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Although JSE-listed sugar producer Illovo had a disappointing 2015 financial year, the company’s downstream business remains strong and its contribution to operating profit is anticipated to be in excess of 20% in the current financial year.
Illovo chairperson Don MacLeod added that the group would be focusing on its domestic markets, both consumer and industrial, and the opportunities available in growing African regional markets, as exchange rate volatility, in general, and the weaker euro, in particular, would continue to be a major influence on export earnings and the conversion of foreign subsidiary profits into rand.
“We will continue to pursue downstream investments to enhance and diversify future revenue streams, [as well as] evaluate opportunities for future footprint expansions in Africa, but careful assessment of the risk will remain crucial to any new opportunity evaluation,” he said in a statement on Wednesday.
Further, MacLeod pointed out that domestic markets would remain the backbone of the business and that it was “pleasing that demand growth in Zambia remains positive and that the market conditions in Tanzania continue to improve”.
However, he highlighted that the effective implementation of a new import tariff structure in Mozambique remained elusive, while in Malawi, the strong kwacha, high interest rates and little or no economic growth continued to weigh on demand.
“Rising costs, particularly wage increases at levels above inflation, are a concern in a market place which is under pressure, and productivity improvements, together with production cost reduction initiatives, will be areas of continuing focus,” he stated.