Exports of sugar to the low priced European Union (EU) market have dropped by 62 percent as a strategic response to sugar import parity prices, listed Illovo Sugar (Malawi) Limited plc financial results show.
The drop comes at a time domestic sales volumes have risen by six percent while regional sales volumes have dropped by three percent, according to the results for the year ended March 31 2017.
In its published results which were presented to shareholders on Tuesday in Blantyre, the Malawi Stock Exchange-listed sugar manufacturer says prices for the EU market are in the medium-term expected to remain static with sugar prices closely aligned to world prices.
In 2015, EU revealed plans to scrap off sugar quotas from this year, a development which the Malawi Government and the Sugar Growers Association of Malawi said was an issue of concern.
The planned arrangement meant that Malawi, alongside other sugar-producing countries, stand to lose a significant portion of their export market when the EU ends production quotas for its 19 countries.
EU member States are limited to supply a maximum of 13.5 million tonnes of sugar, but consume 17 million tonnes a year as the African, Caribbean and Pacific (ACP) States and least developed countries such as Malawi supply up to 3.5 million tonnes through their quota-free, duty-free access to the EU market.
“The business benefitted from improvements to the sales mix with sugar being redirected from various lower priced EU markets into regional markets,” reads the financial report in part.
Illovo Sugar (Malawi) Limited managing director Mark Bainbridge is quoted in the report as saying that the export mix was optimised by the commercial teams, switching product from lower value EU bulk raw sugar exports to higher value regional markets which delivered improved revenues and margin, increasing domestic sales volumes by six percent.
““Despite the challenging economic and agricultural conditions, we improved profitability and reduced net debt by 37 percent from K38.2 billion to K24.2 billion. This was achieved through management’s continuing attention on cost reduction and continuous improvement methods which saw various quality audits at both estates being successfully concluded during the period,” he said.
According to the financial results, profit after-tax in the year increased by 292 percent to K7 billion. n