INTERIM RESULTS for the six months ended 30 September 2015 GROUP - - PowerPoint PPT Presentation

for the six months ended 30 September 2015

INTERIM RESULTS

Gavin Dalgleish, Managing Director

GROUP OVERVIEW

3 Interim Results 30 September 2015

Operating profit decreased by 37% Headline earnings per share down 58% – full year remains between 25% and 45% below the prior year Higher interest rates and working capital funding Closure of USA furfural-based nematicide business Downstream earnings up 15% to R160m – highlighting benefit of diversification strategy Continuous improvement culture embedded further Downstream operating profit up R68m to R130m Sugar production down 10% to 1.16 million tons – regional drought conditions, particularly South Africa Early season flood damage impacts Mozambique production Good factory performances across the Group with an improvement at Nchalo Distillery in Tanzania operated consistently above design capacity, producing a high quality product Strong ethanol production and electricity co- generation Domestic sales growth in Zambia and Swaziland, together with increased regional sales Improved market conditions in Tanzania Reduced demand and below inflationary price increases in Malawi – affordability concerns Sustained pressure on export sugar prices – weaker Euro and world sugar prices reach seven year lows Continued sales mix improvement via diversion of volumes sales from EU into regional

SALIENT FEATURES – SIX MONTHS TO SEPTEMBER 2015

Financial Markets Physicals

Zambia refinery expansion and product alignment project on schedule for commissioning in 2016/17 Two further downstream investments under review – Zambia distillery and Swaziland furfural development Structural cost reduction to bring meaningful benefits to the group in the short to medium-term Long-term African sugar fundamentals remain strong with improved medium-term prospects

Growth

4 Interim Results 30 September 2015 Variance + 13 063 + 14 933

• 9 526
• 10 101

+ 10 794

• 142 747
• 123 584

Cane + 1 226 + 11 321

• 8 134
• 5 596

+ 15 523

• 98 122
• 83 782

Sucrose + 5 535 + 1 818

• 2 732
• 551
• 6 440
• 37 891
• 40 261

Recovery + 6 302 + 1 794 + 1 340

• 3 954

+ 1 711

• 6 734

+ 459

Group sugar production decreased by 123 584 tons

Extended drought conditions Dec 14 to Jan 15 floods cause area and yields loss Good harvest, higher sucrose and improved factory performance Improved Nchalo performance offset by low rainfall and late start-up Late start-up; dry weather and aphid infestation affect cane yields/quality Improved factory performance; non- repeat of strike

• ffsets low rainfall

SUGAR PRODUCTION

1 284 174 1 160 590 9 526 10 101 142 747 13 063 14 933 10 794

1 000 000 1 100 000 1 200 000 1 300 000 1 400 000 1 500 000 September 2014 Tanzania Malawi Zambia Mozambique Swaziland South Africa September 2015 Tons Sugar (tons)

5 Interim Results 30 September 2015

REGIONAL DROUGHT CONDITIONS

Lake Kariba (main basin) from Wild Heritage Resort August 2014 August 2015 Rainfall at Sezela mill (98 seasons)

14/15 season rainfall as poor as 03/04 and 10/11

• Prolonged dry period across Southern Africa
• Severe drought in South Africa impacts non-

irrigated cane supply

• Irrigation mitigates c.60% of rainfall risk –

reliance on summer rainfall at irrigated estates

• Limited availability of hydro electricity supply in

Zambia and Malawi reduces ability to irrigate

• Stressed cane more susceptible to pest and

disease infestation (e.g. yellow aphids)

Above Normal Rainfall (January to March) Below Normal Rainfall (January to March) Rainfall Forecast

Mohammed Abdool-Samad, Group Finance Director

FINANCIAL OVERVIEW

7 Interim Results 30 September 2015

GROUP KEY FINANCIAL METRICS

R’ million Sept 2014 6 months Sept 2015 6 months Revenue 5 932 5 489 Operating profit 1 393 881 Cash operating profit 1 529 1 236 Net financing costs 142 228 Profit before tax 1 264 450 Headline earnings 788 331 Analysis Sept 2014 6 months Sept 2015 6 months Operating margin (%) 23.5 16.1 Interest cover (times) 9.8 3.9 Effective tax rate (%) 25.6 33.0 EPS (cents) 171.3 30.8 HEPS (cents) 171.1 71.7 Cash conversion ratio (%) 109.8 140.2 Debt : Equity 41.2 82.0 Gearing (%) 29.2 45.1

881 1 393 1,500 1,000 500

• 37%

Sept 2015 6 months Sept 2014 6 months 71.7 171.1 50 100 150 200

• 58%

Sept 2015 6 months Sept 2014 6 months

Operating Profit (R’m) Headline Earnings Per Share (cents)

8 Interim Results 30 September 2015

* used to translate the Group’s earnings

GROUP EXCHANGE RATES

Weaker Zambia Kwacha was the main driver of the overall R36 million loss on translation

Translation rates* (Average) Sept 2014 6 months Sept 2015 6 months Change (%) Translation Profit Impact Zambia Kwacha / Rand 0.589 0.629 7%  Malawi Kwacha / Rand 37.26 38.14 2%  Tanzania Shilling / Rand 156.04 166.62 7%  Mozambique Metical / Rand 2.93 3.07 5%  Rand / US Dollar 10.63 12.51 18% 

9 Interim Results 30 September 2015

GROUP EXCHANGE RATES

Sharp devaluation of Zambia Kwacha

• Low copper prices and slowdown of Chinese

economy trigger unprecedented devaluation – 59% between April and September

• Central bank intervention increases interest rates
• Inflationary pressure on costs and FX exposure
• Benefit for uncovered export revenues

Malawi Kwacha stronger than expected

12.33 4.5 6.5 8.5 10.5 12.5 14.5 Apr 13 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15 ZMK:USD 300 375 450 525 600 Apr 13 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15 MWK:USD MWK:USD (Expected Trend)

• Malawi obtained US$250m loan that strengthened

currency beyond levels suggested by historic trends

• Negative impact on informal regional trade flows –

inflow of sugar to compete against local production

• Devaluation of 33% since July 2015 as USD

liquidity reduces to fund first loan repayment of US$70m due in October 2015

10 Interim Results 30 September 2015

GROUP EXCHANGE RATES

Weaker Rand benefits downstream exports

• Rand weakens on expectation that the US Federal

Reserve will increase interest rates leading to an

• utflow of foreign capital from emerging markets
• Benefit for export revenue from downstream
• perations in South Africa and sugar in Swaziland

Weaker Euro impacts exports realisations

• Eurozone economy remains fragile – high levels of

government debt; bailout of Greece and slowdown

• f growth in economies trading with China
• Currency supported by monetary stimulus from

central bank

• Lower realisations from EU sugar exports

7.5 8.5 9.5 10.5 11.5 12.5 13.5 14.5 Apr 13 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15 ZAR:USD 1.00 1.10 1.20 1.30 1.40 1.50 Apr 13 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15 EUR:USD

11 Interim Results 30 September 2015

OPERATING PROFIT BY SEGMENT

Business segment

Sept 2014 6 months R’m Sept 2015 6 months R’m Var R’m Operating Profit 1 393 881  512  Sugar 692 437  255  Cane 571 285  286  Downstream & Co-gen 130 159  29

Geographic segment

Sept 2014 6 months R’m Sept 2015 6 months R’m

Var R’m

Operating Profit 1 393 881  512  Malawi 560 240  320  Mozambique 110 35  75  South Africa 170 86  84  Swaziland 124 210  86  Tanzania (9) 106  115  Zambia 438 204  234

50% 9% 41% 2014 Business segment 41% 8% 12% 9%

• 1%

31% 2014 Geographic segment 50% 18% 32% 2015 Business segment 27% 4% 10% 24% 12% 23% 2015 Geographic segment

12 Interim Results 30 September 2015

1 393 881

172 361 229 205 62 36 427 94 32

500 900 1 300 1 700 September 2014 Volume Price (Excl. Malawi) Costs (Excl. Malawi) Malawi Price Malawi Costs Fair Value Movements Downstream and Co-Gen Group Operations Translation September 2015

GROUP OPERATING PROFIT BRIDGE

+ Year on year domestic price increase, albeit below inflation due to weak economy

• Lower export realisations with declining EU

and regional prices and weak Euro

• Stronger than expected Malawi Kwacha
• High underlying inflation (24%)
• Treatment of yellow aphid infestation
• Implementation of performance improvement

plan at Nchalo

R’ millions

• Impact of weaker

Malawian domestic market & stronger Kwacha + Inflationary increases in domestic markets + Diversion of volumes from EU to the region

• Low world and EU sugar prices
• Weaker Euro

+ Weaker domestic currencies

• Inflationary increases
• Impact of weaker Zambia Kwacha on foreign-

denominated costs + Cost savings from Continuous Improvement program

• Production decrease: 123 584 tons
• Sales decrease: 99 946 tons

+ Tanzanian distillery operating consistently above design capacity + Furfural production efficiencies + Rand weakness (export proceeds) + Additional power exports from Swaziland

13 Interim Results 30 September 2015

142 228 16 3 21 3 40 40 43

50 100 150 200 250

September 2014 South Africa Malawi Zambia Swaziland Tanzania Mozambique Group Translation September 2015 R’ millions

FINANCE COST ANALYSIS

• Lower domestic sales and below

inflation pricing due to weak economy impacting cashflow

• Higher interest rate environment

(average T-bill increased from 9.4% in 2014 to 14.4% in 2015 for 6 months)

• Deferred EU sales and regional sales

+ Lower interest rate environment + Improved domestic sales and prices − Impact of weaker Zambian Kwacha and Malawian Kwacha on intercompany financing transactions within the Group + Weaker Zambia Kwacha + Stronger US Dollar

14 Interim Results 30 September 2015

R’ million Sept 2014 6 months Sept 2015 6 months Opening net debt (2 086) (2 731) Operating cash flows (1 270) (1 838) Cash operating profit 1 529 1 236 Working capital (2 137) (2 486) Inventory (2 426) (3 074) Receivables (316) (356) Payables 605 944 Net financing costs (142) (228) Taxation paid (160) (90) Shareholder distributions (360) (270) Investment cash flows (280) (634) Expansion capital (120) (484) Replacement capital (137) (166) Other movements (23) 16 Other financing activities 196 (5) Issue of shares 1

• Translation gain/(loss)

(89) 166 Closing net debt (3 528) (5 042)

(5 042) +43% Sept 2015 Sept 2014 (3 528)

NET DEBT RECONCILIATION

Net Debt Balances (R’ million) Gearing: 29% Gearing: 45%

• Product alignment & refinery project (Zambia)
• Sezela coal & energy and training academy (South Africa)
• St Philips cane development (Swaziland)

Due to the high net debt levels at Interim, driven by the adverse commercial environment and weather conditions, an interim capital distribution has not been declared. This will be reviewed at year-end Increase in stock in Malawi & Zambia mainly due to change in timing

• f domestic and export

sales respectively

Sources The following market information has been compiled using data from the following sources: AB Sugar; Czarnikow; World Bank; LMC; FO Licht; Business Monitor International; GapMinder; World Bank; Index of African Governance; Food and Agricultural Organization of the United Nations; International Sugar Organisation; EU Commission; as well as internally generated information.

MARKET OVERVIEW

16 Interim Results 30 September 2015

WORLD SUGAR MARKETS

World sugar price reached seven year lows during August 2015

• Major risk to pricing is the uncertainty of Brazil’s economic recovery
• Brazilian Real impacted as international capital flows out of emerging markets into safe havens
• Downgrade in Brazil’s credit rating and political unrest saw the Real hit all-time record lows against US$
• Brazil’s central bank is using US$ reserves to strengthen currency
• Brazilian ethanol prices rally as supply is expected to tighten in off-season and government raises gasoline

prices by 6%, supporting higher world sugar prices

• While fundamentals supportive of higher pricing, lower forwards indicate increased speculation in the market
• No. 11 world raw sugar prices

1.8 2.3 2.8 3.3 3.8 4.3 10 11 12 13 14 15 16 17 18 19 20 BRL:USD FX Rate US c/lb

• No. 11 World Price

BRL:USD

17 Interim Results 30 September 2015

Economic fundamentals support an increase in the world price over medium- to long-term

• Continued demand growth of 2% per annum
• Various mill closures occurring and expected due to high debt levels (Brazil and India); while construction of

new capacity is not viable at current prices without significant subsidies

• World sugar balance is expected to be in deficit during 15/16 due to:
• Brazil’s preference for ethanol production to meet strong demand and generate “quick” cash flow
• Concerns that weather will adversely affect crops in key producers (e.g. SE Asia and Southern Africa)
• Substantial global stocks remain after 5 years of surpluses; history suggests a positive price response is

triggered when stock-to-use ratio approaches 40% (currently 47%)

30% 35% 40% 45% 50% 55% 40 50 60 70 80 90 100 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16E Global Stocks (m tons) Stock-to-Use Ratio (%)

WORLD SUGAR MARKETS

3.70

• 4.27
• 13
• 8
• 3

3 8 13

12c/lb 18c/lb 22c/lb 27c/lb 22c/lb 17c/lb 16c/lb 14c/lb

Global production less consumption (m tons) Change in global sugar stocks

World price:

18 Interim Results 30 September 2015

EUROPEAN SUGAR MARKETS

EU prices remain at import parity but value is further reduced in US$ terms

• While EU market prices levelled off during the period, the significant weakening of Euro continued to reduce

the value derived from EU exports

• Competition from major European producers continues ahead of the September 2017 quota reform
• Lower production and stock levels prior to 2017 reform is expected to increase prices temporarily
• Post-reform, Europe will move to a net exporter and sugar prices are expected to drop to export parity
• Imports into Europe expected to continue but benefits from the concessions made to least developed

countries will reduce

1.38 1.08 1.11 1.05 1.10 1.15 1.20 1.25 1.30 1.35 1.40 USD:EUR

Reported EU prices USD:EUR exchange rate

250 350 450 550 650 750 850

EU Gate Refined (€/ton) Import Parity (€/ton) Export Parity (€/ton) EU Gate Refined ($/ton)

19 Interim Results 30 September 2015

AFRICAN SUGAR MARKETS

Sugar consumption per capita

Bubble size = 2014 sugar consumption ('000 tons) Forecast growth rates: 0%-2% 2%-3% 3%-4% 4%-5% 5%-6%

MAURITIUS

1,421 20 3,332 21 32 312 177 23 184 105 30 550 357 205 338 104 204 99 16 495 33 282 939 176 146 179 1,343 49 67 75 35 183 124 87 175 85 270 357 1,330 92 450 30 52 16 205 1,272 228 2,167 55 428

Sugar consumption and growth rates by country

Forecast growth in total sugar consumption per annum from 2014- 2021 based on population growth & GDP per capita growth

Sustained growth in sugar consumption of 3.2% p.a. driven by both population and economic growth

• Sub-Saharan Africa expected to continue recent trends with high levels of population growth, urbanisation

and improvements in life expectancy

• GDP per capita growth forecast to accelerate with a rapidly expanding middle class

38.5 17.6 13.5 26.4 15 10.2 12.1 33.2 26.5 42.3 8.3 7.7 11.5 22.5 5.6 39.9 3.2 Europe Total Africa Sub-Saharan Africa Zimbabwe Zambia Uganda Tanzania Swaziland Sudan South Africa Nigeria Mozambique Malawi Kenya Ethiopia Egypt Congo (DRC) Country / region Sugar per capita (kg)

20 Interim Results 30 September 2015

AFRICAN SUGAR MARKETS

$0 $200 $400 $600 $800

Mar 2014 Mar 2015 Sep 2015 (YTD)

US$ / ton (ex-mill)

Regional & Domestic EU Bulk Raw

Regional prices under pressure with competition from low cost world imports and regional producers

• Regional markets remain a valuable alternative to the EU market with pricing above world market levels
• Supplying quality packaged product will be necessary to secure & grow market share
• Preferential access within Customs Areas and Trade Blocs provide benefit where trade protection is effective
• Bilateral between Zambia and DRC agreed with implementation expected in April 2016

Country with Illovo production Countries which share at least one Customs Area or Trade Bloc with Illovo’s production countries Customs Area & Trade Blocs included:

• COMESA (Common Market for

Eastern and Southern Africa)

• EAC (East African Community)
• SADC (Southern African

Development Community)

• SACU (Southern African

Customs Union)

Proportional pricing of markets Regional markets with preferential access

21 Interim Results 30 September 2015

^ Only 10 countries for which data was available: Algeria, Botswana, Cameroon, Egypt, Ghana, Morocco, Mozambique, Nigeria, South Africa and Tanzania ‘m litres

Industrial sugar growth expected to outpace growth in direct consumer purchases of sugar

• As GDP per capita rises, demand for high-sugar processed foods continues rapid growth long after the

demand for direct consumption sugar has levelled off

• Based on forecast GDP and population growth in Sub-Saharan Africa, this is expected to equate to 5%

growth p.a. over the next decade (which aligns with specific forecasts for carbonated soft drinks)

• Industrial production expected to grow faster than consumption of processed foods, as local manufacture

displaces imports

Household expenditure in developing countries

$0 $20 $40 $60 $80 $100 $0 $2 000 $4 000 $6 000 $8 000 $10 000

Expenditure per Capita GDP per Capita Sugar

(direct consumption)

High-sugar processed foods * 12,000 10,000 8,000 6,000 4,000 2,000 5.7% 6.1% 18 17 16 15 14 13 12 11 10 09 08 07 06

Sub-Saharan Africa 2013 average $1,150 Sub-Saharan Africa forecast for 2021 average $1,380

* Combination of the following food categories: Confectionery, Chocolate and Ice Cream; Soft Drinks, Mineral Waters & Juices; and Other Bakery Products

AFRICAN SUGAR MARKETS

Carbonated soft drink consumption

Consumption in 10 countries^ comprising 46% of Africa’s population:

Zambia = $1 722

22 Interim Results 30 September 2015 20% GLA

Supply 20/21 15/16

11% Kenya

Supply 20/21 15/16

16% Tanzania

Supply 20/21 15/16

31% Malawi

Supply 20/21 15/16

33% Zambia

Supply 20/21 15/16

13% Zimbabwe

Supply 20/21 15/16

10% South Africa

Supply 20/21 15/16

75% Mozambique

Supply 20/21 15/16

Industrial demand – current & forecast demand & supply (‘000t)

Refined capacity under construction

REFINED INDUSTRIAL SALES INITIATIVES

Refined sugar shortfall in the region will attract world sugar imports

• Refinery expansion in Zambia and fully utilise

existing refined capacity in Malawi

• Maximise local production’s short supply chain
• Build strategic partnerships beyond sugar with

key industrial players

• Opportunity to transfer refined sugar quality

capabilities from South Africa to other operations

Regional Refined Deficit Market Penetration

50 100 150 200

20/21 Competitor Mvt Illovo Mvt 15/16 ‘000 tons Competitors Illovo Illovo refined share + 13%

23 Interim Results 30 September 2015

Sept 2014 6 months Sept 2015 6 months Variance Sales Volumes (‘000 tons) 798 698  100 464

58%

427

61%

 37 58

7%

84

12%

 26 211

26%

144

21%

 67 4

1%

19

3%

 15 61

8%

24

3%

 37

2015

2014

Regional World USA EU Domestic

SUGAR SALES BY MARKET

Domestic

• Strong performance in Zambia and Swaziland increases volumes, with stable performance in Tanzania
• Tough trading conditions decrease volumes in Malawi (partially phasing) and Mozambique
• Lower sales in South Africa due to changes in industry stock levels

Regional

• Good progress was made on initiatives to grow sales into regional markets
• Low world sugar prices put pressure on regional sales prices

EU

• Sales of bulk sugar decrease as EU-designated sugar is redirected to more profitable markets
• Demand for premium speciality sugars continues to grow

World

• Direct exposure to the world market decreases from 8% to 3% largely due to the lower South African

production

Marketing Strategy & Commercial Insights

MARKET FOCUS

25 Interim Results 30 September 2015

Market focus

Efficiency Improvement

Diversify profits Position for change Branding Supply chain alignment Packaging Advocacy Refined sales focus Warehousing

Values Core capabilities Governance Purpose

Market focus:

• Reduce bulk

exports to EU

• Need to grow

domestic markets – increased penetration and driving up consumption is vital

• Wider region

provides valuable alternatives

• Target higher

margin segments

• Quality of product,

packaging and supply distinguishes Illovo from the competition

STRATEGIC IMPERATIVE #1 – MARKET FOCUS

26 Interim Results 30 September 2015

South Africa Swaziland Zambia Mozambique Tanzania

Initiatives underway to strengthen domestic market positions

• Comprehensive market insight into our

customers’ & consumers’ buying considerations

• Substantial progress in Tanzania pre-packet

market development, brand awareness & route to market optimisation

• Development of Malawi domestic growth

strategy to address affordability concerns, route to market inefficiencies and illegal imports

• Supply Chain Alignment project to establish

customer centric key performance indicators

• Market protection in South Africa & Tanzania

proving to be effective; successful lobbying for a revised tariff in Mozambique

DIRECT CONSUMPTION SALES INITIATIVES

Domestic market share in countries of operation

Malawi

27 Interim Results 30 September 2015

A DIFFERENT PERSPECTIVE – MALAWI

SHARE OF WORKING POOR

89%

BELOW NATIONAL POVERTY LINE

50%

LIVING IN RURAL AREAS

85%

MINIMUM WAGE IN LOCAL CURRENCY

K16,000

Sources: World Bank (2014), IMF (2014) and UN Statistics Division (2014). GNI 2011. Malawi Census: Third Integrated Household Survey IHS3

28 Interim Results 30 September 2015

BUILDING UNDERSTANDING FROM THE CONSUMER BACK

Acronyms RTM – Route To Market

Determining optimum intervention in each local market to capture value at key points in the chain

• Opportunities for increased domestic volumes and product mix / value improvements
• Focusing on the most valuable consumer segments – higher propensity for brand loyalty & usage
• Building a genuine consumer brand in our key domestic markets – greater barrier to switching

29 Interim Results 30 September 2015

A CASE STUDY IN TANZANIA

YES, QUALITY IS IMPORTANT TO ME

92%

YES, I THINK ALL SUGAR IS THE SAME

22%

YES, I PREFER TO PURCHASE TANZANIAN

91%

YES, I SHOP FOR FOOD STAPLES DAILY

78%

Source: Kilombero Sugar Company Qualitative & Quantitative Research September 2014

“I might not have a lot of money but I still want to give my family the best” “Quality to me means sweetness, colour, hygiene and pack weight” “Ujaama” Nyere’s country first philosophy drives pride in local origin “I only get paid daily so I have to shop daily” “Transport is an issue“

• All communications in Kiswahili
• Expanded pre-pack distribution & NEW 500g pack

size to a TZS price point

• Branded Point-Of-Sale at stores highlighting “Choose

Tanzanian” and “Genuine Sweetness”

• Radio campaign & PR highlighting “Trust in 1kg and

500g” from Kilombero Sugar Company Substantial progress in pre-packet market development, brand awareness & route to market optimisation

BRANDS = CONFIDENCE & TRUST EFFICACY & VALUE FOR MONEY GENUINELY TANZANIAN VERSUS MPORTS PACK SIZE, PORTABILITY & ABSOLUTE PRICE

30 Interim Results 30 September 2015

CONCLUSION

Difficult current year

• Headline earnings per share for the year ended 31 March 2016 expected to be between 25% and

45% below the prior year, compared to the 58% YOY decline for the six months to September 2015 mainly due to:

• Phasing of Malawi’s domestic sales being later than in the prior year, despite the continuation of

challenging market conditions

• Strong operational and financial performance from downstream businesses to continue
• Finance costs will benefit from higher regional sales volumes and export price realisations
• No interim capital distribution declared. Decision on final distribution to be made in May 2016

Improved medium-term prospects expected

• Recovery in sugar production expected in 2016/17 - dependent on normal rainfall conditions
• Improvement in world sugar price supported by shift of global sugar balance to a deficit
• Continued progress to improve sales mix through growth of domestic markets and diversion of

volumes from EU into region

• Further enabled by completion of Product Alignment and Refinery Expansion project in Zambia

in July 2016

• Structural cost reduction programmes will continue to build on the good results achieved by the

group-wide continuous improvement programme

APPENDICES

32 Interim Results 30 September 2015 (7) 110 43 10 64 77 27 2

(10) 40 90 140 Sept 14 Interim Volume Price Cost Fair Value Down- stream Trans- lation Sept 15 Interim

Tanzania

111 39 51 21 6 3 9

50 100 150 Sept 14 Interim Volume Price Cost Fair Value Trans- lation Sept 15 Interim

Mozambique

126 227 22 9 58 40 16

100 200 300 Sept 14 Interim Volume Price Cost Fair Value Co- gen Sept 15 Interim

Swaziland

443 221 47 266 38 15 144

200 400 600 800 Sept 14 Interim Volume Price Cost Fair Value Trans- lation Sept 15 Interim

Zambia

562 242 229 202 8 25 94

200 400 600 800 Sept 14 Interim Volume Price Cost Fair Value Trans- lation Sept 15 Interim

Malawi

174 120 172 9 26 139 14

100 200 300 Sept 14 Interim Volume Price Cost Fair Value Down- stream Sept 15 Interim

South Africa

COUNTRY OPERATING PROFIT BRIDGES

# Excludes the allocation of Group operations # # # # # # Affordability constraints limit price increases, lower domestic volumes & high cost inflation December floods affect yields, low-cost imported sugar impacts domestic market Extended drought affects cane crop, partially

• ffset by price increases

Higher pricing in regional markets, strong co-generation results Good factory performance, improved domestic market conditions Dry conditions reduce production, above inflationary cost increases; FX losses following devaluation of Kwacha

33 Interim Results 30 September 2015

CLOSURE OF AGRIGUARD

Board decision to close Agriguard, the furfural- based nematicide business in the USA

• Process to obtain EPA pre-plant food registration

continuing to prove more timely and expensive than anticipated

• Attempts to find a suitable partner to share registration

and commercialisation efforts were unsuccessful

• Existing Agriguard turf sales in the USA insufficient to

continue as standalone business

• Loss on closure of business represents the write-off of

accumulated costs incurred in the development and registration of the nematicide

• Related operations in South Africa will continue as

“Crop Guard” business is cash generative R’ million Sept 2014 6 months Sept 2015 6 months Revenue 1 3 Operating loss (9) (1) Financing costs (1) (1) Loss on closure of business

• (216)

Taxation 3 (23) Loss for the period (7) (241) Attributable to: Shareholders of Illovo Sugar Limited (4) (201) Non-controlling interest (3) (40) Agriguard financial information

34 Interim Results 30 September 2015

R’ million Sept 2014 6 months Sept 2015 6 months Operating profit 1 393 881 Material items 1 (201) Operating income 1 394 680 Add back: Depreciation & amortisation 207 222 Change in fair value of cane roots (111) (123) Change in fair value of growing cane 37 254 Loss on closure of business

• 216

Other 2 (13) Cash operating profit 1 529 1 236 Cash conversion ratio 110% 140%

CASH GENERATION AND PROFITABILITY

Sustaining the strong conversion of operating profit into cash remains a key focus of the group

35 Interim Results 30 September 2015

FAIR VALUE MOVEMENTS

Fair value of growing cane negatively impacted by weaker Malawian domestic market

Growing cane Sept 2014 6 months R’m Sept 2015 6 months R’m Change R’m Malawi 39 (174) (213) Mozambique (18) (20) (2) South Africa 8 (17) (25) Swaziland (23) 18 41 Tanzania (66) (35) 31 Zambia 23 (26) (49) Total (37) (254) (217) Growing cane represents the estimated sucrose content valued at the estimated sucrose price for the 2016/17 season, adjusted for the cost of harvesting and transporting the cane to the mill Cane roots Sept 2014 6 months R’m Sept 2015 6 months R’m Change R’m Malawi 73 84 11 Mozambique 9 5 (4) South Africa 9 8 (1) Swaziland 13 12 (1) Tanzania 9 5 (4) Zambia (2) 9 11 Total 111 123 12 Cane roots represents the cost of replanting the area under cane in each year, escalated for the impact of inflation & adjusted for the expected remaining life of the roots

36 Interim Results 30 September 2015

43 39 55 289 102 30 21 9 26 50 100 150 200 250 300 350 Group 114 12 Zambia 328 Tanzania Swaziland 38 12 South Africa 98 Mozambique Malawi 42 12 Core Capital Expansion Capital

R ‘million

Capital expenditure on fixed assets, intangible assets & cane developments totals R650 million

Nchalo Sugar Warehouse Sezela Coal & Energy, Training Academy Product Alignment & Refinery Expansion

CAPITAL CASH FLOWS

St Philips Cane Development Nakambala Distillery, Furfural Development, Office Building

37 Interim Results 30 September 2015

GROUP PROJECT PIPELINE

Marshall Campbell Cane Development Outbound Logistics Regional Refined Sugar Nchalo Irrigation Upgrade Asset Realignment (Project 3) Asset Realignment (Project 2) Asset Realignment (Project 1) St Philips Cane Development Eston Packing Station Energy Efficiency Sezela Coal & Energy Savings Nchalo Warehouse Project Nchalo Packed Sugar Speciality Sugar Furfural Development Training Academy Distillery Product Alignment & Refinery Expansion Speciality Sugar Appraise Select Define Execute Operate

Capital Hurdle Rates Internal rate of return: > 20% EBIT / Capital: > 20%

Malawi Mozambique South Africa Swaziland Tanzania Zambia

JV

38 Interim Results 30 September 2015

MALAWI

Improved factory performance at Nchalo partially offset by late season start-up and low rainfall 2013 6 Months Actual 2014 6 Months Actual 2015 6 Months Actual Own Cane (tons) 1 450 632 1 319 943 1 388 805 Yield – Own Cane (tons/hectare) 106.8 106.1 98.3 Sucrose Content – Own Cane (%) 14.5 14.3 14.4 Crush Rate (tons cane per hour) 492 495 481 Capacity Utilisation (%) 80.4 79.5 80.7 Sugar Production (tons) 215 121 195 867 210 800

39 Interim Results 30 September 2015

MALAWI

67% 33% By market – 2014

• Improved factory performance at Nchalo offset by late start

due to unseasonal rain, followed by below average rainfall

• Stronger currency reduced informal regional trade flows,

and allowed imports to compete against local production

• Cost inflation was not fully recovered through domestic price

increases while affordability constraints reduced volumes

• Strong initiatives by management to achieve cost savings

and mitigate impact of high inflationary environment 46% 19% 10% 25% By market – 2015

Sugar Production (‘000 tons) Operating Profit # (MWK ‘billions) Sugar Sales (‘000 tons) Overview

54% 24% 48% Margin Local EU Regional 14/15 211 Sucrose Recovery 2 2 Cane 11 13/14 196

# Excludes the allocation of Group costs

USA 9 9 5 12 4 11 9

2015 2014

21

2013

20

Cane Sugar

40 Interim Results 30 September 2015

MOZAMBIQUE

Lower yields due to December 2014 / January 2015 flood damage and dry weather conditions 2012/13 6 Months Actual 2013/14 6 Months Actual 2014/15 6 Months Actual Own Cane (tons) 426 884 397 752 352 894 Yield – Own Cane (tons/hectare) 82.2 88.3 69.7 Sucrose Content – Own Cane (%) 13.8 13.7 13.6 Crush Rate (tons cane per hour) 217 201 201 Capacity Utilisation (%) 79.5 77.9 72.9 Sugar Production (tons) 76 969 70 430 60 329 Co-generation Production GWHrs generated (external) n/a 1.2 0.8

41 Interim Results 30 September 2015 # Excludes the allocation of Group operations

MOZAMBIQUE

63% 37% By market – 2014

• Floods damaged harvest area and, combined with

subsequent dry weather conditions, reduced cane yields

• Cost inflation was unable to be recovered through domestic

price increases due to competition from low-cost world imports

• Announcement of new import tariff structure bodes well for

future sales

• Higher EU pricing largely due to weaker Metical against the

Euro 59% 41% By market – 2015

Sugar Production Bridge (‘000 tons) Operating Profit # (MZN ‘millions) Sugar Sales (‘000 tons) Overview

31% 10% 24% Margin Local EU Regional 14/15 60 Recovery (4) Sucrose (1) Cane (6) 13/14 70 USA 167 226 103 150 257

2014

324 7

2013

483

2015

120 7 11

Cane Co-gen Sugar

42 Interim Results 30 September 2015

SOUTH AFRICA

Continued drought conditions resulted in a substantial reduction of cane crop 2013 6 Months Actual 2014 6 Months Actual 2015 6 Months Actual Own Cane (tons) 290 321 243 467 212 722 Yield – Own Cane (tons/hectare) 73.6 64.8 53.7 Sucrose Content – Own Cane (%) 14.0 14.9 13.1 Crush Rate (tons cane per hour) 1 1 206 1 129 894 Capacity Utilisation (%) 1 79.1 75.8 76.9 Sugar Production (tons) 531 801 474 492 331 744 Downstream production Furfural (tons) 14 553 13 300 14 876 Furfuryl alcohol (tons) 5 471 3 877 3 612 Alcohol (kl) 2 29 361 29 149 29 087

• 1. Excludes Umzimkulu mill which did not open for the 2014/15 season due to the drought
• 2. Includes alcohol produced by Glendale Distilling Company, an associate entity.

43 Interim Results 30 September 2015

66% 34% By market – 2014

SOUTH AFRICA

• Extended drought conditions continued to affect crop
• Slow liquidation of carry-in stock impacted margins though

partially mitigated by price increases

• Temporary closure of Umzimkulu mill assisted to offset

inflationary increase in costs

• Good furfural production efficiencies achieved and alcohol

production units performed well

• Downstream profits increased with higher alcohol sales at

higher export prices and favourable exchange rates 81% 18% 1% By market – 2015

Sugar Production (‘000 tons) Operating Profit # (R ‘millions) Sugar Sales (‘000 tons) Overview

12% 8% 12% Margin Local World Regional USA 332 (7) Sucrose Recovery 14/15 474 (38) Cane (98) 13/14

# Excludes the allocation of Group costs

47 74 89 46 54 97 37 120 174 12 19

2014 2015 2013

181

Sugar Cane Downstream

44 Interim Results 30 September 2015

SWAZILAND

Improved factory performance and non-repeat of strike partially offset by below average rainfall 2012/13 6 Months Actual 2013/14 6 Months Actual 2014/15 6 Months Actual Own Cane (tons) 608 541 482 448 528 234 Yield – Own Cane (tons/hectare) 101.8 93.6 92.2 Sucrose Content – Own Cane (%) 13.6 13.4 13.2 Crush Rate (tons cane per hour) 481 476 459 Capacity Utilisation (%) 82.7 83.6 77.8 Sugar Production (tons) 195 486 167 430 178 224 Co-generation Production GWHrs generated (external) 32.9 35.1 45.0

45 Interim Results 30 September 2015

SWAZILAND

50% 2% 3% 45% By market – 2014

• Improved factory performance and non-repeat of strike,

partially offset by declining yields (below average rainfall)

• Higher sales volumes to regional and USA markets
• Additional sales to South Africa to compensate for the

impact of the drought

• Revenue benefited from the weaker currency (export

proceeds) and higher molasses prices

• Strong performance from co-generation resulted in record

power exports and substantial fuel savings 54% 12% 4% 30% By market – 2015

Sugar Production Bridge (‘000 tons) Operating Profit # (SZL‘millions) Sugar Sales (‘000 tons) Overview

26% 22% 14% Margin Local EU Regional 14/15 178 Recovery 2 Sucrose (6) Cane 16 13/14 167 USA 171 86 121 92 61 45

2015

227

2014

126 29 11

2013

281 18

Co-gen Cane Sugar

# Excludes the allocation of Group operations

46 Interim Results 30 September 2015

TANZANIA

Favourable climatic conditions combined with good sugar factory and distillery performance 2012/13 6 Months Actual 2013/14 6 Months Actual 2014/15 6 Months Actual Own Cane (tons) 372 298 381 966 393 749 Yield – Own Cane (tons/hectare) 81.0 101.8 86.2 Sucrose Content – Own Cane (%) 12.7 11.9 12.9 Crush Rate (tons cane per hour) 263 262 261 Capacity Utilisation (%) 94.7 90.0 95.4 Sugar Production (tons) 66 780 61 630 74 693 Downstream Production Alcohol (kl) 1 208 4 694 5 817

47 Interim Results 30 September 2015

TANZANIA

100 % By market – 2014

• Good factory performance and higher sucrose content

(favourable climatic conditions)

• Improved domestic market conditions and sales mix (pre-

packaged sugar) resulted in higher pricing

• Cost saving initiatives deliver meaningful savings
• Distillery operated consistently above its design capacity

and produced high quality alcohol

• Slower potable alcohol sales were offset by the benefit of

a weaker Shilling against the US Dollar 100 % By market – 2015

Sugar Production Bridge (‘000 tons) Operating Profit # (TZS ‘billions) Sugar Sales (‘000 tons) Overview

4% 21% (1%) Margin Local EU Regional 14/15 75 Recovery 6 Sucrose 6 Cane 1 13/14 62

• 15

9 10 16

• 6

2015

18 4

• 2

2014

• 1

4

2013

3

Downstream Cane Sugar

# Excludes the allocation of Group operations

48 Interim Results 30 September 2015

ZAMBIA

Delayed season start-up while dry weather and aphid infestation affected cane yields and quality 2013 6 Months Actual 2014 6 Months Actual 2015 6 Months Actual Own Cane (tons) 1 543 800 1 457 056 1 360 165 Yield – Own Cane (tons/hectare) 116.6 121.8 113.3 Sucrose Content – Own Cane (%) 14.6 14.4 14.2 Crush Rate (tons cane per hour) 656 647 704 Capacity Utilisation (%) 92.0 88.7 93.5 Sugar Production (tons) 328 626 314 326 304 800

49 Interim Results 30 September 2015

38% 27% 35% By market – 2014

• Rain delayed start-up, after which prolonged dry weather

and related aphid infestation reduced cane yields and quality

• Growth in domestic demand in Zambia improved sales mix;

reducing exposure to EU markets

• Inflationary price increase not sufficient to mitigate higher

than inflation wage and electricity increases

• Sharp devaluation of the currency resulted in exchange

losses on foreign trading balances 49% 28% 23% By market – 2015

Sugar Production (‘000 tons) Operating Profit # (ZMW ‘millions) Sugar Sales (‘000 tons) Overview

31% 20% 31% Margin Local EU Regional

ZAMBIA

Sucrose (3) Cane (8) 13/14 314 14/15 305 Recovery 1

# Excludes the allocation of Group operations

129 130 146 131 76 63

2015

139

2014

261

2013

275

Sugar Cane