Illovo Sugar Malawi has reported a robust turnover of MWK 139 billion for the six months ended February 29, 2024.

The turnover marks a significant increase from K116.7 billion in the same period last year.

This strong revenue performance underscores the company's resilience amid numerous operational and economic challenges.

However, the company's profit before tax fell sharply to K32.5 billion from K48.6 billion in the prior period, reflecting the impact of several adverse factors.

"While we are pleased with our turnover growth, the decrease in profitability highlights the substantial headwinds we are facing," - the statement reads.

One major factor affecting profitability is the recent increase in corporate tax from 30% to 40% for taxable profits above MWK 10 billion, sanctioned by Parliament after the reporting period.

This tax hike is anticipated to elevate the company’s tax liabilities by the end of the financial year ending August 31, 2024, further squeezing net profit margins.

Additionally, agricultural operations were severely impacted by cyclones over the past two seasons, particularly at the Nchalo estate, leading to reduced cane production.

The scarcity of foreign currency has also impeded the procurement of essential inputs such as fertilizer and pesticides, exacerbating production challenges.

"The combination of adverse weather and economic conditions has significantly hampered the group's agricultural output," - It states.

The company has faced increased violence against its security staff, driven by the hard economic times, which has further complicated operations at Nchalo.

In response, Illovo Sugar Malawi implemented an extensive off-crop maintenance program starting in December 2023 to enhance factory efficiency for the upcoming crushing season.

The shortage of foreign currency has increased foreign payables and boosted cash balances in Malawi Kwacha, a strategic shift aimed at maintaining financial and operational stability amid liquidity constraints.

Despite these efforts, sugar sales slightly decreased to 107.629 tons from 111.958 tons in the prior year.

The devaluation of the Kwacha has imposed significant cost pressures, eroding profit margins.

Furthermore, high domestic demand has limited the company’s ability to export sugar, complicating efforts to achieve foreign exchange self-sufficiency.

Looking ahead, Illovo Sugar Malawi plans to carefully assess all projects and investments requiring foreign exchange to prioritize financial sustainability until the foreign currency liquidity situation improves.

"Going forward the group will evaluate all projects and investments that require foreign exchange to prioritize financial sustainability until the liquidity of foreign currency improves.," the company emphasized.