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Winter rain dampens Illovo's outlook

By unknown | Jan 18, 2008 | COMMENTS [ 0 ]

Robert Laing

Robert Laing

Illovo Sugar warned shareholders that its earnings are likely to grow marginally this financial year ending March 31.

The trading update knocked Illovo's share price nearly 4percent to R23,25 yesterday morning.

Africa's largest sugar producer said it has reduced its forecast production for the year by 4percent to 1,8million tons.

Illovo spokesman Chris Fitzgerald said: "Ideal sugar weather is good rain from January to March and then a dry winter to make harvesting easier. What we got was unseasonal winter rain in South Africa and Zambia which made the cane soggy and harder to process."

Besides disappointing weather, Illovo suffered from stagnant world sugar prices. Though the past two months have seen sugar prices rise to nearly 12 US cents (84 cents), much of this gain has been eroded for the South African-based company because of the strengthening rand.

Fitzgerald said Illovo will wait to see governments' biofuels policy before deciding on whether to invest in the type of synfuel plants which have become a huge industry for Brazilian sugar producers.

He said: "We do make ethanol from molasses, which we sell to the liquor industry which uses it to make cane spirits and vodka.

"But this is a different process to how they make fuel out of sugar in Brazil."

Associated British Foods bought 51percent of Illovo in September 2006. One of Illovo's attractions is its operations in Malawi, Zambia, Tanzania and Mozambique which stand to benefit from the European Union's sugar policies.

European sugar production is being reduced to open the market for imports from economies classified as least developed countries.


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