Illovo Sugar Malawi registers marginal rise in revenue to US$93.26m on back of improved domestic sales

MALAWI – Illovo Sugar Malawi, the Malawian subsidiary of pan-African sugarcane grower and sugar producer, Illovo Sugar Africa, has reported a rise in Net profit for the six-month period to February 2021, amounting to K6.1 billion (US$7.64m) compared to K2.1 billion (US$2.63m) for the corresponding period.

The listed sugar manufacturer has highlighted that its sales revenue remained relatively flat with sugar and molasses sales totalling K74.5 billion (US$93.26m), slightly up from K73.5 billion (US$92. 01m) in 2020, despite the COVID-19 challenges.

Its operating profit rose to K10.6 billion (US$13.27m) against K5 billion (US$6.26m) for the six-month to February 2020, largely on the back of improved domestic market sales volumes.

According to the company, its factories completed their crushing seasons in December 2020 with agricultural operations having performed well in terms of cane yields and overall sucrose content from both own and smallholder farmers’ cane.

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Investment in drip irrigation at Nchalo delivered improvements in cane yield in line with targets, despite very dry weather being experienced in January 2021. Good rainfall in February 2021 partly helped to relieve the dry conditions.

“Domestic sugar sales reflected a welcome return to more normal levels supported by active marketing and logistics improvement initiatives and sustenance of our reduced domestic pricing since mid-December 2019.”

Illovo Sugar Malawi

In terms of milling operations, both factories achieved consistently high throughputs prior to closure of their crushing seasons and commenced their respective off crop maintenance programs in December 2020.

These programs were completed successfully and both plants resumed production in mid-April 2021.

“Despite the domestic market being under significant pressure through a combination of general instability, a slowing economy exacerbated by the COVID-19 pandemic, currency depreciation and the influx of informal imports, domestic sugar sales reflected a welcome return to more normal levels supported by active marketing and logistics improvement initiatives and sustenance of our reduced domestic pricing since mid-December 2019,” read the statement in part.

Export sales revenues were however below expectations with COVID-19 hampering both inter-continental and intra Africa exports.

Illovo Sugar Malawi optimistic of second half

The company is upbeat that the stable domestic inflation and interest rates, moderate exchange rate depreciation and improved national food supplies would provide a platform for a better second half.

In terms of agricultural operations, it is envisaged that there will be a return to more stable weather patterns and continuing improvements in electricity supply by EGENCO in the next six-month period.

Initiatives such as the ongoing factory recovery improvement, optimal use of field irrigation systems, standardizing sound agronomic practices, and embedding of the workforce transition project should all result in improved cane crop yields, plant reliability and people productivity across the business value chain.

With regard to the commercial environment, the business will continue to build on the successful Route to Consumer initiatives with a focus on product pack sizes, branding, affordability and quality.

Sugar exports, in what is expected to be very challenging markets, will also continue to be an area of attention for the commercial teams especially in light of the receding COVID-19 induced logistical challenges as global vaccination programs gather momentum.

The company’s sister company in Tanzania, Kilombero Sugar, commenced its US$238.5 million expansion project, which will increase its sugar production by 144 000 tons from current levels of around 127 000 tons of sugar per annum, to 271 000 tons.

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