment, as well as the reduction in borrowings, come at a time operating profit in the Zimbabwean operations increased by more than 140 percent for the year ended March 31, 2020.
However, Tongaat said there were net monetary losses arising from hyperinflation accounting in the country. It said the “impact of hyperinflation in Zimbabwe had a significant bearing on the reported growth” for the whole group which includes operations in six other countries.
Higher finance costs, together with a net monetary loss arising from hyperinflation accounting in Zimbabwe, countered some of the strong improvements in operating profit of the group, Tongaat said. The company will provide more details of the impact of hyperinflation when it presents its results on July 31, 2020.While monetary losses were recorded, the high levels of inflation also had a positive impact on the fair value of biological assets. Further details of the impact of hyperinflation on the operations and the assumptions used will be provided in the annual results.
Meanwhile, sugar production at the Zimbabwean operations declined marginally while local sales volumes and pricing were managed carefully to prevent sales arbitrage to surrounding markets, Tongaat said.
The past few weeks saw the local sugar producers through Zimbabwe Sugar Sales aggressively increase prices. The current hyperinflationary economy also impacts on customers’ affordability. Ethanol sales grew substantially, while the contribution from exports remained stable.