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Illovo Sugar Limited - EU Sugar Regime Update
Illovo Sugar Limited
(Incorporated in the Republic of South Africa)
Company registration number 1906/000622/06
Share Code: ILV
ISIN: ZAE000003547
("Illovo" or "the company")
EU SUGAR REGIME UPDATE
In the Interim Report released on 16 November 2005 it was noted that the
proposals for reform of the European sugar sector could have a material impact
on the company in the medium to longer term.
Agreement in principle was reached by European Union Agricultural Ministers on
24 November 2005 regarding reform of the European Union Sugar Regime. The
detailed agreement will be submitted for ratification by the European Parliament
on 17 January 2006. The implementation date is 1 July 2006 and the new sugar
regime will be effective until 30 September 2015.
Illovo agrees with the need for reform of the EU sugar sector and welcomes the
steps taken in terms of the reform initiative to significantly reduce production
of sugar in the EU and to eliminate subsidised exports. The reduction in exports
should result in an improved world sugar price which will benefit the group"s
sugar sales into world and regional markets.
The EU raw sugar reference price payable to quota holders under the ACP Sugar
Protocol (in the case of Illovo, affecting mainly its Swaziland operation) will
reduce by 5% on 1 July 2006. This will equalise the price paid for all raw
sugar imported into the European Union. The price for all suppliers of raw
sugar will then remain unchanged until 30 September 2008 after which it will be
reduced in two tranches on 1 October 2008 and 1 October 2009. As a result, no
significant price reduction impact on Illovo is expected until the 2009
financial year. The effective price cut of 32,5% in the raw sugar reference
price applicable to Least Developed Countries over this period is slightly
higher than the company expected, although the period of implementation is
longer than anticipated. It should be noted that the final EU raw sugar
reference price will be approximately 50% higher than the current world sugar
price. Whilst the price cut will impact negatively on revenue from existing
export quotas into the EU, a phased reduction in duty commencing from 2006 and
culminating in duty-free and quota free access for exports from 2009 in respect
of sugar supplied by Least Developed Countries (including Illovo"s operations in
Malawi, Zambia, Tanzania and Mozambique) will provide Illovo with opportunities
to both substantially increase export volumes into the EU market and extend the
range of sugar products supplied. The finalisation of the reform package creates
a period of certainty in respect of the EU market until September 2015 which
will underpin the expansion plans of the group.
Overall, the reform package is expected to benefit the group.
Mount Edgecombe
30 November 2005
Sponsor: J.P. Morgan Equities Limited
Date: 30/11/2005 02:45:03 PM Produced by the JSE SENS Department
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