Jamaica sugar operation drags Chinese company further in the red

Jamaica sugar operation drags Chinese company further in the red

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BY SHAMILLE SCOTT Business reporter scotts@jamaicaobserver.com

Friday, July 26, 2013

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HUA Lien International, an associate of Pan-Caribbean Sugar Company, has said that operations in Jamaica's sugar industry may lead to a significant increase in losses for the period ending June 30, 2013.

The Chinese company made the disclosure in a profit warning document to shareholders and potential investors. 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.

"The board believes that the main reasons attributable to the expected substantial operating loss of Jamaica sugar industry projects are the foreign exchange loss from the US dollar-denominated debts as a result of the depreciation in the value of the Jamaican dollar," the document said, adding that "The decrease in fair value of biological assets as a result of the drought conditions and hurricane being experienced has negatively affected the growth, and so the expected sugar cane yields of the Jamaica Sugar Industry Projects."

However, the notification to the Hong Kong Stock Exchange highlighted that the company is in the process of finalising interim results for the period and that the announcement is based only on a preliminary assessment made by the board.

Hua Lien International is a subsidiary of Pan-Caribbean's parent, Complant International. 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 last year 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.

Meanwhile, the local sugar company on Wednesday said it made financial investments to the tune of US$160 million, which was expended in rolling stock, including tractors, trucks, graders, harvesters and factory equipment.

But the company said it has incurred losses of equipment valued at $28.3 million due to security breaches.

"There have been a plethora of security breaches within Pan-Caribbean Sugar Company which have resulted in the company incurring significant losses, and to date it has not been able to hold anyone accountable for such breaches," the sugar company said in a press release.

Consequently, 132 guards were sent on leave and the sugar company contracted a private security firm.

In response to the move, workers of the sugar estate have been on strike.

The company said it remains committed to facilitating timely discussions with the trade unions to ensure an effective resolution for the security employees placed on paid leave.

Despite the industrial disputes, Pan-Caribbean said it is working towards improving operations and has taken steps to increase cane production by installing new irrigation systems and expanding areas under production.

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