DDL worried sugar upheaval will cut molasses

Demerara Distillers Limited (DDL) yesterday expressed concern over plans for the downsizing of the sugar industry noting that its crucial molasses supply chain would be at risk.

It was the first public statement by the company on the upheaval in the industry which gathered momentum at the end of last year with the closure of the Wales sugar estate.

Three more sugar estates are targeted for closure and  over 4,000 GuySuCo workers were earlier this month issued with termination letters. The closure of estates and wholesale sacking of workers is proceeding without any plan from the government on alternative employment for workers or utilising the sugar estates as going concerns.

In its statement yesterday, DDL said that initial assessment of its distillery production for 2017 shows that is has surpassed projections, with an increase of 30% over 2016.

In keeping with this trend,  distillery production for 2018 is now projected to increase by a further 25% over 2017.

Komal Samaroo

“In this regard, DDL is concerned about developments regarding the state of the sugarcane industry, and the potential downsizing of sugar production.

“These concerns are grounded in the long historical relationship between DDL and GuySuCo, in which DDL is dependent on the sugar estates for its molasses raw material, and in turn is a significant source of cash flow to GuySuCo 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.

“In fact, 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”, the company said.

It added that in light of this shortfall, DDL has been “actively exploring” its potential role in the future of the sugarcane industry, and has commissioned 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.

DDL said it therefore welcomes the comments from Minister of State, Joseph Harmon, at last week’s post-Cabinet press briefing that the Government of Guyana is still open to options that keep the GuySuCo estates operational until arrangements are finalised for them to be privatised.

DDL Chairman, Komal Samaroo, said in the release yesterday  “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. Guyana’s rums are an important economic sub-sector. It is in the national interest to ensure the survival and sustainability of this industry and the Government of Guyana is committed to supporting this industry.”

DDL said it is committed to playing an active role in forging the next steps for survival, and has been engaging all stakeholders, including the Government of Guyana.

During a recent visit in October 2017 to DDL’s facilities by Prime Minister Moses Nagamootoo and Minister of Business Dominic Gaskin, DDL said that the matter of molasses supply was raised.

In remarks after the tour, DDL said  Prime Minister Nagamootoo offered assurances that molasses supply for DDL would be secure. It quoted him as saying, “Those who are saying that sugar is dead, or will be dead, should come and take a tour of DDL’s bond and factory, there is abundant need for molasses … so I don’t see today any sign of the death of the sugar industry. Guyana will continue producing sugar once there is a need for molasses.”

Upon announcement by DDL Chairman Samaroo of the company’s three-year $10 billion investment programme,  DDL said that Gaskin wished the company well with its expansion plans and said that “the government stands ready to give support to DDL wherever possible.”

“This 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 is project to pay in excess of $2.2 billion for 2017 based on its performance”, DDL added.

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