Illovo Sugar Malawi Board acclaims executive management’s fortitude despite many devastating challenges faced in 2022

Lipunga addressing the shareholders during the AGM

* Effects of Cyclones Ana and Gombe were enough to test the limits of one’s resolve

* I was proud of their admirable physical and mental agility which made them cope well with the challenges as they developed

* Several of the company’s Nchalo Estate infrastructure suffered severe damage due to the effects of Cyclone Ana

* But the company rose above it in response by also assisting its sorrounding communities

By Duncan Mlanjira

At its annual general meeting (AGM) on Wednesday, chairperson of Illovo Sugar Malawi Plc Board of Directors, Jimmy Lipunga profoundly applauded the company’s executive management’s “impressive response in finding solutions for the problems that were at hand as well as their candidness when engaging with the Board”.

Lipunga said 2022 “was a year full of events requiring additional effort, which is why I would like to express my gratitude to the staff. While the devastating effects of Cyclones Ana and Gombe were enough to test the limits of one’s resolve, I was proud to witness their admirable physical and mental agility which made them cope well with the challenges as they developed.

“At other levels of our staff, it has been very gratifying to see the level of staff engagement with the business. I have also witnessed growing levels of staff commitment to the business as well as their fortitude despite the many challenges faced during the year.”

On cyclones Ana and Gombe, which the country experienced in January and February last year — that came along with heavy rains and subsequent flooding in the first quarter of the calendar year 2022 — affected operations of the company, but management swiftly responded by also assisting its neighbourhood in its endeavour to ‘Creating a Thriving Community’.

Several of the company’s Nchalo Estate sugarcane fields, irrigation infrastructure, dykes, estate roads, a number of staff houses and other non-irrigation infrastructure suffered severe damage due to the effects of Cyclone Ana.

And while efforts were being done to restore their infrastructure, Illovo Sugar also looked after its surrounding communities that were in distress by providing shelter tents and piped water to the flood victims; refurbishing a maize mill for continued processing of maize flour and setting up the continuing supply of potable drinking water to the estate villages and Nchalo trading centre.

The company also completed the temporary repair of the Nchalo/Bereu road to allow for easy movement between Nchalo and Chikwawa boma; worked in close cooperation with the Government to repair the Nchalo/Chikwawa road and with ESCOM to restore power.

Thus, Lipunga making special mention of the executive management’s fortitude in solving these devastating challenges of mother nature during the AGM, held at Ryalls Hotel in Blantyre as well as virtual.

The shareholders were engaged to officially approve the resolution the Board made to declare a final dividend of K3.9 billion — representing K5.44 per share for the year ended August 31, 2022.

The company had already paid out an interim dividend of K4.0 billion (representing K5.56 per share) in June 2022 in addition to a second interim dividend of K7.1 billion representing K10 per share — represent a total dividend for the year of K14.9 billion at K21 per share against the prior year full dividend of K18 per share, an increase of over 16%.

On the company’s overall performance, Lipunga appraised the shareholders that it achieved 14% growth in turnover to K186.6 billion; 24% growth in operating profit to K39.5 billion and 31% growth in profit before tax to K38.4 billion over the prior year.

“The group experienced significant growth in domestic market and sold 213,550 tonnes from 172,578 tonnes in the prior year,” he continued. “The group contributed to the Malawi fiscus by paying and collected tax on behalf of government amounting to K28.2 billion (K16.8 billion in 2021).

“The group also managed to fully repay debt and achieve a net cash position in the year despite the challenges it faced,” said Lipunga, while also appreciating that through the marketing promotions the company managed — of Iponyeleninso Kwakuya, Every-Day Chef and other sales activation initiatives — contributed to further growth in domestic sales volumes.

This was despite all the challenges the country faced that included depreciation of the Malawi kwacha and its devaluation by 25% against the US$ and other major trading currencies in May.

“This increased our operating costs significantly, most notable being the prices for fertilizer and chemicals,” Lipunga said. “The dynamics on currency price arbitrage at the borders between Malawi and its neighbouring countries resulted in illegal outflow of sugar into those countries, which further contributed to pressure on the stocks allocated for domestic sales.

“We voluntarily suspended sugar exports to ensure adequate sugar availability in Malawi, but for long term we remain committed to export sugar to the deep water and regional markets and therefore contribute to the country’s foreign currency generation.

Going forward, also in cognizance of the effects of CoVID-19 and the war in Ukraine on the global economy, Lipunga said the huge decline in the pandemic’s infections across the world, the company “accelerated its efforts to ensure normal operations and achieve further efficiency and growth in business”.

“Revenue and profit growth, cost reduction, and operational excellence remain primary focus areas for the business. The endeavour to maintain trusted quality in all product formats and pack sizes and achievement of ultimate customer satisfaction continue to drive the passion that underlies and sustains the Illovo brand promise.”

On future priorities, Lipunga said the Russian invasion of Ukraine “has fundamentally changed the geopolitical situation and caused extensive consequences for the global economy — and thus, the Group expects continued impacts on global supply chains, very high energy price levels, high inflation and weaker growth in the global economy”.

“Nonetheless we are positioned well to manage the market dynamics and we expect to deliver a resilient financial performance in the year ahead. Our long-term energy strategy, that reduces our reliance on ESCOM and provides opportunity to generate additional revenue, will be a game changer in addition to building capability across our people, processes, and technology.”

In October last year, Illovo unveiled its plans to utilise the massive irrigation project being undertaken through the Shire Valley Transformation Programme when President Lazarus Chakwera visited the site where the company is set to tap from the largest irrigation canal project in the southern Africa.

The President first visited the project at Kapichira in Chikwawa and thereafter, he was appraised of investment plans that Illovo has prepared — that include using drip irrigation as opposed to the current sprinkler process that needs lots of electricity power.

Managing Director, Lekani Katandula appraised the President that through the use of the canal, Illovo Sugar is set to save on costs of power from ESCOM’s grid, saying the surplus power on ESCOM grid would be fully utilized for rest of the Lower Shire communities.

Chakwera was immensely impressed with the investment plans by Illovo Sugar Malawi, whose participation would also help sustain the irrigation programme for years to come.

He applauded Illovo’s investment into the irrigation programme, which he appealed to other investors to emulate in establishing mega farms.

Lipunga summed it up by saying: “We will intensify our engagement with the government, employees and other stakeholders and deliver on our sustainable environmental, social and governance commitments.

“It is expected that better weather patterns and a return to normal power generation by the Electricity Generation Company Limited (EGENCO) will improve the output from the agricultural operations, and therefore positively impact production efficiency and factory throughput.

“More efforts on drip irrigation and other elements of the agricultural recovery plan, continued grower support, a proactive approach at plant maintenance and efficient production initiatives should result in even further growth in the group’s financial results.

“The group will continue pursuing various initiatives in commercial and logistical operations, that are expected to contribute to better delivery of excellent quality product pack sizes at affordable prices to the ultimate consumer.

“Efforts at growth will also be engaged further in the export markets to assist us counter the impact on the business of the scarcity of foreign currency, and further ensure maximisation of the value from every ton of sugar sold.

“Depreciating exchange rates for the Malawi kwacha against major trading currencies; increasing inflation and interest rates; the scarcity of foreign currency and fuel, continue to militate against the delivery of cost optimisation efforts for the business.

“The group will, therefore, continue to actively engage significant effort at cost reduction, improvement of operational efficiency, export revenue enhancement, and domestic market growth to drive delivery of good results for the business and all stakeholders into the foreseeable future.”