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Sugar factories closing, others languishing on state subsidies

13 December 2015 / 16:12:07  GRReporter
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After yet another difficult year, the questions surrounding the future of the embattled Greek Sugar Factories are growing in number. The disappointing economic performance during the period July 2014 - July 2015, the uncertainty associated with the contract with a Brazilian holding company, which has been tossed about quite a lot in the media, and the business plan for the restructuring of the company, are all bad signs. Therefore, initiatives such as the capital injection by the government in late March, or the reopening of the sugar refinery in Orestiada, are lacking in terms of economic reason.

Dimitris Yanakidis, Greek Sugar Factories CEO, won't say much about the Brazilian holding. He limits himself to expressing his optimism that the obstacles, which have delayed the deal, will be overcome. Yet the still unborn cooperation for the processing of raw sugar from Brazil in the Greek Sugar Factories' refineries raises many eyebrows. The question whether this deal is compatible with the ongoing support, which the company provides to Greek sugar beet producers, is specifically baffling.

The case of Orestiada, on the other hand, is typical of the government's manner of handling such issues. The refinery, just like the one in Ceres, was closed down in July 2014 for being unable to survive on its own. This year, although total sugar production has shrunk to 25,000 tons, and the overall GSF losses have reached €72.4 million (it is the eighth consecutive year of loss), and sugar beet harvesting in the area now lasts only 15 days, the time was deemed right to reopen the plant in Orestiada. For these two weeks, 234 people were appointed at the plant, with 94 of them only given 14-week contracts.

"We had told them (the government) not to plant sugar beet in the area, as production costs would be unbearable. However, they based their decision on social rather than on private business rationale," says to Kathimerini Pavlos Boyanidis, chairman of the beet producers associations in Central Macedonia.

New Democracy MP Niki Kerameus, who lodged two questions on the sugar issue, focused on the €30 million funding, which according to her "constitutes state aid – and one that could not resolve the company's problems. No spending has been earmarked for its restructuring, while the company's management is squandering resources."

Potami's Harris Teoharis, who has also been on the case, points out: "The opacity and corruption in companies like Greek Sugar Factories have for years been disguised by farmers' subsidies, and those involved benefited." Instead of allowing the crisis to put an end to these practices, he goes on, "the government of Syriza-Independent Greeks has opened Pandora's box and sent the bill to the citizens."

Dimitris Yanakidis favours the decision to reopen the Orestiada refinery. He explained to Kathimerini that if harvested sugar beet had been transported to the Plati factory, in the Imatia region, like last year, the latter would have had to stay open for it alone. This is so because due to weather conditions sugar beet planting in the Evros and Rodopi regions is carried out later, in May, and harvesting only takes place when it is already finished everywhere else. Given its small quantity (57,000 tons from 1100 ha), if the beet was processed in Imatia, its production costs would have been exorbitant, says Yanakidis.

But the question remains why Greek Sugar Factories continue to supply their beet from Thrace, where, says the GSF CEO, the production cost per ton in Orestiada is expected to reach €900 this year. The selling price of the product, according to Yanakidis, is somewhere between €520-550 per ton.

But the key issue is that GSF stands no chance of reviving its profitability at the current low level of sugar production, meeting no more than 10% of consumption. Yanakidis says that if the costs of the plants were to be covered, Plati's sugar output should reach 80,000 metric tons and Orestiada's - 40,000 tons.

Meanwhile, Christmas is at our doorstep. Back in September, Yanakidis himself set it as the deadline for remunerating producers for this year's harvest. Now though, asked whether this will be done, his only reply is "we shall see". The company has €70 million to receive from debtors, many of which have meanwhile gone bankrupt.

Tags: Greek sugar factories sugar production sugar beet refinery Orestiada
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