With an operating profit exceeding R1 billion and headline earnings of over R500 million for the 2006/07 financial year ended 31 March, Illovo Sugar has good reason for sweet smiles.
To boost shareholder confidence even further, the company announced that during the same period, headline earnings per share increased by 43%, and there were further reductions in its borrowings and gearing. “Our R515,3 million headline earnings and 149,1 cents headline earnings per share were attained through much improved world and regional sugar prices, higher downstream product export prices, strong domestic market sales, cost savings and the weaker rand,” explained Illovo’s managing director Don MacLeod. “These factors more than offset the negative impact of lower sugar production, primarily in SA and Tanzania during the past year.”
The Illovo Group’s 2006/07 total cane production across SA, Malawi, Zambia, Swaziland, Tanzania and Mozambique was 5,44 million tons – a similar level to the 2005/06 season. However, sugar production of 1,72 million tons for the past financial year was significantly lower due to adverse weather conditions in SA and Tanzania. The rest of the group experienced normal weather conditions, with record cane production achieved in its Malawi operations. Illovo’s sugar sales into domestic markets contributed 64% to the group’s total revenue, while exports to 110 countries contributed the balance of total revenue.
Although the international raw sugar price declined to US10c/lb at the end of the financial year from the February 2006 peak of approximately US19,2c/lb – the highest price in 25 years – the Illovo Group benefited from the much-improved average prices available during the past season, thereby improving its revenues from both world and regional sugar markets. “The Illovo Sugar board of directors has approved a major expansion of sugar and cane production in Zambia. An additional 10 500ha of irrigated cane will be developed by the company and its growers, representing a 50% increase in Illovo’s current area under cane in that country,” MacLeod said. – Lloyd Phillips