Nompumelelo Magwaza
Favourable weather conditions, expansions in its processing operations and plant efficiencies helped Illovo to lift its sugar production by 14 percent to 1.75 million tons in the year to March, the listed sugar producer said yesterday.
Illovo grew sugar production faster than Tongaat Hulett, which delivered a 9 percent rise in sugar output to 1.25 million tons in the same period.
Illovo’s operating profit leapt 41 percent to R1.9 billion with headline earnings a share up 43 percent to R1.896.
Managing director Graham Clark yesterday said that the results came from efficient performances, especially from improved operations.
“In South Africa we were coming off the recovery from the drought we experienced in the past three years and we have seen a nice increase [in sugar output],” he said.
Clark said the company was pleased with cane production from all its operations, including those in Malawi, Mozambique, Swaziland and Zambia.
“Last year, we made progress on many fronts across the business leading to the strong improvement in our financial performance. We had a record cane crop of 6.47 million tons from our own operations and sugar production was up 14 percent, with notable increases in South Africa following the previous year’s drought, and in Zambia and Swaziland after the recent factory expansions in those countries.”
He said Illovo experienced boiler problems in Mozambique, resulting in a shortfall in sugar production. A notable milestone was achieved in Zambia where sugar production exceeded 400 000 tons for the first time, with final production at 403 876 tons.
Both Illovo and Tongaat Hulett have the majority of their operations outside South Africa and have recorded good growth from those countries.
36One Asset Management analyst Daniel Isaacs said although the vast majority of profits for both companies came from countries elsewhere in Africa, their exposures in these markets were different.
He said Illovo benefited from Malawi’s fair value adjustments and Zambia’s operational performance. He added that Illovo enjoyed good performances in South Africa and Mozambique, where profits were up 80 percent.
“One of the main contributors for Illovo was that they had very good cane production, which contributed to improved factory performance.”
Illovo invested R367 million in a new custom-designed central warehouse and distribution facility in Pietermaritzburg, which Clark said would save the group on transport costs and rentals. The investment would hold meaningful storage and logistics benefits for South Africa, he added.
Isaacs said the investment in the warehouse would deliver a massive cost benefit for Illovo. It would give the company an operational advantage over other sugar producers that did not have such a facility, because centralisation made it easier to service clients.
Illovo said 60 percent of its sales volumes continued to be sold into domestic markets where the sugar was produced.
The Zambian economy was responding to its resource boom, which is copper-driven, and Illovo experienced increase in sales, with growth in double digits for three consecutive years. Last year sales increased by 10 percent.
Illovo shares lost 1.32 percent to R37.37 yesterday.