Chinese-bought sugar operations' losses grow
CHINESE-OWNED Pan- Caribbean Sugar continued to incur losses in the second half of the year, following a bad start in 2013.
In a profit warning on the Hong Kong Stock Exchange, Hua Lien International, an affiliate of Pan Caribbean, said that "the substantial operating loss for the newly acquired sugar business in Jamaica continued for the second half of 2013".
For the first half of 2013, it blamed foreign exchange losses from US dollar-denominated debts, and the decrease in fair value of biological assets due to extreme weather-related conditions, for losses at the group's new operations in Jamaica.
In the latest profit warning, Hua Lien's board added the persistent high operating cost to the list.
"The heavy foreign exchange loss from the US dollar-denominated debts continued in second half as the exchange rate between Jamaican dollars and US dollars fell by another approximately five per cent in second half of 2013," said the comopany filing. "The depreciation of the Jamaican dollars against other major currencies has pushed up the prices of all major local production inputs, such as labour."
The profit warning continued: "Drought conditions and hurricane resulted in the reduction in the quantity of harvested canes and the decrease in supply of the key raw material leading to a reduction in the production scale, which together caused an increase in the per unit production cost for current harvest season."
High energy cost and low efficiency due to the insufficiency of electricity and stream generated from the outdated and old bagasse boiler and turbine also pushed the company into the red.
Pan-Caribbean bought three Government of Jamaica-owned sugar assets — Frome, Monymusk and Bernard Lodge -- and committed to reviving the industrial and agricultural production plant and facilities by mid-August 2014.
Complant and Hua Lien agreed to inject US$38 million and US$89 million, respectively, into a joint venture to purchase Pan-Caribbean Sugar. Some of the funds went towards the repayment of short-term loans and working capital.