Johannesburg — ILLOVO Sugar, which yesterday posted a 23% increase in headline earnings per share to 211,6c for the year ended in March, plans a rights issue to raise cash to fund expansions in Africa.

CEO Graham MacLeod said the group required large capital for expansion at a time when difficult economic conditions made it hard to access funds in the market. That was one of the reasons for the rights issue.

"The risk in the global market keeps changing and it is difficult to raise capital in the market without increasing gearing," MacLeod said.

The rights issue would be voted for by shareholders at the group's annual general meeting in July.

Illovo has embarked on a major drive to increase significantly its cane and sugar productive capacity in Zambia, Mozambique, Mali and Malawi.

In SA, the group had undertaken a number of disposals and investments which were expected to result in a more streamlined business. The sale of the Umfolozi sugar mill to a grower consortium was completed in March, with payment received in full. An agreement to sell the Pongola sugar mill to TSB Sugar had been concluded, subject to approval by the Competition Commission.

Operating profit increased 30% to R1,4bn, benefiting from higher world and regional market sugar prices, strong domestic demand and a weaker rand.

MacLeod said improved distribution channels, especially in rural areas which had no access to sugar, had paid off, with SA operations contributing 19% to profit, Malawi 45%, Zambia 12%, Swaziland 9%, Tanzania 9% and Mozambique 6%. But lower sugar production in Zambia, Swaziland and Tanzania partly offset the benefits.

He said net financing costs of R183,7m reflected a small increase compared to the previous year, while taxation at R238,9m remained relatively low. The group's final dividend increased to 64,5c per share from 52,5c, resulting in a total distribution of 106c a share from 85,5c for the full year.

MacLeod said the agricultural operations generally performed "satisfactorily", with cane production in the 2008-09 season amounting to 5,1-million tons.

Group sugar production of 1824-million tons was 2% above the previous season despite a 40000-ton reduction in output compared to the previous year in Zambia following the delayed start to the season and the disappointing mechanical performance of the plant after a factory expansion.