ILLOVO SUGAR (MALAWI) LIMITED

EXTRACTS FROM THE AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2012
Audited 31 March 2012 MKm 36 450 12 034 24 (408) 11 650 (3 570) 8 080 (40) 8 040 (1) 40 8 079 713 444 713 444 1 132 1 132 795 Audited 31 March 2011 MKm 30 809 9 736 10 (567) 9 179 (2 754) 6 425 6 425 (11) 6 414 713 444 713 444 901 899 630 Audited 31 March 2012 MKm 10 018 1 075 (7 222) (1 026) 7 (47) 2 805 Audited 31 March 2011 MKm 8 512 (280) (7 221) (1 246) 20 563 (47) 301

(Incorporated in Malawi on 31 May 1965 under registration number 839)

FINANCIAL PERFORMANCE Group statement of comprehensive income Revenue Operating profit Dividend income Net finance cost Profit before taxation Taxation Net profit for the year Other comprehensive income Total comprehensive income Adjusted for: Net profit on sale of property, plant and equipment Other comprehensive income Headline earnings Number of shares in issue (000) Weighted average number of shares on which net profit per share is based (000) Net profit per share (tambala) Headline earnings per share (tambala) Dividend per share (tambala)

Abridged group statement of cashflows Operating profit before working capital changes Working capital requirements Interest, taxation & dividend Purchase of property, plant & equipment Disposal of property, plant & equipment Decrease in investments Borrowings repaid Net increase in cash and cash equivalents

Abridged group statement of changes in equity

Share capital & premium Balance at beginning/end of the year Retained profit Balance at beginning of the year Net profit for the year Non-distributable reserve Dividends declared Balance at end of year Capital and reserves

782

782

16 399 8 080 (40) (4 587) 19 852 20 634

14 968 6 425 (4 994) 16 399 17 181

Business segmental analysis Revenue Sugar production Cane growing

19 529 16 921 36 450

16 135 14 674 30 809

OVERVIEW Operating conditions at Dwangwa and Nchalo proved difficult during 2011/12. At Dwangwa sucrose levels and cane yields tracked the previous years results, but at Nchalo sucrose and cane yields were lower for both own estate and smallholders cane. The extremely difficult economic environment that prevailed within the country throughout the year, in particular shortages of foreign currency and fuel, impacted on the companys ability to operate at optimum levels of efficiency. However, despite the challenging conditions profit after tax for the year increased to K 8.1 billion. Total cane production from the Malawian operation, including cane from smallholders, increased marginally by 2% and totaled 2.4 million tons, from an increased area harvested and despite a drop-off at Nchalo in terms of sucrose and cane yields compared to the previous year. Both factories operated more effectively than in the previous season with a focus on detailed offcrop maintenance programmes paying dividends in terms of the achievement of operational efficiencies. Overall sugar production improved by 3% over the previous season to 286 000 tons. In terms of sales, domestic volumes accounted for almost 60% of all sugars sold during the year. Transport difficulties occasioned by the erratic supply of fuel within the country, impacted the efficient supply of sugar to both local and export customers. During the latter part of the financial year sugar stocks were very low due to uncontrolled exporting of the commodity by local traders to earn foreign currency, which resulted in limited supply to the local consumer market. Advantage was again taken of good prices on offer for the balance of available sugar in excess of local market demand and over 80 000 tons was exported to Europe and USA, with some 35 000 tons supplied into the highly priced market in Zimbabwe. These exports provided the country with much needed foreign currency and partly assisted the company in maintaining its operational requirements. Total revenue from the sale of sugar and molasses totaled K 36.5 billion which was an increase of 18% over the previous year and reflected the companys ability to optimise market opportunities in favourably priced markets. A continued focus on cost control in all areas of the business resulted in the generation of profit from operations of K 12.0 billion compared to K 9.7 billion in the previous year. However unprecedented cost increases during the year, mainly fuel and other farming and plant maintenance costs, continued to impact negatively on the business. Generally finance costs were reduced year on year with foreign currency shortages impacting on the companys ability to settle its foreign obligations timeously, resulting in the accumulation of large local currency deposits. K 1.0 billion was invested in capital projects during the year to maintain both agricultural and factory efficiencies.

Operating profit Sugar production Cane growing

7 229 4 805 12 034

5 978 3 758 9 736

Abridged group statement of financial position ASSETS Property, plant & equipment Cane roots Non-current assets Current assets Total Assets EQUITY AND LIABILITIES Capital and reserves Deferred taxation Other non-current liabilities Current liabilities Total Equity and Liabilities Depreciation Capital expenditure 8 559 10 182 18 741 22 469 41 210 7 989 9 230 17 219 15 905 33 124

MALAWI KWACHA DEVALUATION The Malawi Kwacha was officially devalued by approximately 50% against the United States Dollar on 7 May 2012. This devaluation will have a material negative impact on the companys cost base, whilst export earnings will be enhanced and partially mitigate the currency devaluation. In accordance with the companys strategy to recover the impact of cost inflation from sugar sales, a local market price increase of 23% was implemented on 8 May 2012. This devaluation is seen as part of the broader national policy planning to restore growth and stability to the Malawian economy. PROSPECTS It is envisaged that in the year ahead modest increases in the area under cane from both Dwangwa and Nchalo smallholders together with a general improvement in sucrose levels and cane yields expected across all the farming operations on both own and smallholder land should result in a marginal increase in the overall cane crop compared to last year. With a continued focus on factory maintenance programmes and the investment in various capital projects, operational plant efficiencies are expected to continue the positive trends experienced over the previous season and should result in an improved sugar make of over 300 000 tons.

20 634 8 601 87 11 888 41 210 450 1 026

17 181 7 947 954 7 042 33 124 396 1 246

Preference will again be given to sales into the domestic market which is expected to increase in total for the year. Full advantage will also again be taken wherever possible of sales into favourably priced export markets. Cost control in all aspects of the business will continue in the year ahead and further exchange rate movements will continue to influence profits. DIRECTORATE The following changes to the directorate took place during the year: G J Clark re-assumed the position of Chairman following the retirement of D G MacLeod. M H Abdool-Samad assumed the position of nonexecutive director replacing K Zarnack resultant to her resignation as Financial Director of Illovo Sugar Limited. Following the retirement of B M Stuart and E I Williams, G B Dalgleish and I P G O Mitchell were appointed to the board as a non-executive director and as an executive director respectively. W A Cowden, the Illovo Malawi Financial Director was promoted to a position within the regional office and in his stead S L Robert was appointed to this executive position on the board. DIVIDENDS An interim dividend of 300 tambala per share (2011: 287 tambala per share) was paid to shareholders on 30 December 2011. Notice is hereby given that a second interim dividend of 470 tambala per share (2011: 323 tambala per share) has been declared on the ordinary shares of the company in respect of the year ended 31 March 2012. The dividend is payable on 6 July 2012 to shareholders on the register at the close of business on 25 May 2012. The Directors will propose at the forthcoming Annual General Meeting of members, to be held on 17 August 2012, to pay a final dividend of 25 tambala per share (2011: 20 tambala per share) bringing the total dividend to 795 tambala per share (2011: 630 tambala per share). BY ORDER OF THE BOARD 11 May 2012 Malawi Sugar Limited Secretaries