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EU sugar reform forces CSM to restructure

By Anthony Fletcher , 28-Sep-2005

CSM's sugar beet processing plant in Hoogkerk, the Netherlands is now fully online following the closure of the firm's Breda factory earlier this year.

The Dutch ingredients company, which has blamed the Breda closure on EU sugar reforms, believes that the move will ensure that its sugar operations remain profitable in difficult circumstances.

Europe's sugar regime has come under fierce criticism for distorting sugar prices, which have been traded in recent months at three times the world price in Europe. Under the new plans sugar users would no longer be obliged to buy from within national borders and between EU members - as is currently the case - allowing them to source from competitive markets and ultimately buy cheaper sugar.

The 25 EU member states still have to approve proposals, but the plan from Agriculture Commissioner Franz Fischler tabled in mid-July to the Parliament is for a one-third cut in the institutional sugar price rolled over three years and starting from the 2005-6 campaign. The move has been welcomed by food manufacturers, who see the changes as leading to a much more liberal sugar trading structure.

These proposed changes to the EU sugar regulation will likely lead to lower sugar prices and production quotas. So by concentrating the sugar beet processing in one factory CSM believes it will considerably improve efficiency and create an excellent starting position for itself in the further consolidation of the European sugar industry.

The company has spent the past few months getting the Hoogkerk, Groningen plant fully operational. Adaptations have been made in order to improve capacity, with the result that CSM will now be able to produce a total of 340,000 tons of sugar.

To reduce transportation distances and further increase operational efficiency, the beet from the south of the Netherlands will be processed by partners across the border. The beet from the south-west for example will be processed by ISCAL in Moerbeke, Belgium, while the beet from the south-east will be processed by Pfeifer&Langen and Jülich in Germany.

CSM says that the estimated average national yield of 62 tons beet per hectare is below last-year's national average, but just above the multi-year average. The harvest anticipated by the Institute for Rational Sugar Production (IRS) works out at a sugar yield of 10 tons per hectare, slightly down on last year (10.8 tons/ha) but still above the ten-year average (9.5 tons/ha).

The move comes after some extensive restructuring at the group. CSM's plans, announced last year, involve making €50m in net savings over the next two or three years.

As part of these plans, CSM recently announced that it would close its BakeMark sales office in Finland in order to restructure its bakery supplies activities in the Nordic area. A substantial part of the business activities of the sales office will be transferred to Raisio Nutrition, a Finnish food company.

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