With the impending downsizing of the sugar industry expecting to impact the operations of Demerara Distillers Limited (DDL), the company has since submitted an expression of interest (EoI) to Government for the potential purchase of one of the sugar estates.
The company, which produces the international award-winning El Dorado Rum, has raised concerns over Government’s plans to downsize the sugar sector. The company heavily depends on molasses for its production.
Public Relations Representative for DDL, Alex Graham, told Guyana Times on Wednesday that once the supply of molasses was threatened, it was in the company’s interest to explore options with the intention of finding a solution.
“At the moment, what we are doing is investigating options that we could participate in that would help us to keep our business interest alive… In that regard, no options are off the table, but there is no specific plan to date,” he stated.
Graham explained that when the Special Purpose Unit (SPU) was established, it had requested interested parties to submit EoIs and DDL submitted same. He went on to note that no formal proposal has been submitted otherwise.
DDL Chairman Komal Samaroo
“At the moment, we are looking at all options. Until the SPU comes back to those who have expressed interests and say these are the soft structures that we’re looking at and that kind of thing, then we would be able to make a formal proposal for one or a combination of the options available,” the company representative posited.
The SPU, a sub-body under the National Industrial and Commercial Investments Limited (NICIL), is tasked with the divestment of the assets of the Guyana Sugar Corporation (GuySuCo) and has since selected London-based PricewaterhouseCoopers (PwC) to value the assets of the heavily indebted and cash-strapped Corporation.
Last Saturday, DDL said that distillery production for 2017 increased by some 30 per cent over 2016, surpassing projections last year. To this end, the company noted production for 2018 was now projected to increase by a further 25 per cent over 2017. However, the company is concerned over the effect the downsizing of the sugar industry will have in meeting its projections for this year.
“With the impending closure of sugar estates, there will be a considerable shortfall in molasses’ availability, which is directly related to the reduced projection of sugar production,” the company noted.
It went on to point out that based on production demand for local and international customers, DDL’s molasses requirement for 2018 was 70,000 tonnes. In contrast, GuySuCo has set a sugar production target of 115,000 tonnes at the three estates currently earmarked to remain in operation, with molasses production being pegged at 52,000 tonnes.
“In light of this shortfall, DDL has been actively exploring its potential role in the future of the sugarcane industry, and has executed a high-level technical and economic feasibility study on innovative approaches to use the existing sugar assets to meet the current and future needs for molasses for an expanding distilling industry,” the company stated.
Last week, Minister of State, Joseph Harmon, told a post-Cabinet press briefing that Cabinet engaged GuySuCo for the updated position on the future plans of the Corporation to return it to efficiency and financial viability as well as the SPU that was set up to manage the divestment of the assets of the industry that will fall outside of the reconfigured GuySuCo.
Harmon noted that both parties outlined plans and recommendations relating to their respective roles and responsibility, on which Cabinet deliberated. However, those deliberations were incomplete and would be concluded at Cabinet’s next meeting on January 2, 2018.
Nevertheless, DDL Chairman Komal Samaroo posited that “we are optimistic that the Government of Guyana understands what is at stake, not just for the sugarcane industry, but for all other stakeholders that are a part of the GuySuCo value chain, including the many thousands who are directly and indirectly involved in the production, distribution and sale of DDL’s value-added products, both locally and internationally.”
According to the company, Government’s support is crucial in recognition of the jobs to be created and the significant increase in taxes contributed to the national economy from greater earnings. In 2016, the DDL Group paid $1.9 billion in taxes, excluding VAT, and was projected to pay in excess of $2.2 billion for 2017 based on its performance.
