SD vital core to Illovo’s expansion

SWAZILAND’s membership in the ACP group and its access to the European Union sugar markets, will play a significant role in Illovo International Sugar’s plans to boost its sugar production by 50 percent in the next five years.

This was reflected in a story carried by Business Report, an insert of South Africa’s The Star yesterday.

Mandla Hlatshwayo, the newly appointed Managing Director of Ubombo Sugar Limited - a subsidiary of Illovo International, will channel the institution’s operations towards achieving that goal.

He assumes the post next week.

“Illovo Sugar, which uplifted attributable profit 44 percent to E516.5 million in the year to March, plans to boost its sugar production 50 percent to 2.6 million tons by 2012,” the publication stated.

Managing Director Don McLeod said on Tuesday that good growing conditions in the areas where Illovo operates were driving the expansion which would be announced in phases.

“Expansion would enable Illovo to take greater advantage of increased access to markets in the EU. For example, Swaziland is part of the Caribbean Pacific group and the other counties where it operates (excluding South Africa) are classified as least developed countries (LDCs).

This means that all the countries where Illovo operates will have duty-free, quota-free access to the EU from 2009,” the report stated.

It was added that of the E1.79 billion Illovo approved for capital expenditure, E1.4 billion has been earmarked to increase the area of irrigated cane in Zambia by 50 percent.

The publication stated that Illovo had also earmarked on smaller factory expansions in Malawi, Tanzania as well as planting additional cane in these countries.

“Operating profit was up 38 percent to E1 billion and operating margins rose to 16.5 percent from 13.7 percent.

Malawi made a 39 percent contribution to operating profit due to record cane production. Zambia contributed 22 percent and South Africa 21 percent followed by smaller contributions from Tanzania, Swaziland and Mozambique.

Group cane production, at E5.4 million tons was on a par with the previous season but the sugar production of 1.72 million tons was lower because adverse weather conditions in South Africa and Tanzania limited yields,” it was stated.

It was stated that the group’s strong results were achieved through the improved world and regional sugar price compared with 2005, when it stood at about $0.08 a pound (E1.24 a kilogram).

Strong domestic market sales also helped.

The sugar price dropped from peak of $0.197 a pound in February, 2006 to $0.10 a pound a year later.

Macleod said: “I believe the sugar price stabilise at current levels in the short term, but in the next 18 months it will increase to between $0.12 and $0.14.”

The price has been dampened by increased sugar production in India, Brazil, China and Thailand, as well as a lower-than-expected fall in EU production.

However, the EU is planning to make the voluntary renunciation of quotas more attractive to growers and manufacturers, to help to re-establish equilibrium in the region before increased imports from LCDs in 2009.

Illovo shares rose 79c to E21.20, while the food producers sectors gained 0.58 percent.