Illovo managing director Gavin Dalgleish: Photo: Supplied

Johannesburg - Illovo would continue to diversify its earnings through electricity co-generation and furfural and ethanol production amid tough market conditions, the listed sugar producer said yesterday.

The company said it had benefited from its geographic spread and its ongoing operating efficiencies in the generation of electricity in Swaziland and its ethanol production in Tanzania.

For the year to March, Illovo’s revenue increased 20 percent to R13 billion while operating profit remained flat at R1.8bn. Headline earnings a share advanced by 4.3 percent to R1.94.

The group’s managing director, Gavin Dalgleish, said profit remained flat year on year because of two major factors – the impact of low prices for imported sugar on South African markets and Tanzania and more significantly the impact of the fair value adjustment.

“If you strip out the impact of the fair value you will get a more positive story,” he said.

He, however, believed that Illovo delivered an acceptable performance amid the tough trading conditions.

“The business delivered an acceptable financial and operational performance last year considering the difficult trading conditions in all of our markets,” Dalgleish said.

Illovo completed the construction of the new potable alcohol distillery in Tanzania. “The first batch of extra neutral alcohol produced from the plant was approved and product quality has remained robust,” Illovo said.

“Throughput constraints in Tanzania, due to energy interruptions from the sugar integrated mill, have limited the contribution to earnings in the current year but the alcohol revenue will provide diversity to the 2014/15 earnings.”

Dalgleish said: “Sugar and downstream production and revenue were both up and we will continue to seek ways to diversify our earnings further.”

Co-generation remained a priority across the group, with a large commercial co-generation plant recently commissioned in Swaziland.

“The plant is operating well and commercial exports to the national grid continue to exceed contractual commitments,” the group said.

The plant supplies about 48 gigawatts an hour into Swaziland’s national grid.

Dalgleish believed that the commitment by the government to reduce sugar imports would bear good results for the industry in the future.

“We are starting to see some positive impact from the import tariff. The new tariff has had the impact we were hoping for in the short term, certainly the imports have slowed down considerably. We are starting to get broader range of trade and enquiries from people buying imported sugar,” he said.

The group’s sugar production increased by 4.8 percent to 1.83 million tons due to increased throughput and improved performance in the South African mills and a full season of operations at the expanded capacity in Swaziland.

The recovery from drought in South Africa had also had a positive impact on sugar production, Dalgleish said.

In Mozambique, sugar production was in line with the previous years while Tanzania recorded a disappointing year of operations resulting in the carry-over of both own and outgrower cane of over 220 000 tons to the 2014/15 season.

The Swazi operations exceeded 250 000 tons of sugar production for the first time.

Illovo’s shares lost 0.36 percent to R30.35 yesterday.