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Golden Grove looking to rebound from $2 billion losses

Published:Friday | August 7, 2015 | 12:00 AMMark Titus
Karl James

Western Bureau:

After racking up more than $2 billion in losses since it took over the facility from Government in 2009, Seprod Limited, the owners of the Golden Grove Sugar Company, in St Thomas, wants to market its own sugar internationally.

In fact, the factory, which is now restructuring with a view of turning around its fortunes, is now awaiting a response from the Sugar Industry Authority (SIA) for agency status, which will allow it to independently market its own sugar.

"Yes, I am aware that Seprod did apply, and the application is being considered," said Ambassador Derek Heaven, chairman of Jamaica Cane Product Sales (JCPS), which has been marketing the sugar produced by Golden Grove up until the last crop year. "If this status is conferred on them, they will become the third marketing agent for sugar in Jamaica."

JCPS and the Chinese-owned Pan Caribbean Sugar Company (PCSC) are the current merchants for the six privately owned operations, which churned out a mere 134,000 tonnes of sugar in the just-concluded 2014-2015 crop year.

The yield by the six factories was substantially lower than the 154,000 tonnes of sugar that was produced in 2013-14. Except for Worthy Park Estate, which met its projected target, all the other factories fell below projections.

During their recent annual general meeting, Seprod's chairman, P.B. Scott, blasted the regime that disallows most local sugar producers from negotiating selling price and finding buyers for their products on the international market.

"What is absolutely clear is that the industry requires structural adjustment and significant changes for it to survive in the long run," Scott said. "If those changes are made, it is our intent to participate in the industry, (but) if it is not restructured to our liking, we will be exiting the industry."

According to Karl James, the general manager of JCPS, who spoke to The Gleaner Tuesday from Washington, DC, the Golden Grove Factory would continue the production of sugar and molasses, but would outsource its cane-growing operation in order to reduce its operation cost.

"It is nothing strange," said James. "The Chinese (PanCaribbean Sugar Company) are doing it because the cost of growing cane is a huge chunk of the operating cost."

Golden Groves' record shows that the price paid for its sugar in 2015 fell by 32 per cent, from $75,000 per tonne last year to $51,000 this year. At the same time, input costs have been rising, particularly the cost of cane, almost doubling from $2,750 in 2009 to $5,000 on average last year.

 

$1.3b capital deficit

 

Last year, Seprod managed to expand the cane it had planted by 70 per cent; that is, it increased the approximate amount of cane it had growing in its own fields from 77,500 tonnes at the end of 2009 to 131,000 tonnes at the end of last year.

Golden Grove, for which Seprod currently owns a 71 per cent stake, had a working capital deficit of $1.3 billion at the end of 2014, and its total liabilities exceeded its assets by $870 million. It recorded a $400 million loss last year, compared with a $522 million loss in 2013.

"The drought did affect all the factories, except for Worthy Park and, interestingly, it was the only facility to meet its projected target," said James. "... but as far as I know, all the factories will be making sugar for the 2015-2016 season."