Seprod evaluates its St Thomas investments

Seprod's Golden Grove awaits its fate

BY KARENA BENNETT
Business reporter
bennettk@jamaicaobserver.com

Wednesday, September 19, 2018

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Seprod's decision to continue operating or shutter production at the Golden Grove Sugar Factory is now dependent on a written farm status approval from the Government, allowing the food manufacturer to absorb losses of the operation at the Group level.

After years of losses on the struggling operation, in addition to a cess placed on the locally produced sugar that cost the industry almost $1 billion per year, Seprod's announcement to ditch the operation following losses of $220 million for six months ended June 2018.

“We have gone to the government and said to them we want the ability to take the losses to the group level, that's the bottom line. If that happens then we will continue the operation because at that point the destruction of value wouldn't be to the same extent, if that doesn't happen, as I said to the shareholders this morning, within 12 months we will exit the operations,” Chief Executive Officer of Seprod Limited, Richard Pandohie told journalists during its Annual General Meeting on Monday.

The Seprod Group of Companies includes the Serge Island Farms Ltd, Serge Island Dairies Ltd, International Biscuits Ltd, Industrial Sales Ltd, Caribbean Products Ltd, Jamaica Grains and Cereals Ltd, Golden Grove Sugar Company and Musson International Dairies Ltd.

Ultimately, Seprod wants to minimise its tax burden by using the Group of Companies as the asset to absorb the losses of Golden Grove.

“We already have the approved farm status; we are waiting for the Ministry of Finance or the Tax Authority of Jamaica to give us in writing. We wanted to have had a response from Friday prior to this meeting so I could have definitively said yes or no, but we know they are working really hard behind the scenes,” the CEO reasoned.

SERGE ISLAND CLOsuRE BY MARCH 2019

While the manufacturer awaits response from the Government, Seprod says it has already relocated 50 per cent of machinery from the Serge Island factory in Seaforth, St Thomas, to the company's Bogwalk, St Catherine operations.

The factory, which produces a wide range of milk, milk products and juices is expected to be consolidated into the Bog Walk operation by March 2019. Seprod named challenges such as electricity outages, transportation, small labour pool and proximity to the ports as ineffeciencies for the Serge Island operation.

“Is not a simple process, but we are consolidating. We use one megawatt energy at Serge and around one and a half at Bog Walk. By themselves, it's not enough to do anything, but put together we will be able to put an LNG energy plant at Bogwalk that will take me off the grid. That's an example of the kind of efficiencies we will get with the consolidation,” Pandohie told the Jamaica Observer.

He added that of the 60 displaced by the consolidation, 30 have already accepted employment opportunities for the Bog Walk, St Catherine, operation.

PRODUCTION CENTRE FOR AGRICULTURE IN ST THOMAS

Still, Chairman of the Seprod Group, PB Scott, is adamant that plans are underway to create a more sustainable business in St Thomas, that will allow the company to compete across Caricom and into other markets.

Scott told shareholders that Seprod will be building out a 'world-class' dairy operation which will see the company purchasing machines to produce 3,000 to 4,000 litres of milk per hour, in comparison to current capacity of 1,000 litres per hour. Seprod will also be approaching more farmers as it looks to move up the value chain in its dairy product production.

The company is now in discussions with contractors in Israel, Holland and locally to determine the cost of building out the dairy operation and notes that it should be able to update shareholders over the next three months.

Currently, Jamaica produces roughly 13 million litres of milk, but Seprod wants to push that number up to 23 million litres.

“We are going to create a production centre for agriculture in St Thomas that will be world-class. Production will not stand idle and rust like Goodyear; we intend to create a very modern dairy operation that will hopefully produce significantly more milk than we are producing today,” Scott said.

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