Sugar sales increased despite revenue decline

SWAZILAND Sugar Association (SSA) Chief Executive Officer (CEO) Mike Matsebula said despite a decline in revenue generated by the sugar industry in Swaziland, sales volumes had increased.He mentioned that the increase was due to stock draw-downs and adjustments to the shipping schedules.

“This has cushioned the industry from the negative impact on realised proceeds from sugar sales,” he said. Matsebula said therefore, instead of sugar sales revenues increasing as a result of the increased sales, they had remained stagnant because of the unfavourable exchange rate movements.

The Swazi sugar industry has also been seriously affected by the poor climatic conditions for cane growing in the region (but not necessarily drought). In the current year, local sugar production has declined by about 10% from initial forecasts. This combined with the unfavourable exchange rate movements (strengthening of the Rand viz-a-vis the Euro and Dollar), which are significant for an industry which exports over 50% of its output, has impacted negatively on the realised proceeds for the industry.

Further, the CEO said this environment (where sugar sales revenues are not improving) was not ideal given the cost increases being incurred by the industry, especially on irrigation costs which have risen sharply as a result of the recent high electricity price increases.

He said therefore, for those members who were generating profits, these were expected to reduce significantly while for those members who were already either on the margins of profitably or were making losses the situation will now be dire.
“While SSA cannot be in a position to pronounce on the financial performance of its individual members (growers and millers), it is reasonable to expect that they shall also be negatively affected by these market developments,” he said referring to the recent announcement that there would be changes in the European Union for South African sugar.

Further he said “It must, however, be noted that the financial performance of the Swazi and South African sugar industries would not be similar given the differences in the markets served of the two industries. In particular, there are differences in the exposure to different markets (South African millers have less exposure to world/export markets).”

“In addition, the CEO said shareholding structures were different (Swazi industries do not have shareholding in South African industries while the reverse was true for South African millers).

This is important because the financial performance of South African millers is normally an aggregation of the performance of the Group (which includes shareholding in different companies and different countries) rather than an individual plant.”

source: observer