DJ Wilmar's Buy Of CSR Unit Shows Confidence In Industry

Wilmar International Ltd.'s (F34.SG) successful completion Wednesday of a A$1.84 billion purchase of CSR Ltd.'s (CSR.AU) Sucrogen sugar and renewable energy unit is a strong vote of confidence in the future of the Australian industry, Steve Greenwood, chief executive of farmer lobby Canegrowers, said.

Singapore-based Wilmar enters the Australian industry at a time of significant stress after raw sugar production in Australia slumped by a fifth after heavy rainfall and floods damaged crops and delayed and disrupted harvesting in recent months, he said.

"News on the Sucrogen sale has been particularly good in light of the very ordinary season that has been 2010," he said in a statement. "We understand that Wilmar intends a significant injection of much-needed capital to bring greater efficiencies to the crushing process."

The Sucrogen purchase marks a significant milestone for the Australian sugar industry. The business has been part of CSR for 155 years, making it one of Australia's oldest agribusinesses. Sucrogen usually produces about 2 million metric tons of raw sugar a year, usually about 40% of national output, and is the dominant producer in Australia and one of the largest in the world.

CSR reported Wednesday the underlying value of Sucrogen remains at A$1.75 billion with the increase in the sale price to A$1.84 billion accounted for in a purchase price adjustment to reflect CSR's funding of Sucrogen since April 1. CSR plans to return to shareholders
about A$800 million from the proceeds of the sale or about 52.7 Australian cents a share and continue to operate its building supplies and aluminum businesses.

"The huge investment being made in the Australian sugarcane industry is a sign that large, commercial players see a bright future for our industry," Greenwood said, noting Thailand's Mitr Phol Sugar Corp. also bought a strategic stake in Maryborough Sugar Factory Ltd. (MSF.AU), which is in the process of buying Queensland state's far northern mills.

"Further movement is expected," he said.

source: tradingmarkets