| Fri 18 Jul 2003, 9:04 | | Annual General Meeting |
|
Illovo Sugar Limited -
Illovo Sugar Limited
Company registration number 1906/000622/06
Share Code: ILV
ISIN: ZAE000003547
17 JULY 2003
CHAIRMAN"S ADDRESS
PRESENTED BY ROBBIE WILLIAMS
The past year saw the group achieve very good results. Headline earnings
increased by 34% to R454,6 million with headline earnings per share rising by
33% to 136,8 cents. Record production of cane, sugar, ethyl alcohol, diacetyl,
lactulose and acetoin were attained.
Overall the season was characterised by favourable weather conditions which
assisted in the achievement of improved cane and sucrose yields. Factory
performance continued to improve with high levels of mechanical and operational
efficiency being attained. The downstream plants also performed particularly
well.
This shareholders meeting provides the opportunity to update you on the groups
operations. Climatic conditions across the group have been variable during
recent months. Good growing conditions, although not quite as favourable as
last year, have been experienced in most parts of Africa and America, but the
very dry conditions in some areas of South Africa have impacted negatively on
the cane crop in this country. Overall sugar production is forecast to be
around 2,2 million tons which is 100 000 tons below last season whilst cane
production is estimated to be 5,6 million tons, a reduction of 200 000 tons.
Summer rainfall in South Africa was disappointing and although certain parts of
the group"s operations benefited from above average rainfall in May the cane,
sugar and furfural production will be lower than last year. The sucrose percent
cane, milling conditions and factory performance have been good. The current
sugar production estimate in South Africa is almost 1,15 million tons which is
12,5% below last year"s final production figure. However the group"s share of
industry production is anticipated to be higher than last year. The furfural
and related product plants at Sezela and the distilleries at both Merebank and
Glendale are all performing well, although furfural output is forecast to be 8%
lower than last year due to the reduced cane crop. The commercialisation of
furfural as an agricultural chemical continues to make progress although new
registrations in South Africa have been slightly delayed. Progress in the
United States and Europe is encouraging.
In Malawi sugar production is forecast to be around 10 000 tons less than last
year. Weather conditions have been normal and the operations are running well
with factory performance to date being better than last year.
Although it was drier than normal in Zambia during summer, good irrigation and
favourable sunshine hours have resulted in the cane crop looking excellent.
Sugar production is expected to be marginally down (21/2%) depending on the
timing of the summer rainfall season which can impact on the extraction of cane
from the fields.
Sugar production in Swaziland is expected to be slightly higher than last year.
Following hot and dry conditions with abnormally high minimum temperatures
welcome winter rain was received during June which stabilised the flow of the
Usuthu River and enabled storage dams to be filled to reasonable levels.
The milling season at Kilombero in Tanzania started earlier than normal in late
May and cane yields and factory performance have been good. Weather conditions
have generally been favourable for cane growth, and sugar production is
estimated to be 8% higher than last year"s record output.
Encouraging performance is being achieved at Maragra in Mozambique in both field
and factory operations. Unfortunately very heavy rain at the end of June and in
early July has hampered harvesting and haulage operations, but the drainage
system coped well. Sugar production is forecast to be 67 000 tons which is a
30% improvement over last year.
At Monitor in the United States the contracted beet area was below expectations
but the crop is in excellent shape and given normal rains improved yields should
offset the lack of acres. Sugar production is estimated to be 15% higher at
around 170 000 tons. The sugar market in the United States remains firm but
natural gas prices, which impact on the cost of production, remain extremely
high.
World sugar prices have been volatile and in the last few months have tended to
move downwards. The current futures prices are around US 6,5 cents/lb. However
around 50% of anticipated world raw sugar exports in respect of the group have
been priced at just above US 7,0 cents/lb. This compares with the average price
achieved last year of approximately US 6,2 cents/lb.
Discussions around the W.T.O. negotiations, the European Union Sugar Regime
after 2006 and the challenge by Brazil, Australia and Thailand regarding the
existing European Sugar policy are important to the group and developments are
being closely monitored with input being made into the lobby process.
Profits remain sound, but as Illovo is a major exporter of sugar and downstream
products, earnings are affected by exchange rates. In addition, profits from
foreign operations are impacted by the currency translation effect. The rand is
considerably stronger at present compared with the same period last year and
there will be a significant negative effect on earnings should the rand continue
to trade at current levels for the remainder of the financial year.
Date: 18/07/2003 08:28:04 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
