| Wed 14 Jul 2004, 15:42 | | Trading Statement And Cautionary Announcement+ AGM |
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Illovo Sugar Limited - Annual General Meeting - 14 July 2004/Chairman`s Address
Including A Trading Statement And Cautionary Announcement
Illovo Sugar Limited
Company registration number 1906/000622/06
Share Code: ILV
ISIN: ZAE000003547
ANNUAL GENERAL MEETING - 14 JULY 2004
CHAIRMAN`S ADDRESS INCLUDING A TRADING
STATEMENT AND CAUTIONARY ANNOUNCEMENT
In respect of the year ended 31 March 2004, as already reported, headline
earnings per share of 76,9 cents were 42% below those achieved in the previous
12 months. Operating profits were severely impacted by the strong rand in
respect of sugar and downstream exports, and the translation of foreign profits.
We announced on 17 May 2004 that, in line with Illovo`s objective that there
should be direct and meaningful Black Economic Empowerment (BEE) participation
in the South African sugar milling industry, the company had entered into an
agreement for the sale of the Gledhow sugar factory and cane growing estates on
the north coast of KwaZulu-Natal. The purchaser is a broad-based BEE company.
The purchase price of R335 million is to be settled in cash and Illovo will
continue to provide management support for a period of five years after
transfer. The agreement was approved unconditionally by the Competition
Commission on 9th July.
In addition, Illovo has entered into discussions with various parties, including
a consortium comprising the Monitor Sugar Beet Growers` Association and the
Michigan Sugar Company (Grower Co-operative), regarding the divesting of its
interest in Monitor Sugar Company in the U.S.A. Discussions are continuing and
shareholders will be advised of developments in due course.
This shareholders` meeting provides the opportunity to update you on the current
state of the group`s operations.
Climatic conditions across the group have been variable in recent months.
Rainfall in the cane growing areas of the group`s South African operations has
been very disappointing and as a result cane, sugar and furfural production will
be lower than last year. The current South African sugar estimate reflects a
decline in sugar production of 11% (excluding Gledhow).
In the rest of Africa good growing conditions have been experienced and
production is expected to be at least equal to or exceed that of last year in
every country of operation.
In the United States of America the beets have recently been planted and the
initial estimate of sugar production represents a small improvement over last
year.
For the group as a whole, overall sugar production is forecast to be around 2
million tons for the season (21/2% below last year excluding Gledhow) whilst
cane production is forecast to be around 5,4 million tons (11/2% below last year
excluding Gledhow).
This season factory performances at both the sugar and downstream plants have
generally been good, and the mechanical efficiency and overall recovery in the
African operations has been better than last year.
In South Africa however, the cane quality has impacted on sugar recoveries
although they remain above the industry average.
The factories have settled down well after the offcrop with some of the sugar
mills having achieved record crush rates, whilst the Merebank distillery has
achieved a new weekly production record.
The world sugar price has continued to be volatile. However in recent weeks the
futures prices have strengthened significantly to above 8 cents/lb. Market
sentiment is more bullish than a couple of months ago as a result of a number of
factors including; (i) a further reduction in the Indian production estimate,
(ii) the crop in Thailand which is reported to be suffering from a serious
drought, (iii) a growing demand for Brazilian ethanol. In respect of the
2004/05 season, the South African Sugar Association has priced 635 500 tons (60%
of anticipated exports) of world market sugar at 6,89 cents/lb.
Proposals for reform of the European Union sugar sector and the re-launching of
the World Trade Organisation negotiations could have a significant future impact
on the group in respect of existing production and on potential expansion. It
is important that sugar producers from developing countries continue to have at
least the existing preferential access into the European Union and the United
States at reasonable prices. Initial proposals in regard to reform of the
European Sugar sector envisage a lowering of the EU internal sugar price, a
reduction in quotas and the cutting of export subsidies. However, officials
have stated that the proposals are `work in progress` and that the final product
could look considerably different following negotiations with all interested
parties. Finalisation is only expected early next year. The company is
actively participating in the process and providing technical input to the
discussions.
Illovo`s results for the current 2004/05 financial year will be considerably
impacted by the level of the rand compared to other currencies, particularly the
US Dollar. The rand has been much stronger during the first quarter of this
financial year than the average rate achieved last year. If the rand continues
at these levels it is anticipated that headline earnings will decline
substantially this year.
In terms of the Listings Requirements of the JSE Securities Exchange South
Africa, this information constitutes a trading statement. Consequently, the
auditors, Deloitte & Touche, have been mandated to report that this trading
statement has been properly completed on the basis of reasonable assumptions and
is consistent with group accounting policies. On completion, the accountant`s
report will be available for inspection at the registered office of the company.
It is anticipated that the accountant`s report will be submitted by the end of
July 2004.
In the interim, shareholders are advised to exercise caution when dealing in the
shares of Illovo Sugar until the accountant`s report is made available and this
will be announced on SENS.
14 July 2004
Mount Edgecombe
Sponsor
Cazenove
Date: 14/07/2004 03:25:45 PM
Produced by the JSE SENS Department
