ZAMBIA – Illovo Sugar’s Zambian unit, which contributes nearly a third of the group’s profit, said on Thursay it had posted record production of 424,024 tonnes during the milling season ended December.

“This is the highest tonnage produced by a single sugar factory on the African continent in any given season,” said Zambia Sugar’s acting MD, Rebecca Katowa, referring to the company’s Nakambala complex in southwestern Zambia.

Zambia Sugar is listed in Lusaka and is 76.4% held by Illovo, which in turn is a subsidiary of London-based Associated British Foods. Thanks to an expansion project at Nakambala, completed in 2009, Zambia Sugar is Illovo’s second-biggest contributor to profit after Malawi.

The expansion boosted Zambia Sugar’s milling capacity from 240,000 tonnes a year to 450,000 tonnes.

Illovo said in its interim results last month that it was expecting record sugar production in both Zambia and Mozambique. The company reported a 14% fall in group-wide operating profit to R1.39bn for its six months to end-September, as lower cane and sugar production, and falling sugar prices affected earnings.

Illovo MD Gavin Dalgleish said last month his company planned to build an alcohol distillery at Nakambala, as part of its long-term strategy to generate 20% of operating profit from downstream sources. It was awaiting board approval for the project.

Illovo recently commissioned a distillery in Tanzania, which Mr Dalgleish said was operating at its full capacity of 14-million litres thanks to strong demand for potable alcohol across East Africa.

Ms Katowa said in the season ended December, Zambia Sugar crushed a record 3.417-million tonnes of sugar cane, 60% of which was produced on the company’s own fields and the balance supplied by outgrowers.

Zambia Sugar’s “outgrower scheme” consists of 14 large-scale growers and more than 250 smallholder outgrowers, according to the company, which produces a range of sugar and speciality downstream products under its Whitespoon brand.

About 40% of Zambia Sugar’s product is sold domestically, with the balance exported into the European Union (EU) and regional African markets.

Sugar producers including Illovo and Tongaat Hulett face the prospect of a smaller market for their sugar in Europe, as the EU gradually deregulates its industry and ends production quotas on how much sugar its domestic producers can sell.

According to Mr Dalgleish, Illovo plans to start redirecting a large portion of its European exports to regional African markets.

“We are having a real look at our various routes to market, and we’re looking at developing prepacked brands in largely direct consumer markets,” he said.

“So we’ve already got a lot of activities under way to reposition under the new EU reality.”

The company intended reducing sales into the EU to about 150,000 tonnes annually, from highs of more than 420,000 tonnes, he said.

It exports about 30% of its sugar to Europe.

January 9, 2014;

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