Mauritius sugar industry faces price cuts & uncertain future
Also, Mauritius sugar major, Medine Group, continues its restructuring with the latest step being the elimination of its holding companies to unlock value to shareholders and reduce administrative costs. (Image: development progress)
Mauritius sugar sector is confronted with an uncertain future due to reduction in prices paid to the planters, which might fall under the threshold of Rs 14,000, to hit around Rs 13,500, similar to that prevalent in 2010.
One of the reasons for this reduced price is the overproduction of this commodity on the world market. The major markets of Europe and United States have led an aggressive campaign to reduce their consumption of sugar because of health concerns.
The surplus on the market is about 4.4 million tons as the production of sugar amounts to approximately 181.1 million tons against 176.7 million tons consumed this year.
However, at the government house, and in particular at the Finance Ministry, they have assured planters of a systematic monitoring of price changes to avoid being at a loss by a possible announcement of the sugar syndicate.
In the current political situation, which is rife with the possibility of a Snap General Election before the presentation of the next budget in November, the government could be called to top up any new price reduction of sugar to small planters by increasing the subsidies already planned under the aegis of the Ministry of Agro-industry.
Since the beginning of the year, the government had announced a study on the sugar industry, which is due to start in September, and the deadline indicated by the MCIA to start this study is a matter of concern as the management of the institution is absent.
The Mauritius Cane Industry Authority (MCIA), formerly the Mauritius Sugar Authority, is set to start the study on repercussions of the abolition of sugar quota of the European Union as from September 2014.
Nevertheless, they will be able to draw some comfort from another study aiming at an optimal production level of 125,000 tons of molasses annually.
On the other hand, Mauritius sugar major, Medine Group, continues its restructuring with the latest step being the elimination of its holding companies to unlock value to shareholders and reduce administrative costs.
The three holding companies – Black River Investments Company Limited (BIS), Medine Shares Holding Company (MSH), and Alma Investments (Alma) – form the Medine group and manage the Medine Limited, Excelsior United Development Companies (EUDCOS) and the Societe De Developpement Industriel & Agricole Ltee (SODIA).
Through this process, the board of directors of the Medine group explained that they expect to deliver enhanced value to existing shareholders, and to allow the group to save on administrative costs in the middle and long term.
However, as the Medine Group is an associate company of Promotion and Development Limited (PAD), PAD will hold 34.97% of Medine, 34.50% of SODIA and 20.97% of EUDCOS after the restructuring exercise.