Cevital to Boost Sugar Refining Capacity 25% as India, Sudan Demand Gains
Cevital, Algeria’s biggest sugar producer, plans to expand its Bejaia refinery by 25 percent next year to tap rising international demand for the commodity, Chief Executive Officer Issad Rebrab said.
Cevital, which already controls about 85 percent of the Algerian market, refines some 2 million metric tons of sugar annually in the port town of Bejaia, and plans to add 500,000 tons in 2011 at a cost of about $15 million, Rebrab said. About half of its output will be earmarked for export.
Global sugar demand is forecast to climb 2.1 percent in the 2010-11 season, more than double the year-earlier pace, as world production rises 5.4 percent, Macquarie Group Ltd. said in a report last week. Refiners are expanding output to benefit from prices that have jumped about 17 percent in the past 12 months.
“We want to reach 2.5 million tons of capacity at Bejaia in the next 12 months,” Rebrab said in an interview at a trade conference in Montreal yesterday. “We have already begun the studies. Most of the infrastructure we need is already in place, so we don’t need to make a big investment.”
Cevital sells its sugar in countries such as India, Sudan, Tunisia, Iraq and Saudi Arabia, Rebrab said. The company would consider further expanding capacity to 3 million tons should demand continue to rise, he said, without providing a timeframe.
Prices Soar
Refined-sugar futures touched $731.70 a ton on NYSE Liffe in London yesterday, the highest price since February. Prices have gained over the past year on forecasts for reduced crop yields in Brazil, Pakistan and Russia.
Closely held Cevital has about 12,500 employees and annual sales of $2.2 billion. Food-processing operations such as oil, margarine and sugar account for about 60 percent of revenue. The company also imports cars and develops shopping centers, among other businesses.
Sugar isn’t the only food business targeted for growth. Cevital intends to build a $100 million oilseed-crushing plant, also in Bejaia, that would supply export markets, Rebrab said. Construction will begin once Cevital receives permission from Algeria’s government, “probably in a few months,” he said.
The company is also awaiting government approval for a deepwater harbor, a shipyard, two steel factories, an aluminum smelter -- together with Rio Tinto Group -- and a car plant. These and other planned projects would require Cevital and foreign partners to invest as much as $30 billion, Rebrab said.
Project Financing
Cevital has lined up 1.4 billion euros ($2 billion) from two international banks to part-fund the projects, Rebrab said, declining to identify the banks. Shippers including France’s CMA CGM SA and Denmark’s A.P. Moeller-Maersk A/S are interested in investing in the deepwater harbor, he said.
Cevital would consider selling a stake to international investors or offering shares in some of its units on the stock market to raise more capital, Rebrab said, stressing that no transaction is imminent.
“Our strategy to finance our share of the projects is to first use our cash flows, our lines of credit, and possibly raise debt on the Algerian market,” he said. “If we don’t have enough money from these sources, then we will list some of our units on the stock market. But this is still a long way away.”
To contact the reporter on this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net
To contact the editor responsible for this story: David Scanlan at dscanlan@bloomberg.net
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