Tongaat Hulett pushed up operating profit and headline earnings for the six months to September as revenue fell 4.5% during the period.
Headline earnings of R661m were 4.8% better than the R631m reported in the six months to September 2016. Meanwhile, operating cash flow before working capital came to R2.447bn, rising from R2.317bn in the same period previously.
Operating profit increased 9% to R1.47bn.
"The sugar operations have seen the beginning of the production volume recovery after the drought conditions of the previous two years.
"This benefit was offset by the impact of lower world sugar prices and a period of high imports into SA," CEO Peter Staude said on Monday.
The group’s starch operations had experienced a carry-over effect into the first half of the year of maize costs at import parity prices, he said. This was a result of the previous season’s drought, concurrently with lower co-product revenue.
But Tongaat Hulett had benefited from its portfolio approach, with land conversion and development activities showing a considerable rise from the prior comparable period, Staude said.
Meanwhile, the company’s various sugar operations generated total operating profit of R835m in the period, up from R825m in 2016.
"Tongaat’s interim results were effectively prereleased in a trading statement last week and so there were no surprises in the results released [on Monday] morning," Dirk van Vlaanderen, associate portfolio manager at Kagiso Asset Management, said.
The sugar businesses "continue to show good promise as the volume-rebound from the drought-impacted lows continues to gather momentum".
Zimbabwe put in an exceptional profit performance, with earnings up 43%, while Mozambique saw a more modest 6% profit increase.
Van Vlaanderen said the South African sugar business had a weaker six months, with profit down 31%, despite higher volumes. This was due to increased import volumes depressing domestic pricing and displacing local volumes to the less lucrative world market.
"This is unlikely to recur in the second half of the year as the gap in tariff protection, which resulted in significant sugar imports, has now been resolved…. The South African sugar business should enjoy better pricing on higher volumes."
Although the company’s starch business was weak, Van Vlaanderen said this was expected and "it should recover nicely into the second half".
The group’s land division had a good half, with operating profit of R441m — up from a "disappointing" R269m in 2016, he said. Meanwhile, guidance for near-term profit remained at a healthy R1.5bn level.
"While the land division will inevitably deliver a ‘lumpy’ profit stream, we believe there is significant latent value in Tongaat’s land portfolio, providing a solid, long-term valuation underpin for the company," Van Vlaanderen said.