DDL molasses supply threatened by GuySuCo’s production cuts- contemplates entry in sugar industry; wants estates remain operational

Dec 31, 2017 News

---

By Leonard Gildarie
Demerara Distillers Limited (DDL) has expressed deep worry over the impact that the planned closure of three sugar estates will have on its rum production.
The Diamond-headquartered company, which reported yesterday that its production increased 30 percent this year, is likely to see more growth next year.
However, three sugar estates- Rose Hall, Skeldon and Enmore- have recently sent home almost 4,000 workers as part of a major restructuring of the state-owned Guyana Sugar Corporation (GuySuCo).
The estates are to be placed in the control of a Special Purpose Unit (SPU), controlled by the Government of Guyana.
Government, through its Cabinet of Ministers, is currently in talks with stakeholders to determine whether the estates will continue operations until investors are found to manage them.
This week, the Cabinet started an intense, all-day-long discussion with stakeholders with more talks set for Tuesday, during the next Cabinet meeting, Minister of State, Joseph Harmon, disclosed Friday. It is likely some major decisions will be made then.
Yesterday, DDL made it clear the planned cut in production in a smaller, restructured GuySuCo will have impact on its supply of molasses, which the sugar company supplies to them.
GuySuCo has set a sugar production target of 115,000 tonnes at three estates currently earmarked to remain in operation, with molasses production being pegged at 52,000 tons.
This will clearly not be enough for DDL which is projecting that its demand for 2018 will be around 70,000 tonnes of molasses, if it is to meet demands for both local and international customers.
Molasses is crucial to rum making. DDL’s El Dorado rums have been winning awards over the years.
The three estates- Skeldon, Rose Hall and Enmore- completed production for the year with the industry recording its worst figures in years.
Government is insisting that Guyana can ill-afford to continue bailing out an industry that has been chalking up losses in more than a decade. The industry, until recently, remained one of the biggest employers in the country with over 16,000 workers.
GuySuCo wants the workforce to be slashed to about 10,000 for it to become profitable.
Major Growth
According to DDL, yesterday, initial assessment of its distillery production for 2017 shows that it has surpassed projections by 30% 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% over 2017,” the company explained.
DDL is a major employer too, with over 1,200 persons with holdings in Demerara Bank, and interests in distribution and shipping.
DDL made it clear that it is concerned about developments regarding the state of the industry, and by extension 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, 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 shortfall in molasses availability, which is directly related to the reduced projection of sugar production.”
The company disclosed that in light of the expected shortfall of molasses, it has been actively been exploring its potential role in the future of the sugarcane industry.
In fact, DDL 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.
“DDL therefore welcomes the comments from Minister of State, Joseph Harmon, at this week’s post-Cabinet press briefing, indicating 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 the company remains 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.
These include 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 was echoed by His Excellency, President David Granger, at the launching of DDL’s Special Edition 50th Anniversary El Dorado Rum in April 2016.
At the event, DDL reminded, the president said that Guyana’s rum industry is precious and that 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.”
Good Performance
According to the company, the performance of the distilling industry in 2017 has been a bright spot for the local economy, building on the success of El Dorado – “one of Guyana’s few, truly internationally-renowned brands – the imperative of finding compelling solutions to guarantee its future sustainability goes without saying.”
The company said that 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.
The company pointed out that during a recent visit in October 2017 to its facilities by Prime Minister, Moses Nagamootoo, and Minister of Business, Dominic Gaskin, the matter of molasses supply was raised.
“In remarks after the tour, Prime Minister Moses Nagamootoo offered assurances that molasses supply for DDL would be secure.”
DDL’s statement noted that the PM said: “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.”
Minister Gaskin, also commenting at the same event, had said that “it was good to get a walk through and get a glimpse of their manufacturing facilities.”
He commended DDL as “one of the biggest value-added companies in Guyana and probably Guyana’s most successful value-added company.”
DDL also noted that that Samaroo had announced plans of the company to invest $10B over the next three years.
“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.”
The issue of GuySuCo has been a burning one for the unions, which is against privatisation and divestment, and the administration, which is adamant that GuySuCo in the current state cannot continue.

---

---