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Illovo Sugar Limited - Annual General Meeting: Chairman`s Address ILLOVO SUGAR LIMITED (Incorporated in the Republic of South Africa) Company registration number 1906/000622/06 Share Code: ILV ISIN: ZAE000003547 ANNUAL GENERAL MEETING - 13 JULY 2005 CHAIRMAN`S ADDRESS In respect of the year ended 31 March 2005, as already reported, headline earnings per share of 42,6 cents were 40% below those achieved in the previous year. Operating profits were severely impacted by the continuing strong rand in respect of both sugar and downstream exports and the translation of foreign profits. The strength of the local currencies compared to the US dollar in the operations outside South Africa also reduced profits in those local currencies. In addition lower sugar production and related downstream production in South Africa had a negative effect. During the past financial year, both the Gledhow sugar factory and cane growing estates and the Umfolozi sugar factory were sold to Black economic empowerment companies. In addition the Monitor Sugar operation in the United States was sold prior to the beginning of the new sugar campaign. A further BEE cane farm sale was made during the year. It is worth noting that overall group borrowings have been reduced by around R2 billion over the past three years through internal cash generation and the sale of assets. The expansion potential in Illovo`s existing factory and field operations is significant and, in addition, the group is investigating opportunities for power generation and new investments in Africa. The EU Agriculture Commissioner formally presented the proposals from the European Commission for the reform of the EU sugar regime on 22 June 2005. The key elements of the reform were very much as expected although they reflect a significant change to the present regime. The reform process now sits with the EU Ministers of Agriculture who will debate the proposals between now and November/December 2005. The proposals are based on a significant reduction in the price, the elimination of export subsidies and a voluntary scheme for the buy-back of EU beet quotas funded by a levy on beet production. The aim is to reduce EU sugar production by up to 5 million tons. It is proposed that the new regime would continue until 2015. The proposals provide for unchanged access to ACP producers and leaves the Everything But Arms (EBA) initiative for the Least Developed Countries (LDC`s) in respect of tonnage unchanged. The proposals as formulated will reduce the price received by the group in respect of current ACP/LDC supplies to the EU with effect from 1 October 2007, however potential exists for increased supplies to the EU market in the following quota year which will offset the reduction in price. This tonnage would be sourced from production previously supplied to lower priced world and regional markets together with planned expansion of production. Unfortunately the reform proposals provide no additional benefits to the Least Developed Countries, and the company is actively participating in the lobbying process and providing technical input to the LDC and ACP country members involved in the discussions on achieving a lower price cut over a longer implementation period. 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. Although it has been extremely dry in South Africa over the past three months sugar production is estimated to be similar to that of last year despite the sale of the Umfolozi mill. In Zambia it has been exceptionally hot and dry with summer rains considerably below the long term mean, however irrigation and improved factory performance have resulted in anticipated sugar production being above that of last year. Elsewhere in the group, weather conditions have been favourable for crop growth. Generally the factories have been operating well and a number of new performance records have been achieved in recent weeks. Sugar production in each country, except South Africa, is anticipated to exceed that of last year. For the group as a whole, overall sugar production is forecast to be around 1,8 million tons for the season (9,5% above last year excluding Umfolozi) whilst cane production is forecast to be around 5,4 million tons (21/2% above last year). The alcohol plant at Merebank continues to perform very well whilst the furfural and related plants at Sezela have operated satisfactorily. The refinery expansions at Pongola and Noodsberg in South Africa are progressing well. The world sugar price has continued to be volatile but with a much stronger upward trend in recent weeks, with the current raw sugar futures prices around 9,40 cents/lb. In respect of the 2005/06 season, the South African Sugar Association has priced 707 350 tons (57% of anticipated exports) of world market sugar at 8,99 cents/lb. In general, all operations are performing well. In addition, the world sugar price and the current rand/US dollar exchange rate are more favourable for the company than in the previous year. These factors will positively impact on profits for the current financial year. Illovo Sugar Limited AGM - Chairman`s Address 13 July 2005 Sponsor: JP Morgan Equities Limited Date: 13/07/2005 02:38:38 PM Produced by the JSE SENS Department
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