Illovo profit up 161 percent
Illovo Sugar (Malawi) Limited profit has peaked at K20 billion (about $50m), a 161 percent jump from the previous year’s K8 billion (about $20m) amid a difficult economic environment characterised by the devaluation and floatation of the kwacha.
The Malawi Stock Exchange (MSE)-listed sugar manufacturer, in its financial results for the year ended March 2012, said this monetary policy decision effected in May 2012 exerted “pressure on the cost of wages and also inputs particularly electricity, fuel and maintenance materials”.
“All these increases compounded pressure on the profitability of the company, but the implementation of phased sugar price increases during the year and the improvement in revenue stream in kwacha terms from the sale of sugar into favourably prices export market established through our well organised marketing structures enable the company to protect its operating margin and ensure a continuing return to its shareholders,” reads the statement accompanying the results.
Although much improved over the previous year, the company said periodic shortages of foreign exchange resulted in payment delays of some external commitments with a resultant rise in interest charges with large increases in bank base lending rates also compounding the negative movement in the interest bill for the year.
The company whose balance sheet has grown 55 percent to K63.9 billion (about $160m) from K41.2 billion (about $103m), said the sugar cane production for the year totalled 2.5 million tonnes with 15 percent grown by smallholder farmers.
Revenue jumped 73 percent to K63.2 billion (about $158m) from the previous year’s K36.5 billion (about $91.2m).
The company’s sugar production at the two factories, Dwangwa in Nkhotakota and Nchalo in Chikhwawa, operated at “satisfactory levels of operational efficiency” in the year.
Sugar production totalled 300 000 tonnes, up from last year’s 283 000 tonnes, an increase of six percent.
The company said the bulk of the sugar produced during the season was sold to the local market direct consumption and industrial consumers who accounted for 55 percent of the total sugar sales in the year.
“The fortification of sugar with vitamin A for direct consumption in Malawi commenced during the year under guidance from government of Malawi in line with its requirements to combat macro-nutrient deficiencies within sections of the population. Exports to preferential markets in Europe and USA represented 32 percent overall sales volumes and the balance was sold to regional customers mainly in Zimbabwe,” said the company.
The company is expected to pay a total dividend of K14.65 per share, up from K7.95 per share the year before.
Illovo is expected to achieve a cane harvest of similar size next year with its local market sales expected to be given preference.
But it said the anticipated continuation of the uncertain and difficult economic environment will result into marginal growth of sugar sales on the local market.
“Stocks levels will again be carefully managed to ensure adequate sugar supply to the domestic consumer. Full advantage will again be taken of export opportunities as they rise to maximise the revenue stream,” said the company.
