J Wray & Nephew confirms closure of Appleton sugar factory

J Wray & Nephew confirms closure of Appleton sugar factory

Contracted cane farmers get multimillion-debt write-off

Observer business writer

Thursday, July 30, 2020

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RUM producer J Wray & Nephew Limited (JWN) is now confirming that it will cease operating its Appleton Estates Sugar Factory in St Elizabeth but before that it will be offering a generous separation package to the 370 employees impacted.

Yesterday's confirmation of the closure follows the start of consultations with all stakeholders. A date on the closure will be announced after further consultations with the union. The next meeting is scheduled for Wednesday, August 5, 2020, when the unions and their delegates will meet with JWN executives.

Speaking in an interview with the Jamaica Observer, JWN Chairman Clement “Jimmy” Lawrence disclosed that the management of Appleton will be divested to Frome Sugar Estate in Westmoreland, which is a third-party company with knowledge of the sugar operations. He added that Frome will re-employ a significant number of the 370 employees impacted.

There are plans to alleviate the impact of the closure on third-party farmers. The Appleton Estate Distillery and the Joy Spence Appleton Estate Rum Experience will continue normal operations.

When asked where the distillery would be getting feedstock for the processing of JWN blend of spirits with the closure of Appleton Estate Sugar Factory, Lawrence explained that this would not be affected as the company buys molasses from local producers, which is augmented by imports in the normal course of business.

Heavy losses from the factory

The company has reported annual losses of US$12 million (approximately $1.8 billion) on its sugar production operations for over a decade. These sustained losses have forced the company to take this necessary course of action. Sugar production over the years has been dismal for the company and the Jamaican sugar industry.

In a recent statement, the Ministry of Industry, Commerce, Agriculture and Fisheries revealed that from the 2020 sugar crop, only 44,000 tonnes of sugar were produced. According to Sugar Industry Enquiry Commission Report of 2010, between 200,000 and 300,000 tonnes of raw sugar are required to keep the industry viable.

In 2018 JWN was forced to close its Holland & Casa Marantha sugar estates, also in St Elizabeth, in a bid to reduce its overall losses. But, according to the company, those closures did not result in any savings.

The negative impact of the novel coronavirus has also contributed to the company's decision. The global pandemic resulted in the closure of bars, tourism and other routes to market, and in so doing crippled the domestic and export earnings of JWN. Lawrence expressed regret at the move, but emphasised that the company had no alternative.

Massive debt write-off for cane farmers

When questioned about the impact on cane farmers, Lawrence told the Observer that, “JWN has put in a programme whereby cane farmers will have their produce routed to Frome, and we will be assisting them to get that to happen. Also, there is an amount of debt due from cane farmers that we will forgive...”

He was pressed for a figure on the bad debt that will be forgiven but the JWN chairman was unable to say. He, however, confirmed that it is a seizable sum amounting to millions of dollars.

“This decision was not an easy one, but was arrived at following several weeks of consultation with our stakeholders. Those union consultations follow years of exploration and significant capital investments aimed at improving the productivity and efficiency of the factory. We are in the process of working out the best outcome for the impacted workers and the wider community,” said Lawrence.

Even in the face of financial loss, JWN dug deep into its reserves and allocated $300 million to support Jamaica's COVID-19 response on top of the support it has given to its employees. The company contributed high-strength alcohol to the national health system through its donation to the National Health Fund; provided nearly 10,000 food packages to various disadvantaged groups; and mobilised its staff to lend manpower to various causes.

The company noted that, despite the losses, it chose to contribute to the national response to the global pandemic as it is committed to living its core values. “We will continue to support community-based initiatives with projects and educational programmes within the affected communities,” Lawrence stated.

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