Sugar producer Illovo Sugar expected the group’s sugar production for the current season to amount to about 1,7-million tons, 200 000 t higher than the year before, if normal growth and operations continued for the remainder of the season.

The group on Thursday noted in statement that it expects its headline earnings for the full 2010 financial year to be similar to that of the 2009 financial year, after it reported a 32% rise in actual headline earnings to R668,1-million in the first six months of the year, compared with the R507,3-million recorded in the six months ended September 30, 2008.

However, on a sugar season basis, headline earnings were down slightly to R384,2-million in the six months ended September 30, 2009, compared with the R384,8-million achieved the year before.

Improved world market sugar prices in South Africa, as well as increased sugar production in Zambia and Tanzania had contributed to the increase in the group’s actual results for the six months, the company noted in a statement to shareholders.

All sugar factories had performed satisfactorily during the six months, Illovo stated, noting that cane growth across the group had also been good.

Sugar production had contributed 61% of operating profits, cane growing 33% and downstream products 6%.

Malawi had made the biggest contribution of 42% to operating profits, followed by Zambia contributing 26%, South Africa 14%, Tanzania 8%, Swaziland 7% and Mozambique 3%.

Sugar output in Zambia was boosted with the completion of the second phase of the expansion project at the Nakambala sugar mill, which now had an increased capacity of 450 000 t/y of sugar.

The Zambian operation had acquired the 325 000-t/y cane-growing company Nanga Farms to deliver cane to the sugar mill. There was potential to further increase the cane producer’s output.

Further, Illovo reported that its Maragra factory expansion project, in Mozambique, was progressing, with the second phase on track to be completed at the end of the 2010 financial year.

The factory’s output would increase to 150 000 t/y of sugar, once completed.

Sugar output in Swaziland was also set to rise to more than 300 000 t/y when the R1,5-billion Ubombo factory expansion and cogeneration project, in Swaziland, is commissioned in April 2011.

The factory currently produced about 230 000 t/y of sugar.

Equipment orders for the project, which would also increase its power generation capacity by using biomass as a supplementary fuel for the factory boilers, have already been placed.

The power plant would enable the factory and estates to become self-sufficient in electricity consumption, while also supplying some power to the country’s national electricity grid for 48 weeks of the year.

The expansion project was linked to the completion of a new dam and canal system, being implemented by the Swaziland government, which would enable the company to develop about 5 000 ha of land to cane in the medium term.

The development of the first 885 ha of land would be completed by the end of this sugar season, Illovo stated.

Illovo was, meanwhile, expecting to receive financial approvals for its proposed greenfield project, in Mali, by January. Cane development would start during the first half of the 2010 calendar year, while the factory would be commissioned in November 2012.

STRONG SUGAR PRICE

The sugar producer noted that domestic market sugar sales and prices in its countries of operation outside South Africa had been strong, with the world sugar price having recently risen to a 28-year high, as a result of a significant production decline in India and capital constraints facing Brazil’s sugar industry.

The higher world price had also resulted in a firming of sugar revenue realisations in the regional markets supplied by the group.

While lower prices for sugar exports to the European Union (EU) became effective on October 1, this would be offset by increased market access for the group’s operations outside South Africa, which were now allowed duty-free and quota-free entry into the EU markets, Illovo stated.