Operations Review

This segment comprises oil palm plantation and sugar milling activities, which include the cultivation and milling of palm oil and sugarcane.

As at 31 December 2020, our total planted area stands at 232,053 hectares (ha). Through joint ventures, we own plantations in Uganda and West Africa totalling approximately 46,000 ha. We also directly manage 35,276 ha under smallholder schemes in Indonesia and Africa, and another 157,515 ha under smallholders schemes through associates in Africa.

In recent years, we took the opportunity of the relatively low palm oil prices to step up our re-planting programme and thus maintaining the average age of our plantations at a relatively young 11 years. This will support the medium to long-term growth of our plantation operations. Around 56% of our plantations are at the prime production age of seven to 18 years and 28% are at age six years and below.

We operate sugar cane and sugar beet mills in Australia, India, Myanmar, China and Morocco. As the largest raw sugar producer in Australia, we supply more than half of the country’s raw sugar. Each year we crush about 15 million tonnes of sugarcane to make more than two million tonnes of raw sugar. About 80% of the raw sugar we produce is shipped to overseas markets.

We own 62.5% of Shree Renuka Sugars Limited (SRSL), the leading sugar company in India. SRSL has a cane crushing capacity of 8.4 million MT and ethanol distillery capacity of 160 million litres per annum. In Myanmar, we have a sugar production capacity of 1.4 million MT and a bioethanol plant. In China, we process sugar beet in Inner Mongolia. In Morocco, our associate Cosumar S.A. operates sugar cane/sugar beet mills and a sugar refinery. Cosumar is the sole sugar producer in Morocco and the third largest in the African continent.

Sustainability

We remain steadfast in our commitment to make a positive impact and drive transformation across the industries we are in. With our No Deforestation, No Peat, No Exploitation (NDPE) Policy at the core, we adopt a holistic approach to sustainability which is integrated with our businesses and operations.

In our sugar business, we have started to develop our supplier programme which will initially focus on traceability. We have now expanded our sugar traceability data collection outside of Australia to cover the supplying mill information for our sugar refineries in New Zealand, Indonesia and India.

Our Performance

In 2020, pre-tax profit for the Plantation and Sugar Milling segment turned around from a loss of US$41.3 million in 2019 to a profit of US$104.8 million, benefitting from firmer palm and sugar prices.

In Palm Plantations, production yield increased by 2% to 20.4 MT per ha in 2020 from 20.1 MT per ha in 2019, resulting in a 3% increase in total fresh fruit bunches production to 4,030,264 MT for the year.

While the recovery of sugar prices in the second half of 2020 improved performance of the sugar milling business, the results were partly offset by a US$20.0 million impairment of sugar milling assets in India in the first half of 2020. Excluding this non-cash impairment, the sugar milling business broke even for the full year. Sales volume for sugar milling operations decreased by 12% to 3.5 million MT in 2020 due to the timing of sales by our Australian milling operations.

Outlook and Strategy

The segment is expected to benefit from higher palm oil and sugar prices in 2021. Palm oil stocks are expected to remain low as production is expected to recover only in the second half of 2021.

Overall global supply for sugar is expected to be tight due to poorer crop outlook in Europe, Central America and Asia. Global stocks are reaching its lowest level in the past 10 years and should support demand along with imports expected from China, Indonesia and Pakistan. At the same time, corn tightness could become an important supporting factor with positive arbitrage in favour of sugar for corn ethanol and corn starch.