THE Sugar Company of Jamaica is showing a healthier financial position than it ever has since the turn of the decade, recording an $84 million operating profit in the 2004 fiscal year, according to chairman Derick Latibeaudiere.

And, as for the fiscal year just ended in March, projections are that the SCJ will chalk up an even better operating surplus of $200.58 million, according to the company’s unaudited accounts published in the Jamaica Public Bodies report for 2005.

Latibeaudiere’s claim of an $84m operating profit, however, is a significant swing away from the estimated $183.99 million operating loss that finance minister Dr Omar Davies laid before parliament four months ago in the JPB report.

The SCJ chairman, in strong defence of the sugar company and its management, praised the Livingstone Morrison-led management team for sticking to its mandate of running the company within its resource constraints, while reducing operating costs and stemming the haemorrhaging of resources.

The result, according to the chairman, saw the company “moving from an operational deficit of $685 million in 2001/02 to an operating profit of $84 million in 2003/04.”

“In pursuit of our mission, we have established a number of operational objectives including examining the major operating problems in agriculture and factory operations and implementing corrective measures and examining and restructuring our financial operations,” said Latibeaudiere, in a press briefing two weeks ago.

“We are also rebuilding the physical infrastructure and working towards improving employee morale.”

The SCJ group company employs some 4,535 staff, 29 per cent of whom are classified as temporary workers.

Morrison, SCJ chief executive officer, attributed the move into operational ‘black’ to better cost control, better internal budget controls, centralising purchasing and improved profitability resulting from increased productivity.

Crop production rose 19 per cent, he said, from 109,257 tonnes of sugar in 2002/03, to 130,000 tonnes in 2003/04.

However, the assumption of a debt service burden of over $3 billion from the St Thomas and Trelawny sugar companies to service debts and fund operating activities had set the company back.

“With that level of debt service burden, those resources had to be diverted from our programme of upgrading which, when combined with the negative effects of the hurricane and drought, resulted in our projecting production of 82,000 tonnes this year which is a bad result,” said Morrison.

Despite its operational gains, however, the SCJ, which is responsible for over 65 per cent of Jamaica’s sugar production, remains deep in the red, with a projected net profit loss of $112.91 million up to March 2005 that has pushed the accumulated deficit to $7.2 billion.

A near $5 billion of the amount represents short-term liabilities, most of it payables to creditors. Its own receivables, meaning debts owed to the cane churner, is a mere $868 million in contrast.

Last month Opposition leader Bruce Golding and All Island Jamaica Cane Farmers Association chairman Alan Rickards had called for the sacking of the SCJ management in the face of the low output of under 82,000 tonnes in the current crop, and failure to adequately prepare the industry for the impending price cuts.

Golding later suggested that the board of the SCJ should also resign after they issued a vote of confidence in the management.

But Latibeaudiere, who is also central bank governor, sought to add perspective to the SCJ’s financial crunch, saying that in 1998 when government retook control of the sugar estate, after selling its majority stake to a private consortium in 1994, it also took over $3 billion of losses.

Morrison said the assumption of those debts of the St Thomas and Trelawny sugar companies set back the company.

“With that level of debt service burden, those resources had to be diverted from our programme of upgrading which, when combined with the negative effects of the hurricane and drought, resulted in our projecting production of 82,000 tonnes this year, which is a bad result,” said Morrison.

Since then, in seven years, the losses have more than doubled, but no move has been made to downsize – the state having long adopted a policy position of grandfathering the sector, to safeguard the more than 40,000 workers, a good portion of them largely unskilled and illiterate, employed across the industry.

Jamaica continues to produce sugar at a unit cost per pound of 23 and 24 US cents, double the 12 US cents and under that the more competitive producers on the world market have been achieving for years.

But failure to substantially retool factories and other factors continue to show an operation whose liabilities far outweigh its assets – the factors that spell insolvency.

In 2004, for example, the SCJ had $1.68 billion more liabilities than it had assets to cover, double the previous year’s $888 million.

The projected out-turn for 2004/05, however, while still poor, indicates that the company had made significant gains, slicing the excess liabilities over assets to $371 million.

Latibeaudiere two weeks ago indicated that government was still partially driven by non-economic factors.

He emphasised the important social role of sugar particularly to the rural community as a major employer of labour and source of income, and in the wider economy, as an important source of foreign exchange.

Among the measurable results of the SCJ over the review period 2002-2004 outlined by the SCJ chairman were:

. investment of US$10.4 million to upgrade old, inefficient agricultural machinery and equipment;

. planting of some 8,350 hectares of cane, with a further 3,000 hectares projected for 2005 to bring total planting to 11,350 hectares over five years, increasing the net area of lands in sugar cane by 13 per cent from 15,450 hectares in 2001 to approximately 17,770 hectares in 2005; and

. increasing average cane yield from 61 tonnes cane per hectare in 2002 to 69 tonnes in 2004.

However, on the latter point, Latibeaudiere acknowledged that the effects of Hurricane Ivan last year, followed by severe drought in the early months of 2005 had contributed to lower sugar yields, but called it a temporary setback.

Measures were already in place, he said, to repair the damage, with the expectation that continued upgrading of infrastructure and replanting, yields would exceed 70 tonnes of cane per hectare at all SCJ locations by 2007.

Jamaica starts losing its protected market in Europe in 2007, which means that the sugar it produces either has to match the efficiencies of competing world producers to maintain market share, or it has to cut back drastically on production.

Either way, a fallout is coming.

Latibeaudiere says the SCJ is now shooting for average production price per pound of US 15 cents, and a planned shift to value-added products.

He also mentioned the implementation of a new computerised Agricultural Management System to monitor performance indicators on each farm and measures to implement better housing programmes for sugar workers.

On the critical issue of retooling sugar factories, many of which are decrepit, Latibeaudiere noted that the focus was on providing the infrastructure to support future investment in by-products and related areas such as cogeneration plants.

To that effect approximately US$6 million was invested between 2003 and 2004 with requirements for an additional US$2.8 million this year, he pointed out.

Diversification into value-added products such as refined sugar, rum, ethanol, cogeneration of electricity for sale to the national grid, are all part of a menu of options being explored to find the best comparative mix, he said.

Reported by Dwight Bellanfante, reporter, and Lavern Clarke, Sunday Observer editor