Harare — SOUTH Africa's agri-processing group Tongaat Hulett has announced plans to consolidate its Zimbabwe sugar operations in its financial statements for the first half of this year, advising shareholders that the move was likely to have a sizeable impact on financial results.

"The consolidation of the Zimbabwean operations would be included in Tongaat Hulett's interim results, for the half-year ended June 30 2009," the group said in a cautionary statement to shareholders.

It said the consolidation followed the macro-economic changes that occurred when Zimbabwe dollarised, a move it said "restored key relevant fundamentals to the economy".

"This removed many of the distortions that existed in the Zimbabwean economy, which included unrealistic local market sugar price realisations, not receiving the full benefit of export proceeds, exchange rate uncertainty and foreign currency restrictions, shortage of inputs and the effects of extreme hyperinflation," the group said.

Previously, in terms of the relevant international accounting standards (IAS), Zimbabwean operations were not consolidated and were accounted for on a dividend received basis.

As a result of the changes at the beginning of the year, Tongaat Hulett said it now meets the requirement for consolidating its Zimbabwean operations in terms of IAS27, namely, that it obtains the benefits from the assets and activities in Zimbabwe, with the requisite control over the operations.

"Triangle Sugar (100 percent owned by Tongaat Hulett) and Hippo Valley Estates (50,3 percent) will thus be consolidated into Tongaat Hulett's financial results for 2009," the announcement said, noting that the impact of this consolidation was currently being worked out.

The carrying value of the Zimbabwe investment on the company's balance sheet as at December 31 2008 was R263 million, which rose when the 50,3 percent stake in Hippo Valley Estates was acquired through Triangle Sugar under conditions prevailing at the end of 2006.

Tongaat Hulett's sugar operations in Zimbabwe comprise two large sugar mills with a combined capacity to crush 4,8 million tonnes of cane in a 38-week crushing season, to produce 600 000 tonnes of sugar.

Sugar production in 2008 stood at 298 000 tonnes compared to 580 000 tonnes produced in 2002.

Opportunities to expand sugar production from 600 000 tonnes to 820 000 tonnes are under way.

The cane estates supplying the two sugar mills comprise 46 300 hectares of fully irrigated land yielding in excess of 110 tonnes cane per hectare per annum under normal operating conditions.

In 2008, the estates delivered 86 percent of the cane crush with the balance delivered from estates owned by outgrowers.

At full capacity the two sugar mills produce 160 000 tonnes of molasses with the alcohol distillery at Triangle having the capacity to convert this molasses to 40 million litres of alcohol/ethanol.

Both sugar mills operate white-end sugar refineries with a combined capacity to produce 140 000 tonnes of white sugar per annum.

The Zimbabwe operations, which run extensive livestock and game sections, have significant eco-tourism potential as well.