Minister of Agriculture, Roger Clarke. - File
The following is a recent statement to the House of Representatives by the Agriculture Minister Roger Clarke, on the reasons behind the closure of the Hampden sugar factory in Trelawny, which has put more than 200 people out of work.
IT IS with mixed feelings that I address this Honourable House today. My statement
addresses the matter of the closure of the Hampden Sugar Factory which, having
regard to the history and importance of the Hampden factory to the people and
economy of Trelawny, gives me much displeasure and discomfort.
But, while I am saddened by the closure of Hampden factory I am confident of the future of sugar in the parish of Trelawny.
The Long Pond factory will continue to operate and is being prepared to mill Long Pond farmers' cane, Hampden farmers' cane, and estate cane from both Long Pond and Hampden. All the cane grown in the parish will be milled at the Long Pond factory which, as we speak, is being extensively repaired to ensure that it is in the best condition possible before the start of crop which is scheduled for 13 January 2003. Long Pond has the capacity to mill over 300,000 tonnes of cane whereas available cane in the Trelawny area is estimated at only 170,000 tonnes.
I must emphasize that all the analyses show that the decision to close the Hampden factory, and to mill all the cane in the area at the Long Pond factory, is in the best interest of the people of Trelawny and in particular the cane farmers in the parish.
For the past several months we have been reviewing and analysing the situation in Trelawny. A fact is that the Hampden experience has been particularly bad over the past five to ten years, culminating in the estate being placed in receivership some two years ago because it was incapable of paying its creditors. In addition to the serious financial problems experienced by the estate over the past ten years, the field and factory operations have also been in decline. Let me share a few statistics with you.
The Hampden factory which has the capacity to produce 15,000 tonnes of sugar and which produced 12,000 tonnes in 1997, made only 5,000 tonnes of sugar during the 2001/2002
season.
The cost of producing sugar at Hampden is the highest in the SCJ Group with cost ranging between US$0.26 and US$0.38 per lb. In fact Hampden has been losing between $6,321 and $21,776 on each ton of sugar produced over the past six years.
Hampden Estate has 1,284 hectares available for planting cane. However, only 676 hectares or 46 per cent is in cane. The situation is compounded by the fact that of the planted area only 474 hectares or 37 per cent of the available lands can be considered to be in good cane.
The performance indicators show that agricultural operations have suffered from an absence of reinvestment as estate cane has declined by more than 50 per cent from 63,000 tonnes in 1995 to 31,000 tonnes for 2000/2001, and declining further to 26,400 tonnes for 2001/2002.
Those of us who are familiar with the sugar cane business know that cane fields must be replanted every six to seven years in order to maintain yields at economic levels. I will tell you that Hampden continues to depend on fields with 16-year-old rations due to the absence of investment in agriculture over the years. This is one of the factors that contribute to the high cost of producing cane at the estate.
The factory is in a terrible state of disrepair and is therefore unreliable and incapable of inspiring confidence in the potential cane farmers in the region. The list of factory equipment shows that critical components of the factory have exceeded their useful lives and are therefore in need of replacement. The state of disrepair has impacted on factory utilisation as grinding times as a percentage of gross available time has been consistently below 45 per cent over the past eight years with the exception of 1994 when 56 per cent utilisation time must be at a minimum of 70 per cent for factory operations to be profitable. The stats sheet shows that during one crop the factory experienced over 1,700 stops.
The records show that during the period 1997 to 2002, Hampden sustained losses of over $45m.
I choose to share these bits of information with you in order to get you to understand that the closure of Hampden factory was inevitable having regard to the poor performance over several years. In contrast the Long Pond factory has been maintained in a reasonable state of repairs and has performed creditably in recent years. As an example, whereas Hampden experienced utilisation time of under 50 per cent, Long Pond had utilisation time of close to 70 per cent for the recently completed crop, this after taking into consideration weather stoppages. The condition of the Long Pond factory is also being improved as a comprehensive repair programme is currently in progress.
Trelawny Sugar Company Limited took over the assets and liabilities of Hampden on 19th April, 2002, and since then the Board of Directors led by Derick Latibeaudiere, and the management of the company have been working to put the operations of Hampden on a path to sustainable viability.
The team considered the possibility of implementing a comprehensive rehabilitation programme to correct the mechanical problems in the Hampden factory. This assessment showed that over the next three years investment of $370 million to $400 million would be required to ensure that the factory operates at minimum levels of efficiency. Note, however, that this level of investment would be imprudent and cannot be justified by the factory capacity and payback prospects.
THE FUTURE OF HAMPDEN
While we see it necessary to close the Hampden factory, we are very confident about the future of Hampden. Our decision to terminate milling operations at the Hampden factory is complemented by plans to increase the utilisation of the distillery and the cane lands at the Hampden Division. The estate will be restructured and reorganised to concentrate on rum production and cane farming.
Most of you would be aware that the Hampden distillery produces bulk rum, which commands premium prices on the international market. Major customers are domiciled in Germany, Holland and Scotland. The demand for Hampden rum is normally greater than output and the operations have been consistently profitable.
While the distillery currently receives several services from the sugar factory we are confident that the profitability of the rum business will be enhanced from the reorganisation and streamlining of the distillery operated as an autonomous entity. The distillery will take delivery of cane juice from the Long Pond factory and, as is currently the case, will source molasses from Caribbean Molasses. Power was being supplied by the factory in a very inefficient manner and closure will allow for streamlining and sizing of the diesel unit to supply power in the most cost effective manner.
We are also pursuing plans to supplement the sale of bulk rum with the sale of a limited quantity of high value branded rum. This initiative will be pursued as part of an EU grant funded project through the West Indies Rum and Spirits Pool Association.
The agricultural operations of Hampden pose no particular challenge. The intention is to transform the agriculture activities into a profitable operation by 2003/2004. This will be accomplished through the implementation of an aggressive replanting programme and the reorganisation of the cane-farming department. Our intention is to replant 1,000 hectares in cane at Hampden over the next two years, and to employ the latest available equipment and cane farming techniques to ensure the profitability of the cane farming operations.
In addition to the upgrading and expansion of the estate farms, the Trelawny Sugar Company will initiate discussions with the Trelawny cane farmers with a view to identifying ways of assisting those farmers who are interested in continuing in the cane farming business.
TRANSPORTATION COSTS
A major concern of the Hampden cane farmers is the increased transportation cost that will be incurred in moving cane to Long Pond instead of Hampden. Preliminary estimates show that approximately 27,000 tonnes of farmers' cane that normally goes to the Hampden factory will be moved to the Long Pond factory. Clearly it would be unreasonable to expect that the farmers would immediately start to pick up the additional transportation cost. It is for this reason that the additional transportation cost will be absorbed by Trelawny Sugar Company for a period of three years commencing with the 2002/2003 cropping period.
REDUNDANCY
There are approximately 200 employees who will be affected by the closure of the factory. I have asked the management to meet with the union representatives in order to try to minimise the number of persons who will be dislocated. We will explore the possibility of providing employment for some of these employees in other jobs and at other locations within the SCJ Group.
In this regard I must commend the employees, the union delegates and union leaders for the reasoned and responsible manner in which they approached the discussions about their future. We have already received a number of very useful suggestions which will be taken on board in finalising any separation arrangement. We estimate that redundancy will cost the company $66m and arrangements are being made to ensure that the necessary funding arrangements are put in place. In addition we will incur expenses to provide the affected employees with advice on a range of matters including financial planning, and guidelines for starting small farms.
