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Malawi remains Illovo’s cash cow

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For four years running, Malawi is still the biggest contributor to Illovo Sugar Group’s operating profit, with its contribution accounting for 47 percent, the group’s preliminary report for the year ended March 31 2013 has shown.

According to the report, Malawi is trailed by neighbouring Zambia 25 percent, South Africa nine percent, Swaziland eight percent, Mozambique six percent and Tanzania five percent.

This shows that the Malawi Stock Exchange (MSE)-listed Illovo Sugar (Malawi) Limited has maintained its top position as the group’s cash cow.

In the 2011/12 financial year, Malawi contributed 39 percent to the group profits, followed by Zambia at 33 percent, Tanzania 11 percent and South Africa seven percent.

Illovo Sugar (Malawi) Limited managing director Patrick Mitchell earlier told Business News that factory performance had improved for the whole group.

“The performance of the factories across the group has generally been good and, in particular, both mills in Malawi have run consistently well during the season with good recoveries of sucrose from sugarcane,” he said.

Improved sugar availability helped to increase sales volumes by 11 percent compared to the previous year and better sales prices were realised in all market segments, yielding an increase of R1.9 billion (K70.3 billion) in sugar revenue from R1.35 billion (K49.95 billion).

Reads the report in part: “The 2012/13 season has demonstrated the positive benefits from ongoing initiatives around the group to build our production capacity and enhance operational efficiency. Weather conditions were generally favourable during the past year and a record cane crop of nearly 6.5 million tonnes was produced from our own agricultural operations.

It said total cane production from independent farmers also increased with 8.4 million tonnes delivered to factories during the course of the season.

“Recovery from the previous year’s drought in South Africa and the benefit of recent factory expansions around the group, notably in Swaziland and Zambia, as well as improved plant efficiency and better process recoveries, resulted in the group’s sugar production increasing over that of the previous season by 14 percent to 1.75 million tonnes,” said the sugar manufacturer.

Group sugar production increased by 220 343 tonnes compared to the previous season, largely driven by the recovery in South Africa where sugar production rose by 35 percent year-on-year.

While all other operations recorded increases in sugar production though, in Mozambique, production fell short of the previous year due to a generally poorer factory performance, according to the report.

Credible factory performance was achieved in all operations other than Mozambique, with highlights being good mechanical efficiency in South Africa and Malawi, and the expanded factories in Zambia and Swaziland running at their new throughput rates.

The report said that in excess of 60 percent of the group’s sales volume continues to be sold into domestic markets in the countries in which the group produces sugar.

It said in 2012/13, this represented 1.07 million tonnes, sold through a range of pre-packed and bulk industrial and direct consumption sugars in brown and refined sugar offerings.

Malawi and Zambia continue to supply sugar into large deficit markets in East and Central Africa where these two countries enjoy a geographical advantage over other potential suppliers.

Pricing in these markets was buoyant during 2012/13, reflecting a general shortage in sugar supply and high inland transport costs.

Preferential exports into the European Union (EU) and the United States grew further during the past year, according to the report.

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Business News

Malawi remains Illovo’s cash cow

For four years running, Malawi is still the biggest contributor to Illovo Sugar Group’s operating profit, with its contribution accounting for 47 percent, the group’s preliminary report for the year ended March 31 2013 has shown.

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