Africa-Press – Eswatini. High input costs continued to pose a threat to the sugar industry during the 2021/22 season.
This was disclosed in the Eswatini Sugar Association (ESA) integrated annual report for the year 2021/2022. It was mentioned that the costs rose way above the 80 per cent mark.
For example, some fertiliser prices soared by 82 per cent year-on-year, while fuel rose by more than 50 per cent at the season’s end.
ESA reported that agrochemicals such as herbicides, pesticides and ripeners showed a similar price trend by the close of the season.
Electricity tariffs increased by three per cent at the beginning of the season, following a price freeze in the previous year which was introduced to cushion consumers during the COVID-19 pandemic.
ESA stated that there were many factors behind these elevated input costs, such as supply constraints in the fertiliser-producing countries, mainly Russia, China, the USA, India and Canada.
“Rising shipping costs, and elevated oil and gas prices were also contributing factors to the price increases, along with growing global fertiliser demand for various crops, increased energy costs, labour shortages and trade duties,” said ESA, which was led by Phil Mnisi as Chief Executive Officer (CEO) during the period under review.
Mnisi now serves as Governor of the Central Bank of Eswatini (CBE) while Banele Nyamane holds the fort at the association albeit on an acting basis. In terms of response to the rising input costs, ESA explained that some initiatives were already underway to address the challenge.
These were roll-out of solar powered irrigation pumping to save on energy costs and bulk purchasing of agrochemicals including fertiliser, pesticides and chemical ripeners.
In terms of outlook going forward, ESA said as they closed the year, agrochemical prices remained elevated.
“Looking forward to 2022/23, agrochemical analysts believe these higher prices could persist as the ongoing geopolitical tension between Russia and Ukraine has further contributed to the price pressures of these input costs,” reads the report in part.
However, with more production coming back on-stream following the relaxation of COVID-19 restrictions globally, it was projected that prices could decline in the second half of 2022. “It is therefore necessary to adopt new cost-saving measures to ensure the long-term sustainability of our industry and safeguard the viability of the smallholder growers in particular,” it was emphasised.
Despite the spike in input costs, ESA reported that the group recorded revenue of E5.76 billion, a drop from E6.10 billion, which had been generated in 2021.
It was explained that the decrease in revenue was mainly attributable to a decrease in sales volumes and foreign exchange rates even though the selling prices were better compared with the previous year.
The cost of sales decreased from E5.92 billion to E5.66 billion in line with the decrease in distributable proceeds.
ESA mentioned that profits which were made by the association were distributed in full to the millers and growers and formed part of the cost of sales. Distribution costs incurred during the year were E17.2 million against E13.8 million in 2021, increasing marginally compared with the previous year.
Foreign exchange gains of E64.1 million were realised compared to a gain of E26.3 million during the same period last year.
It was pointed out that this was mainly because of the cover with a better rate that was taken in the past year.
Interest paid decreased from E87.2 million to E75.3 million due to the decreased production levels as well as good working capital management compared with the previous year.
Total overheads decreased from E109.04 million to E88 million mainly because some costs were deferred to the following year due to COVID-19 restrictions.
Inventories decreased from E291.5 million to E105.6 million due to lower closing stock quantities.
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