Home Top Stories Downsizing of sugar industry will severely impact operations – DDL
…company’s production target in limbo
As Government moves ahead with plans to close several sugar estates, local companies whose production depends on the produce of the Guyana Sugar Corporation (GuySuCo) are already forecasting the impact the decision will have on their operations.
One such company is Demerara Distillers Limited (DDL), which has expressed concerns about developments regarding the state of the sugarcane industry, and the potential downsizing of sugar production.
According to the international award winning rum producer on Saturday, initial assessment of its distillery production for 2017 shows that is has surpassed projections, with an increase of 30 per cent over 2016. In keeping with this trend, and largely resulting from DDL’s intensive efforts in international marketing, the distillery production for 2018 is now projected to increase by a further 25 per cent over 2017.
Herein, however, lies the company’s concerns which are ground in the long historical relationship between itself and GuySuCo given DDL’s dependence on the sugar estates for its molasses raw material, and in turn is a significant source of cash flow to the sugar company for its operations.
“With the impending closure of sugar estates, there will be a considerable short-fall 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 is 70,000 tons. In contrast, GuySuCo has set a sugar production target of 115,000 tons at the three estates currently earmarked to remain in operation, with molasses production being pegged at 52,000 tons.
In light of this shortfall, DDL said it 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.
Nevertheless, DDL added that it welcomes the comments from Minister of State Joseph Harmon at last week’s post-Cabinet press briefing where he indicated that Government is still open to options that keep the GuySuCo estates operational until arrangements are finalised for them to be privatised.
The Minister informed reporters that Cabinet engaged GuySuCo to obtain an update on the future plans of the Corporation to return it to efficiency and financial viability, as well as the Special Purpose Unit (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, which Cabinet deliberated. However, those deliberations were incomplete and would be concluded at Cabinet’s next meeting on January 2, 2018.
Meanwhile, Chairman of DDL 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.”
This position, the company said, was echoed by President David Granger at the Launching of DDL’s Special Edition 50th Anniversary El Dorado Rum in April 2016, when he said, “Guyana’s rum industry is precious; it must be protected and preserved in the face of peril. Workers’ jobs and the livelihood of those who indirectly depend on the industry are at stake. The loss of foreign exchange and excise earnings by the industry can result in severe problems in our economy.”
DDL asserted that the imperative of finding compelling solutions to guarantee its future sustainability goes without saying.
According to the company, it is committed to playing an active role in forging the next steps for survival, and has been engaging all stakeholders, including Government.
Government support is crucial, the company said, 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 is projected to pay in excess of $2.2 billion for 2017 based on its performance.