ABF completes African sugar share acquisition

By Anthony Fletcher

- Last updated on GMT

Related tags: British sugar, Africa, United kingdom

Associated British Foods' (ABF's) acquisition of Africa's largest
sugar producer underlines the fact that the European industry is
thinking globally.

The UK ingredients group is determined to remain a visible force following the introduction of new EU sugar regulations, and the announcement yesterday of the firm's £286m capture of 51 per cent of the fully diluted ordinary share capital of Illovo Sugar underlines ABF's global plans.

ABF's global strategy stems partly from changes to the EU sugar regime. This will provide free access for exports to the EU from Least Developed Countries (LDCs) from 2009. The LDC classification includes Malawi, Zambia, Tanzania and Mozambique.

Illovo is the largest cane sugar producer in Africa. It is the leading producer in South Africa, Malawi, Zambia and Swaziland and has a strong and growing presence in Tanzania and Mozambique.

It is expected that Illovo will benefit from the application of ABF subsidiary British Sugar's expertise in improvement in operational efficiencies, co-product development, marketing and product innovation.

British Sugar will provide an efficient route to market for sugar exports from Illovo.

In turn, British Sugar's Chinese cane sugar operations could benefit from Illovo's agricultural expertise.

"The combination of British Sugar and Illovo will create a powerful partnership in Africa and Europe,"​ said George Weston, ABF chief executive.

"Illovo has strong positions in its African markets, an excellent management team and the opportunity to benefit from free access for exports from its LDC operations to the EU from 2009. There is considerable scope to develop Illovo through British Sugar's market and technical expertise."

At the same time as this global expansion, British Sugar is consolidating its European operations. The division, which currently produces around half of the UK's sugar requirements, said it would close its York and Allscott beet sugar plants at the end of the year, in order to concentrate processing at the remaining four factories around the country.

Illovo is listed on the JSE Limited (JSE). In the year ended 31 March 2006 its revenue was £458m (R5.5bn), it generated a profit before taxation and material items of £54m (R651m) and headline earnings of £29m (R352m). At 31 March 2006 it had gross assets of £333m (R4.0bn).

British Sugar is a substantial and core business within ABF. It has sugar operations in the UK, Poland and China, processing around 2 million tonnes of sugar annually, and is the lowest cost beet sugar processor in the EU.

ABF, currently the fourth-largest food producer in Britain, said profit before tax and goodwill amortisation was down two per cent to £255m for the 24 weeks ended 4 March 2006. Basic earnings per share was down 16 per cent to 21.0p and profit before tax down 13 per cent to £234m.

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