Key performance metrics never seem to be addressed at GuySuCo

Nov 28, 2021 Letters

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Dear Editor,

Kaieteur News – Almost weekly, letters to the newspapers and one opinion column expressed disapproval of the Guyana Sugar Corporation (GuySuCo) CEO’s performance. One had to wonder, would key stakeholders join the CEO on his journey to his stated goal of a profitable GuySuCo producing between 100,000 and 150,000 metric tonne (mt) per year.
The reduction of the company’s production would likely not be pleasing to those stakeholders who desired a larger sugar producing company; even if the government-controlled company lost lots of money.
So, it is not surprising to see the media criticisms, in what appears to be a coordinated effort to have the CEO removed.
The CEO’s strategy is focused on selling predominately higher margin packaged sugar, rather than bulk sugar.
Had Guyana’s sugar consumption been 100,000 and 150,000 mt per year, then the strategy’s success would be all but assured. However, the strategy’s success is highly dependent on selling in foreign markets, between 65,500 and 115,500 mt of sugar, predominantly as packaged sugar. Winning contracts to sell packaged sugar in small market Caribbean countries will not be sufficient to be successful; GuySuCo’s packaged sugar will have to displace competitors’ packaged sugar in larger markets, most likely in the Caribbean.
The strategy’s likelihood of succeeding is lower than it appears, because of excessive sugar production cost at US$600 per mt. GuySuCo’s margin on packaged sugar is less than US$100 per metric ton, i.e. less than US 4.5 cents per pound of sugar. Competitors filling their packages with much cheaper manufactured or sourced bulk sugar can easily adjust prices to stop any sustained intrusion of GuySuCo’s packaged sugar filled with US$600 per mt of manufactured sugar.
In addition, opening shuttered estates negatively affects the strategy. Sugar manufacturing cost will rise above the US$600 US per mt, because results of the better performing Albion and Blairmont estates will be neutralized further by opening more estates with average to below average performance.
The US$600 mt sugar manufacturing cost has to be lowered for an improved likelihood of the strategy’s success.
At GuySuCo, not enough sugar is produced for the manufacturing cost incurred. Poor sugar production results from poor sugarcane yields, exacerbated by constant industrial actions and absenteeism during harvesting. Sugar production is also lower as poor sugarcane quality results in 10 to 50 percent more weight of sugarcane (depending on estate) to produce a ton of sugar.
In sugar manufacturing, a key performing metric is the cost expended for sugarcane farming, i.e., cost to plant, grow and harvest sugarcane; industry benchmarking indicates sugarcane farming costs represent between 70 and 80 percent of total sugar manufacturing cost. GuySuCo’s sugarcane farming and administrative costs are excessive and provide opportunity for improvement. The good news is that factory cost is not excessive when compared with industry benchmarks and would decrease with increase sugar production.
Ourworldindata.org trended the decline of sugarcane yields in Guyana from 1961 to 2018. Sugarcane yields have declined from being consistently 80 mt/ hectare in the 1960s to less than 60 mt/hectare by 2018; the bottom fell out in 2011 and yields have remained below 60 mt/ hectare level since.
The CEO described an initiative to replant new sugarcane as some sugarcane harvested can be up to 10 years old.
This should help improve sugarcane yields as well as sugar yields i.e., less tons of sugarcane will be required to produce a ton of sugar.
This activity of renewing the cane will take many years; it is incomprehensible why improving sugarcane yields was not the number one priority when EU ASMP funding was available, rather than building the US$200 million Skeldon factory. Reasonable sugar production cost will not occur by just getting sugarcane yields back to 80 mt/hectare. Further cost reductions have to occur at 80 mt/ hectare yields or GuySuCo will have to produce sugarcane yields above 110 mt/hectare with the current cost structure. There is no history of 110 mt/ hectare sugarcane yields by the company.
GuySuCo management history is a carousel of CEOs and failed strategies to turn around the company.
These failed strategies never addressed poor sugarcane /sugar yields and excessive sugarcane farming and administrative costs.
The question is whether GuySuCo’s CEOs were ever empowered to address these key performance metrics, which their counterparts in first quartile performing sugar industries are focused on improving.

Sincerely,
D.C. Daly

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