Illovo Sugar was set to focus on capitalising on large-scale expansion projects in Zambia and Swaziland, MD Graham Clark said yesterday, after scaling back its South African production due to declining profitability.
“Just over two years ago we decided to expand outside SA because the returns and margins in other parts of Africa are more attractive. We’re now seeing it start to flow through to the business, with strong increases in both cane and sugar production.”
A major expansion programme in Zambia resulted in factory capacity enabling sugar production of 450000 tons per year, and Illovo acquired a large cane-growing company that produces 325000 tons of cane a year with the potential for more.
Zambia contributed 18% of group operating profit in the year to March — well behind the 42% contributed by the Malawian operation, but ahead of SA’s 17%. “Eventually we see our top three operations being Malawi, Zambia and Swaziland, with each putting in about 25% of our profits,” Mr Clark said.
Swaziland contributed only 8% of operating profit in the period , but Illovo had begun a project there that would increase sugar production from 220000 tons to more than 300000 tons a year, together with a biomass-fuelled power plant that would enable the factory and estates to become self- sufficient while supplying power to Swaziland’s national grid.
“Power tends to be costly and unreliable in Africa, so generating our own means we’ll be able to control a big input cost,” Mr Clark said. “The other leg is to open up a new revenue stream, although it’s too early to say what the contribution would be there.”
A greenfields project in Mali was expected to contribute 200000 tons to Illovo’s annual production when it came into full operation in “three to five years”.
The domestic operation contributed revenue of R3,45bn in the year to March — more than double the company turnover in any other single country. But it brought in an operating profit of just R255,3m, justifying Illovo’s decision to cut back its investment in the division. Illovo has sold its operations on the north coast of KwaZulu-Natal and the South African business became a stand- alone subsidiary in April.
Total group cane output in the 2009-10 season was 6,1-million tons — an annual increase of 1- million tons despite the negative effect of heavy rainfall in Zambia and SA. Sugar output was 1,69- million tons, more than 100000 tons up on the previous year.
Illovo benefited during the year from high international sugar prices, which reached a 28-year high thanks to poor harvests in Brazil and India. It also saw increased profits from exports to the European Union, which in October ended tariffs on sugar imports from developing countries.
[Business Day]
Tell Mwanachingwala to be civilised enough and desist from his intended arson behaviour. I heard Malawi is able to produce some fuel called methanol or ethanol from sugar canes? I think we should attract some investment in the research of this so we develop our own fuel plant.
The country is still attracting investment and re-investment. This is for the long term good of the country. I think it our duty as citizens to support Government’s efforts to maintain policy consistency. It is dangerous to give comfort to leaders who are unstable and can not maintain constency in their pronouncements.
# 1 and 2 despite all these goodies from investors the bottom line remains our pipo are not co owners. This in effect leaves us with nothing. I dont blame the chief for threatening to burn the fields. I dont think he would imagine such a thing if he was a shareholder. How long shall they steal our profit while we stand aside and look. Govt needs to empower its citizens by ensuring Zambians have a stake in such projects. We are tired of being workers while our resources are being raped by so called investors. Our children will grow up in poverty because all our resources will be in the hands of foreigners. Do you know how hard it will be in the next 20 years to own a sugar plantation? These guys wont easily give it up for our children. The time is now, empower the Zambians and the legacy wi
how come that sugar is more expensive for consumers in Zed than most of the other illovo countries?
how come that sugar is more expensive for consumers in Zed than most of the other illovo countries?
Because cost of production is higher in Zambia.