Illovo expects earnings rise

Johannesburg - Illovo Sugar said in a trading update on Tuesday that its headline earnings per share (HEPS) and earnings per share (EPS) for the six months ended September 30 are expected to be between 25% and 30% higher than those of the previous corresponding period.

Operating profits for the period are anticipated to increase by around 35%.

Illovo said its results are generally impacted by production volumes, domestic market sales, the level of the rand compared to other currencies, and by the world price of sugar.

"Actual results for the six months ended September 30, compared to the corresponding period last year, will particularly reflect the positive impact of improved world market sugar prices in South Africa, increased sugar production in Zambia following the commissioning of the major expansion at Nakambala, and increased sugar production and favourable sugar sales pricing in Tanzania," the group said.

Illovo did point out that for the first six months of the financial year, determined on a sugar season basis, HEPS and EPS were expected to be similar to those of the comparative period of the previous year.

"This is due to the value of the rand, which is currently projected to remain significantly stronger for the remainder of the current year compared to the second half of the previous financial year. This will impact negatively on foreign currency denominated export revenue in respect of both sugar and downstream products, as well as the conversion of foreign subsidiary company profits into rands, for the season as a whole," the group said.

Operating profits for the full year ending 31 March 2010 are expected to be between 10% and 20% higher than those of the previous year, Illovo said.

"Group financing costs for the year will reduce following the receipt of rights issue proceeds in September 2009, but as a result of taxation normalising at around 30%, headline earnings are anticipated to be similar to those of the previous year.

"The higher weighted average number of shares in issue after the rights issue, which provided for the issue of 30.83 new shares for every 100 existing Illovo shares, is expected to dilute HEPS and EPS for the full year by between 10% and 20% compared to the previous financial year," Illovo concluded.

The company's interim report is due to be released on November 19.

- I-Net Bridge