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RES income drops by 41% to E179 million

RES Corporation Managing Director, Nick Jackson.

By Silindzelwe Nxumalo

THE Royal Eswatini Sugar (RES) Corporation has recorded a drop of 41 per cent in their comprehensive income for the year ended March 2023. According to the corporations’ integrated report for 2022/23, the income for the year under review was E179 million compared to E303 million income made in the previous year.

RES Corporation Managing Director Nick Jackson said that the year 2022/23 was a challenging year for RES, characterized by extreme weather conditions such as heavy rain, storms, and strong winds. The MD said consequently, they failed to achieve their expected cane yield of 109.9 tonnes cane per hectare (tch), with an achievement of 96.4 tch against 93.7 tch for 2021/22.

He stated that sugar production was 1 per cent lower compared to the previous year and the total area affected by storms was 15 392 ha, with 5 301 ha of cane severely lodged. “National social issues resulted in stay-aways, which also impacted our production,” he said.

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Jackson stated that due to the extreme weather conditions, their factories operated under inefficient stop-and-start conditions, resulting in the season extending into the rainy season, typically reserved for our annual off-crop maintenance programme.

He mentioned that their financial performance was thus disappointing, with total comprehensive income decreasing by 41% from E303 million for 2021/22 to E179 million for 2022/23. He said the sugar futures continued to rise and suggested a tight balance for 2023 in both raw and white sugars with a small surplus of 1 million tonnes.

“A strong US Dollar and weak Real, high oil and energy prices, and reimposition of Brazilian fuel taxes are affecting the ethanol parity pricing, which may result in increasing input costs in both field and factory,” he said. The MD further stated that sugar prices should rise towards the middle to end of the decade due to world production constraints.

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He said the financial challenges facing one of their major competitors in the region could be both a blessing and a curse for RES as the competitor’s drop in production, or even complete failure, could mean an opportunity for Eswatini to put more sugar into the South African market, but could also weaken the South African Sugar Industry, something that could pose an additional risk to RES. “This is important in the context of the tariff for SACU because the sugar user’s voice would become louder as the sugar industry’s voice gets weaker,” he said.

Jackson added that the sugar users would be pushing for cheaper sugar through the suspension of the tariff and thus easier access to world market sugar at world market prices. RES Corporation Board Chairman Dr A.T Dlamini mentioned that even though their financial performance was significantly lower than last year the business continued to add value to its shareholders, with a total dividend declaration of 53.5 cents per share compared to the previous year’s share of 192.9 cents per share.

Dlamini stated that unit production costs remained under pressure, driven by the lower climate and pest and disease-affected volumes, and exacerbated by the impact of the Russia-Ukraine war on fertilizer and fuel prices. He stated that it was becoming increasingly clear that climate change was probably one of the most critical global challenges that would have a long-term impact on businesses and humankind.

“The effects of climate change on various components of the business are explained in more detail. We will have to develop an encompassing response strategy to mitigate these impacts,” he said.

Dlamini mentioned that they were committed to integrating ESG matters into their business decisions, company strategy, reporting, and operations going forward, and this would be an area they would expand on in future reports.

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