Illovo to sell worm-Killer to counteract falling sugar profits

Illovo Sugar Ltd., Africa’s biggest producer of the sweetener, will sign an agreement with one of the top three agrochemical companies in the U.S. turf market to sell and distribute its patented worm-killing agent.

"It’s a fantastic new possibility for us,” Illovo’s Managing Director Graham Clark said in an interview from Johannesburg yesterday, declining to identify the U.S. companies. The nematicide, which kills nematode worms, is made from furfural, a product that can be made as a derivative of sugar cane, Clark said. Nematodes damage the root systems of plants and hampers their ability to absorb water and nutrients in the soil which can cut crop yields.

In efforts to arrest the decline in profits in South Africa, where it produces 40 percent of its sugar, Illovo has diversified and also makes ethyl alcohol, fertilizer and food flavorings such as diacetyl, which is used to enhance the taste of margarine. Furfural and its derivatives are also used in foundries to bind foundry sands and by refineries to purify crude oil.

Creating new markets and demand for Mount Edgecombe, South Africa-based Illovo’s so-called downstream products such as furfural “deals with a niche in our South African business where we have seen a decline in sugar margins,” he said.

"We have a team of very clever scientists that examined the compound and they have convinced us that it has properties for use in agriculture and cropping generally,” Clark said.

After an eight-year approval process in the U.S. with that country’s Environmental Protection Agency and the Food and Drug Administration the company won consent in July for the pesticide to be used on lawns and turf farms. Registration for use on food crops is being pursued.

Rival Nematicides

An agreement with one of the agrochemical companies is in the process of being concluded, Clark said. The approval coincides with the phased banning of the toxic methyl bromide, a gas that is used as a fumigant to kill pests but depletes stratospheric ozone, according to the EPA.

Illovo and a U.S. partner will aim to supply 25 percent of the market, Clark said.

"We are very early in the process, we don’t know what the competitor reaction is going to be,” he said. “All the big agrochemical guys will be in the market with an alternative product.”

"We hold the patents, the intellectual property sits with us,” he said. “They have got to do a bit of catch-up.”

Ramp up Production’

The downstream business is a “significant contributor” to Illovo’s profit in South Africa Clark said. “I would hope that over time the South African profit contribution will be dominated by downstream revenue.”

Furfural and its derivatives are produced at the Sezela mill complex on the south coast of South Africa’s KwaZulu-Natal province. Illovo has a production capacity of around 20,000 metric tons a year.

"As that product becomes more accepted in the market place we would divert it from its traditional use, put it into the new application and ramp up production if required,” Clark said

Illovo sells the product in South Africa under the name of Crop Guard. and has registered the product in the U.S. under the name MultiGuard Protect.