Illovo’s profits low despite good sales

Illovo Sugar expects this year’s average local raw sugar price to be almost US5c/lb lower than last year. “The world raw sugar price has been volatile, but recently stabilised at around US10c/lb,” says managing director Don MacLeod. “Last year, the world price rose to almost US20c/lb and the South African sugar industry achieved an average realisation of US14,92c/lb in respect of world raw sugar sales, whereas in the current year it is anticipated that the average price will only be slightly over US10c/lb. T his has negatively impacted on the group’s regional sales and resulted in Illovo’s latest interim results for the year ending 30 September showing that the group’s operating profit was similar to last year, despite increased sugar production and an improved domestic market and sales. “general our sugar factories performed satisfactorily. Assuming normal growing and operating conditions for the remainder of the season, group sugar production is expected to be around 1,875 million tons, which is 150 000t above that of last year. main increases in production are forecast to occur in South Africa, Tanzania, Zambia and Mozambique,” MacLeod says. llovo also announced that it, in partnership with the Malian government, will build a new sugar mill in that country. Illovo already runs sugarcane growing and sugar processing operations in SA, Swaziland, Malawi, Zambia, Tanzania and Mozambique. Illovo invests in Africa – this time in Mali MacLeod says the company’s board had approved an equity investment of R394 million in a public-private partnership with the Malian government for a sugar mill that will ultimately produce 200 000t of sugar per year, an ethanol plant that will produce 15 000kℓ annually, and an electricity co-generation facility. “Illovo will hold a 70% equity stake in this industrial entity, with the balance to be held by private investors and the government of Mali,” MacLeod explains. “total cost of the factory is estimated to be R1,4 billion, of which 40% will be equity-funded and the balance debt-funded. In addition, Illovo will manage a government-sponsored agricultural development to produce around 1,5 million tons of sugarcane per annum.” S ugar production will commence in December 2009, with the mill reaching full capacity in 2011. The anticipated investment in Mali is, however, still subject to the finalising of the requisite concessional debt funding for the agricultural development. – Lloyd Phillips