Come mid-July, 150 persons will be out of work in St Thomas as manufacturing conglomerate Seprod turns off the lights at the Golden Grove Sugar Factory.
“We just didn’t do a good job and we didn’t achieve what we set out to do,” was the frank admission from Chief Executive Officer Richard Pandohie, who had personally taken charge of a last-ditch effort to revive Jamaica’s only sugar-manufacturing facility in eastern Jamaica.
Pandohie says the impending closure is the honest answer to a commitment made three years ago when the company decided to have a go at reviving the ailing sugar operation.
“As communicated to the shareholders three years ago and reiterated last year, if we realised that we couldn’t make a dent in this problem, then we would have done the right thing,” Pandohie said.
Golden Grove Sugar Company in Duckenfield, St Thomas, was established in 1924. The company changed several owners during its operations and in 2009 the Seprod Group of Companies acquired a majority share in its.
By 2019, with the company facing a $3 billion debt, Pandohie set about filling in what had proven to be a money pit. Chief Financial Officer Damion Dodd says the company did all in its power to pull Golden Grove out, but it was more than all the changes and brain power that Seprod brought to the table.
“We tried everything over the years to make it sustainable, but it’s really a bigger issue. It has to do with the entire sugar industry,” Dodd said.
“We’ve done a lot to curtail those losses so that we could even achieve a break-even position. We found that structurally it would be very difficult for Golden Grove to achieve that,” he added.
The definitive word on the closure came as Seprod filed its audited annual report. A post-balance sheet event noted that the company had increased its stake in Golden Grove from 71.2 per cent to 89 per cent by acquiring the holding of another shareholder in the subsidiary, it said said.
When contacted, Dodd revealed that the company had acquired the shareholding of Fred M. Jones Estate with a view to full ownership through a buyout of an unamed overseas investor.
“There are two other shareholders in Golden Grove. We are moving from our 71.2 per cent to 100 per cent. We’re in negotiation to acquire all the rest,” Dodd said, noting that it was the best workout, since Seprod was pulling the plug.
“What they’re getting for their shares is far below their investment and this is just a step to close down the operations,” Dodd said.
TOUGH DECISIONS According to Pandohie, if Seprod took the sugar losses out of the equation the company’s results would be phenomenal. He says Seprod has spent the last three months taking a hard look at the numbers, taking the tough decisions and managing expectations.
“We communicated to all stakeholders, including government, farmers and so on. We are closing the manufacturing side of the operation. This is the last crop that we’re doing. Come the middle of July, when it stops, it will stop,” was Pandohie’s final word on Golden Grove.
He says Seprod has established a special unit to manage the transition. The 150 jobs to be made redundant is comprised of 101 permanent positions and the rest are casual workers, according to Pandohie. He says Seprod will be using unreaped cane as fodder for its dairy operation at Serge Island in eastern St Thomas. For the future, Pandohie says the Duckenfield lands will be converted to growing other crops.
“As we have said in recent times, we’re working with the Coconut Industry Board to go into coconuts and move up the value chain with that. We’re also looking at cassava and sweet potato. We want to produce gluten-free flour for export,” Pandohie said.
Turning to the company’s performance, Pandohie said Seprod notched up a good year as at December 2018. Seprod more than doubled its profits, which moved from $524.65 million in 2017 to $1.12 billion in 2018. This was on the back of a 43 per cent increase in revenues, which moved from $16.51 billion at the end of 2107 to $23.55 billion in 2018. Pandohie said a lot of the boosted performance had to do with the acquisition of the Facey Commodity distributorship in September 2108.
“We have to put that improvement in context in that some of it arose from the Facey acquisition. That boosted the last three months of our financial year,” Pandohie said.
He says Seprod is optimistic regarding their performance, noting that between organic growth and acquisitions, the company is expecting to be delivering even better shareholder value. He notes that now that the Facey acquisition is settled, job one is the continuation of horizontal and vertical integration to unlock more shareholder value.
“There are integrative and synergistic opportunities which we’ve not yet explored. All you are seeing is the normal activity that would be attributable to the operation of Facey. There are issues of horizontal and vertical integration that we should start to see the results of by third quarter onwards,” Pandohie said.
Key to the integration, Pandohie said, is the establishment of a distribution and logistics arm of Seprod. The company finished its first new warehouse at Felix Fox Boulevard in Kingston. The 35,000 square feet space will bring the total warehousing space to 75,000 square feet, according to CFO Dodd. That was, he said, the first phase of a 300, 000 square feet warehousing and logistics operation.