Malawi Stock Exchange-listed Illovo Sugar Malawi has singled out foreign currency scarcity, a weakening Malawi Kwacha, high policy rate and bank interest rates and rising inflation among macroeconomic variables affecting its profitability.
This follows a 33 percent decline in its profit the company posted in the six month-period ended February 2024.
A published financial statement shows that the company registered profit-before-tax of K32.5 billion compared to K48.6 billion it made in the prior period.
Further, it shows that the company achieved sugar sales of 107,629 tonnes compared to 111,958 tonnes over the same period in the prior year due to lower agricultural and factory output.
However, the company registered an increase in revenue to K139 billion compared to the K116.7 billion, representing a 19 percent jump.
“Limited availability of foreign currency impacted on timely sourcing of necessary spares and contractor services for a successful off-crop, aside from the inflationary effect of the 44 percent devaluation of the Kwacha in November 2023.
“The recent flooding that occurred in March 2024 in Nkhotakota also had the potential to delay timely completion of the factory maintenance at Dwangwa as part of the estate was significantly flooded and the main access roads to the site were cut off,” the statement reads.
Illovo Managing Director Lekani Katandula said the company has experienced a significant rise in foreign payables due to a scarcity of foreign exchange, which in turn has led to an increase in Malawi Kwacha cash balances.
“This approach is aimed at ensuring the company’s financial sustainability and operational stability until the liquidity of foreign currency improves.
“By carefully managing resources and expenditures, the group intends to navigate the current economic challenges and position itself for long-term success once the foreign exchange situation stabilises,” Katandula said.
