LE 750 million facility to double current output
CAIRO: Delta Sugar announced Wednesday it is considering an offer from the family of Sheikh Zayed bin Sultan Al Nahyan, the late president of the United Arab Emirates, to invest in its planned $131 million (LE 750 million) sugar beat factory in Sharkeyya.
In a statement to the Cairo and Alexandria Stock Exchange (Case), Delta said the new factory will feature two production lines, the first of which will produce 150,000 tons per year and employ 900 workers.
Work on the second line will begin as soon as the first line reaches its maximum output and will bring the facility’s total production capacity to 250,000 tons per year, the statement said. Original plans of the factory, announced in August, called for an annual capacity of 125,000 tons.
Delta issued the statement after Case suspended trading on the company’s stock for almost three hours on Wednesday because the company failed to respond to Case’s inquiries about the potential partnership with the Al Nahyan family.
According to the company’s Financial Administration Director Masoud Hamed, Delta has received six land offers to house the new facility. Once the company’s choice is finalized, construction will take approximately two years, he said. The new factory will nearly double Delta’s total annual output, now standing at 260,000 per year. The company is the country’s second largest sugar manufacturer behind The Company for Sugar and Integrated Industries with an output of 1 million tons per year.
Most likely, Delta Sugar will choose the offer from the Sheikh Zayed family, a company official told Reuters. “They have been in discussions with them for a few months now.
In April, DS announced plans for new sugar factories in Fayyum and Dakhaila with combined production capacities of 350,000 tons per year, though no start dates were announced.
The government started talking about [the Sharkeyya factory] six months ago when world sugar prices skyrocketed and directly affected the sugar prices here in Egypt, Economist Magdy Sobhy of Al Ahram Center for Political and Strategic Studies told The Daily Star Egypt. [The government] saw the need to control prices and the solution was to increase local production.
Sugar now sells for LE 3 per kilo for consumers, up from LE 2.25 in January, 2006. Egyptians consume about 2.4 million tons of sugar per year, of which 800,000 to 1 million tons are imported, according to The Egyptian Chamber of Food Industries (ECFI).
Delta is 51 percent government-owned. The company’s remaining shares are mostly traded on the Case. In early 2006, Minister of Investment Mahmoud Moheiddin announced the government intends to float another 30 percent of Delta shares by the end of the year, but the move was never made.
The proposed partnership by the Al Nahyan family is expected to draw public criticism because of the strategic importance of the sugar, said Sobhy.
I think the current time is not suitable [to seek strategic investors] because most of your expertise exist in the public sector and because there are no financing problems, says Sobhy. It s a very profitable industry so there should be no reason to sell.
Production in the new Delta factory in Sharkeyya will rely on sugar beats instead of the traditional use of sugarcane to increase efficiency, the company said.
The shift has been adopted in recent years in most new factories because beats use less water and produce more sugar, said Shahhat Selim, sugar sector expert at ECFI.
On average, beats hold 14-15 percent sugar content, compared with 10-11 percent in sugarcane, he says. The price per ton stands at LE 140-LE 150 per ton for both.
In Q1 2006-7, Delta announced a net income of LE 299.7 million, up from LE 281.2 million in the first quarter of 2005-6. According to a company statement, 2006 production reached 260,000 tons of sugar, 110,000 tons of fertilizers and 90,000 tons of molasses.