Illovo Sugar Limited - Annual General Meeting: Chairman"s Address

Illovo Sugar Limited - Annual General Meeting: Chairman"s Address               
ILLOVO SUGAR LIMITED                                                            
(Incorporated in the Republic of South Africa)                                  
Company registration number 1906/000622/06                                      
Share Code: ILV                                                                 
ISIN: ZAE000003547                                                              
ANNUAL GENERAL MEETING - 13 JULY 2005                                           
CHAIRMAN"S ADDRESS                                                              
In respect of the year ended 31 March 2005, as already reported, headline       
earnings per share of 42,6 cents were 40% below those achieved in the previous  
year.  Operating profits were severely impacted by the continuing strong rand in
respect of both sugar and downstream exports and the translation of foreign     
profits.  The strength of the local currencies compared to the US dollar in the 
operations outside South Africa also reduced profits in those local currencies. 
In addition lower sugar production and related downstream production in South   
Africa had a negative effect.                                                   
During the past financial year, both the Gledhow sugar factory and cane growing 
estates and the Umfolozi sugar factory were sold to Black economic empowerment  
companies.  In addition the Monitor Sugar operation in the United States was    
sold prior to the beginning of the new sugar campaign.  A further BEE cane farm 
sale was made during the year.  It is worth noting that overall group borrowings
have been reduced by around R2 billion over the past three years through        
internal cash generation and the sale of assets.  The expansion potential in    
Illovo"s existing factory and field operations is significant and, in addition, 
the group is investigating opportunities for power generation and new           
investments in Africa.                                                          
The EU Agriculture Commissioner formally presented the proposals from the       
European Commission for the reform of the EU sugar regime on 22 June 2005. The  
key elements of the reform were very much as expected although they reflect a   
significant change to the present regime.  The reform process now sits with the 
EU Ministers of Agriculture who will debate the proposals between now and       
November/December 2005.  The proposals are based on a significant reduction in  
the price, the elimination of export subsidies and a voluntary scheme for the   
buy-back of EU beet quotas funded by a levy on beet production.  The aim is to  
reduce EU sugar production by up to 5 million tons.  It is proposed that the new
regime would continue until 2015.                                               
The proposals provide for unchanged access to ACP producers and leaves the      
Everything But Arms (EBA) initiative for the Least Developed Countries (LDC"s)  
in respect of tonnage unchanged.  The proposals as formulated will reduce the   
price received by the group in respect of current ACP/LDC supplies to the EU    
with effect from 1 October 2007, however potential exists for increased supplies
to the EU market in the following quota year which will offset the reduction in 
price. This tonnage would be sourced from production previously supplied to     
lower priced world and regional markets together with planned expansion of      
production. Unfortunately the reform proposals provide no additional benefits to
the Least Developed Countries, and the company is actively participating in the 
lobbying process and providing technical input to the LDC and ACP country       
members involved in the discussions on achieving a lower price cut over a longer
implementation period.                                                          
This shareholders" meeting provides the opportunity to update you on the current
state of the group"s operations.                                                
Climatic conditions across the group have been variable in recent months.       
Although it has been extremely dry in South Africa over the past three months   
sugar production is estimated to be similar to that of last year despite the    
sale of the Umfolozi mill.  In Zambia it has been exceptionally hot and dry with
summer rains considerably below the long term mean, however irrigation and      
improved factory performance have resulted in anticipated sugar production being
above that of last year.  Elsewhere in the group, weather conditions have been  
favourable for crop growth.  Generally the factories have been operating well   
and a number of new performance records have been achieved in recent weeks.     
Sugar production in each country, except South Africa, is anticipated to exceed 
that of last year.                                                              
For the group as a whole, overall sugar production is forecast to be around 1,8 
million tons for the season (9,5% above last year excluding Umfolozi) whilst    
cane production is forecast to be around 5,4 million tons (21/2% above last     
year).                                                                          
The alcohol plant at Merebank continues to perform very well whilst the furfural
and related plants at Sezela have operated satisfactorily.                      
The refinery expansions at Pongola and Noodsberg in South Africa are progressing
well.                                                                           
The world sugar price has continued to be volatile but with a much stronger     
upward trend in recent weeks, with the current raw sugar futures prices around  
9,40 cents/lb.  In respect of the 2005/06 season, the South African Sugar       
Association has priced 707 350 tons (57% of anticipated exports) of world market
sugar at 8,99 cents/lb.                                                         
In general, all operations are performing well.  In addition, the world sugar   
price and the current rand/US dollar exchange rate are more favourable for the  
company than in the previous year.  These factors will positively impact on     
profits for the current financial year.                                         
Illovo Sugar Limited                                                            
AGM - Chairman"s Address                                                        
13 July 2005                                                                    
Sponsor:  JP Morgan Equities Limited                                            
Date: 13/07/2005 02:38:38 PM Supplied by www.sharenet.co.za                     
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