Johannesburg, Nov 19 - South Africa's Illovo Sugar expects to double exports into Europe over the next 4-5 years due to quota and tariff-free access into the EU and a vast output expansion plan, its managing director said on Thursday.
Associated British Foods unit Illovo, Africa's biggest producer of the sweetener, is set to benefit from a new European Union sugar trade regime that allows producers in developing countries to export into the EU for free from Oct. 1.
The company has also embarked on an expansion programme -- boosted by a 3 billion rand ($404.3 million) rights issue -- in its operations in Zambia, Swaziland, Mozambique and Mali that is set to increase output across the group by about 200,000 tonnes to round 1.78 million tonnes this year.
"The bulk of our expansions, other than Mali, will generally send the surplus sugar to Europe," Graham Clark told Reuters in an interview after the company released its interim results.
"Currently we're exporting somewhere between 150-160,000 tonnes, and we'd be probably looking to double that in the next 4-5 years."
Clark said Illovo expected global sugar prices to stay at current highs for "the next couple" of years, aided by a global deficit of the sweetener due lower output in major markets.
"Our own house view is that we're probably going to see these firmer prices for the next couple of years and then prices will reduce beyond that," he said.
"We see the 20 cents per pound level for the next couple years, and then three to five years out we see the price coming off to the 15-16 cents per pound level.
Illovo reported a 3 percent fall in first-half headline earnings per share on Thursday and said it expected full-year headline EPS to fall by between 10-20 percent compared with last year, due to the impact of its rights offer.
It said headline EPS dropped to 106.5 cents, weighed down by a higher effective tax rate.
Headline earnings are the main profit gauge in South Africa and strip certain one-off, financial and non-trading items.
First-half cash operating profit rose by 39 percent to 862.3 million rand and revenue rose 27 percent to 8.6 billion rand.
Illovo's shares were down 0.81 percent at 31.74 rand at 0930 GMT, lagging a 0.38 percent weaker JSE All Share index .
The firm declared an interim dividend of 32 cents per share.