– still seeking buyers
Measures in the sugar industry’s turnaround plan had set a timeline of June this year for the disposal of several underper
The crippling $3 billion loss from 2008 and projected cash deficits going forward had resulted in the Interim Board examining effective cost management in the industry. In addition to the cost restriction policy for all estates–set at $490,000 per cultivation hectare–the blueprint focused on selling off marketable assets. “In time of cost and spending restrictions, the corporation cannot afford to carry an underperforming asset. Use of Herdmanston House is very minimal. However, the property requires payment of staff, utility bills and repairs and maintenance. The property is currently in need of significant repair, funding for which cannot be a priority,” the plan said.
Still on cost cutting, the plan said the distance of the Diamond cultivation from the factory and the attendant overheads contribute to the poor financial performance of the LBI estate and it recommended that the lands be sold given the proposed reorganisation of the East Demerara Estates. Further, it mentioned land at Ogle which is also to be sold. According to the turnaround plan, relocation of personnel from the Ogle compound to Enmore is expected to significantly reduce operating costs such as electricity, security and water treatment. It said too that the Ogle compound is prime real estate, adding that its sale could generate significant cash inflows.
Essentially, the disposal of land is to be pursued by the corporation as a cash inflow initiative. The plan stated that GuySuCo has land at Diamond and in other locations that are “highly marketable”. It said the Diamond area has been transformed into a housing area, and noted that locations in the Berbice region in proximity to the Berbice bridge are now heavily in demand. “It is essential that the corporation be able to see these lands at market rates,” the plan said, while pointing out that in the past GuySuCo has failed to benefit in any significant way from the sale of lands. It said land currently being recommended for sale “could have a significant impact on the corporation’s cash inflow as a consequence.”
Potentially, the plan said, the corporation could pocket in excess of $32 billion if the property and lands identified for sale are purchased. It stated that of this value, cash earnings of $3 billion have been included in 2010, with a profit on sale of land of $1.5 billion. In terms of what the industry could gain, the plan projected sales at Herdmanston house ($130 million); Ogle compound ($1.4 billion); Diamond lands at ($30.6 billion).
But in a letter to Stabroek News recently, the Guyana Agricultural and General Workers Union (GAWU), queried the decision to close Diamond cultivation, saying the land at Diamond is a sizable area of some 2,600 hectares (6,424 acres) of prime arable land requiring no drainage pumps, “unlike many of the industry’s other cultivated areas.” It pointed out that the sugar corporation has proposed the expansion of the East Demerara cultivation in order to offset the production loss resulting from the closure at Diamond, but observed that the proposed “new land area” was previously retired by GuySuCo because it was established that the soil was not adequately productive and, as marginal land, it was not economically viable to cultivate.
The union questioned who would buy the land at Diamond, asking rhetorically, “Will squatters take it over? Or will it be acquired without compensation by the government?”
However, GuySuCo in a rebuttal letter said that if the sale of the Diamond lands fails to materialise then the borrowings for the corporation will be considerably greater, assuming lenders could be found. It added that if the land sales do not materialise, a loss of $4,900 million is projected.
It was pointed out in the plan that the corporation has fallen behind in its planting repeatedly since 2005 and yields have suffered through accumulation of older ratoons.
To solve this problem, the Interim Board said planting would need to be aggressively pursued and ideally needs to be no less than 20% yearly for the foreseeable future–a strategy that has apparently been employed from the first crop for this year. The plan also mentioned the inadequate supply of cane in the industry, saying that the new factory at Skeldon is designed for continuous cane supply. It noted that the start and stops that currently exist because of short cane supply will increase costs and could cause damage to equipment, adding that the strategic focus will therefore be to accelerate land development of both estate and farmers.
Despite calls by President Bharrat Jagdeo for cane supply in the industry to be ramped up, GuySuCo has projected that the required supply is not likely until 2011. The plan points to increased land development by the corporation and farmers, but it also focuses on the expansion of the Blairmont estate, which it said has a long-standing reputation for good soils, excellent cane yields and low cost production. It said also that the Blairmont area is considered to have significant land areas suitable for development. “The Interim Board considers expansion of Blairmont to be the right direction for the estate,” the plan said.
Further, it noted that there will be a concentration on increased supply where it makes commercial sense. It said also that the replanting exercise throughout the industry will take into consideration the need for a fully mechanised layout process, adding that conversion will be closely linked to the replanting programme as is currently the case at Enmore.
