Seprod focuses on power generation plant and tripling exports

BY STEVEN JACKSON Business reporter jacksons@jamaicaobserver.com

Friday, May 01, 2015

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Seprod, the farming conglomerate, will reconsider setting up its own power plant to cut costs amid posting disappointing earnings from sugar.




It also plans to triple export earnings in three years from its current $1/2-billion level.




Cane typically produces four revenue streams including sugar, molasses, rum and energy. But only sugar and molasses are exploited at its Golden Grove Sugar Company, stated chief executive officer Richard Pandohie.




"Furthermore, not only are we not generating energy, but we are actually purchasing energy from the grid -- a very untenable situation. Management is reviewing several options for a co-generation unit which could significantly change the cost and revenue profile of Golden Grove," stated Pandohie in his statement accompanying the just released financials.




In 2012 Seprod told media it was considering investing in a 30-megawatt plant fuelled by biogas -- a by-product of sugar cane--and supplemented with liquefied natural gas. Despite efficiency concerns, the group made $1.05 billion total comprehensive income on $14.7 billion in revenues for its 2014 financial year ending December.




"While this is respectable growth, our earnings were weighed down by the performance of our sugar operations at Golden Grove," added chairman PB Scott in the annual report. "Our sugar business has been and continues to be challenging. While we have very little control over the price of our end product, we do have control over our own actions."




Golden Grove, the "only" locally owned sugar factory with a bagging facility, produced 19,000 tonnes of sugar or one-third higher than a year earlier. But the "bad news" was that poor cane quality resulted in more cane being required to produce an equivalent amount of sugar.




Scott added: "There is very little point in not facing the reality that exists in that industry. Not only are we not as efficient as we should be as an operator, but we are facing the possibility of lower prices in the future. This is clearly not a good combination. It is imperative, therefore, that we waste little time in trying to correct what we control."




Seprod's 2011 annual report stated that by 2015 it expects to increase cane production from 190,000 tonnes to 300,000 tonnes. It remains on target, as actual cane crushed totalled 255,000 tonnes in 2014.




The group sees its future prospects partially in growing export earnings amid concerns of an ever depreciating Jamaican dollar.




"In 2014, export revenue of $544 million represented 4.0 per cent of total revenue. We aim to increase this to 12 to 15 per cent by 2017," stated Pandohie on the proposal which would take export earnings within the region of $2 billion based on Jamaica Observer estimates.




Seprod previously told Caribbean Business Report that it plans to locally produce whipping cream, yogurts, smoothies and cheese, while also investing in its farm in order to double the milk yield per cow. This is part of the company's ongoing US$4.6 million ($530 m) in milk investments for its 2015 financial year.





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