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A combination of devaluation impact, flood damage and loss on sale of investment drove the Fiji Sugar Corporation to a $36.8 million loss in the 2009 financial year.
The country’s only sugar miller copped a heavy blow in an unrealized exchange loss of $24.4 million, a direct impact of the 20 percent devaluation of the Fiji dollar in April against its long term loan facility with India’s Export/Import Bank.
The bleak results however overshadowed an improvement in trading operations, where operating revenue increased to $245.8 million compared to $234.9 million in 2008, and trading loss improved to $5.9 million, compared to $22.8 million in 2008.
“The Fiji dollar was devalued by 20 percent on 15 April 2009. While this is a huge boost to the sugar industry for the future, operating results for the year was seriously affected by a massive $24.4 million unrealized exchange loss on the borrowings for the Mill Upgrade Program,” said FSC chairman Gautam Ramswarup.
The company is undergoing massive reforms as its main market, the European Union, has significantly reduced the preferential price that it used to pay for FSC’s sugar.
This has meant reduced earnings from that market. The company is addressing the shocks by instituting a number of internal reforms, complemented by industry reforms spearheaded by the government, who owns a bulk of FSC.
“Following the reform of the EU Sugar Regime the EU sugar price reduced by 14.3 percent during the year. A further 21.7 percent reduction will come into force from 1 October 2009, taking total reductions to 36 percent. This remains one of the main driving forces for the reform of Fiji Sugar Industry. Fortunately, this will be negated to a large extent, by the devaluation of the Fiji Dollar,” Ramswarup said.
The Government, he added, had started streamlining institutional structures within the industry, where the Sugar Commission of Fiji and the Fiji Sugar Marketing were dissolved and their functions distributed to remaining appropriate institutions.
“In addition, a Snapshot Review Report on the Fiji Sugar Corporation was carried out with a view to identifying strategies and initiatives to return the Corporation to profitability,” Ramswarup said.
“Perhaps the most significant event during the year was the progress on the Mill Upgrade Program which was substantially completed, allowing the commencement of the 2009 crushing season with upgraded mills. This was despite the worst floods in Fiji’s history in January 2009 when the mill upgrade and maintenance works were at its peak.”
The company faced a challenging year as sugar production dropped and percentage of burnt cane increased, affecting sugar quality.
