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Illovo Expands in Africa as Drought Threatens Production

Nov. 23 (Bloomberg) -- Illovo Sugar Ltd., Africa’s largest sugar producer, is expanding outside South Africa as a drought in its home country may reduce output by as much as 10 percent in the year to March 31.

Production in South Africa will probably be more than 25 percent lower than in the year-earlier period as output declines a second year, Illovo said today in a statement. It forecast a “marked recovery” in fiscal 2013.

The sugar producer said it expects to obtain funding for the construction of a sugar factory in Mali by early 2012. It is also expanding its Umbombo Sugar Ltd. factory and power plant in Swaziland and plans to start making potable ethanol from molasses in Tanzania by 2013. Similar projects are being studied in Zambia and Malawi, it said.

“Mali is a medium-term project that will take the best part of three years to fruition,” Managing Director Graham Clark said by phone. “While that is going on, really it’s a case of consolidating all the other investments and bringing the benefits of scale into the operations in Zambia, Swaziland, Mozambique and Malawi, not to forget Tanzania where ongoing small scale expansions have worked well for us.”

Shares in the Mt. Edgecombe-based company declined 2.3 percent to 25 rand by the close in Johannesburg, paring an earlier decline of as much as 9.1 percent and giving the company a market value of 11.5 billion rand ($1.3 billion).

Earnings per share rose 1.8 percent to 131.2 cents in the six months through September as cost-cutting, higher prices, a more favorable exchange rate and improved production in other regions countered slower sugar cane production in South Africa, Clark said. Revenue increased 3.1 percent to 4.1 billion rand.

To contact the reporter on this story: Stephen Gunnion in Johannesburg at sgunnion@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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