Mining & Trade News

Illovo Sugar Malawi has registered a 61.2% Net profit decline for the year ended August 31, 2019 with the company recording K10.08-billion profit against K16.45-billion profit recorded in previous 2018 financial year.

This was revealed during the company’s annual general meeting held on Thursday, February 27, 2020 at Ryalls hotel in Blantyre.

MD Mark Bainbridge told Mining and Trade Review that challenging market conditions, such as pre- and post-election unrest and continued illegal sugar importation has exacerbated the decline in cash flow.

Bainbridge said: “Fundamentally we have faced a stiff market environment in domestic sales in the year ended, as there has been increased competition on the market base due to influx of low priced sugar illegally imported from bordering countries.”

“Despite intensive support from the Malawi Revenue Authority (MRA) which had run several search and confiscation operations coupled with sensitisation programmes aimed at halting illegal practices, export quality and pricing constraints have also impacted the company’s operations throughout the season”.

However, he said that in a quest to counter some of the registered and projected business shocks, the firm’s commercial and logistics teams adapted a revised strategy to enhance sugar direct deliveries to customers and have also embarked on consumer promotional and activation initiatives and optimised portfolio.

On prospects, Bainbridge said the company is expecting normal weather patterns and improvements in power generation to have a positive impact on the agricultural output and factory throughput, as the company is also set to enact strategies to turnaround financial and operational stability to the smallholder sugarcane farmers.

“The business will continue its various initiatives in the local direct consumption market and extend the delivery footprint to the wider consumer market,” he said.

During the AGM, the company also announced that it has opted not to pay dividends to its shareholders for the year ended because management has prioritised debt reduction and other initiatives such as revenue and volume enhancement strategies to secure business development and sustainability through reduction in the overall cost of sugar production.

But a representative of Minority Shareholders Association in the firm Frank Harawa argued that the company has registered a decline in profit because the selling price of the commodity is high on the local market as compared to on the export market.

“To us, it is not reason enough for locals to be paying more for the same commodity which is being sold at a cheaper price on foreign markets, I therefore suggest management lowers prices on the local market allowing many to afford of which in turn it will cushion up business returns and recover costs incurred during exportation process, ” he said.

According to the company’s 2019 report, exchange rates, inflation and interest rate movements and the debt levels of the company continues to have a marked effect on the overall business profitability.

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