DURBAN Sugar giant Illovo Sugar has outsourced the management of its local warehousing and distribution to Barloworld Logistics in a deal worth R3,8bn .

In one of the largest transactions of its kind in SA, the logistics and supply chain management company will manage Illovo's outbound sugar distribution operations for the next 10 years. The move is expected to improve customer service and reduce costs.

This is the third major deal Illovo has announced since May, having sold its Gledhow mill and cane-growing estates to a black empowerment consortium for R335m and disposed of its troublesome sugar beet investment Monitor Sugar in the US earlier this month for $40m.

It also comes as Illovo predicts its earnings in the current year will slide more than 30% due to the strong rand and continued dry conditions in SA.

In May, Illovo MD Don MacLeod said the Gledhow and Monitor sales would further reduce borrowings.

Yesterday's deal, backdated to June 1, sees Barloworld Logistics assuming the management and operation of 18 distribution facilities, mostly in KwaZulu-Natal, with 183 staff transferred to Barloworld Logistics.

Illovo marketing executive Mike Buchanan said yesterday an audit commissioned two years ago revealed opportunities for the group to improve costs, service levels and efficiencies in outbound distribution operations.

Barloworld Logistics CEO Paul Stuiver said the deal would see the group manage and optimise the Illovo supply chain, from the packaging line to customers. This involved more than 100000m² of warehouse space, and the outbound movement of more than 1-million tons of sugar annually to 2500 delivery destinations.

Barloworld would invest R50m-R60m in the deal, and this would include R25m in advanced logistics solutions.

Stuiver said the investment would provide demand planning, warehouse management and transport-management systems for the realignment of the outbound logistics processes in an integrated logistics approach .

In the year to March, Illovo watched headline earnings topple 42% to 76,9c. With the 36% strengthening of the rand the company's revenue dipped 8% to R6,48bn and operating profit crumbled to R726,6m .

Chairman Robbie Williams warned shareholders last month current-year figures would be "considerably impacted" by continued rand strength.

The currency had already been "much stronger" in the first quarter of the financial year than the average achieved last year, and should this continue headline earnings would "decline substantially", he said.