Economic ExpertSpeak: Omnicane targets greater value-add in sugar production
CEO of Mauritius-based sugar major Omnicane, Jacques d’Unienville, spoke about the company’s noteworthy achievements in terms of diversifying its activities, as well as expanding into different geographies (Image: Imagine)
Jacques d’Unienville, the CEO of Mauritius-based sugar major Omnicane, spoke to AfricaMoney about the challenges facing the sugar sector in the island economy. The authoritative business leader spoke about the company’s noteworthy achievements in terms of diversifying its activities – where Omnicane has attained great success with its property development projects such as the Mon Trésor Real estate Development – as well as expansion into different geographies – where the company is pursuing a project in Kenya, the Kwale Sugarcane Cluster, and contemplating investment in Ghana as well.
Edited excerpts from an exclusive interview:
Can you outline what, according to you, have been the major achievements of Omnicane in 2013?
In Mauritius, we have recently started our-state-of-the-art bioethanol distillery, which is now fully operational with an initial production capacity of 80,000 litres per day. The first shipment of some 2.9 million litres has left Mauritius on 11th August 2014 and we are forecasting one shipment of similar capacity every 2-3 months. Alongside the bio ethanol production plant, we are producing domestic carbon. We are finalizing our Carbon Burn Out (CBO) facility which will burn the extra carbon in the fly ash and bottom ash so as to reduce their carbon content from 20% to 5% to enable the final product to be mixed with bulk cement, while also producing extra energy for our industrial cluster at La Baraque.
The group has also ventured into a long term urban development plan. This strategy was presented to the European Investment Bank (EIB), which has funded a 60-year Master plan for the development of the region conducted by Royal Haskonings in 2013. The project is now actively reaching its rolling out phase – the first component being the Holiday Inn Mauritius Airport Hotel which started its operations since December 2013. The Holiday Inn Mauritius Airport hotel is the stepping stone of the comprehensive sustainable development at Mon Trésor comprising of a business park, Freeport activities, light industrial, Heritage, shopping hospitality and residential activities. On the international front, we have increased our shareholding in the Real Good Food Company and are also pursuing a project in Kenya, the Kwale Sugarcane Cluster, which is currently slated to start before the end of 2014.
What would be the key challenges posed by the abolition of the EU sugar quota in 2017 on Omnicane’s sugar division?
First of all, we are affected by it just as are all the producers in the EU and all ACP producers that are now exporting sugar. The challenge is to be able to reduce our cost of production and be more competitive, but there are many ways to go about it. So, with the reduction in cost we are going to focus more instead on value addition. For instance, we have invested in The Real Good Food Company plc, a leading UK bakery and sugar group, to take our sugar operations forward with greater value-addition. Essentially, this is how we choose to look at it: whenever there is a challenge, there is an opportunity. But there is no denying that the road ahead is going to be tough. For our sugar division, we will also have to look at other markets in the region, which is the logical thing to do because it is a sugar-deficit market in SADC and East Africa.
Mauritius’ sugar sector is increasingly investing in high-end sugar to counter potential repercussions of abolition of the EU sugar quota. Does Omnicane have any such plans or other strategies to face a future without EU support for the Mauritius sugar sector?
I do not think the question of no EU support arises, as we have good access to the EU market and, so far, the access to the EU markets has not been questioned. However, as I mentioned earlier, the market conditions are getting tougher so we are going towards greater value addition to cope with these challenges, and there are plenty of niche markets that I think Mauritius could look at. At the end of the day, it is tough to be competitive in a pure commodities market, this is why we have to shift to specific products and this is where the whole challenge of product differentiation and geographic diversification lies.
According to financial highlights for the six months ended June 30, 2014, Omnicane Ltd achieved a turnover of Rs 1.6 billion, representing a 0.97% increase compared to the corresponding period of 2013. Also, loss before tax increased to reach Rs 255.58 million compared to a loss of Rs 85.87 million in the corresponding period of 2013. Can you comment on the financials in light of this statement?
Our activity being seasonal, the crop season happens only in the second half of the year, henceforth, financials are expected to recover in the second half. Secondly, prices of sugar are going down this year and this is one of the main reasons why our financial results are lower than last year’s, even for the corresponding period. However, we have launched new projects, which are taking off well. The ethanol project is now in full production, so we have started the first shipment and the second shipment is arriving soon and this should yield results in the near term. Our property division is also doing quite well with the Highland Rose project, in which we should hopefully get good results by the end of the year as well.
During the inauguration of the Holiday Inn Mauritius Airport, the Mon Trésor real estate development project was unveiled. Where do you stand on this project?
This is an ongoing project, and is definitely a priority, with lots of resources committed to it. Obviously, it is a long-term project and it has involved a lot of planning before we even embarked on it. We have a master plan which takes into account local resources and growth prospects for the next 50 years in dialogue with the government authorities. Our next phase will involve the launch of the business park next to the hotel and we already have contacts and clients lining up for that, so works should start in the upcoming months on that aspect as well. There is also the residential part of the project but this is a long-term plan and will not all happen within the year but will be phased out over 5-10 years.
In your view, what have been the biggest achievements of Omnicane with regard to sustainable projects?
I think that in our agro industrial cane cluster, our philosophy of efficient production and championing a zero-waste philosophy has been quite an achievement. We have done a lot of research and ground work on it. Obviously, producing electricity from bagasse is also one of our big achievements, but sustainability is also about social aspects. We have been doing quite a lot of work with the Omnicane Foundation, which is the dedicated channel through which we fulfill our corporate social responsibility objectives. This inclusive approach is yielding good results as more and more people especially from the local community are benefiting from it.
Can you comment on the targeted production of ethanol from the plant in Mauritius? Besides Europe, is Omnicane considering selling its ethanol in other countries, including Mauritius?
The market for ethanol is very open and we will go where the best opportunities are. So, we have a strategic partner in Europe, the Alco group, which is one of the biggest ethanol producers and traders. That is a solid base to begin with, but we need to discuss further with them and see where the best opportunities are, and, if they lie outside Europe, by all means we will take those avenues up as well.
What are the projects of Omnicane with regards to the niche African market for hydro-electrical power plants?
We have a joint venture with the French company Mecamidi and our aim is to build a portfolio of hydroelectric power plants in the region. We are presently working on at least seven projects in Uganda, Rwanda, and Kenya, and these projects are going to materialize soon.
Regarding your projects in Africa, your sugar and energy project in Kenya gained momentum in 2012, while you have recently announced intent to participate in a Ghana sugar plantation project, which has an overall investment size of USD 250 million. How are these projects contributing to Omnicane’s overall strategy?
This is a long term and capital-intensive project where we have a Kenyan partner, the Pabari Group, which is the main shareholder of the project. We are managing the project with them, and hold 20% stake. The main challenge for this year is to start production. Obviously, it will take time before we reach the production stage, because there is huge infrastructure to be built – reservoirs, roads, planting the cane, building a factory – but all this has been going on and is progressing on track. Hopefully, we be will on target, which is to start producing sugar as from November this year.
These projects are very crucial because we want to have a critical size in the region and benefit from our association with the Real Good Food Company to market sugar in these countries. Also, this is an area where our core expertise lies – sugar and electricity.
In Ghana, we are still conducting a feasibility study for the project and undertaking due diligence, and if these go well, then we will go in for the project. We have not yet committed money to the project, as it is anyways going to be a partnership with several other stakeholders that should be involved in a project where the size of investment is as huge as USD 250 million. Obviously, this is a great project, which should succeed. The market in Ghana is currently importing all its sugar but has a climate conducive to sugar production, so it looks very promising indeed.
Finally, in relation to your mission statement (‘Research, develop and operate to meet the needs of today without compromising those of the future’), what are your projects for 2014?
Our project for 2014 is mainly getting Kenya started, and we have also a carbon burn out project in Mauritius, which is quite a challenge as a pioneering project in the island. And hopefully, we will be able to focus on consolidating our activities, because we have expanded a lot recently. This is our target for this year, in a nutshell.