Illovo faulted on pricing, dividends
Illovo Sugar (Malawi) plc shareholders on Thursday took to task their board over alleged over-pricing of sugar on the domestic market and low dividends.
Speaking during the 55th Annual General Meeting (AGM) of the Malawi Stock Exchange (MSE)-listed sugar manufacturer in Blantyre, one of the minority shareholders, Frank Harawa, observed that the price of Illovo sugar is higher in Malawi than on the export market.
Harawa, who is also Minority Shareholders Association secretary, said it does not make sense for Malawians to buy the sugar at a higher price when it is produced locally.
He also expressed dissatisfaction with the issuance of a dividend of 50 tambala per share, a situation he said will fail to push up share price on the local bourse.
He said: “We noted that the price that Illovo is selling their sugar in Malawi per tonnage is higher as compared to what is charged in export markets; the figures are explicit.
“If we lower a little bit the price of our sugar, then they maybe able to compete even domestically with low-priced illegal sugar, knowing that the cost of producing will not hurt us at all.
“It’s interesting that it was minority shareholders that pushed for the dividends but at 50 tambala, it’s a bit lower, they could have done better. We are also looking at share price on MSE which has continued to go down now at K110. Maybe they could have paid K10 to be more enticing.”
Available figures show that with a production cost of K435 000 per tonne, Illovo Sugar (Malawi) plc sells a tonne at K722 300 on the domestic market and K390 000 on the export market.
While admitting that the average price of their sugar exports is lower and below their cost of production, the firm’s managing director Mark Bainbridge said domestic prices are determined by sugar prices in the region.
This, he said, helps to tame illegal sugar imports into the local market, thereby, reducing the cost of sugar, which now hovers at K800 per kilogramme (kg) from K900 (kg).
Bainbridge said: “We are competing against excessive sugar from other countries on the world market. Currently, the excess sugar is sold to South Africa and deficit markets in the region [like Kenya, Tanzania, Rwanda, Burundi and DRC].”
“Our shareholders have been patient having go through a four year dividend drought but they understood. We gave out the dividend as a thank you for supporting us and we still have some tough difficult to face.”
During the year under review (year ended August 31 2019), the sugar manufacturer’s profit dropped to K10 billion from K16.4 billion during the same period last year due to illegal sugar imports, increased competition, pricing constraints and challenges with export quality.
Meanwhile, in its cautionery statement published on Friday, the firm advised that profit after tax for the half year ending February 29 2020 is expected to be lower than the previous corresponding period by at least 70 percent due to a decrease in domestic sugar sales caused by an influx of illegally imported sugar. Sugar is one of the country’s major foreign exchange earners and Illovo (Malawi) plc has a 97 percent market share.
