Illovo Sugar (Malawi) - Annual Report 2011

2011
ILLOVO SUGAR (MALAWI) LIMITED
A N N U A L
R E P O R T
Above left: Cane supplies in Malawi are being further consolidated by the companys own cane expansions together with additional small-holder grower cane development. Above right: Total cane throughput in Malawi, including deliveries from small-holder growers, amounted to 2.4 million tons in 2010/11.
Above: Sugar production in 2010/11 amounted to 282 445 tons. Fuel to power the operations is provided primarily by renewable energy sources. Right: Illovo branded pre-packed brown and refined sugar is sold to Malawian consumers through a system of distribution centres positioned throughout the country. Left: Combined EU and regional market sales improved, increasing by 7% compared to last year. Below left: Stakeholder activities during the year included a visit by shareholders to the Dwangwa agricultural and factory operations. Right and below right: Illovo Malawi provides medical care for its employees, their family members and the wider community, and also provides financial and other support for a range of social welfare and community development activities.
KEY FEATURES
2011 Results (K million) Revenue Operating profit Net profit for the year Headline earnings 30 809 9 736 6 425 6 414 28 643 10 915 7 116 7 108 2010 L I M I T E D 1 2 3 3 4 5 6 9 13 14 16 50 50 51 52 I L L O V O
1
Financial statistics Return on average shareholders' equity (%) Return on net assets (%) Interest cover (times) Dividend cover (times) 39.0 39.4 17.2 1.4 48.8 49.6 16.4 1.4
CONTENTS
KEY FEATURES GROUP PROFILE GROUP STRUCTURE AND SHAREHOLDING CORPORATE INFORMATION OPERATING LOCATIONS DIRECTORATE AND SENIOR MANAGEMENT DIRECTORS REPORT CORPORATE GOVERNANCE VALUE ADDED STATEMENT FIVE YEAR REVIEW ANNUAL FINANCIAL STATEMENTS ANALYSIS OF SHAREHOLDERS SHAREHOLDERS DIARY NOTICE OF MEETING FORM OF PROXY
S U G A R
Headline earnings Dividends paid/proposed - Paid first interim - Declared second interim - Proposed final Net worth Year-end market price
899 630 287 323 20 2 408 11 000
996 700 287 393 20 2 208 11 000
( M A L A W I )
Share performance (tambala per share)
GROUP PROFILE
Illovo Sugar (Malawi) Limited is listed on the Malawi Stock Exchange with the Illovo Sugar group of South Africa holding 76% of the issued share capital. Old Mutual Life Assurance Company (Malawi) Limited holds 9% whilst the balance of the shares are held by the public and institutional investors. Illovo is currently Malawis only sugar producer with significant agricultural and milling assets at the Dwangwa Sugar Estate in the mid-central region and at the Nchalo Sugar Estate situated in the south of the country. In a normal season, combined with supplies of cane from Malawian small-holder growers, approximately 2.5 million tons of sugar cane can be produced enabling an annual sugar production of approximately 330 000 tons. Cane growing operations are significantly enhanced at both estates by access to good soils and secure water sources for irrigation, resulting in generally high annual cane yields and levels of sucrose content in cane. Cane grown at Dwangwa is irrigated from the Rupashe River, supplemented as necessary by water from Lake Malawi, whilst Nchalo sources water from the Shire River. Approximately 60% of sugar produced is sold to local industrial and consumer markets with the remainder exported to markets in the European Union (EU), the United States of America (USA) and the African region.
Both factory operations produce molasses as a by-product of the sugar manufacturing process, which is sold as a fermentation raw material to the Ethanol Company Limited and Presscane Limited, both fuel alcohol distilleries in Malawi. Illovo Malawi is a significant earner of foreign currency and through direct and indirect taxes is a major source of revenue to the Malawi fiscus. The company has a 39% share of the market capitalisation of local counters on the Malawi Stock Exchange. Its operations are of considerable benefit to the local economy, providing permanent and temporary employment for more than 10 000 people, with many local industries, who collectively employ large numbers of people, dependent upon Illovo for their ongoing sustainability. Social responsibility programmes undertaken by the company bring about significant benefits to surrounding communities and are important contributors to Malawis overall strategy for poverty alleviation. Illovo Sugar (Malawi) Limited is part of the Illovo Sugar group which is a leading, global, low-cost sugar producer and a significant manufacturer of high-value downstream products. The Illovo group is Africas biggest sugar producer and has extensive agricultural and manufacturing operations across six African countries. Illovo Sugar is listed on the Johannesburg Stock Exchange Limited and is a subsidiary of Associated British Foods plc which holds 51.5% of the issued share capital.
I L L O V O
S U G A R
( M A L A W I )
L I M I T E D
GROUP STRUCTURE AND SHAREHOLDING
ASSOCIATED BRITISH FOODS 51.5%
ILLOVO SUGARGROUP 100%
PUBLIC AND INSTITUTIONAL INVESTORS 15%
SUCOMA HOLDINGS 76%
OLDMUTUAL LIFE ASSURANCE COMPANY 9%
ILLOVO SUGAR MALAWI 100%
DWANGWA SUGAR CORPORATION
CORPORATE INFORMATION
Secretaries : Malawi Sugar Limited represented by G S Garson
Business address and : Illovo Sugar (Malawi) Limited, registered office Illovo House, Churchill Road, Limbe, Malawi Postal address Telephone Fax E-mail address Website address : Private Bag 580, Limbe, Malawi : +265 (0)1 843 988 : +265 (0)1 840 761 : illovomalawi@illovo.co.za : www.illovosugar.com
Transfer secretaries : First Merchant Bank Transfer Secretaries, 2nd Floor, Livingstone Towers, Glyn Jones Road, Blantyre, Malawi Postal address Telephone Fax E-mail address Auditors : Private Bag 122, Blantyre, Malawi : +265 (0)1 822 150 : +265 (0)1 823 314 : callisto.mkona@fmbmalawi.com : Deloitte
Principal bankers
: Standard Bank Limited
I L L O V O
S U G A R
Attorneys : Chisanga and Tomoka Savjani and Company
( M A L A W I )
L I M I T E D
OPERATING LOCATIONS
KARONGA
MZUZU
DWANGWA
LILONGWE
L I M I T E D
LAKE MALAWI
BALAKA
( M A L A W I )
ZOMBA
KEY
BLANTYRE LIMBE
S U G A R
Cane estates and sugar factories Cities Distribution centres
NCHALO
I L L O V O
DIRECTORATE
NAME CHAIRMAN D G MacLeod (64) # EXECUTIVE DIRECTORS I G Parrott (44) # W A Cowden (32) E I Williams (64) NON-EXECUTIVE DIRECTORS Dr M A P Chikaonda (56) G J Clark (55) *# S L G Malata (49) * D B Mawindo (53) A R Mpungwe (60) B M Stuart (63)# K Zarnack (38) *# * #
QUALIFICATIONS
APPOINTED POSITION
BCom, AMP(Oxon)
1997
Deputy Chairman Illovo Sugar Limited
BCom, CIA BAcct(Hons), CA(SA) GCC(Fact-Elec&Mech), SMSAIEE
2003 2009 2009
Managing Director Illovo Sugar (Malawi) Limited Finance Director Illovo Sugar (Malawi) Limited General Manager Nchalo
DipBus, BA(Hons), MBA, PhD BAcct(Hons), FCA BCom, MSc(Fin&Acc) LLB(Hons), MBA BA(Hons) BCom, Dip(Sugar Tech), SEP BCom, CA(SA)
2006 1996 2003 2005 2006 2007 2005
Group Chief Executive Public Listed Company Managing Director Illovo Sugar Limited General Management Management Consultant Private Company Director of Companies Operations Director Illovo Sugar Limited Financial Director Illovo Sugar Limited
Audit Committee Member Remuneration Committee Member Risk Management Committee Member
SENIOR MANAGEMENT
NAME E M Banda (38) Dr H H Z Chakaniza (41) C R Chikwama (35) S A Cloete (56) D W H Cousens (62) D W Davey (62) D P R Davies (56) G S Garson (56) D George (57) C H Kyle (61) I I Majamanda (44) G M Mkandawire (64) Dr A W Mkumbwa (41) K G M Naidoo (54) J P Ngolombe (37) W Nyamilandu-Manda (40) D P R Piringu (55) E T Rousseau (51) A C Stewart (61) K M J Tembo (48) QUALIFICATIONS BA(PubAdm) MBBS BA(PubAdm) GCC(Elec) BScEng(Agric), MSc(Eng), MBL ABP Dip(IMM) BCom, MBL BTech(Eng), BCom(Hons) BCom, HDPM BSc(Agric), MSc(AgricEng) BSc(Econ), MCom(Mkt) MBBS, MPH BCom, MBL BSocSc(Econ) BSocSc(Econ&Psych) DipBus, BCom(Acct) BCom, NHD(ChemEng) Cert(Agric) Dip(IndEng) JOINED 1998 2000 2006 2009 2010 2002 2003 2002 2010 2007 1998 2003 1998 2009 2001 1999 1989 2008 1975 1992 OPERATING RESPONSIBILITY Group Human Resources Manager Medical Services Dwangwa Human Resources Nchalo Factory Dwangwa General Manager Expansion General Manager Marketing Company Secretary Group Risk Manager Human Resources Consultant Agriculture Nchalo Commercial Manager Medical Services Nchalo Finance Dwangwa Human Resources Dwangwa Marketing Limbe Finance Limbe Factory Nchalo Agriculture Dwangwa General Manager Dwangwa
L I M I T E D I L L O V O S U G A R ( M A L A W I )
Finance Nchalo
DIRECTORS REPORT
OVERVIEW Total sugar production of 282 000 tons was around 4% lower than in 2009/10, representing a generally satisfactory performance against a background of poor operating conditions caused by unseasonal rains during the season. Sales revenues of K 30.81 billion in 2010/11 were marginally above those of the previous year, assisted by strong demand for sugar and attractive prices in the region, particularly in Zimbabwe. However, reduced offtake in the local Malawi market impacted negatively on the companys financial performance with profit after tax of K 6.43 billion reducing by almost 10% compared to 2009/10. Continued focus on cost control and various management interventions within all areas of the business helped to mitigate the decline in profit after tax. Almost K 1.25 billion was spent on capital projects during the year to improve the overall performance of Illovo Malawis agricultural and factory operations.
L I M I T E D
OPERATIONS CANE GROWING
( M A L A W I )
cane expansions at Dwangwa, are being undertaken to further consolidate cane supply to the operation. SUGAR PRODUCTION
Cane yields at both estates were similar to the previous season, with total cane throughput in Malawi totaling 2.4 million tons assisted by a welcome yield increase in cane cultivated by Malawian small-holder farmers. However, unseasonable wet weather conditions during the year resulted in lower than estimated sucrose content in cane, negatively impacting upon sugar production. Ongoing small-holder grower cane developments at Kasinthula, adjacent to Nchalo, in addition to smaller estate
Operational conditions at both factories were negatively impacted by unseasonal rains during the season resulting in 70 000 tons of cane at Nchalo being carried over for processing. As a result, total sugar production in 2010/11 decreased to 282 445 tons, representing a 4% reduction compared to that of the previous season.
I L L O V O
S U G A R
MARKETING Throughout the world, sugar is one of the most highly protected agricultural commodities, with significant duties and tariffs applied in all but a few sugar producing countries. To safeguard their ongoing sustainability, almost without exception, sugar producing countries protect their domestic markets through tariffs in one form or another. Globally, sugar is recognised as a sensitive product and in line with practices adopted by other regional trade partners, import control measures are necessary to prevent the illegal importation of sugar. Malawis sugar industry continues to make significant investments in capital equipment and human skills development programmes to improve its competitiveness, and today is recognised as being amongst the lowest-cost and most efficient cane sugar producers in the world. The preservation of a stable domestic market is critical to the sugar industrys long-term viability, and to the Malawian economy as a source of income for local farmers and a significant generator of foreign exchange and tax revenue for the government. Illovo branded pre-packed brown and refined sugar is sold to Malawian consumers through a system of distribution centres strategically positioned throughout the country. Together with sales to industrial manufacturers of sugar containing products, total local off-take amounts to more than 60% of production with the balance exported into long-standing markets in the EU and USA, and also regionally into markets in neighbouring African countries. DOMESTIC MARKET Compared to 2009/10, demand for sugar within the domestic market was depressed, with overall sales decreasing by about 12% to 170 861 tons. Sales were also impacted by fuel shortages which impeded the efficient distribution of sugar stocks across the country whilst further increases in transporters freight rates continued to impact negatively on the cost base of the company. EXPORT MARKET Encouragingly, an improvement in both EU and regional sales, together with sales into the USA market, resulted in total exports of more than 107 000 tons, representing a 7% increase over those achieved in 2009/10. Reliance was again placed on the companys ability to produce quality products which are able to be shipped timeously to export customers.
DEEP WATER EXPORT MARKET More than 53 000 tons of sugar was exported to markets within the EU during the year. The bulk of these sales were contracted by European refiners. Sales to the USA market remained at similar levels to the previous year and totalled 4 875 tons. REGIONAL MARKET The Zimbabwean market accounted for the majority of sugar exported into the African/Indian Ocean region, with other customers in Burundi, the Democratic Republic of Congo (DRC) and Kenya. Total regional sugar sales in 2010/11 amounted to over 49 000 tons. QUALITY All agricultural and factory operations retained accreditation under the ISO 9001:2008 quality management system. There was continued focus on the Hazards Analysis and Critical Control Points (HACCP) programme at both factories, with considerable attention again being devoted to the production of quality products to support sales into valueadded markets, particularly those in Europe. FINANCIAL Total revenue from the sale of sugar and molasses in 2010/11 amounted to K 30.81 billion, reflecting a 7% increase compared to that of the previous year, despite wet weather conditions during the season which impacted negatively on total sugar output. Depressed domestic requirements for sugar resulted in the company taking full advantage of strong regional demand at attractive prices, albeit against a background of a stable Kwacha / US Dollar exchange rate. The company entered into forward exchange contracts on Euro / US Dollar proceeds during the year and this assisted in supporting the revenue stream. Profit after tax decreased from K 7.12 billion in 2009/10 to K 6.43 billion during the year despite concerted efforts by the company, including the implementation of strict cost control measures, to ameliorate the impact of the decrease. Above average increases in input costs, particularly electricity and fuel, together with higher employee costs and the strengthening of the Rand against the Kwacha served to increase the overall cost of production and reduce profits.
I L L O V O
S U G A R
( M A L A W I )
L I M I T E D
DIRECTORS REPORT
(continued)
The continued shortage of foreign currency in Malawi resulted in delayed payments to the companys foreign creditors, with resultant interest penalties. Supply constraints, particularly in respect of chemicals, fertilisers and items of machinery, affected parts of the business. The company continued to manage its finance charges in an efficient manner and was again able to negotiate preferential interest rates with its banking partners. During the year capital expenditure totalling almost K 1.25 billion was spent on projects to ensure the future sustainability of the business. HUMAN RESOURCES The company continued with its drive to instil a culture of safety consciousness within the workplace and devoted considerable time towards this initiative by holding safety briefings and educational workshops throughout the year, for all employees. Safety targets are clearly defined and constant monitoring took place with noticeable improvements in safety behaviour during the year. The company also manages an effective occupational health regime and continues to look after the well-being of its people, both in terms of their health and the provision of a healthy working environment. The companys healthcare facilities are available not only to its own employees, but also to their dependents and the wider communities surrounding the estates. The company maintained its accreditation under both the NOSA Platinum and ISO 9001:2008 management systems. The company has a successful staff development programme with on-going technical skills development and transfer programmes aimed at achieving continuous improvement across all levels of the organisation. The company continues to support Malawian graduates under its management training programmes in the various disciplines required for the future sustainability and success of the company. Recognising Malawis diverse environments, which are predominantly rural with limited infrastructure and significant development needs, Illovo Malawi has a wide-ranging social investment programme aimed at uplifting living standards and the general well-being of the communities in which it operates. Focus areas during the year included education with assistance provided to several schools through the building and rehabilitation of classrooms, the provision of desks and teaching aids, and the payment of salaries of teaching staff. Maize was once again grown on the Nchalo estate to assist the government with its goal of achieving food security, whilst the company provides on-going support
to various feeding schemes throughout the country where school-going children are provided with fortified meals on a regular basis. Substantial help was also extended to government to assist in its provision of quality health services to its people, with several donations of medical supplies and equipment to various health facilities throughout the country. Assistance was also provided to repair damaged infrastructure on the national road network following several periods of torrential rains. The company maintained its pro-active approach against epidemics such as HIV/AIDS and malaria, and awareness and education programmes were undertaken during the year to address the negative impact of these and other diseases. The government has recognised the effectiveness of the companys malaria prevention campaign, holding it as a model in the fight against this disease. PROSPECTS On-going additional small-holder development at Kasinthula, to supply the Nchalo factory, and a more modest expansion of land at Dwangwa, on both estate and small-holder grower areas, should auger well for securing additional cane supply to the factories in the 2011/12 season. Given a return to more normal weather conditions and an expected recovery to previously achieved yields from the companys own cane and that of the small-holder growers, an increase in the overall cane harvest is expected for the coming year. The offcrop maintenance programmes undertaken at both factories should improve operational efficiencies in the new season and align factory performance with expected targets and the achievement of rated factory crush rates. Together with the improved plant efficiencies, this should ensure that sugar production increases over the previous year by approximately 10%. Domestic market sales are anticipated to reflect growth over the 2010/11 years results. Export sales are anticipated to also show an increase of approximately 10% over the current year. Market opportunities will continue to be explored to maximise the revenue stream. Exchange rate movements will continue to influence profits and an on-going emphasis will still be placed on the control of costs in all areas of the business. Approximately K 1.51 billion will be spent on capital projects during the coming year to further secure the on-going growth of the company.
I L L O V O
S U G A R
( M A L A W I )
L I M I T E D
CORPORATE GOVERNANCE
Listed companies on the Malawi Stock Exchange are required to disclose the extent of their compliance or non-compliance with the Code of Corporate Practices and Conduct contained in either the Cadbury or King Reports. The directors are committed to the implementation of and endorse the Code of Corporate Practices and Conduct contained in the King Report on Corporate Governance (King II).
ANNUAL FINANCIAL STATEMENTS The following statement, which should be read in conjunction with the auditors report, is made for the purpose of clarifying to members the respective responsibilities of the directors and the auditors in the preparation of annual financial statements. The directors are required by the Companies Act, 1984, to prepare financial statements for each financial year, which give a true and fair view of the state of affairs and profit or loss of the company. The directors consider that, in preparing the financial statements, the group has used appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates, and confirm that all applicable accounting standards have been followed. After making appropriate enquiries, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence in the year ahead. For this reason, they continue to adopt the goingconcern basis in preparing the financial statements. The external auditors concur with this opinion.
The directors have responsibility for ensuring that the company maintains accounting records which disclose with reasonable accuracy at any time the financial position of the company and which enable them to ensure that the financial statements comply with the Companies Act, 1984. The directors also have responsibility for safeguarding the assets of the group and for the prevention and detection of fraud and other irregularities. BOARD OF DIRECTORS The company has a unitary board of directors that is balanced between executive and non-executive directors. The board supervises the management of the groups business and affairs and is involved in all decisions that are material to the business. In doing so, the board acts at all times in the best interest of the group. The board meets at least once in each quarter with additional meetings held when appropriate. At each board meeting a complete update on the affairs and business of the group is presented by executive management. In addition, the companys articles of association provide for decisions taken between meetings to be confirmed by way of directors resolutions.
L I M I T E D I L L O V O S U G A R ( M A L A W I )
(continued)
The roles of the chairman and the chief executive are separated and the chairman is a non-executive director. AUDIT COMMITTEE The audit committee comprises three directors, all of whom are non-executive. The audit committee meets at least twice a year with management and has both external and internal auditors in attendance. The committee reviews the interim financial results, annual audited financial statements and the external and internal auditors reports and reports its findings to the board for consideration when approving the financial statements for delivery to the shareholders. REMUNERATION COMMITTEE The remuneration committee comprises two non-executive directors. The committee is responsible for reviewing compensation of the executive directors and executive management of the company. ETHICAL STANDARDS The group has adopted a Code of Management Practices that applies both to the groups management and staff. The code provides a benchmark against which employee conduct can be assessed to ensure that the highest ethical standards are met. FRAUD CONTROL The group has a Fraud Hotline that enables employees and members of the public to raise evidence of irregular activity directly with an independent entity. INTERNAL CONTROL
RISK MANAGEMENT ASSESSMENT The risk management committee is chaired by a non-executive director and consists of both non-executive and executive directors and meetings are attended by senior management. A comprehensive risk assessment audit is undertaken twice per annum of factors which could have a material impact on group results. As well as financial assessment, other audited areas include agricultural, electrical and mechanical risk, environmental compliance and exposure to changes in the economic and political environment. The reports are reviewed by the committee to ensure that risk identification, mitigation and management are undertaken. EXECUTIVE MANAGEMENT Executive management meets monthly to discuss issues material to the operations of the group. To ensure that there is adequate interaction between management and the board, three members of executive management are directors. STAFF DEVELOPMENT PROGRAMMES The group firmly believes that an effective employee development programme is important for future sustainability of the business and as a consequence has instituted various staff training programmes. The group carries out business understanding programmes that assist in developing effective sharing of relevant information, which enables employees to gain a better understanding of the company. The group also undertakes regular discussions with employee representatives which facilitate effective consultation by management with the workforce before taking decisions that affect the workers and also helps in the speedy identification and effective resolution of conflict. SOCIAL RESPONSIBILITY
L I M I T E D
The board has overall responsibility for the groups systems of internal control and for monitoring their effectiveness. The systems are designed to safeguard the groups assets and shareholders investments. The audit committee, on behalf of the board, reviews the scope and coverage of internal audit together with its findings. In addition, the groups external auditors are granted unrestricted access to all information that may be required in the execution of their duties. Reports from the external auditors are regularly monitored to assess the effectiveness of the groups systems of internal control. The directors and external auditors have not detected any adverse information that would indicate a material breakdown in systems of internal control during the year under review.
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I L L O V O
The group seeks to do business in a manner which endeavours to make it welcome and accepted in the communities in which it operates. As an agricultural business, the group operates in rural areas with generally high levels of poverty. Infrastructure, normally provided by national government, is generally lacking and therefore the group provides healthcare, housing, electricity and water, and schooling assistance to its employees and their dependants. Both estates have their own clinics run by medical doctors and staffed by fully qualified nurses. It is estimated that over 70 000 people live on the groups premises at Dwangwa and Nchalo. As part of the groups social responsibility programme, Illovo Malawi provides financial and other support to a wide range of social welfare and community development activities. Examples of some of the projects undertaken during the last year are outlined on the page to the right:
S U G A R
( M A L A W I )
SOCIAL RESPONSIBILITY PROJECTS RECIPIENT Central Primary School District Commissioner Chikhwawa Dwangwa Community Government of Malawi DETAILS Construction of housing. Donation of building materials for the renovation of the assembly hall. Donation of tree seedlings. Various donations for community projects. Growing of maize at Nchalo to contribute towards national food security. Maintenance and repair of flood damaged roads, culverts and bridges. Various cash donations towards national functions. Donation of desks. School infrastructure maintenance. Cash donations for teaching materials. Operational support. Construction of a school block. Construction of a medical assistants house. Donations of cash and sugar to various orphanages and feeding schemes. Donations of cash and sports equipment, together with sponsorship of sporting events. Rehabilitation of a school block and office and provision of furniture.
L I M I T E D
Kanjedza Primary School Kasasa Primary School Kasinthula Cane Growers Limited Lengwe Primary School Mafale Health Centre Malawi Charitable Organisations Malawi Sports Organisations Malikopo Primary School Mbewe Community Police Montford Hospital Mwanza Primary School Nchalo Community Nchalo Magistrates Court Nchalo Police Nchalo School Riverside School Scottish International Relief (Marys Meals) Tomali Market
Construction of an office and donation of furniture. Subvention of salaries for a doctor and other staff, together with cash donations for the purchase of medical supplies. Maintenance of potable water facilities. Construction of a school block. Various donations for community projects. Construction of toilets. Donation of computer equipment. Construction of offices for victims support unit. Donation of computer equipment and furniture. Roofing of a school block, renovation of library and desk repairs. Payment of Head Teachers salary and provision of housing. Maintenance of school infrastructure. Donations towards school feeding programmes. Construction of market buildings.
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I L L O V O
S U G A R
( M A L A W I )
(continued)
SAFETY, HEALTH AND ENVIRONMENT Safety awareness again remained an area of prime attention during the year with constant monitoring of the safety environment and a continued education of the workforce at all levels. Daily safety briefings are undertaken to re-enforce safety measures and constant efforts are applied to instil a safety mind-set throughout all areas of the business. Safety standards and methods are continually monitored and updated, guided by the safety first principle. The HIV/AIDS pandemic continued to represent a challenge to Illovo and in this regard the company administers peer education and training facilities, actively encourages voluntary counselling and testing and operates a Wellness Programme designed to improve the quality of life of those employees infected with HIV/AIDS. Antiretroviral drugs are dispensed on behalf of the government through the companys clinic network. Malaria prevention and control was also a health area that received considerable focus during the year. The group manages the environmental impact of its activities and strives to maintain an environment which meets the needs of current and future generations. It also acknowledges the growing public awareness concerning environmental
issues and the essential role that a managed and protected environment plays in the growing of sugar cane used in the production of sugar. The group will continue to follow sound environmental practices and develop its business in a socially responsible manner. Biomass, residual cane matter after harvesting and cane fibre or bagasse, the fibrous residue following the extraction process, are used as a bio-renewable fuel source by the factory boilers to produce steam for processing requirements and to generate electricity to power the agricultural, factory and other operations. Waste water from the factories is treated and recycled as irrigation water for the cane crop. This process supplements river / lake water demand and reduces the requirement from these sources for crop irrigation. Nchalo continues to support an indigenous tree reforestation project in the Lower Shire Valley and in an effort to protect the original fauna and flora of the area a 400-hectare protected reserve known as Nyala Park has been set aside within the Nchalo estate boundary.
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I L L O V O
S U G A R
( M A L A W I )
L I M I T E D
VALUE ADDED STATEMENT
The value added statement shows the wealth the group has been able to create through manufacturing, trading and investment operations and its subsequent distribution and reinvestment in the business.
2011 K million 30 809 10 (1 888) (13 313) 15 618
2010 K million 28 643 8 (1 525) (11 297) 15 829
Wealth created Revenue Income from investments Paid to growers for cane purchases Cane growing and manufacturing costs
Wealth distributed To employees as salaries, wages and other benefits To lenders of capital as interest To shareholders as dividends To the Government as taxation Wealth reinvested Retained profits in holding and subsidiary company Depreciation Deferred taxation
4 962 567 4 994 2 559 13 082 1 431 396 709 15 618
3 915 666 4 794 2 263 11 638 2 322 554 1 315 15 829
Analysis of taxes paid to and collected on behalf of the Government Central and local Government Current taxation Customs duties, import surcharges and other taxes Total contribution to central and local Government The above amount contributed excludes the following: - employees taxation deducted from remuneration - net VAT amount collected on behalf of the Government - non-resident tax collected on behalf of the Government - withholding tax on dividends Total contributed to Government
2 045 514 2 559
1 811 452 2 263
598 1 084 41 462 2 185 4 744
504 1 172 364 465 2 505 4 768
Wealth distributed (%) To employees as salaries, wages and other benefits To lenders of capital as interest To shareholders as dividends To the Government as taxation Wealth reinvested (%) Retained profits in holding and subsidiary company Depreciation Deferred taxation
3% Depreciation
4% Deferred taxation
32% To employees as salaries, wages and other benefits
4%
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I L L O V O
9 3 4 16
To lenders of capital as interest
32% To shareholders as dividends
S U G A R
16% To the Government as taxation
( M A L A W I )
32 4 32 16 84
9%
Retained profits in holding and subsidiary company
L I M I T E D
FIVE YEAR REVIEW
K million
2011
2010
2009
2008
2007
Consolidated statement of comprehensive income Revenue Operating profit Net finance costs Profit before taxation Net profit for the year Headline earnings Dividends paid Reconciliation of headline earnings Net profit for the year Adjusted for : Net profit on sale of property, plant and equipment Headline earnings Consolidated statement of financial position Shareholders' equity Deferred tax Interest-bearing debt Total funding Property, plant and equipment Cane roots Investments and loans Current assets - cash Current assets - other Total assets Interest-free liabilities Net assets Earnings and dividends Basic and diluted earnings per share Headline earnings per share Dividends paid and proposed Dividend cover on headline earnings
L I M I T E D
30 809 9 736 (567) 9 179 6 425 6 414 (4 994)
28 643 10 915 (666) 10 257 7 116 7 108 (4 794)
26 090 9 740 (596) 9 144 6 353 6 339 (3 853)
21 173 7 945 (717) 7 233 5 025 5 004 (3 603)
19 638 7 222 (345) 6 882 4 866 4 854 (2 554)
6 425 (11) 6 414
7 116 (8) 7 108
6 353 (14) 6 339
5 025 (21) 5 004
4 866 (12) 4 854
17 181 7 947 355 25 483 7 989 9 230 732 15 173 33 124 (7 641) 25 483 Note 1 2 3
15 750 7 239 977 23 966 7 144 8 190 563 1 006 12 768 29 671 (5 705) 23 966
13 428 5 924 668 20 020 5 975 7 049 545 1 475 11 423 26 467 (6 447) 20 020
10 928 4 631 402 15 961 4 327 5 724 515 1 272 10 235 22 073 (6 112) 15 961
9 506 3 907 543 13 956 3 086 4 954 442 2 256 8 267 19 005 (5 049) 13 956
tambala tambala tambala times
900.6 899.0 629.0 1.4
997.4 996.3 700.0 1.4
890.5 888.5 625.0 1.4
704.3 701.4 490.0 1.4
682.0 680.4 475.0 1.4
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I L L O V O
S U G A R
Financial statistics Return on average shareholders' equity Return on net assets Gearing Interest cover Net worth per share
( M A L A W I )
4 5 6 7 8
% % % times tambala
39.0 39.4 17.2 2 408
48.8 49.6 16.4 2 208
52.2 54.1 16.3 1 882
49.2 53.1 11.1 1 532
58.3 58.0 20.9 1 332
2011
2010
2009
2008
2007
Operational statistics Hectares harvested Nchalo Dwangwa 19 521 13 102 6 419 19 717 13 316 6 401 18 674 12 398 6 276 18 345 12 106 6 239 17 996 11 887 6 109
Tons cane per hectare (weighted average) Nchalo Dwangwa
109 111 106
108 108 109
114 114 113
104 101 110
116 118 114
Cane crushed (tons) Nchalo Dwangwa Outgrowers
2 389 058 1 450 380 682 636 256 042
2 360 821 1 440 667 695 104 225 050
2 330 152 1 413 352 708 219 208 581
2 115 075 1 221 107 688 543 205 425
2 298 964 1 399 336 694 864 204 764
Sucrose percent (weighted average) Nchalo Dwangwa Outgrowers
14.06 13.64 14.93 14.09
14.41 13.88 15.36 14.88
14.81 14.48 15.41 15.06
14.34 13.96 14.92 14.67
14.52 14.12 15.22 14.88
Sugar produced (tons) Nchalo Dwangwa
282 445 168 573 113 872
294 952 178 647 116 305
303 774 186 991 116 783
265 788 154 581 111 207
288 460 176 636 111 824
Analysis of sugar sales by destination (tons '000) Domestic market Export market
278 171 107
295 195 100
300 202 98
268 182 86
285 195 90
Notes: 1 2 3 4 5 Basic and diluted earnings per share Net profit for the year divided by the weighted average number of ordinary shares in issue. Headline earnings per share Headline earnings divided by the weighted average number of ordinary shares in issue. Dividend cover on headline earnings Headline earnings per share divided by dividends per share. Return on average shareholders equity Net profit for the year expressed as a percentage of average shareholders equity. Return on net assets Operating profit expressed as a percentage of average net operating assets.
L I M I T E D
6 Gearing Interest-bearing debt (net of cash) expressed as a percentage of shareholders equity. 7 8 Interest cover Operating profit divided by net financing costs. Net worth per share Shareholders equity divided by the number of shares in issue at the end of the year.
15
I L L O V O
S U G A R
( M A L A W I )

ANNUAL FINANCIAL STATEMENTS
For the year ended 31 March 2011 APPROVAL OF ANNUAL FINANCIAL STATEMENTS INDEPENDENT AUDITORS REPORT STATUTORY INFORMATION ACCOUNTING POLICIES STATEMENTS OF COMPREHENSIVE INCOME STATEMENTS OF FINANCIAL POSITION STATEMENTS OF CHANGES IN EQUITY STATEMENTS OF CASH FLOWS NOTES TO THE STATEMENTS OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS 17 18 19 21 28 29 30 31 32 33
16
I L L I O L V L O O VS O U G SA U R G ( AM R A L ( A M W A I )L AL W I M I I) T EL DI M I T E D
APPROVAL OF ANNUAL FINANCIAL STATEMENTS
The directors of Illovo Sugar (Malawi) Limited are responsible for the preparation and the integrity of the annual financial statements of the group and the company, and the objectivity of other information presented in the annual financial statements. In order to fulfil this responsibility, the group maintains internal accounting and administrative control systems designed to provide reasonable assurance that assets are safeguarded and that transactions are executed and recorded in accordance with the groups policies and procedures. The going-concern basis has been adopted in preparing these financial statements. The directors have no reason to believe that the group and the company will not be a going-concern in the foreseeable future. The groups external auditors, Deloitte, audited the financial statements and the auditors report is represented on page 18. The annual financial statements of the group and the company which appear on pages 21 to 49 were approved by the board of directors on 5 May 2011 and are signed on its behalf by:
D G MacLeod I G Parrott Chairman Managing Director 5 May 2011
17
I L L O V O
S U G A R
( M A L A W I )
L I M I T E D
INDEPENDENT AUDITORS REPORT
Independent auditors report to the members of Illovo Sugar (Malawi) Limited We have audited the company and consolidated financial statements of Illovo Sugar (Malawi) Limited and its subsidiary (the group) as set out on pages 21 to 49, which comprise the statements of comprehensive income for the year ended 31 March 2011, the statements of financial position, the statements of changes in equity and the statements of cash flows for the year then ended and a summary of significant accounting policies and other explanatory notes. Managements responsibility for the Financial Statements Management is responsible for preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in a manner required by the Companies Act, 1984 and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of the group as of 31 March 2011, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and in accordance with the provisions of the Companies Act, 1984, so far as concerns the members of the company.
( M A L A W I )
L I M I T E D
Public Accountants Blantyre, Malawi 26 May 2011
18
I L L O V O
S U G A R
STATUTORY INFORMATION
1.
NATURE OF BUSINESS The principal activities of the company and its subsidiary are the growing of sugar cane and the manufacture of sugar. This is more fully described under the group profile appearing on page 2. REVIEW OF OPERATIONS Detailed commentary is given in the directors report on pages 6 to 8.
2.
3. ACQUISITIONS 4. There were no acquisitions in the current year. SHARE CAPITAL Full details of the current authorised and issued share capital are set out in the statement of changes in equity on page 30 of the financial statements. There have been no changes in the current year.
5. SHAREHOLDERS An analysis of shareholders and their shareholdings is given on page 50. The register of members reflects six beneficial shareholdings equal to or greater than 1% of the issued ordinary share capital of the company. Details are given on page 50.
6. DIVIDENDS A first interim ordinary dividend of 287 tambala per share (2010: 287 tambala per share) was declared on 22 October 2010. A second interim ordinary dividend of 323 tambala per share (2010: 393 tambala per share) was declared on 5 May 2011. The first interim ordinary dividend was paid on 31 December 2010 and the second is payable on 1 July 2011. The directors recommend a final dividend of 20 tambala per share (2010: 20 tambala per share) to be declared at the forthcoming annual general meeting on 12 August 2011 to shareholders registered in the companys books at close of business on 26 August 2011 and payable on 7 October 2011. The second interim and final dividends have not been included as a liability in these financial statements. Total distribution for the year will be 630 tambala per share (2010: 700 tambala per share). The directors of the wholly owned and only subsidiary of the company, Dwangwa Sugar Corporation Limited, declared and paid dividends of K 2.00 billion (2010: K 2.00 billion) to the company, during the year. ILLOVO SUGAR MALAWI EMPLOYEES SHARE PURCHASE SCHEME During the year under review the trustees of the Scheme disposed of 14 700 (2010: 600) and purchased 120 000 (2010: 70 000) shares in the company bringing the total number of shares held to 589 346 (2010: 484 046). SUBSIDIARY COMPANY Information concerning the subsidiary of the company is set out on page 38 in note 8 to the financial statements. DIRECTORATE AND SECRETARIES The names of the secretaries together with the companys business and postal addresses and the directors in office at the date of this report, are set out on pages 3 and 5 respectively. There were no changes to the directorate during the year. In terms of the companys articles of association, a third of the non-executive directors retire by rotation at the forthcoming annual general meeting. Accordingly, Messrs G J Clark, S L G Malata and B M Stuart will retire and being eligible offer themselves for re-election.
L I M I T E D
7.
8. 9.
19
I L L O V O
S U G A R
( M A L A W I )
STATUTORY INFORMATION
(continued)
Mr S L G Malata holds 96 736 (2010: 96 736) ordinary shares in the company at 31 March 2011. The register of shares of the company is available for inspection at the registered office. No change in the interest of directors has occurred between the year-end and the date of approval of these financial statements. DIRECTORS FEES At the last annual general meeting held on 12 August 2010 shareholders approved the fees payable to each director and the chairman to be K 750 000 per annum with effect from 1 April 2010. At the forthcoming annual general meeting, it will be proposed that such fees be increased to K 825 000 per annum for the ensuing year. HOLDING COMPANY SUCOMA Holdings Limited (incorporated in Mauritius) is the holding company of Illovo Sugar (Malawi) Limited (incorporated in Malawi) with a 75.98% interest in its issued share capital. Illovo Sugar Group (incorporated in the Republic of South Africa) owns 100% shareholding in SUCOMA Holdings Limited. The ultimate holding company is Associated British Foods plc (incorporated in the United Kingdom).
10.
11.
12. AUDITOR 13. 14. Deloitte will continue in office in accordance with the provisions of Section 191(1) of the Companies Act, 1984. SPECIAL RESOLUTIONS There were no special resolutions adopted during the financial year. POST BALANCE SHEET EVENTS There have been no matters of material interest to report on in the period between the end of the financial year and the date of approval of the financial statements.
20
I L L O V O
S U G A R
( M A L A W I )
L I M I T E D
ACCOUNTING POLICIES
The principal accounting policies of the group conform to International Financial Reporting Standards (IFRS) which have been consistently applied. COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS The financial statements have been drawn up in accordance with International Financial Reporting Standards.
1.
2.
ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS In the current year, the group has adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (the IASB) and the International Financial Reporting Interpretations Committee (the IFRIC) of the IASB that are relevant to its operations and effective for annual reporting periods beginning on or after 1 April 2010. At the date of authorisation of these financial statements, the following relevant Standards and Interpretations were in issue but not yet effective:
IFRS 3 Business Combinations - Amendments resulting from May 2010 Annual Improvements to IFRSs (effective for annual periods beginning on or after 1 July 2010). IFRS 7 Financial Instruments: Disclosures - Amendments resulting from May 2010 Annual Improvements to IFRSs (effective for annual periods beginning on or after 1 January 2011). IFRS 7 Financial Instruments: Disclosures - Amendments enhancing disclosures about transfers of financial assets (effective for annual periods beginning on or after 1 July 2011). IFRS 9 Financial Instruments - Classification and Measurement (effective for annual periods beginning on or after 1 January 2013). IAS 1 Presentation of Financial Statements - Amendments resulting from May 2010 Annual Improvements to IFRSs (effective for annual periods beginning on or after 1 January 2011). IAS 12 Income Taxes Limited scope amendment (recovery of underlying assets) (effective for annual periods beginning on or after 1 January 2012).
L I M I T E D
IAS 24 Related Party Disclosures - Revised definition of related parties (effective for annual periods beginning on or after 1 January 2011). IAS 27 Consolidated and Separate Financial Statements - Amendments resulting from May 2010 Annual Improvements to IFRSs (effective for annual periods beginning on or after 1 July 2010). IFRIC 13 Customer Loyalty Programmes - Amendments resulting from May 2010 Annual Improvements to IFRSs (effective for annual periods beginning on or after 1 January 2011). IFRIC 14 IAS19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction November 2009 Amendments with respect to voluntary prepaid contributions (effective for annual periods beginning on or after 1 January 2011). IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective for annual periods beginning on or after 1 July 2010).
21
I L L O V O
The directors anticipate that, other than IFRS 9, these Standards and Interpretations in future periods will have no significant impact on the financial statements of the entity. IFRS 9 will impact the measurement of financial instruments.
S U G A R
( M A L A W I )
ACCOUNTING POLICIES
(continued)
3.
BASIS OF PREPARATION The consolidated financial statements have been prepared on the historical cost basis, except for the revaluation of certain non-current assets and financial instruments. No other procedures are adopted to reflect the impact on the financial statements of specific price changes or changes in the general level of prices. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the groups accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in notes to the financial statements number 1 on page 33. BASIS OF CONSOLIDATION The consolidated financial statements incorporate the financial statements of the company and its subsidiary. Where necessary, adjustments are made to the financial statements of the subsidiary to bring its accounting policies into line with those used by the group. All significant intercompany transactions and balances are eliminated on consolidation. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the groups accounting policy. Depreciation is charged so as to write-off the cost of assets over their estimated useful lives, using the straight-line method. Depreciation commences when the assets are ready for their intended use and is calculated at rates appropriate in terms of managements current assessment of useful lives and residual values. Land is not depreciated. Management reviews the residual values annually taking into consideration market conditions and projected disposal values. In the annual assessment of useful lives, maintenance programmes and technological innovations are considered. Borrowing costs expended on new productive capacity prior to commencement of production are capitalised where such expenditure is incurred over a period in excess of 12 months. CANE ROOTS AND GROWING CANE
4.
5.
6.
L I M I T E D
Cane roots and growing cane are valued at fair value determined on the following basis: Cane roots - the escalated average cost, using appropriate inflation related indices, of each year of planting adjusted for the remaining expected life. Growing cane - LEASED ASSETS Leases are classified as finance leases whenever the conditions of the lease transfers substantially all risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Assets subject to finance lease agreements are capitalised at their cash cost equivalent and the corresponding liabilities are raised. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. The cost of the asset is depreciated at appropriate rates on the straight-line basis over the estimated useful life of the asset. Lease finance charges are charged to operating profit as they are incurred. Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term. the estimated sucrose content at 31 March valued at the estimated sucrose price for the following season, less the estimated costs for harvesting and transport.
( M A L A W I )
7.
S U G A R

I L L O V O
22
8. INVENTORIES Inventories are stated at the lower of cost and net realisable value. The basis of determining cost is the average method. The cost of finished goods comprises all costs of purchase, cost of conversion and other costs incurred in bringing such inventories to their present location and condition. Maintenance stores are valued at average cost with obsolete items being written-off. Redundant and slow-moving inventories are identified and written-down to their net realisable values. FACTORY OVERHAUL COSTS Factory overhaul costs represent expenditure actually incurred on plant and equipment for the overhaul of the factory in preparation for the new sugar season commencing after the year-end. This expenditure is fully written-off in the following year. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash resources which comprise cash on hand, balances with bankers and investments in short-term money market instruments.
9.
10.
11. INVESTMENTS 12. Investments are stated at cost to the group less amounts written-off to give recognition to declines in value. FOREIGN CURRENCY ASSETS AND LIABILITIES The individual financial statements of the group are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Malawi Kwacha, which is the functional currency of the group, and the presentation currency for the consolidated financial statements. In preparing the financial statements of the individual companies, transactions in currencies other than the groups functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity.
L I M I T E D
23
I L L O V O
S U G A R
( M A L A W I )
ACCOUNTING POLICIES
(continued)
13.
FINANCIAL INSTRUMENTS Financial assets and financial liabilities are recognised on the groups statement of financial position when the group becomes a party to the contractual provisions of the instrument. Investments are recognised at fair value, plus directly attributable transaction costs at date of purchase. At subsequent reporting dates, debt securities that the group has with the expressed intention and ability to hold-tomaturity (held-to-maturity debt securities) are measured at amortised cost using the effective interest rate method, less any impairment loss recognised to reflect irrecoverable amounts. An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the investments carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. Impairment losses are reversed in subsequent periods when an increase in the investments recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the investment at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised. Investments other than held-to-maturity debt securities are classified as either investments held-for-trading or as available-for-sale, and are measured at subsequent reporting dates at fair value, except to the extent that the fair value is not accurately estimatable, where cost is used. Where securities are held for trading purposes, gains and losses arising from changes in fair value are included in profit or loss for the period. For available-for-sale investments, gains and losses arising from changes in fair value are recognised directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in the profit or loss for the period. Impairment losses recognised in profit or loss for equity investments classified as available-for-sale are not subsequently reversed through profit or loss. Impairment losses recognised in profit or loss for debt instruments classified as available-for-sale are subsequently reversed if an increase in the fair value of the instrument can be objectively related to an event occurring after the recognition of the impairment loss. Trade receivables are measured at initial recognition at fair value. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. Financial liabilities and equity instruments issued by the group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below. Interest-bearing bank loans and overdrafts are initially measured at fair value, and are subsequently measured at amortised cost, using the effective rate method. Any difference between the proceeds (net of transaction costs) and settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the groups accounting policy for borrowing costs (see note 16 to the financial statements). Trade and other payables are measured at fair value. Derivative instruments are measured at fair value. It is the policy of the group not to trade in derivative financial instruments for speculative purposes. Equity instruments issued by the group are recorded at the proceeds received, net of direct issue costs. Gains and losses arising from a change in the fair value of financial instruments that are not part of a hedging relationship are included in net profit or loss in the period in which the change arises. Financial assets and liabilities are offset and the net amount reported in the statement of financial position when the group has a legally enforceable right to set off the recognised amounts, and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

L I M I T E D
( M A L A W I )
24
I L L O V O
S U G A R
14. TAXATION Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The groups liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date. Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the group intends to settle its current tax assets and liabilities on a net basis. REVENUE RECOGNITION Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts and sales related taxes. Sales of goods are recognised when goods are delivered and title is passed. DIVIDEND AND INTEREST REVENUE Dividend revenue from investments is recognised when the shareholders right to receive payment has been established. Interest revenue is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that assets net carrying value. RETIREMENT BENEFITS The group provides retirement benefits for its employees through two defined contribution plans, the SUCOMA Group Pension Scheme and the SUCOMA Group Non-contributory Pension Fund. Contributions by group companies to defined contribution retirement plans are recognised as an expense in the year in which the related services are rendered by employees. Severance liabilities in terms of the Employment Act regulations are assessed annually and provided for where applicable.
L I M I T E D
15.
16.
17.
25
I L L O V O
S U G A R
( M A L A W I )
ACCOUNTING POLICIES
(continued)
18.
EARNINGS PER SHARE The calculation of basic and diluted earnings per share is based on the net profit attributable to the shareholders and the weighted average number of ordinary shares in issue during the year. Where new equity shares are issued for no consideration, the profit is apportioned over the shares in issue after the issue and the corresponding figures for the earlier periods are adjusted accordingly. DIVIDENDS PER SHARE Dividends on ordinary shares are recognised in equity in the period in which they are approved by the companys board of directors. Dividends for the year that are declared after the reporting date are dealt with in a note. The calculation of dividend per share is based on the dividends paid to shareholders during the period divided by the number of ordinary shareholders on the register of shareholders on the date of payment.
19.
20. PROVISIONS Provisions are recognised when the group has a present obligation (constructive or legal) as a result of a past event and it is probable that the group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. ASSET IMPAIRMENT REVIEW At each reporting date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
21.
L I M I T E D
( M A L A W I )
S U G A R
26
I L L O V O
22.
COMPARATIVE FIGURES When accounting policies are changed with retrospective effect, comparative figures are restated in accordance with the new policies. In addition, comparative figures are adjusted to conform to changes in presentation in the current year. BORROWING COSTS Borrowing costs are recognised in profit and loss in the period in which they are incurred. Borrowing costs expended on new productive capacity prior to commencement of production are capitalised where such expenditure is incurred over a period in excess of 12 months. SEGMENTAL ANALYSIS Segmental reporting is presented in respect of the groups business segments. The primary format is based on the groups management and internal reporting structure and combines businesses with common characteristics. Inter-segment pricing is determined on an arms length basis. Assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segmental capital expenditure is the total costs incurred during the period to acquire segment assets that are expected to be used for more than one year. The group is comprised of the following business segments: Cane growing Sugar production - the growing of sugar cane for use in the sugar production process; and - the manufacture of sugar from sugar cane.
23.
24.
27
I L L O V O
S U G A R
( M A L A W I )
L I M I T E D
STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2011
Notes Revenue 2
GROUP 2011 2010 K million K million 30 809 28 643
COMPANY 2011 2010 K million K million 18 383 17 320
Operating profit Dividend income Finance costs Interest income Profit before taxation Taxation Net profit for the year Other comprehensive income Total comprehensive income for the year Basic earnings per share (tambala)
3 4 4
9 736 10 (679) 112 9 179
10 915 8 (872) 206 10 257 (3 141) 7 116 7 116 997
5 995 2 000 (436) 112 7 671 (1 689) 5 982 5 982
6 874 2 000 (567) 206 8 513 (2 004) 6 509 6 509
(2 754) 6 425 6 425
28
901
28
I L L O V O
S U G A R
( M A L A W I )
L I M I T E D
STATEMENTS OF FINANCIAL POSITION

AS AT 31 MARCH 2011
Notes ASSETS Non-current assets Property, plant and equipment Cane roots Investment in subsidiary company Other investments Loans receivable
GROUP 2011 2010 K million K million
COMPANY 2011 2010 K million K million
6 7 8 9 10
7 989 9 230 17 219
7 144 8 190 563 15 897
5 625 6 834 324 12 783
5 078 6 144 324 563 12 109
Current assets Inventories Growing cane Factory overhaul costs Trade and other receivables Holding company and fellow subsidiaries Cash and cash equivalents
11 12 13 14 20 15
2 501 9 608 819 1 202 1 043 732 15 905
2 026 9 044 772 926 1 006 13 774 29 671
1 514 6 214 456 1 021 1 043 732 10 980 23 763
1 094 5 814 431 595 994 8 928 21 037
Total assets EQUITY AND LIABILITIES Capital and reserves Share capital and premium Retained earnings
33 124
782 16 399 17 181
782 14 968 15 750
782 11 231 12 013
782 10 243 11 025
8 902 Current liabilities Trade and other payables Holding company and fellow subsidiaries Short-term borrowings Bank overdrafts Taxation payable Provisions
8 166
6 204
5 713
19 20 21 15 22
7 041 Total equity and liabilities 33 124
5 755 29 671
5 546 23 763
4 299 21 037
The financial statements were authorised for issue by the Board of Directors on 5 May 2011 and were signed on its behalf by:
D G MacLeod (Chairman)
I G Parrott (Managing Director)

29
I L L O V O
S U G A R
3 926 1 193 46 175 1 585 116
2 966 663 47 750 1 210 119
3 052 1 462 46 174 724 88
2 360 727 47 750 326 89
( M A L A W I )
L I M I T E D
Non-current liabilities Long-term borrowings Deferred tax Post-retirement benefits
16 17 18
134 7 948 820
180 7 239 747
134 5 689 381
180 5 184 349
STATEMENTS OF CHANGES IN EQUITY

Share Capital K million
Share Premium K million
Retained Earnings K million
Total K million
GROUP Balance at 31 March 2009 Total comprehensive income for the year Dividends declared - Second interim for the year ended 31 March 2009 - Final for the year ended 31 March 2009 - First interim for the year ended 31 March 2010 Balance at 31 March 2010 Total comprehensive income for the year Dividends declared - Second interim for the year ended 31 March 2010 - Final for the year ended 31 March 2010 - First interim for the year ended 31 March 2011 Balance at 31 March 2011 COMPANY Balance at 31 March 2009 Total comprehensive income for the year Dividends declared Balance at 31 March 2010 Total comprehensive income for the year Dividends declared
L I M I T E D
14
768
12 646 7 116 (4 794) (2 640) (107) (2 047)
13 428 7 116 (4 794) (2 640) (107) (2 047) 15 750 6 425 (4 994) (2 804) (143) (2 047) 17 181
14
768
14 968 6 425 (4 994) (2 804) (143) (2 047)
14
768
16 399
14
768
8 528 6 509 (4 794) 10 243 5 982 (4 994)
9 310 6 509 (4 794) 11 025 5 982 (4 994) 12 013
14
768
Balance at 31 March 2011
14
768
11 231
ANALYSIS OF SHARE CAPITAL AND PREMIUM
GROUP AND COMPANY 2011 K million 2010 K million 20
( M A L A W I )
Authorised share capital 1 000 000 000 (2010: 1 000 000 000) ordinary shares of 2 tambala each Issued share capital 713 444 391 (2010: 713 444 391) ordinary shares of 2 tambala each Share premium 20
S U G A R
14 768 782
14 768 782
30
I L L O V O
STATEMENTS OF CASH FLOWS

Notes Cash flows from operating activities Operating profit before working capital requirements Working capital requirements Cash generated from operations Finance costs Interest income Taxation paid Dividends paid Net cash flow from operating activities c a b
8 512 (281) 8 231 (679) 112 (1 670) (4 994) 1 000
8 805 (347) 8 458 (872) 206 (2 054) (4 794) 944
5 159 (456) 4 703 (436) 112 (786) (4 994) (1 401)
5 417 69 5 486 (567) 206 (1 591) (4 794) (1 260)
Cash flows from investing activities Purchase of property, plant and equipment Proceeds on disposal of property, plant and equipment Dividends received Net movement on loans receivable Net cash flow used in investing activities Net cash flow before financing activities Cash flows from financing activities Long-term borrowings repaid Short-term borrowings repaid Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents (46) (1) (47) 301 (47) (28) (75) (853) (46) (1) (47) 314 (47) (28) (75) (865)
L I M I T E D
(1 246) 21 10 563 (652) 348
(1 731) 19 8 (18) (1 722) (778)
(819) 17 2 000 563 1 762 361
(1 522) 10 2 000 (18) 470 (790)
Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year
15 15
256 557
1 109 256
244 558
1 109 244
31
I L L O V O
S U G A R
( M A L A W I )
NOTES TO THE STATEMENTS OF CASH FLOWS

GROUP 2011 2010 K million K million a. Operating profit before working capital requirements is calculated as follows: Operating profit Add back: Depreciation Profit on disposal of property, plant and equipment Change in fair value of cane roots Change in fair value of growing cane Operating profit before working capital requirements 9 736 396 (16) (1 040) (564) 8 512 10 915 554 (11) (1 141) (1 512) 8 805
5 995 267 (13) (690) (400) 5 159
6 874 376 (5) (792) (1 036) 5 417
b. Working capital requirements comprise the following: Movement in inventories Movement in factory overhaul costs Movement in trade and other receivables Movement in advances by holding company and fellow subsidiaries Movement in trade and other payables Working capital requirements (475) (47) (276) (513) 1 030 (281) (392) (221) 780 (273) (241) (347) (420) (25) (426) (308) 723 (456) (130) (84) 741 (215) (243) 69
c. Taxation paid is reconciled to the amounts disclosed in the statements of comprehensive income as follows: Amounts payable at beginning of year Prior year underprovision paid Per statements of comprehensive income Amounts payable at end of year
L I M I T E D
(1 210) (2 045) 1 585 (1 670)
(1 438) (15) (1 811) 1 210 (2 054)
(326) (1 184) 724 (786)
(975) (15) (927) 326 (1 591)
Taxation paid
32
I L L O V O
S U G A R
( M A L A W I )
NOTES TO THE FINANCIAL STATEMENTS

1. Critical accounting judgements and key sources of estimation uncertainty Critical accounting judgements made by management In the process of applying the groups accounting policies, management has made the following judgement, apart from those involving estimations, that affect the amounts recognised in the financial statements and related disclosure: Impairment of assets In making its judgement, management assesses at each reporting date whether there is an indication that items of property, plant and equipment and other assets may be impaired. If any such indication exists, the recoverable amount of the asset is assessed in order to determine the extent of the impairment loss, if any. The recoverable amount is the higher of fair value less costs to sell and value in use. Key sources of estimation uncertainty In the process of applying the groups accounting policies, management has made the following key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date: Property, plant and equipment residual values and useful lives These assets are written down to their estimated residual values over their anticipated useful lives using the straight line basis. Management reviews the residual values annually considering market conditions and projected disposal values. In assessing useful lives, maintenance programmes and technological innovations are considered. The carrying value of property, plant and equipment is disclosed in note 6 to the financial statements. Cane roots valuation The escalated average cost of planting cane roots are adjusted for the remaining expected life. This requires an estimation by management of the average number of ratoons expected from the crop. The carrying value of cane roots is disclosed in note 7 to the financial statements. Growing cane valuation Growing cane is valued at the estimated sucrose content, valued at the estimated sucrose price for the following season, less the estimated costs for harvesting and transport. The estimated sucrose content requires management to assess the expected cane and sucrose yields for the following season considering weather conditions and harvesting programmes. In reviewing the estimated sucrose price, management is required to assess into which markets the forthcoming crop will be sold and establish domestic and export prices as well as the related foreign currency exchange rates. The carrying value of growing cane is disclosed in note 12 to the financial statements. Severance pay allowance provision The group determined its severance allowance provision as at 31 March 2011 through an internal review, building upon the provision that was determined through an actuarial valuation done by QED Actuaries and Consultants (Pty) Limited, a member of Aon Group Company of the Republic of South Africa on 25 March 2008. The carrying value of severance pay allowance provision is disclosed in note 18 to the financial statements. Provision for doubtful debts Allowances for doubtful debts are recognised against trade receivables between 60 and 120 days based on estimated irrecoverable amounts determined by reference to past default experience of the counterparty and an analysis of the counterpartys current financial position. There are no other key assumptions concerning the future, or key sources of estimation uncertainty at the reporting date, that management have assessed as having a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
33
I L L O V O
S U G A R
( M A L A W I )
L I M I T E D

(continued)
2. Revenue Revenue represents the proceeds receivable from: Sugar Molasses and other products 30 452 357 30 809 Includes revenue from exports 9 521 28 457 186 28 643 8 085 18 175 208 18 383 5 682 17 235 85 17 320 4 808
3. Operating profit Revenue Cost of sales Distribution expenses Administration expenses Operating profit 30 809 (17 178) (2 142) (1 753) 9 736 28 643 (13 926) (2 033) (1 769) 10 915 18 383 (10 438) (1 279) (671) 5 995 17 320 (8 226) (1 231) (989) 6 874
Operating profit has been determined after taking into account the following items: Depreciation Profit on disposal of property, plant and equipment Fair value adjustments: - cane roots - growing cane Factory overhaul costs
L I M I T E D
(396) 16 1 040 564 (772) (8) (21) (21) (2) (55) (326) (75)
(554) 11 1 141 1 512 (551) (5) (19) (32) (5) (109) (337) (67)
(267) 13 690 400 (431) (8) (12) (13) (1) (47) (299) (44)
(376) 5 792 1 036 (347) (5) (11) (28) (1) (83) (286) (38)
Directors' fees Auditor's remuneration: - statutory audit fees - fees for other services - expenses Management fees and services Operating lease charges Contribution to retirement benefit funds
34
I L L O V O
S U G A R
( M A L A W I )
4. Finance costs and interest income Finance costs - interest expense on bank borrowings and long-term debt (679) (872) (436) (567)
Interest income - interest income on short-term bank deposits and zero coupon bonds
112
206
112
206
5. Taxation Current tax Current tax - prior year Deferred tax Deferred tax - prior year 2 045 760 (51) 2 754 % Reconciliation of rate of taxation Malawi corporation rate of taxation Add increase in charge for year due to: Disallowable expenditure Prior year adjustment Effective rate of taxation 0.6 (0.6) 30.0 0.5 0.1 30.6 30.0 30.0 1 811 15 1 315 3 141 % 1184 556 (51) 1 689 927 15 1062 2 004
For income tax purposes the Malawi Revenue Authority has agreed to treat the group as one tax paying entity.
L I M I T E D
35
I L L O V O
S U G A R
( M A L A W I )

(continued)
Land and buildings K million
Capitalised leased plant K million
Plant, equipment, vehicles and furniture K million
Total
K million
6.
Property, plant and equipment GROUP Cost Opening balance at 1 April 2009 Additions Disposals Closing balance at 31 March 2010 1 550 379 1 929 22 22 6 475 1 352 (125) 7 702 8 047 1 731 (125) 9 653
Opening balance at 1 April 2010 Additions Disposals Closing balance at 31 March 2011
1 929 214 2 143
22 22
7 702 1 032 (35) 8 699
9 653 1 246 (35) 10 864
Depreciation Opening balance at 1 April 2009 Charge for the year Disposals Closing balance at 31 March 2010 241 50 291 13 2 15 1 818 502 (117) 2 203 2 072 554 (117) 2 509
Opening balance at 1 April 2010 Charge for the year Disposals Closing balance at 31 March 2011
L I M I T E D
291 35 326
15 1 16
2 203 360 (30) 2 533
2 509 396 (30) 2 875
Net book value Closing balance at 31 March 2010 Closing balance at 31 March 2011 1 638 1 817 7 6 5 499 6 166 7 144 7 989
( M A L A W I )
The group's sugar and cane growing activities are situated on land under 99 year lease from the Government of Malawi as follows: Commencement: 1 January 1965 1 March 1966 1 October 1974 1 March 1977 1 July 1992
2011 Hectares 4 763 4 12 391 13 300 3 767
2010 Hectares 4 763 4 12 391 13 300 3 767
36
I L L O V O
S U G A R
Land and buildings K million
Capitalised leased plant K million
Plant, equipment, vehicles and furniture K million
Total
K million
6.
Property, plant and equipment (continued) COMPANY Cost Opening balance at 1 April 2009 Additions Disposals Closing balance at 31 March 2010 1 152 379 1 531 22 22 4 176 1 143 (22) 5 297 5 350 1 522 (22) 6 850
Opening balance at 1 April 2010 Additions Disposals Closing balance at 31 March 2011
1 531 125 1 656
22 22
5 297 694 (35) 5 956
6 850 819 (35) 7 634
Depreciation Opening balance at 1 April 2009 Charge for the year Disposals Closing balance at 31 March 2010 157 39 196 13 2 15 1 243 335 (17) 1 561 1 413 376 (17) 1 772
Opening balance at 1 April 2010 Charge for the year Disposals Closing balance at 31 March 2011
196 27 223
15 1 16
1 561 239 (30) 1 770
1 772 267 (30) 2 009

L I M I T E D
Net book value Closing balance at 31 March 2010 Closing balance at 31 March 2011 1 335 1 433 7 6 3 736 4 186 5 078 5 625
2011 The companys sugar and cane growing activities are situated on land under 99 year lease from the Government of Malawi as follows: Commencement: 1 January 1965 1 March 1966 1 October 1974 1 July 1992 The register of land and buildings is open for inspection at the registered office of the company. 4 763 4 12 391 3 767 Hectares
2010 Hectares
4 763 4 12 391 3 767
37
I L L O V O
S U G A R
( M A L A W I )

(continued)
7.
Cane roots The carrying value of cane roots can be reconciled as follows: Carrying value at beginning of year Change in fair value Carrying value at end of year 8 190 1 040 9 230 7 049 1 141 8 190 6 144 690 6 834 5 352 792 6 144
The groups area under cane for the purpose of valuing of cane roots as at 31 March 2011 was 20 473 ha (2010: 20 466 ha). The companys area under cane for the purpose of valuing of cane roots as at 31 March 2011 was 13 806 ha (2010: 13 799 ha).
8.
Investment in subsidiary company The only subsidiary of the company is Dwangwa Sugar Corporation Limited, a company registered in Malawi. Interest in the subsidiary is as follows: Issued capital Effective percentage holding Shares at cost The directors' valuation of the shares based on the net asset value of the company at end of year 42 100% 324 5 493 42 100% 324 5 050
9.
Other investments Unlisted investment at cost: Ethanol Company Limited 210 000 Ordinary shares of K 1 each, representing 7.64% of issued share capital. 0.2 The directors valuation of the shares based on the net asset value of the company at end of year 93 0.2 71 0.2 0.2 -
L I M I T E D
10. Loans receivable Kasinthula Cane Growers Limited 563 563 563 563
( M A L A W I )
Advances to Kasinthula Cane Growers Limited were repayable over a period of ten years that started in 2005, at rates of interest equal to those borne by Illovo Sugar (Malawi) Limited on long-term borrowings disclosed in note 16. The advances were fully repaid in October 2010.
S U G A R
11. Inventories Consumables Molasses Sugar 1 495 4 1 002 2 501 1 352 674 2 026 929 4 581 1 514 690 404 1 094
38
I L L O V O
12. Growing cane The carrying value of growing cane can be reconciled as follows: Carrying value at beginning of year Change in fair value Carrying value at end of year The following are the key assumptions in the valuation of growing cane: Expected area to harvest the following season (ha) Estimated yield (tons cane/ha) Average maturity of cane at 31 March
9 044 564 9 608
7 532 1 512 9 044
5 814 400 6 214
4 778 1 036 5 814
20 240 110 67%
20 466 111 67%
13 580 111 67%
13 799 111 67%
13. Factory overhaul costs Balance at beginning of year Capitalised during the year Amortised during the year Balance at end of year
772 819 (772) 819
551 772 (551) 772
431 456 (431) 456
347 431 (347) 431
14. Trade and other receivables Trade and other receivables Other receivables and prepayments
504 698 1 202
359 567 926
504 517 1 021
359 236 595
The directors consider that the carrying amount of trade and other receivables approximates their fair value. Trade and other receivables include debtors denominated in foreign currencies amounting to K 419 million (2010: K 278 million). The foreign debtors are denominated in the following currencies: European Euro United States Dollar 397 22 419 278 278 397 22 419 278 278
Secured bank overdraft facility: Amount used Amount unused Total bank overdraft facility
1 1 499 1 500 8 375
1 500 1 500 7 875
1 1 499 1 500 8 375
1 500 1 500 7 875
39
I L L O V O
Unsecured bank overdraft facility, reviewed annually and payable at call: Amount used Amount unused
174 6 701 6 875
750 5 625 6 375
173 6 702 6 875
750 5 625 6 375
S U G A R
15. Cash and cash equivalents The group and the company have overdraft and guarantee facilities with various Malawian banking institutions. These facilities attract interest rates between 15% and 18% (2010: 12% and 19%). Bank balances are made up of the following currencies: European Euro 293 293 Malawi Kwacha 721 406 721 394 South African Rand 3 3 8 307 8 307 United States Dollar 732 1 006 732 994 Bank overdraft balances are made up of the following currencies: 175 750 174 750 Malawi Kwacha 175 750 174 750 Total cash and cash equivalents 557 256 558 244
( M A L A W I )
L I M I T E D

(continued)
GROUP AND COMPANY 2011 2010 K million K million
16.
Long-term borrowings Foreign currency borrowings Less: Current portion repayable within one year 180 (46) 134 The above borrowings are due for repayment in the following years ending 31 March: 2011 2012 2013 2014 2015 46 46 44 44 180 Foreign currency '000 Foreign borrowings Euro European Investment Bank - Own resources European Investment Bank - Risk capital Illovo Group Holdings - Loan Illovo Group Holdings - Zero coupon bond Illovo Group Holdings - Loan Illovo Group Holdings - Zero coupon bond Total foreign borrowings 2 639 2 364 1 289 6 500 (7 160) 3 544 (3 898) 2015 8.0 2005 - 2015 2005 - 2015 2015 7.1 3.0 8.0 180 162 87 444 (489) 240 (264) 180 227 202 109 444 (499) 240 (269) 227 Years of repayment Interest rate % 2011 K million 47 46 46 44 44 227 2010 K million 227 (47) 180
L I M I T E D
( M A L A W I )
Euro denominated borrowings from the European Investment Bank (EIB) are unsecured, and were raised to finance the Kasinthula Cane Growers Limited development project in the Chikhwawa valley and mill expansion at Nchalo. These borrowings comprise an own resources loan of Euro 6.5 million repayable over 15 years in 22 equal semi-annual instalments that commenced in September 2004, with interest payable semi-annually in arrears at rates applicable to comparable loans made by the bank, and a risk capital loan of Euro 3.5 million repayable over 15 years in 11 equal annual instalments that commenced in March 2005, with interest at 3% per annum payable annually in arrears. Long-term loan agreements concluded with Illovo Group Holdings Limited (IGHL), a subsidiary of Illovo Sugar Limited, are linked to zero coupon bonds which appreciate over the respective loan terms to provide for the repayment of loan capital. The Euro denominated loans and bonds have been structured to provide for the repayment of both EIB and IGHL loan capital. These instruments remove the currency risk on net loan capital which, in respect of both loans, has therefore been translated at Kwacha exchange rates prevailing at date of inception. This gives rise to a contingent liability as disclosed in note 24.
40
I L L O V O
S U G A R
17. Deferred tax The movement in the year is analysed below: Balance at beginning of year Charged to statements of comprehensive income Balance at end of year Analysis of deferred tax liability: Excess capital allowances over depreciation Cane roots and growing cane Other Retirement benefit obligations
7 239 709 7 948
5 924 1 315 7 239
5 184 505 5 689
4 122 1 062 5 184
2 048 5 651 495 (246) 7 948
1 836 5 170 457 (224) 7 239
1 489 3 914 401 (115) 5 689
1 334 3 587 368 (105) 5 184
18. Post-retirement benefits Balance at beginning of year Raised during the year Utilised during the year Balance at end of year
747 80 (7) 820
709 79 (41) 747
349 39 (7) 381
349 41 (41) 349
Section 35 (1) of the Employment Act No. 6 of 2000 requires employers to pay severance allowance to employees whose employment contracts are terminated either by mutual agreement between the employer and the employee or unilaterally by the employer. During the year ended 31 March 2008, the Trustees of the SUCOMA Group Pension Scheme and the SUCOMA Group Non-contributory Pension Fund amended the trust deeds of the pension funds to allow the portion of employer contribution to the fund to be available for making severance allowance payments. The severance allowance provision as at 31 March 2011 was determined through an internal review by management, building upon the provision that was determined through an actuarial valuation done by QED Actuaries and Consultants (Pty) Limited, a member of Aon Group Company of the Republic of South Africa on 25 March 2008. The total severance pay liability as at 31 March 2011 is K 1 551 million (2010: K 1 429 million) which has been reduced by K 731 million (2010: K 682 million), being the employers portion of the pension fund assets, in line with the deeds of variation of the pension funds. The average retirement age for employees is 60 years. The key assumptions underlying the computation of severance allowance provision are as follows: i) Discount rate - 12% ii) Expected rate of salary increases - 11% iii) Future pension increases - 11% The SUCOMA Group Pension Scheme, which is managed internally by Trustees, is a defined contribution scheme and the contributions by employees and the group are 7.5% (2010: 7.5%) and 10.5% (2010: 10.5%) of the fund members basic pensionable salaries, respectively. The SUCOMA Group Non-contributory Pension Fund, which is managed internally by Trustees, is also a defined contribution scheme and the contributions by employees and the group are 0.0% (2010: 0.0%) and 8.0% (2010: 8.0%) of the fund members basic pensionable salaries, respectively. The Trustees are employees of the group. The administration of both pension funds has been subcontracted to Nico Life Insurance Company Limited. Nico Holdings Limited is contracted to invest the assets of the two funds. The legislation that gave rise to the requirement to provide for severance allowance, the Employment Act, has been revised. The principal change to the Employment Act is the removal of the provision requiring employers to accrue for severance allowance relating to future retirement costs. The new Act was assented to, but not gazetted, and it is supposed to be introduced in conjunction with new pensions legislation (Pensions Act) which was passed by Parliament during the year, assented to and gazetted subsequent to the yearend but shall come into force on such date as the Minister may appoint by notice published in the Gazette. The amended acts introduce an obligation on the part of employers to ensure that employees are covered by registered pension arrangements. Both these pieces of legislation, when effective, will give rise to changes in the accounting for post retirement benefits. There is a contingent asset of K 93 million in the event that these legislations become effective in their current form.
L I M I T E D
41
I L L O V O
S U G A R
( M A L A W I )

(continued)
19.
Trade and other payables Trade payables Other payables and accruals
1 341 2 585 3 926
949 2 017 2 966
1 003 2 049 3 052
690 1 670 2 360
The directors consider that the carrying amount of trade and other payables approximates their fair value. Trade and other payables include liabilities denominated in foreign currencies amounting to K 131 million (2010: K 98 million). The foreign creditors are denominated in the following currencies: South African Rand United States Dollar 114 17 131 51 47 98 90 17 107 51 45 96
20.
Amount due from holding company and fellow subsidiaries Illovo Group Marketing Services Limited Illovo Sugar Limited Amount due to holding company and fellow subsidiaries Holding company and fellow subsidiaries Dwangwa Sugar Corporation Limited
1 039 4 1 043 1 193 1 193
663 663
1 039 4 1 043 1 054 408 1 462
400 327 727
Amounts due to holding company and fellow subsidiaries are denominated in foreign currencies except for Dwangwa Sugar Corporation Limited. Amounts due to holding company and fellow subsidiaries comprise of: Illovo Sugar Limited - Procurement Illovo Group Holdings Limited Illovo Group Marketing Services Limited Illovo Sugar Limited (Share-based payments) Zambia Sugar plc Illovo Sugar Limited Illovo Projects Services Limited Sucoma Holdings Limited 821 191 117 55 9 1 193 519 11 43 107 (10) (7) 663 682 191 117 55 9 1 054 256 11 43 107 (10) (7) 400
Amounts due from holding company and fellow subsidiaries are denominated in the following currencies: European Euro South African Rand
L I M I T E D
1 039 4 1 043
1 039 4 1 043
Amounts due to holding company and fellow subsidiaries are denominated in the following currencies: European Euro South African Rand United States Dollar 135 938 120 1 193 11 662 (10) 663 191 799 64 1 054 11 399 (10) 400
( M A L A W I )
Certain senior employees of the company participate in the Illovo Sugar Limited group share-based payment scheme.During the year, the company recorded expenses of K 38.4 million (2010: K 14.7 million) relating to the cash-settled share-based payment scheme.
21.
S U G A R
Short-term borrowings Current portion of long-term borrowings
46 46
47 47
46 46
47 47
These short-term borrowings relate to the current portion of the long-term borrowings as per note 16. 22. Provisions At beginning of year Raised during the year Utilised during the year At end of year
I L L O V O
119 (3) 116
88 31 119
89 (1) 88
66 23 89
These provisions reflect the groups estimated liability to employees in respect of accumulated annual leave.
42
23. Capital commitments Contracted Approved but not contracted
50 230 280
96 97 193
48 140 188
82 69 151
Capital expenditure commitments are to be financed from internal resources and existing facilities. 24. Contingent liabilities The company has invested in a series of zero coupon bonds issued by Illovo Group Holdings Limited (IGHL), a subsidiary of Illovo Sugar Limited, in order to limit exposure to adverse exchange rate movements under long term loans with the European Investment Bank (EIB) and IGHL as detailed in note 16. There is a contingent liability of K 289 million (2010: K 466 million) at the reporting date arising from devaluation of the Malawi Kwacha since inception of these loans, which will be realised only in the event of premature termination of the underlying loan agreements. There were legal claims made against the group in the ordinary course of business, the outcome of which is uncertain. An amount of K 39.1 million (2010: K 24.3 million) represents an estimate of the cost to the group in the event that legal proceedings find the group to be liable.
25. Operating lease commitments GROUP AND COMPANY 2012 K million Land and buildings Motor vehicles Bytes Technology Group 22 182 21 225 2013 K million 22 170 15 207 2014 K million 21 158 9 188 2015 K million 21 151 4 176 2016 onwards K million 1 439 64 1 503 2011 Total K million 1 525 725 49 2 299 2010 Total K million 1 571 423 1 994
26. Related party transactions

L I M I T E D
Related party relationships exist between the company and its subsidiary and other subsidiaries of the Illovo Sugar Group. All transactions are concluded at arm's length. Year-end balances are stated in notes 16 and 20 respectively, and on the face of the statements of financial position. The annual transactions with related parties, other than management fees disclosed in note 3, are as follows: Illovo Sugar Limited Procurement The annual sales transactions with related parties are as follows: Azucarera Ebro Mitra Sugar Silver Spoon The annual interest payable with related parties is as follows: Illovo Group Holdings Limited 227 387 749 1 675 589 3 013 1 388 1 175 2 563 3 268 3 285
43
I L L O V O
S U G A R
( M A L A W I )

(continued)
GROUP GROUP AND AND COMPANY COMPANY 2011 2010 2011 2010 K million K million K million K million
27. Exchange rates and inflation The average of the year-end buying and selling rates of the foreign currencies most affecting the performance of the group is stated below, together with the increase in the National Consumer Price Index for the year, which represents an official measure of inflation. Kwacha/Euro Kwacha/Rand Kwacha/US Dollar Inflation 215.5 23.2 150.8 7.2% 204.1 20.9 150.8 8.3%
28. Basic earnings per share The calculation of the basic and diluted earnings per share attributable to the ordinary equity holders of the group is based on the following data: Earnings Earnings for the purposes of basic and diluted earnings per share Number of shares ('000s) Weighted average number of ordinary shares for the purpose of basic/diluted earnings per share Basic and diluted earnings per share (tambala) Reconciliation of headline earnings: Net profit for the year Adjusted for: Profit on sale of property, plant and equipment Gross Tax Headline earnings Headline earnings per share (tambala) 29. Dividends per share Dividend per share is calculated by dividing the total dividends paid in the year by the weighted average number of ordinary shares in issue during the year.
L I M I T E D
6 425 713 444 901 6 425 11 16 (5) 6 414 899
7 116 713 444 997 7 116 8 11 (3) 7 108 996
First interim dividend paid (for current year) Second interim dividend paid (for previous year) Final dividend paid (for previous year)
2 047 2 804 143 4 994
2 047 2 640 107 4 794 713 444 713 444 672
( M A L A W I )
Number of shares in issue ('000) Weighted average number of shares on which dividend per share is based ('000) Dividend paid per share (tambala)
713 444 713 444 700
S U G A R
A second interim and final dividend in respect of the year ended 31 March 2011 of 323 tambala (2010: 393 tambala) per share and 20 tambala (2010: 20 tambala) per share respectively, amounting to a total dividend of K 2.440 billion (2010: K 2.947 billion), was approved by the board of directors on 5 May 2011. These financial statements do not reflect this dividend payable. 30. Compensation of key management personnel The remuneration of directors and key management during the year was as follows: Short-term benefits Post-retirement benefits Other long-term benefits 728 55 103 886 591 44 234 869
I L L O V O
The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends.
44
Sugar production K million
Cane growing K million
TOTAL K million
31. Segmental analysis The primary business segments of the group are classified into sugar production and cane growing as follows: GROUP Year to 31 March 2011 Revenue Operating profit Interest revenue Interest expense Income tax expense Statement of financial position Non-current assets Property, plant and equipment Cane roots Current assets Inventories Growing cane Factory overhaul costs Trade and other receivables Holding company and fellow subsidiaries Cash and cash equivalents Current liabilities Trade and other payables Holding company and fellow subsidiaries Short-term borrowings Bank overdrafts Taxation payable Provisions Non-current liabilities Long-term borrowings Deferred taxation Post-retirement benefits Net assets value Property, plant and equipment transactions are categorised as follows: Purchases during the year Depreciation Year to 31 March 2010 Revenue Operating profit Interest revenue Interest expense Income tax expense Statement of financial position Non-current assets Property, plant and equipment Cane roots Loans receivable Current assets Inventories Growing cane Factory overhaul costs Trade and other receivables Cash and cash equivalents Current liabilities Trade and other payables Holding company and fellow subsidiaries Short-term borrowings Bank overdrafts Taxation payable Provisions Non-current liabilities Long-term borrowings Deferred taxation Post-retirement benefits Net assets value Property, plant and equipment transactions are categorised as follows: Purchases during the year Depreciation 15 040 5 663 206 (872) (1 630) 3 764 3 764 3 794 1 450 772 566 1 006 4 370 2 253 663 47 750 588 69 3 545 180 3 052 313 (357) 1 150 264 13 603 5 252 (1 511) 12 133 3 380 8 190 563 9 980 576 9 044 360 1 385 713 622 50 4 621 4 187 434 16 107 581 290 28 643 10 915 206 (872) (3 141) 15 897 7 144 8 190 563 13 774 2 026 9 044 772 926 1 006 5 755 2 966 663 47 750 1 210 119 8 166 180 7 239 747 15 750 1 731 554 16 135 5 978 112 (679) (1 624) 4 195 4 195 5 506 2 004 819 908 1 043 732 4 761 2 902 1 193 46 175 372 73 3 825 134 3 349 342 1 115 451 172 14 674 3 758 (1 130) 13 024 3 794 9 230 10 399 497 9 608 294 2 280 1 024 1 213 43 5 077 4 599 478 16 066 795 224 30 809 9 736 112 (679) (2 754) 17 219 7 989 9 230 15 905 2 501 9 608 819 1 202 1 043 732 7 041 3 926 1 193 46 175 1 585 116 8 902 134 7 948 820 17 181 1 246 396
The geographical segment of the group's business has not been prepared because all the group's operations are held within Malawi. There were no significant non-cash transactions during the current or prior years.
45
I L L O V O
S U G A R
( M A L A W I )
L I M I T E D

(continued)
32.
Financial instruments Introduction and overview The group has exposure to the following risks arising from its transactions in financial instruments: Capital Treasury Foreign currency Interest rate Credit Liquidity This note, in addition to notes 14,15,16,19 and 20, presents information about the groups exposure to each of the above risks, the groups objectives, policies and processes for identification, measurement, monitoring and controlling risk, and the groups management of capital.
32.1 Categories of financial instruments Financial assets Loans and receivables (including cash and cash equivalents) Financial liabilities At amortised cost The details of liabilities at amortised costs are as follows: Long-term borrowings Trade and other payables Holding company and fellow subsidiaries Short-term borrowings Bank overdrafts Taxation payable 134 3 926 1 193 46 175 1 585 7 059
L I M I T E D
2 977 7 059
2 495 5 816
2 796 5 592
2 152 4 390
180 2 966 663 47 750 1 210 5 816
134 3 052 1 462 46 174 724 5 592
180 2 360 727 47 750 326 4 390
32.2 Capital risk management The group manages its capital to ensure that it remains a going concern whilst maximising the returns to stakeholders through the optimization of the debt and equity balance. The capital structure of the group consists of debt (which includes short-term borrowings net of cash and cash equivalents) and equity.
( M A L A W I )
32.3 Treasury risk management A treasury risk management committee, consisting of senior executives in the group, meets periodically to analyse currency and interest rate exposures and formulate treasury management strategies in light of prevailing market conditions and current economic forecasts. This committee operates within group policies approved by the board. The group seeks to minimise the effects of these risks by using derivative financial instruments to hedge these risk exposures. The use of financial derivatives is governed by the groups policies approved by the board of directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits is reviewed by the internal auditors on a continuous basis. The group does not enter into or trade in financial instruments, including derivative financial instruments, for speculative purposes.
46
I L L O V O
S U G A R
32.4
Foreign currency risk management The group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts, where necessary. The carrying amounts of the groups unhedged and uncovered foreign currency denominated assets and monetary liabilities at the reporting date are as follows: Liabilities European Euro South African Rand United States Dollar Assets European Euro South African Rand United States Dollar 1 436 7 30 1 473 278 278 1 436 7 30 1 473 278 278 135 1 052 137 1 324 553 47 600 135 913 72 1 120 298 46 344
32.4.1 Foreign currency sensitivity analysis The group is largely exposed to the European Euro, the South African Rand and the United States Dollar. The following table details the groups sensitivity to a 10% increase and decrease in the Malawi Kwacha (K) against the relevant foreign currencies. A 10% movement is the usual sensitivity rate used when reporting foreign currency risk internally to key personnel and represents management assessment of the reasonable change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items. A positive/negative number below denotes a decrease/increase in profit before tax where the Kwacha weakens/strengthen against the relevant currency. Euro impact 2011 2010 K million K million Profit or loss 130 28 Rand impact 2011 2010 K million K million 105 56 Dollar impact 2011 2010 K million K million 11 13
32.5
Interest rate risk management Taking cognisance of the seasonality of the group's cash flow and long-term interest rate forecasts, the risk management committee positions the group's interest rate exposures according to expected movements in interest rates internationally as well as in the countries in which the group operates.
32.5.1 Interest rate sensitivity analysis The sensitivity analyses below have been determined based on the exposure to interest rates on the financial assets and liabilities at the reporting date and a 5% interest rate change taking place at the beginning of the year. If interest rates had been 500 basis points higher/lower and all other variables held constant, the groups profit before tax for the year ended 31 March 2011 would move by K 28 million (2010: K 21 million).
I L L O V O
47
S U G A R
( M A L A W I )
In managements opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the year-end exposure does not reflect the average exposure during the year. Purchases from foreign suppliers are seasonal with higher purchases towards the last quarter of the year in order to meet demand.
L I M I T E D

(continued)
32.6
Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the group. The group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The group uses other publicly available financial information and its own trading records to rate its major customers. The groups exposure and the performance of its counterparties are continuously monitored. Credit exposure is controlled by counterparty limits that are reviewed and approved by the risk management committee annually. Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable and where appropriate, credit guarantee insurance cover is purchased. The group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The group defines counterparties as having similar characteristics if they are related entities. Concentration of credit risk did not exceed 5% of gross monetary assets at any time during the year. The credit risk on liquid funds is limited because the counterparties are reputable banks. There are no off-statement financial position credit exposures. The highest credit exposure outside the bank balances was K 84 million (2010: K 115 million) in relation to domestic trade receivables.
32.7
Liquidity risk management Ultimate responsibility of liquidity risk management rests with management, which has built an appropriate liquidity risk management framework for the management of the groups short, medium and long-term funding and liquidity requirements. The group manages liquidity risk by maintaining adequate reserves and banking facilities, continuously monitoring forecast and actual cash flows, and matching of the maturity profiles of financial assets and liabilities. Included in note 15 is a listing of additional undrawn facilities that the group has access to if the need arises.
32.7.1
Liquidity and interest risk tables The following tables detail the groups remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the actual cash flows of financial liabilities based on the earliest date on which the group can be required to pay. The table below shows both interest and principal cash flows. Weighted average effective rate % 2011 Bank overdraft Borrowings 2010 Bank overdraft Borrowings 1 year K million 175 46 More than 1 year K million 134
L I M I T E D
15.0% 9.6%
( M A L A W I )
15.0% 9.6%
750 47
180
The groups non-financial assets are interest-free and their maturity period is indefinite.
48
I L L O V O
S U G A R
32.7.1 Liquidity and interest risk tables (continued) The following table details the groups expected maturity for its non-derivative financial assets. The table has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets. The inclusion of information on non-derivative financial assets is necessary in order to understand the groups liquidity risk management as the liquidity is managed on a net asset and liability basis. Weighted average effective interest rate % 1-3 months K million 1 202 732 1 934 3 months to 1 year K million 1 - 5 years K million 5+ years K million Total K million 1 202 732 1 934
31 March 2011 Trade and other receivables Cash and cash equivalents 31 March 2010 Loans receivable Trade and other receivables Cash and cash equivalents
23%
25 926 1 006 1 957
104 104
434 434
563 926 1 006 2 495
The amounts included above for variable interest rate instruments for both non-derivative financial assets and liabilities are subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period. The group has access to financing facilities as described in note 15, of which K 8.200 billion (2010: K 7.125 billion) was unused at the end of the reporting period. The group expects to meet its obligations arising from operating cash flows and proceeds of maturing financial assets.
49
I L L O V O
S U G A R
( M A L A W I )
L I M I T E D
ANALYSIS OF SHAREHOLDERS
31 MARCH 2011
Shareholders Category Individuals 1 5 001 10 001 50 001 100 001 200 001 500 001 Number %
Ordinary Shares Number held % of shares issued
5 000 10 000 50 000 100 000 200 000 500 000 and over
1 700 317 250 31 22 17 33 2 370
71.73 13.37 10.55 1.31 0.93 0.72 1.39 100.00
2 372 020 2 665 442 4 822 416 2 581 343 2 959 075 6 020 474 692 023 621 713 444 391
0.33 0.37 0.68 0.36 0.42 0.84 97.00 100.00
Banks and nominees Holding company Individuals Insurance and assurance companies Investment and trust companies Non-resident Other corporate bodies Pension and provident funds
51 1 2 149 13 48 47 30 31 2 370
2.15 0.04 90.68 0.55 2.02 1.98 1.27 1.31 100.00
22 045 284 542 084 186 27 539 957 79 637 976 11 257 490 5 847 381 3 043 718 21 988 399 713 444 391
3.09 75.98 3.86 11.16 1.58 0.82 0.43 3.08 100.00
Shareholders holding 1% or more of the total equity SUCOMA Holdings Limited Old Mutual Life Assurance Company (Malawi) Limited Savjani Ramesh Haridas Mr Press Trust First Merchant Bank Limited National Investment Trust Limited 542 084 186 62 625 602 14 821 735 11 628 794 9 578 144 8 107 611 75.98 8.78 2.08 1.63 1.34 1.14
L I M I T E D
SHAREHOLDERS DIARY
Financial / Statutory Financial year-end Annual general meeting Reports and profit statements Interim report Profit announcement for the year Annual report and financial statements Dividends First interim Second interim Final
( M A L A W I )
March August
S U G A R
October April August
Declaration Payment Declaration Payment Declaration Payment
October December May July August October
50
I L L O V O
NOTICE OF MEETING
Notice is hereby given that the 46th annual general meeting of members of the company will be held at Country Club Limbe, Limbe, Malawi on Friday, 12 August 2011 at 11h00 to transact the following business:
1.
Financial statements To receive and adopt the annual financial statements for the year ended 31 March 2011.
2.
Election of directors To re-elect Messrs G J Clark, S L G Malata and B M Stuart who retire by rotation in terms of the articles of association, and who, being eligible, offer themselves for re-election.
3. 3.1
Ordinary business To consider and, if deemed fit, to pass with or without modification the following ordinary resolutions: That unless otherwise determined by the company in general meeting, each director shall be entitled to remuneration for his/her services as such at the rate of K 825 000 per annum and that the remuneration herein determined shall be payable by the company every four months in arrears with effect from 1 April 2011.
3.2 That Deloitte be re-appointed as auditors for the March 2012 financial year and that the directors be authorised to fix their remuneration. 3.3 That a final dividend of 20 tambala per share for the year ended 31 March 2011 recommended by the directors be declared to all shareholders registered in the books of the company at close of business on 26 August 2011 and be payable on 7 October 2011.
4.
Other business To transact such other business as may be transacted at an annual general meeting of members.
51
I L L O V O
S U G A R
( M A L A W I )
By order of the Board Malawi Sugar Limited Secretaries Limbe, Malawi 5 May 2011
L I M I T E D
A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend, speak and vote in his/ her stead. The proxy need not be a member of the company. Proxy forms should be forwarded to reach the companys registered office or the office of the transfer secretaries not later than 16h00 on Friday 29 July 2011.

FORM OF PROXY FOR THE 46TH ANNUAL GENERAL MEETING
I/We (Name/s in block letters) of (Address) Number of votes being the shareholder/member of the abovenamed company and entitled to (1 share = 1 vote) do hereby appoint 1. of or failing him/her 2. of or failing him/her 3. The Chairman of the meeting as my/our proxy to attend, speak and vote for me/us and on my/our behalf at the annual general meeting of the company to be held at Country Club Limbe, Limbe, Malawi on Friday, 12 August 2011 at 11h00 and at any adjournment thereof as follows: Agenda Item Mark with X where applicable 1. 2. 3.1 3.2 3.3 Adoption of 2011 annual financial statements. Re-election of directors. Determination of directors remuneration. Re-appointment of Deloitte as auditors. Declaration of final dividend. In favour Against Abstain
Signed at Signature
on this
day of
2011
Assisted by me (where applicable) (see note 3) Full name/s of signatory/ies if signing in a representative capacity (see note 4)
Notes: 1. A member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend, speak and vote in his/her stead. A proxy need not be a member of the company. 2. If this proxy form is returned without any indication as to how the proxy should vote, the proxy will be entitled to vote or abstain from voting as he/she thinks fit. 3. A minor must be assisted by his/her guardian. 4. The authority of a person signing a proxy in a representative capacity must be attached to the proxy unless the company has already recorded that authority. 5. In order to be effective, proxy forms must reach the registered office of the company (Illovo Sugar (Malawi) Limited, Illovo House, Churchill Road, Private Bag 580, Limbe, Malawi) or the transfer secretaries (First Merchant Bank Transfer Secretaries, 2nd Floor, Livingstone Towers, Glyn Jones Road, Private Bag 122, Blantyre, Malawi) by no later than 16h00 on Friday, 29 July 2011. 6. The delivery of the duly completed proxy form shall not preclude any member or his/her duly authorised representative from attending the meeting, speaking and voting instead of such duly appointed proxy. 7. If two or more proxies attend the meeting, then that person attending the meeting whose name appears first on the proxy form, or whose name is not deleted, shall be regarded as the validly appointed proxy.

Illovo Sugar (Malawi) - Annual Report 2011

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Illovo Sugar (Malawi) - Annual Report 2011

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2011

ILLOVO SUGAR (MALAWI) LIMITED

899 630 287 323 20 2 408 11 000

996 700 287 393 20 2 208 11 000

Share performance (tambala per share)

GROUP STRUCTURE AND SHAREHOLDING

ASSOCIATED BRITISH FOODS 51.5%

ILLOVO SUGARGROUP 100%

PUBLIC AND INSTITUTIONAL INVESTORS 15%

SUCOMA HOLDINGS 76%

OLDMUTUAL LIFE ASSURANCE COMPANY 9%

ILLOVO SUGAR MALAWI 100%

DWANGWA SUGAR CORPORATION

: Standard Bank Limited

Attorneys : Chisanga and Tomoka Savjani and Company

Cane estates and sugar factories Cities Distribution centres

Deputy Chairman Illovo Sugar Limited

BCom, CIA BAcct(Hons), CA(SA) GCC(Fact-Elec&Mech), SMSAIEE

2003 2009 2009

2006 1996 2003 2005 2006 2007 2005

OPERATIONS CANE GROWING

VALUE ADDED STATEMENT

2011 K million 30 809 10 (1 888) (13 313) 15 618

2010 K million 28 643 8 (1 525) (11 297) 15 829

4 962 567 4 994 2 559 13 082 1 431 396 709 15 618

3 915 666 4 794 2 263 11 638 2 322 554 1 315 15 829

2 045 514 2 559

1 811 452 2 263

598 1 084 41 462 2 185 4 744

504 1 172 364 465 2 505 4 768

32% To employees as salaries, wages and other benefits

To lenders of capital as interest

32% To shareholders as dividends

16% To the Government as taxation

Retained profits in holding and subsidiary company

FIVE YEAR REVIEW

30 809 9 736 (567) 9 179 6 425 6 414 (4 994)

28 643 10 915 (666) 10 257 7 116 7 108 (4 794)

26 090 9 740 (596) 9 144 6 353 6 339 (3 853)

21 173 7 945 (717) 7 233 5 025 5 004 (3 603)

19 638 7 222 (345) 6 882 4 866 4 854 (2 554)

6 425 (11) 6 414

7 116 (8) 7 108

6 353 (14) 6 339

5 025 (21) 5 004

4 866 (12) 4 854

tambala tambala tambala times

900.6 899.0 629.0 1.4

997.4 996.3 700.0 1.4

890.5 888.5 625.0 1.4

704.3 701.4 490.0 1.4

682.0 680.4 475.0 1.4

39.0 39.4 17.2 2 408

48.8 49.6 16.4 2 208

52.2 54.1 16.3 1 882

49.2 53.1 11.1 1 532

58.3 58.0 20.9 1 332

Tons cane per hectare (weighted average) Nchalo Dwangwa

109 111 106

108 108 109

114 114 113

104 101 110

116 118 114