The shares jumped as much as 5.4 percent, the most since April 23 on an intraday basis, traded 2.9 percent higher at 38.60 rand by the close in Johannesburg. About 1.2 million shares were traded, or 2.5 times the daily average over the last three months. Illovo, which has units in Malawi and Zambia, has gained 11 percent over the last five trading days, making it the second best-performer on the FTSE/JSE Africa All-Share Index.
“You’re paying up for African exposure, plus a recovery story where earnings will see 30 percent growth as well as strong exposure to a depreciating rand,” Brendan Grundlingh, an analyst at Standard Bank Group Ltd.’s SBG Securities (Pty) Ltd. unit, said by phone from Johannesburg today. “There are not many food companies or industrials that can give you that.”
Profit for the year through March 31 at Illovo’s Malawian unit jumped to 20.9 billion kwacha ($58 million) from 8 billion kwacha a year earlier, the company said on May 10. The Zambian division saw an 8.5 percent increase in profit to 141 million kwacha ($26 million) in the same period. The rand has weakened 8.6 percent since the start of the year, the worst-performer among 24 emerging-market currencies tracked by Bloomberg.
A 10 percent weakening of the rand against the dollar relates to a gain in net income of about 5 percent for Illovo, Grundlingh said. The company said in its annual report for the year ending March 2012 that 88 percent of operating profit is “derived from non-rand-based countries.”
Sugar production at Illovo, 51 percent-owned by London-based Associated British Foods Plc (ABF), is rising after drought in Malawi and Zambia eased, Grundlingh said.
The company’s 14-day relative strength index is above 70 for a 14th day. A reading above 70 signals that a stock may be overvalued and poised to decline. Illovo is expected to release results for fiscal year through March on May 27.
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