Illovo Sugar : 2016-05-11 Zambia Sugar Plc - Financial Results - 31 March 2016

80cf11fd-1f13-4600-919c-b876cabe37f3.pdf COMMENTARY FOR THE YEAR ENDED 31 MARCH 2016 Review

A myriad of factors impacted adversely on sugar production in the period under review. These included dry climatic conditions in November and December 2014, power interruptions to irrigation and the outbreak of yellow sugarcane aphids which reduced sugarcane yields by 11% across the entire harvest area. This yield decline was partly offset by a 2% increase in area under cane delivered. Small-holder schemes supplied 10% of the total

3.102 million tons of cane crushed by the Nakambala mill. Consequently, sugar made was reduced by 10% from 424 000 tonnes achieved last year to 380 400 tonnes.

The reduced sucrose in cane was partially offset by improved sugar recoveries in the mill. Refined sugar production also increased to meet growing demand. The season saw a significant improvement in factory throughput, reflecting the benefit of improved equipment reliability and preventative maintenance practices together with a sustained focus on continuous improvement initiatives.

Total revenue, grew by 6% year on year, from K1.91 billion to K2.02 billion, largely due to continued growth in the domestic market where direct consumption increased by 7% and industrial consumption grew by 4%. In order to maximise revenues from reduced production, the sales mix was adjusted by reducing bulk EU exports by 45%. The remaining sugar was sold into regional markets where prices remained under pressure from world market sugar.

Operating profit increased by 11% year on year, from K329.8 million (2014/15) to K366.2 million (2015/16) mainly due to the higher fair value of growing crops. This represents an operating margin of 18%. However, operating profit excluding the impact of fair value gains decreased by 49% from K295.1 million to K150.2 million. Finance costs increased by 35% to K221.9 million as a result of high local interest rates and an increase in working capital requirements. Closing borrowings increased by K509 million to K1.686 billion, mainly due to the higher working capital requirements and the new refinery capital expenditure. Headline earnings decreased by 19% from K141.3 million (2014/15) to K114.4 million (2015/16) and headline earnings per share declined by 19% from 44.6 ngwee to 36.1 ngwee.

The company continued to be a significant provider of employment, with an average workforce of 5 500 during the year, including 1 970 permanent employees with seasonal workforce peaking at 4 800. In terms of wealth creation the company injected in excess of K855 million (2015/16: K730 million) into the local economy through payments to amongst others, employees, cane growers and government in the form of direct taxation. In addition, K450 million of total goods and services excluding cane supply were procured from within Zambia. The company remains committed to a responsible and relevant corporate social responsibility programme and continued to contribute meaningfully in the areas of primary health care, education, sport and cultural activities.

Prospects

The factory commenced crushing in the third week of April and operations have quickly stabilised. Early season sugarcane yields are at expected levels and should improve as the crop matures.

Sugar cane yields and sucrose in cane are expected to remain relatively unchanged in the 2016/17 production season. The crop has been negatively affected by drought conditions, power shortages, the low water levels in the Kafue River and pest infestations due to drought stressed cane. Sugar production is therefore expected to match the previous season. Reasonably strong growth is expected in local market. However, margins in the regional export markets are expected to remain under pressure from surplus sugar stocks on the world market. Realisations in these export markets will continue to be influenced by exchange rate movements. The new expanded sugar refinery will help the company take advantage of the growth in the local and regional industrial sugar markets.

Dividends

As highlighted in the Quality of Earnings Statement included in the summarised consolidated statement of comprehensive income, and notwithstanding the increase in operating profit, a major element of the operating profit for the year ended 31 March 2016, relates to a considerable non-cash fair value movement on growing crops. Owing to the major capital investment in the new refinery, increased working capital levels, difficult commercial environment, weather-related crop decline and the operating profit having a considerable non-cash element, a second interim (2015: 13.0 ngwee per share) and final dividend (2015:

2.0 ngwee per share) has not been declared.

By order of the Board

Mwansa Mulumba Mutimushi Company Secretary

4th May 2016

FI NAL RESULTS‌ ZAM BIA SUGAR PLC (I NCORPORATED IN THE REPUBLI C OF ZAM BI A) CAM PANY REGI STRATI ON NUM BER: 2880 SHARE CODE: ZSUG ISIN:-ZM 0000000052 In accordance with the requirements of the Securitiesand Exchange Act No. 38, Zambia Sugar Plc announces itsresults for the year ended 31 March 2016

SUM M ARI SED CONSOLI DATED STATEM ENT OF COM PREHENSI VE I NCOM E SUM M ARI SED CONSOLI DATED SEGM ENTAL ANALYSI S

Audited Audited Audited Audited

2016 2015 2016 2015

K '000 K '000 K '000 K '000

Revenue 2 015 435 1 907 169 Revenue

Sugar production 1 517 363 1 399 350

Operating profit 366 219 329 803 Cane growing 498 072 507 819

Net finance costs (221 915) (163 900) 2 015 435 1 907 169

Profit before taxation 144 304 165 903 Operating profit

Taxation (23 785) (20 122) Sugar production 226 564 255 309

Profit for the year 120 519 145 781 Cane growing 139 655 74 494

Other comprehensive income 19 938 (7 979) 366 219 329 803

Total comprehensive income for the year 140 457 137 802

SUM M ARI SED CONSOLI DATED STATEM ENT OF FI NANCI AL POSITION

Profit attributable to: Audited Audited

Shareholders of Zambia Sugar Plc 114 354 141 309 2016 2015

Non-controlling interest 6 165 4 472 K '000 K '000

120 519 145 781 Assets

Property, plant and equipment 1 732 341 1 227 306

Total comprehensive income attributable to: Intangible asset 67 902 67 902

Shareholders of Zambia Sugar Plc	134 292	133 330	Cane roots	230 392	195 392
Non-controlling interest	6 165	4 472	Growing cane	496 728	315 737
140 457	137 802	Inventories	164 331	134 814
Trade and other receivables	585 442	439 599
Det er minat ion of head line ear nings	Other current assets	62 141	49 168
Profit attributable to shareholders of Zambia Sugar Plc	114 354	141 309	Cash and bank balances	77 694	77 884
Total assets	3 416 971	2 507 802
Headline earnings for the year	114 354	141 309
Equity and liabilities
Capital and reserves	1 051 422	964 615
Number of shares in issue ('000)	316 571	316 571	Non-controlling interest	39 229	36 360
Weighted average number of shares in issue ('000)	316 571	316 571	Deferred tax liability	142 711	120 292
Basic and diluted earnings per share (ngwee)	36.1	44.6	Borrowings	1 686 289	1 004 439
Headline earnings per share (ngwee)	36.1	44.6	Current liabilities	497 320	382 096
Dividend per share (ngwee)	-	23.0	Total equity and liabilities	3 416 971	2 507 802
- First interim paid	-	8.0
- Second interim declared	-	13.0	SUM M ARI SED CONSOLI DATED STATEM ENT OF CASH FLOWS
- Final proposed	-	2.0	Audited	Audited
2016	2015
K '000	K '000
Cash operating profit	207 524	352 054
Working capital requirements	(44 292)	(23 549)
Finance costs, taxation and dividends paid	(282 941)	(234 383)
Net cash (outflow)/inflow from operating activities	(119 709)	94 122
Cash outflow from investing activities	(562 331)	(76 800)
Net cash (outflow)/inflow before financing activities	(682 040)	17 322
Cash inflow from financing activities	681 850	-
(Decrease)/increase in cash and bank balances	( 190)	17 322
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Qual ity of Ear nings Stat ement	2016	2015
K '000		K '000
Operating profit	366 219	329 803
Adj usted for:		(34 728)
Change in fair value of cane roots and growing cane	(215 991)
Operating profit less fair value changes	150 228	295 075

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