Maryborough Sugar Factory expands sugar empire

MARYBOROUGH Sugar Factory announced today an underwritten plan to raise $38 million by issuing new shares to part fund an acquisition.The company is purchasing 50 per cent of a northern mill joint venture that it doesn't own, which will see it emerge as Australia's third largest sugar producer.

The remaining consideration, transaction and integration costs for the purchase under an option arrangement from Belgium-based Finasucre's Bundaberg Sugar unit will be funded by debt, Maryborough said.

Key benefits from the purchase include increasing Maryborough's raw sugar production capacity to 540,000 tonnes from 325,000 tonnes a year, with cane crushed rising to 4.0 million tonnes from 1.7 million tonnes, resulting in a sharp jump in gross earnings, Maryborough chairman James Jackson said.

Maryborough will also be able to capture strong sugar futures prices for the 2011 season from the significant unhedged portion of the joint venture's production, transition Maryborough's business mix to higher free cash flow generating assets from capital growth assets, elevate the role of Maryborough in supplying a growing Asian sugar market where a regional supply deficit is forecast to increase and provide further growth opportunities in renewable energy, he said.

Buying full control of the joint venture is the next step in Maryborough's consolidation of the Australian sugar industry and follows the company's purchase of Mulgrave Mill in 2008 and its more recent participation as half owner of the joint venture, Mr Jackson said.

"Our export volumes will constitute approximately six per cent of the raw sugar trade in East Asia."

Meanwhile, Marlborough's major shareholder, Thailand's Mitr Pohl Sugar Corp., which owns 19.9 per cent, supports the planned purchase of the joint venture share and will participate in the equity raising, Mr Jackson said.

The northern milling venture, which formally started on December 1, comprises operations of the Mulgrave, South Johnstone, Babinda and Tableland mills and associated milling assets, including contracts, cane rail networks, easements, leases and licences.

source: theaustralian