ABF invests millions in Mali sugar plant

By Charlotte Eyre

- Last updated on GMT

Related tags Sugar European union Associated british foods

Associated British Foods today announced the £100m (€139m)
expansion of subsidiary Illovo Sugar's facilities in Mali, as EU
reforms force the company to move operations out of the bloc.

The UK-based company, like many others, has chosen to switch production to Asia and Africa after having to cut sugar quotas in the EU. ABF, which holds a 51 per cent stake in Illovo, said the money will be used to construct a new sugar mill, an ethanol plant and an electricity generator in the West African country.

Illovo will hold a 70 per cent stake in the project, with the remaining shares to be owned by private investors and the Malian government.

ABF expects the enlarged facilities will at full capacity produce 200,000 tonnes of sugar and 15m litres of ethanol per annum by 2011.

In a preliminary announcement of results ending for the year 15 September 2007, ABF said that it had increased margins for sugar production through investments in production outside the European Union.

Adjusted operating profit for the sugar division increased 73 per cent to £199m, while margins also were up by 0.2 percentage points to 17.3 per cent, resulting from sugar production in Africa and Asia, the group said.

Sugar manufacturers are being forced to invest outside the bloc, the company said, because of the European Commission's sugar reforms.

Earlier this year, the EU pledged to cut sugar production by six million tones over four years in order to cut surplus supply in the region.

As part of the programme, financial incentives have been offered to the less competitive producers to leave the market.

The goal is to remove about 6m tonnes of quota by 2010 to ensure balance on the market.

The Commission hopes the changes will help take some 3.8m tonnes of quota off the market.

If insufficient quota has been renounced by 2010, the Commission will make compulsory quota cuts.

ABF said profit from EU businesses is expected to be lower next year, from €173 per tonne to €126, after reducing the European quota this year by 13.5 per cent, or 193,000 tonnes.

Several companies have also expressed difficulty in maintaining profits.

Danisco has announced the closure of its sugar production plant in Lithuania, while Tate & Lyle sold its Mexican sugar business, Grupo Industrial Azucarero de Occidente.

Related topics Commodities Cocoa

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