MD'S REPORT
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MD'S REPORT
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2018 MD’s Report

 

The keen observer will have taken note of my previously gloomy predictions in relation to this year’s expected financial results. The prospect of growing sugar imports, a stronger Rand and flat markets all underpinned my pessimistic expectations at the time. Suppliers and shareholders will no doubt be pleased to hear that I ultimately missed the mark on this one. Instead, the Rand did not quite drop as far as we had budgeted for and the sugar operations recorded one of its best crush totals on record to ensure a welcome set of financials. Significant strides towards improved cost controls, particularly in terms of energy costs and transport savings, have also contributed strongly to this year’s results. Operating profit ended the year on R120m, which together with a net profit of nearly R70m, did not fall far short of the record returns of 2017.

In addition to investments made to date, these funds will allow us to continue implementing a range of capital projects in the coming years aimed at achieving additional processing improvements. One should not underestimate the value created by a productive manufacturing plant, particularly when accompanied by numerous efficiency gains. To this end, it is worth elaborating on some of the recent accomplishments of the manufacturing operations. I can quote several examples. Amongst them, the drop in coal and electricity consumption, the reduced bagasse moistures, the improved recoveries, the reformulated extract recipes, the improved weight and presentation of extract products, improved control systems, reduced maintenance costs, detailed reporting platforms and the rationalisation of site vehicles. All of these interventions are the result of effective analysis, planning and implementation by dedicated staff who deserve recognition for their achievements. Considering the state of our industries at the moment, these and other investment innovations have gone a long way towards preserving value for our stakeholders.

Operationally, therefore, we have reason to be positive going forward. The sugar mill has shown us what it can do and assuming the weather doesn’t spoil the party, we have the potential and ability to realise maximum output. The extract factory has stabilised its mechanised production features and is on the verge of implementing additional automations. The product spread is now stable, allowing for effective planning, which in turn results in optimal bark intake during the peak season. The sawmill is progressively increasing its average daily output by systematically eliminating avoidable breaks in production. Outdated processes are being replaced with more efficient ones resulting in synchronised improvements throughout the lumber production chain. The farms are consistently improving their productivity statistics thanks to an increasing range of husbandry best practices. It would be remiss not to also note the important contributions made by all the various supporting divisions. Marketing continues to grow the UCL brand and making sure that our products are favoured amongst our increasing customer base. The finance department has fine-tuned its administrative functions to the extent that information is available when needed and the accuracy of data limits the need to rely on estimates. Human Resources have placed the right people in the right jobs to ensure skills are available where they are needed. Health and Safety standards are higher than ever following years of awareness campaigns and the infusion of safety protocols within daily operational routines. Quality Assurance has achieved major benchmarks in terms of food safety and management systems accreditation resulting in a high degree of customer satisfaction. Progress can be seen throughout UCL’s operations and we look forward to seeing this trend accelerating where required and becoming entrenched where already accomplished.

Some important institutional changes have taken place within the structures of the sugar industry during the course of 2017/18. Representation and transformation have been at the forefront of almost every debate and decision relating to industry matters. The need for effective change is recognised by all and the various role-players have been grappling with how best to implement effective structures that will take the sugar industry forward even as the pressures of low pricing are bearing down on all participants. The provisional outcome has seen the formation of separate grower and miller federations which will represent the various sectional associations who qualify for representation on these bodies and ultimately also the South African Sugar Association Council. These changes were strongly supported by government who are placing pressure on the industry to increase its rate of transformation and support for emerging growers. While not all issues have been resolved and the amended regulations await adoption by government, it is clear that the sugar industry is irreversibly moving forward in the hope of achieving unity based on constructive cooperation by all role-players and a shared desire for economic sustainability.

Optimism should not be offered cheaply, particularly under the looming spectre of impending financial pressures. However, we have a good thing going at UCL. Despite occasional difficulties we have managed to consistently create value over many years by maintaining strong relations, promoting our shared ideals and always striving for high standards. These attributes will continue to serve us well and so we say with confidence that we have trust in the future.

Sugar farming | Sugar Manufacturing | Leather Tanning Products | Forestry | Saw Milling

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