Illovo says drought and strong rand impacting on output and earnings
Natal|Cogeneration|Crushing|Design|Illovo|PROJECT|Tongaat-Hulett|Malawi|Mozambique|Swaziland|Ubombo Factory|Umzimkulu Factory|Cogeneration|Crushing|Sugar Producer|Cogeneration|Graham Clark|Operations
© Reuse this
JSE-listed sugar producer Illovo expects its sugar output for the 2011 financial year to be similar to the 1,7-million tons of sugar produced in the year ended March 31, 2010, but warned that its earnings would be lower, owing to foreign exchange impacts.
Sugar output at its South African operations has, in the first half of the 2011 financial year, been negatively impacted on by drought in KwaZulu-Natal, while unseasonal rain in Swaziland has also led to lower production in that country.
Illovo, led by MD Graham Clark, on Thursday highlighted the strong rand and the drought in KwaZulu-Natal as two of its biggest challenges.
Fellow South African sugar producer Tongaat-Hulett on Monday also reported that its full-year sugar output would be impacted on by the drought, while export revenues were being impacted on by foreign exchange translations.
Illovo reported drastically reduced cane yields and cane availability at its South African operations, which resulted in the early closure of its Umzimkulu and Eston factories.
For the full-year, the local operations were expected to produce about 90 000 t less sugar than the 663 000 t produced in the 2010 financial year.
The company indicated that, even with a good summer rainfall, cane production on the south coast of KwaZulu-Natal in the 2011 calendar year would likely remain lower than that of the current year.
Illovo has, therefore, decided not to operate its Umzimkulu factory in the 2011/12 financial year, and will instead divert cane supplies to its other factories to enable these to run closer to their capacity.
Meanwhile, unseasonal rain in Malawi, Mozambique and Swaziland impacted on the cane quality in these three countries during the first half of the current financial year.
Nevertheless, the company has continued to make progress with regard to the expansion programme at the Ubombo factory, in Swaziland, with the upgraded facilities, capable of producing 300 000 t/y of sugar, to be commissioned in time for the start of the next season.
The R1,5-billion project would be completed by April next year.
Ubombo produced about 210 000 t/y of sugar in the 2010 financial year.
Additional cane development was being completed, while bagasse and biomass cogeneration facilities, which would allow the plant to be self-sufficient, would start up once the expansion project was complete.
Further, Illovo also reported a favourable season for its Zambian and Tanzanian operations.
Its Zambian operation, which was regularly exceeding its design capacity, crushing more than 100 000 t a week of cane, was expected to produce “significantly” higher volumes in the 2011 financial year.
About 315 000 t of sugar was produced at this operation in the 2010 financial year.
The Tanzanian operation was also expected to increase its output marginally on the 121 000 t produced in the previous financial year.
EXPORT EARNINGS AND SALES
Despite improved world sugar prices, the local industry has been unable to take full advantage of the opportunity, owing to the lower local sugar production, Illovo stated.
Therefore, its world market sugar exports were not expected to exceed 355 000 t this year, compared with the 742 281 t exported in the previous financial year.
Further, the weaker euro and lower-than-expected European sugar price realisations has also impacted negatively on downstream revenue and sugar export earnings from sales to the European Union during the first half of the financial year.
In addition, the continued strength of the rand and the weakness of the dollar were expected to further negatively impact on the company’s export earnings, as well as on the conversion of foreign subsidiary profits for the full-year
This would likely result in headline earnings a share (HEPS) for the full-year falling by between 30% and 40% on the HEPS of 171,2c a share recorded in the 2010 financial year.
Earnings a share (EPS) were also expected to be between 35% and 45% lower than the EPS of 161,4c a share recorded in the previous financial year.
Illovo’s headline earnings of R574,2-million for the six months ended September 30, 2010, was already down 14% on the headline earnings of R668,1-million reported for the six months ended September 2009.
Edited by: Mariaan Webb
© Reuse this
Comment Guidelines (150 word limit)
Other Agriculture News
Specialised chemicals provider Omnia was expecting to see financial gains from its new underground charging unit, which enables it to take its emulsion into the underground mining space, during the next financial year, MD Rod Humphris said on Tuesday. Speaking at a...
South African Breweries (SAB) would aim to put 5 000 smallholder farmers, to supply its South African operations, into production by 2020, corporate affairs and transformation director Monwabisi Fandeso said on Thursday. He explained that this initiative formed a...
Integrated poultry producer Astral Foods has boosted year-on-year headline earnings from R165.1-million for the previous year to R329.7-million for the 2014 financial year, largely owing to a continued turnaround in the profitability of the group’s poultry division....
Updated 7 hours ago
A Spoor & Fisher partner on Wednesday called on the Department of Trade and Industry (DTI) to finalise its proposed policy for Intellectual Property (IP). The policy, which had not been drafted in consultation with IP law experts, was published in September 2013,...
Auditor-General Kimi Makwetu
Updated 7 hours ago
Auditor-General Kimi Makwetu has called on all government leaders to play a crucial role in ensuring that government departments and entities improve their audit outcomes. He has raised concerns over irregular expenditure, non-compliance with legislation, auditees...
The Somalia Stock Exchange expects seven companies in the telecoms, financial services and transport sectors to list their shares when the bourse is set up in 2015, its founder said. Somalia's economy is slowly recovering from more than two decades of conflict,...
Recent Research Reports
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
This Week's Magazine
JSE-listed real estate investment trust (REIT) Rebosis Property Fund achieved a distribution growth of 8.1% to 99.45c per linked unit in the financial year ended August 31, despite volatile market conditions.
The MOM incubator was designed to help babies in developing nations who were dying in conflict-struck nations or who do not receive hospital care
A low-cost, inflatable incubator won this year’s international James Dyson design award, which aims to encourage and inspire the next generation of design engineers.
The World Bank released its ‘Doing Business 2015: Going Beyond Efficiency’ report last month and ranked South Africa 43 out of 189 global economies for its ease of doing business, with Singapore topping the rankings.
Air Products South Africa officially launched its R300-million Eastern Cape air- separation unit (ASU), at its new manufacturing facility in the Coega Industrial Development Zone (IDZ), earlier this month. It is the second facility that Air Products launched in South...
BMW South Africa (SA) has signed a power purchasing agreement with energy company Bio2Watt. The offtake partnership will bring renewable energy to the carmaker’s Rosslyn plant, north of Pretoria.