CSM to sell European sugar operations
high value ingredients.
The move can be seen as a tacit admission that CSM Sugar will not be able to operate competitively on its own once the new EU sugar regime comes into force in July 2006.
"CSM does not see itself as the consolidator of the European sugar market," said CSM chief executive Gerard Hoetmer.
The Netherlands-based company says that it intends to focus its efforts on growth markets such as bakery ingredients and bakery products on the one hand and lactic acid and lactic acid derivatives on the other.
The new sugar regime will undoubtedly transform the European sugar sector, though the final agreement did feature a number of concessions designed to ease the pain. First there was the climb-down from the original proposed 39 per cent price cut to a figure of 36 per cent, and most significantly for sugar producers, there was agreement the sector would be compensated for, on average, 64.2 per cent of this price cut.
This price cut has also been coupled with a generous four year restructuring fund.
The agreement has led some market analysts to suggest that the most competitive players in the European sugar industry will be able to continue operating. Standard & Poors for example said that over the initial four years of the reform process, transition measures, such as the use of protected reference prices and the reliance on a voluntary incentive scheme for farmers and processors to relinquish their quotas, should ensure that EU sugar production is reduced by about one-third by encouraging the exit of the less efficient manufacturers.
CSM, although keen to exit the EU sugar market itself, believes that its sugar division has a future in a restructured environment.
"CSM Sugar is an excellent company," said Hoetmer. "The factory in Vierverlaten is one of the most efficient in Europe.
"We still see scope for further efficiency improvements, but the new EU sugar regulation will open a new era. By selling it we expect CSM Sugar to retain its strong position both in the short and long term."
CSM Sugar currently produces and sells between 350,000 and 380,000 tons of sugar every year. The company is based in Diemen, the Netherlands, and has two production sites at Vierverlaten, which produce sugar from beet. These facilities process 18,500 tons of sugar beet a day.
The firms Breda plant produces sugar specialities such as syrup, caster sugar and liquid sugar, and is home to the companys central laboratory.
Approximately 300 personnel are employed on a permanent contract. During the campaign some 75 extra personnel are recruited temporarily.
The company has an annual turnover of 250 million and according to CSM runs at a profit. The services of a bank have been enlisted to coordinate the process of a possible sale.