Strategic overview

• Be the leading sugar and downstream products operation in Africa, an increasing global supplier and world-class organisation
• Be the lowest-cost producer in every country in which it operates and among the lowest cost producers in the world 

4% increase in sugar cane production at operations outside South Africa with record production from Zambia operation

4% decrease in group sugar production due to impact of South African drought and frost damage

Operating margin declined by 1.8% to 12.5% 

• Optimise the return on every stick of cane by adding value to its core commodity products – fibre, sugar and molasses. It will focus on its core business and develop material niche operations which add value
• Increase profits in real terms on a sustainable basis and maximise the return on capital employed through cost leadership, the use of innovative technology and the participation of its employees 

Headline earnings decline of 7.7% to 179.0 cents per share

51% increase in downstream operating profit following full year operation of Tanzania distillery and improved energy efficiency and power export in Swaziland 

• Provide a safe working environment for all employees, contractors and stakeholders 

The majority of our operations accredited with a minimum Four-star NOSA rating in 2014/15 (Sezela mill was the pilot site for the new integrated management system audit)

Both the distilleries in South Africa received Occupational Health and Safety Management System OHSAS 18000:2007 accreditation

Launch of Project Zero across all countries to increase safety awareness 

• Be the market leader, meeting and proactively anticipating customer needs 

Development and implementation of a new prepack market and route to market strategy in Tanzania and approval of a new refinery in Zambia 

• Be a moral performance-focused organisation that people are proud to work for, where they are challenged to “go the extra mile”, feel they can make a difference and know that good performance is recognised 

Employee development spend
(Rm)

• Be welcomed in the communities in which it operates because of what it does, how well it does it and be accepted as a progressive company by all communities; aligning strategies to meet changing circumstances in the various countries in which the group operates
• Be cognisant of the rural locations of the group’s operations and the impact that it has on job creation and poverty alleviation in such areas 

89% of energy requirements from renewable resources using own installed capacity

Social benefits to employees and our neighbouring communities amounted to R315 million (2014: R268 million)

• Declining EU value encourages more sugar to be delivered within our historic domestic and regional areas of operation
• Wider region provides valuable alternatives strengthened by Illovo’s dominant position within South Eastern Africa region
• Remaining volume needs to target higher-margin segments such as prepack and industrial sugars
• Quality of product, packaging and supply distinguishes us from others 

• Strengthening Illovo’s reputation for quality and service delivery by realising the SA Central Warehouse and Nchalo packing and warehouse investment benefits and replicating such initiatives in the wider group
• Increase local market intelligence in order to better understand customer and trade purchase patterns with specific focus on better meeting customers’ industrial refined sugar requirements, improving product mix (more prepack) and route to market models, eg, the Zambia refinery expansion and Tanzania prepack market development
• Advocacy initiatives to increase effectiveness of import tariffs both in domestic and regional markets and ensure full application of currently existing tariffs and duties
• Improved local knowledge of demand requirements through assessing existing customers’ needs (short and long term) with potential to identify further supply (sugar and downstream) opportunities within their larger networks
• Maximise utilisation of regional preferential access through bodies such as the Southern African Development Community (SADC)
• Move away from EU bulk sugar as greater margins are achieved when supplying EU direct consumption sugar and maximise syrup export opportunities into EU
• Roll out of “cost to serve” modelling to assist in the identification of further product mix improvements 

• Lower cost of production achieved through implementation of CI initiatives across the group
• Increased downstream activities dilute fixed cost base 

• Additional CI initiatives across the group, covering all functions and cost areas
• Development and integration of supply-chain metrics assisting in the identification of further cost reduction opportunities across various markets and functional areas 

• Introduction of non-sugar revenue improves robustness of returns
• Meeting more of our customers’ needs via a wider product range increases customer loyalty (eg, refined sugar, speciality sugar, potable alcohol, CO2)

• Downstream expansion efforts will be primarily focused on technologies Illovo is familiar with evidenced by the successful commissioning of the Kilombero distillery and the existing assessment of the viability of the Zambian potable distillery and CO² plant
• Ensure achievement of fair value on molasses sales, with opportunity to price towards import parity
• Explore all opportunities to maximise value from proprietary furfural technology with the current focus being on finalising the assessment of the Swaziland furfural project  

• Regional growth will continue ahead of global averages
• Ensuring mills are operating at their optimal levels is vital
• Establishing an understanding as to what footprint change works for Illovo which will enable efforts to be focused and accurate 

• Focus on current asset utilisation and low-capital expansions
• De-commoditising the sugar product offering through increased focus in industrial refined supply (yielding higher growth rates) and meeting increased quality requirements (reduces supply volatility through alignment with customer needs) will encourage overall sucrose growth. Further focus on strengthening retail brands will encourage consumer pull
• Leverage position as Africa’s largest producer to evaluate greenfield expansion opportunities 

• Enhance shareholder wealth by optimising long-term returns and growth of the business, as a world-class organisation
• Profitably expand the group’s sugar and cane production
• Evaluate opportunities to invest further in downstream operations, and consider footprint expansion as attractive opportunities arise 

• Reach production level of two million tons of sugar by 2017
• Improve overall time efficiency and yields via speed-profiling and lost opportunity analysis
• Establish a Sugar Centre of Excellence and Training Academy
• Extend downstream contribution to the group, possibly via new ethanol and furfural operations 

Sugar production
(million tons)

• Achieve a competitive rate of return on shareholders’ funds and increase profits on an ongoing basis in real terms
• Maintain a distribution/dividend cover of at least two times
• Manage investments and working capital to achieve efficient usage of funds employed
• Undertake research and development to maximise value added from core products 

• Embed a culture of Continuous Improvement across the business, to lead to improved working practices, increased plant optimisation and enhanced operating profit
• Bring operations at recently commissioned distillery at Kilombero to steady state
• Gearing not to exceed 40%, and interest cover to be maintained above five times 

• Provide a safe working environment for all employees, contractors and stakeholders 

• Drive to further decrease workplace injuries by focusing on behavioural performance and entrenching further rigid health and safety standards
• Continuous improvement and increased prominence of group safety, environmental and quality performance 

• Be proactive in identifying the needs of customers
• Consistently deliver quality products and services to customers 

• Optimise distribution networks to minimise cost to serve
• Move further along value chain, via improved packing capability and sales mix
• Continuous product delivery within specification and on time 

• Promote the ongoing development of all employees so that they reach their maximum level of competence and participate fully to achieve the group’s objectives
• Offer equal opportunity to all employees 

• Develop desired leadership behaviours through the values driven leadership initiative
• Continuously improve human resource productivity metrics, including number of employees per thousand tons of sugar produced
• Integrated talent management programme including succession planning at operational and management level
• Provide support and training to encourage development of local employees at all operations  

• Be socially responsible, and maintain and develop appropriate ethical, environmental and risk management standards as an integral part of the business
• Ensure the company is managed in an efficient, accountable, responsible, transparent and moral manner
• Take cognisance of all stakeholders’ interests in the group’s business
• Maximise usage of bagasse and biomass to generate electricity 

• Objective to ensure reliable, cost-efficient energy supply to our operations and strive for 100% renewable energy use
• Implement sustainability policy and framework
• Compliance with all JSE and King III requirements