We have extracted the financial summary from the full year abridged report of Alteo Limited listed on the Stock Exchange of Mauritius under the share code ALT.mu. Alteo is a holding company, which deals in cane farming, sugar milling, sugar refining, energy production, real estate and hospitality in Mauritius and regionally.
The following is an excerpt from the Q12019 Interim Report:
GROUP REVIEW FOR THE QUARTER
LOWER PROFITABILITY OF THE SUGAR CLUSTER
Group turnover increased by 25% in the quarter under review mainly explained by the significantly better sales achieved by the East African sugar operations. However, EBITDA and profit after tax dropped by 4% and 14% respectively as the Mauritius sugar operations remained under pressure in a low price environment and lower margins were realised on imported sugar sales in Tanzania. The adverse performance of the Sugar cluster was mitigated to some extent by the improved results of the Energy and Property clusters.
Earnings per share deteriorated by 64% over the period mainly influenced by the adverse performance of the Mauritian sugar operations in which Alteo holds relatively high effective interests.
DROP IN RESULTS MAINLY DRIVEN BY OPERATIONS IN MAURITIUS DESPITE TURNAROUND IN KENYA
The results of the Mauritian operations were down on account of a persisting unfavourable price environment. The fact that the recent sector support measures announced by Government excluded millers and an adverse movement in the fair value of consumable biological assets further weighted on the Mauritian operations results. The cluster performance was however positively affected by the beginning of a turnaround in Kenya with a significantly higher production and sales volume resulting from an enhanced sugar cane availability. The medium term strategy of accelerated cane development implemented by management as from January 2017 started to translate into an increasing cane throughput as from July 2018, the average cane growth cycle being 18 months in the Transmara region. Prices on the domestic market also improved during the quarter. Finally, the Tanzanian operations achieved better sales but realised a lower profitability as priority was given to the sales of lower margin imported sugar. These operations also suffered from a slightly lower average price this quarter.
HIGHER PROFITABILITY WITH BETTER TARIFF AND CONTROL OVER MAINTENANCE COSTS
The Energy cluster posted a higher profit after tax mainly due to a better average tariff achieved by Alteo Energy Ltd (AEnL) and better controlled maintenance costs at Consolidated Energy Co Ltd (CEL).
RESULTS IMPROVED WITH HIGHER PROPERTY SALES REVENUE RECOGNITION
Property sales revenue continued to be recognised during the quarter as the construction works progressed on seven villas sold off-plan in the prior year. No property sales had been booked in the comparative quarter. Further, the cluster results were also influenced by the improved performance of Anahita Golf & Spa Resort driven by a better occupancy.
INITIATIVES TO ADDRESS SUGAR CLUSTER CHALLENGES IN MAURITIUS
Further to a set of recommendations made by a technical committee, Government recently decided to provide support to sugar cane planters in respect of the 2018 crop sugar production. This came in the form of a renewed assistance of Rs1,250 per tonne from the Sugar Insurance Fund and an additional remuneration for bagasse of Rs1,250 per tonne of sugar, thus bringing the revenue accruing from bagasse to Rs2,500 for small planters and Rs1,700 for other planters. These measures come over and above the ex Mauritius Sugar Syndicate price estimate of Rs9,700 per tonne but, regrettably, are not applicable to the milling sector which remains in an extremely vulnerable situation with significant losses forecasted for the financial year. Alteo, together with other millers, are continuing their efforts to address this anomaly.