Mauritius sugar major Omnicane sees pretax profits plunge 52% on lower prices & strike
Mauritius sugar major Omnicane Ltd posted a marginally lower turnover by 1.3% at Rs 3.88 billion but pretax profits fell by a significant 52.6% to Rs 269.35 million for the full year 2014 upon lower sugar prices together with workersâ€™strike, compounded by a dampened performance of its Holiday Inn airport hotel in its first year of operations. (Image:architectsstudioltd.com)
Mauritius’ leading sugar producer Omnicane reported a 1.3% dip in turnover to Rs 3.88 billion for 2014 but operating profits recorded a significant drop of 42.9% to hit Rs 438.9 million, causing pretax profits to stand at Rs 269.35 million, which represents a 52% drop over the year-ago period.
This sharp plunge in profitability was explained mainly by the Rs 249.9 million decrease in the results of the sugar cluster which was hit by the 24.2% reduction in sugar prices and the strike in the sugar industry in November 2014 over a pay dispute. This was mitigated by a special SIFB compensation of Rs 2000 per ton.
Besides, the first year of operations of the Holiday Inn Airport hotel run by Omnicane was not favourable and a loss of Rs 84.7 million was recorded, further affecting the operating profits of the company.
Conversely, Omnicaneâ€™s major revenue-generating segment, the energy cluster, which accounts for 65.7% of total turnover, reported a slightly better performance in 2014. It notched a higher revenue by 5.3% and better operating profits by 8.9% based on the robust performance of the Ethanol plant that started operation in April 2014 â€” which produces electricity from the waste Omincane generates from milling sugar that is then sold to the national grid.
The financing cost of the company went up by 1.9% and investment income fell by Rs 21.3 million owing to a one-off dividend in specie in 2013, but this was partly offset by higher interest receivable.
The share of results of Omnicaneâ€™s associate companies in the sugar sector was down by Rs 89 million, resulting in overall losses of Rs 63.2 million under this category. It is to be noted that the exceptional items of Rs 459.4 million shown in the Profit and Loss account of the company comprised mainly of profit on sale of the Highland Rose plots, as well as other plots of land in the Highlands.
The management noted that sugar pricescontinue to be under pressure in the EU market, hence no improvement is expected for crop 2015. However, it went on to assure stakeholders that the group is exploring new avenues to improve margins in its sugar segment operations.
On a positive note, the Ethanol plant is expected to generate higher profits in 2015 and the hospitality segment shall report better results with an increase in the occupancy rate of the Airport hotel being targeted for 2015.
Finally, the sugar mill run by Omnicane associate KISCOL in Kenya has started its operations in January 2015 and is expected to process a full harvest in 2015.