| Thu 10 Jul 2008, 15:55 | | ILV - Illovo Sugar Limited - Chairman`s Address - Annual General Meeting - 10 |
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ILV
ILV
ILV - Illovo Sugar Limited - Chairman`s Address - Annual General Meeting - 10
July 2008
ILLOVO SUGAR LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1906/000622/06)
Share Code: ILV
ISIN: ZAE000083846
ANNUAL GENERAL MEETING - 10 JULY 2008
CHAIRMAN`S ADDRESS
In respect of the year ended 31 March 2008, as already reported, the group
achieved good results with headline earnings increasing by 16% to R599,6 million
and headline earnings per share increasing by 15% to 171,6 cents.
The group has commenced its growth strategy and the first phase of the major
expansion project to increase the group`s production facility in Zambia to 440
000 tons of sugar per annum has been completed. Benefiting from the increased
cane supply and factory upgrade, sugar production is expected to increase to
around 275 000 tons in the current year. The second and final phase of the
project is making good progress and is due to be completed in April 2009.
Smaller factory expansions in Malawi and Tanzania were completed in the recent
offcrop period. Further small expansions are planned in Malawi over the next
two years. The Mali project is making slow progress and sugar production is now
only anticipated to commence in December 2010. The requisite concessional debt
funding for the agricultural development is being progressed, but it is taking
longer than anticipated. A major expansion of the group`s production facilities
in Mozambique has recently been approved and will result in output from this
operation doubling over the next three years. The expansion plans for the
group`s Swaziland operations have moved a step closer with good progress having
been made on the Lower Usuthu Smallholder Irrigation Project, and impounding of
water in the newly-constructed Lubovane Dam has commenced. The project involves
the establishment of 12 000 hectares of irrigated agricultural land over a
period of six to seven years, a large proportion of which will be developed to
cane for delivery to the group`s Ubombo factory where the required additional
milling capacity will be installed. The first deliveries of cane are expected
in 2009/10. The company`s existing factory operations have significant growth
potential and further developments are being pursued across the group.
The reform of the European Union sugar regime continues to take effect and since
implementation, domestic sugar quota renunciations have amounted to 5,6 million
tons, which is only 400 000 tons below the Commission`s target for quota
withdrawals. The various Economic Partnership Agreements and duty-free/quota-
free access to the European Union for Least Developed Countries will be of
benefit to the group`s operations in Swaziland, Malawi, Zambia, Mozambique and
Tanzania, as much of the group`s expansion activity is underpinned by the
anticipated increase in sugar tonnages which these countries will be able to
export to the European Union under the reform package.
This shareholders` meeting provides the opportunity to up-date you on the
current state of the group`s operations.
Generally, climatic conditions have been good across the areas in which the
group operates and favourable to crop growth, although in South Africa,
following a very dry April and May, severe rains were experienced on the South
Coast of KwaZulu- Natal in mid-June. The rains caused extensive damage to
agricultural bridges, causeways and road infrastructure as well as landslides on
some of the steeper slopes. Repairs are underway and the two affected mills are
back in production following a week`s interruption to operations. For the group
as a whole, sugar production is forecast to be around 2 million tons, which is
over 200 000 tons above that achieved last year. Cane production is expected to
be about 250 000 tons above last year. The company has taken back ownership of
the Umfolozi mill, but discussions regarding its long-term future ownership are
continuing.
The sugar factories` performance in general has been satisfactory, although the
Nakambala factory in Zambia has taken time to settle down following the first
phase of the expansion, which was commissioned about six weeks later than
anticipated. The downstream plants at Sezela and Merebank have continued to
perform well with furfural production expected to be about 5% above that of last
year.
The world sugar price has continued to be volatile but with an upward bias in
recent weeks. The October 2008 futures price is trading at US13,86 cents/lb
whilst the October 2009 futures price is at US15,88 cents/lb. This trading
range reflects a positive view of the world sugar market in the next calendar
year although high stocks are impacting on current prices. The South African
sugar industry has priced about 65% of its current year`s anticipated export
availability at US12,65 cents/lb.
The results for the current year will again be impacted by the level of the rand
compared to other currencies, particularly the US dollar. Overall, it is
anticipated that growth in earnings will be achieved in the current financial
year.
Mount Edgecombe
10 July 2008
Sponsor
J P Morgan Equities Limited
Date: 10/07/2008 15:55:01 Produced by the JSE SENS Department.
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