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Seprod buys two sugar estates

Published:Wednesday | July 18, 2012 | 12:00 AM
The Duckenfield sugar factory in St Thomas, as seen in late 2009. - FILE

Steven Jackson, Business Reporter

Seprod Group expects to raise its cane production by two-thirds within three years from its purchase of two sugar estates disclosed this week as part of its latest round of investments totalling more than half-billion dollars in the sugar operation.

The company not only acquired some 820 hectares of lands last year to add to its Golden Grove Sugar Company operations, but also upgraded its factory. The strategy of an upgraded factory and "economies of scale" is expected to reap increased revenues for the group, according to Group Chairman Paul Scott.

"Golden Grove has purchased the Bowden Estate lands and Seprod purchased Coley Estates consisting of some 820 hectares combined," said Scott.

"We have invested heavily in developing the lands, and while we have not yet seen the full benefits of the work done, we expect to see this in the future as the lands become fully cultivated. We expect that our cane production will improve from 180,000 tonnes to 300,000 tonnes by 2015," he said in a statement appended to Seprod's annual report for year ending December 2011, released to the Jamaica Stock Exchange ahead of the company's annual general meeting scheduled for August 20.

'Significant upswing'

If Seprod achieves those objectives, that plus improved transportation infrastructure to support delivery of raw material to the factory should result in "a significant upswing in the production figures," Scott said.

Sugar remains a loss-maker for the group, which has poured J$1.4 billion into the venture since its acquisition of the Duckenfield factory from Government three years ago. The loss was not specified.

Last year, Seprod spent J$550 million to invest in the operation via an equity deal that saw its ownership increase from 55 per cent to 80 per cent. The remaining shareholding is owned by Fred M. Jones Estate, a company associated with Richard Jones, who is the third-largest individual shareholder in Seprod.

The change in the relative ownership resulted in a dilution loss for the group of J$179 million and shrinkage of the accumulated deficit to Fred M. Jones Estate which fell from J$196.23 million to J$17.19 million.

Seprod invested $881 million of capital in Golden Grove in its 2011 financial year. Most of that amount was spent on the sugar factory, according to Managing Director Bryon Thompson.

"As a result of these investments, the factory recorded significant efficiency gains during the year," noted Thompson in the financial report. Other gains, he said, included an increase in output efficiency from a tonne cane/tonne sugar ratio of 12.9 to 11.2; and an increase in factory recovery index from 97 per cent to 94 per cent.

"These are not one-off performances, as the factory continues to show improved efficiencies in the present crop year," Thompson said.

The factory produced 16,123 tonnes of sugar and 6,600 tonnes of molasses, which Seprod said represented a 28 per cent improvement in output.

Seprod annual revenues jumped 22 per cent to J$12 billion last year but it recorded an annual 7.6 per cent reduction in after-tax profit, from J$830 million to J$767 million. The decline was mainly due to the effect of a deferred taxation charge on the group.