Dalgleish said over  the next few years the company would focus on moving out of the EU into the northern parts of Africa, where sugar supply was not high.  The company already operates in Malawi, Zimbabwe, Tanzania, Swaziland and Mozambique.

Dalgleish said Illovo was well positioned to take advantage of the sugar deficit that was apparent in the northern parts of the continent.  In the long term he expected world prices to steadily rise despite the current slowdown in prices. 

Global demand for sugar has grown 2.3 percent this year and developing countries now consume 70 percent of the world's sugar, according to UK research firm Czarnikow Group.  Revenue soared 23 percent  to R6.23 billion in the six months to September, Illovo reported yesterday.  Sugar production was up 9.4 percent and sales volumes rose 11 percent, and the weak rand lifted realisations.  Operating profit rose 9.6 percent year on year to R1.6bn.

Illovo's margins were under pressure from lower domestic sales volumes and an increase in export volumes at lower prices.  Operating margins for the period declined 10.9 percent to 26.1 percent a year earlier.  The local sugar industry, led by the SA Sugar Association, has requested a review of the dollar-based reference price and a tariff increase of 50 percent to protect producers against cheap sugar imports, which it said had resulted in the industry losing millions and was threatening jobs.

The South African sugar industry makes about R12bn a year and 350 000 employees, mostly in rural areas.  Dalgleish said sugarcane suppliers would be less attracted to going into business without tariff protection and this would lead to job losses.

Illovo said it would continue to support its cane growers as they were an integral part of the business.  Dalgleish said cheap imports had a direct impact on Illovo's South African and Tanzanian operations.  There were no direct imacts from sugar imports in Illovo's other African markets. 

Illovo said its recent investments into three operations offere a template that could be replicated across the group.  These include it South African central distribution centre, its Tanzanian potable alcohol distillery and the co-generation plant in Swaziland.

Despite pressure expected on commercial sales, sugar production is set to incrase by 5 percent in the full year, mainly from the South African market.

Source:  The Mercury