Illovo Sugar (Malawi) plc has attributed its profit drop to illegal sugar imports, increased competition, pricing constraints and challenges with export quality.
The listed sugar manufacturer said yesterday in a statement accompanying financial results for the year ended August 31 2019 that this has resulted in severe impact on the business cash flow and also on taxes paid to Malawi Revenue Authority.
The financial statement jointly signed by chairperson Gavin Dalgleish and managing director Mark Bainbridge shows that profit dropped to K10 billion from K16.4 billion during the same period last year.
At the same time, Illovo Malawi said taxes paid during the period dropped to K4.5 billion from K7.8 billion the year before.
Illovo Malawi’s performance in the year under review could be a signal of larger problem in the real sector, espeically in manufacturing.
In a statement, Illovo said: “Challenging market conditions, including pre and post-election civil unrest continued to be experienced in the commercial sphere with illegal sugar imports continuing unabated despite good support from the Malawi Revenue Authority, which had run several search and confiscation operations.”
Illovo Malawi, whose revenue has also dropped to K129.6 billion from last year’s K141.7 billion, said Dwangwa Estate experienced some initial challenges with plant commissioning issues.
During the year, the firm said on-going quality focus on all sugar products and formats, packing, warehousing and distribution of the product continued to deliver positive contribution.
Illovo said management prioritised debt reduction coupled with revenue and volume enhancement strategies and on-going cost rationalisation across the entire business value chain.
Looking into the future, Illovo Malawi expects that normal weather patterns and improvement in power generation by Electricity Generation Company (Malawi) Limited should have a positive impact on the agricultural output and factory throughput.
Meanwhile, Illovo Malawi has, after a four-year dividend drought, declared a dividend of 50 tambala per share, which will be payable on March 31 2020.
Sugar is one of the country’s major foreign exchange earners and Illovo Malawi Limited, which has a 97 percent market share, employs about 5 759 permanent employees and 3 558 seasonal agricultural workers at peak periods.