Liepaja, Jelgava sugar mills to brave out EU sugar reforms

  • 2006-03-29
  • From wire reports
RIGA - Shareholders of Liepajas Cukurfabrika have decided against shutting down their mill, and will try to continue operations after the planned EU sugar reform. Director Valija Zabe said the company would ask the government for an additional production quota to the tune of 2,000 tons. If the mill's request is granted, its total quota will reach 26,850 tons, she said.

Now that it has decided to continue operations, the mill will have to pay 126.4 euros per each ton of sugar, or a total of 3.3 million euros, to the EU restructuring fund.
As Zabe explained, the sugar mill is planning to continue production for at least one more year. During this time, managers and owners hope the EU will answer all questions regarding the sugar reform.

She pointed out that the Liepaja sugar factory will continue producing sugar thanks to previous investments made. Over the past four years alone, the company has spent some 6 million lats (8.5 million lats) on production investments.
The head of the sugar mill said the European sugar market was changing rapidly, and this year would show whether Liepaja Cukurfabrika would manage to compete successfully in the European market.

Agriculture Ministry spokeswoman Dagnija Muceniece said the ministry was satisfied with the decision.
Jelgavas Cukurfabrika, one of Latvia's two sugar mills, announced on March 10 it would stop production but then later said it would make a final decision after the future of its competitor, Liepaja Cukurfabrika, was decided.

Last week, Jelgava sugar mill officials said they had changed their mind and would try to stick it out.
The sugar mill's shareholders had to decide whether the company would keep producing sugar in the future in view of the EU's sweeping sugar reform, designed to significantly cut both sugar price and sugar production in Europe. If sugar companies decide to continue production, they will have to reduce their output, but if they stop production, they will be granted generous compensations.

"This is the final decision 's farmers can sow sugar beets being sure that JCF will buy them in amounts allowed by the company's production quota," said JCF board chairman Janis Blumbergs.
However, the sugar mill's board member and finance director Maris Freifalts told Latvia's LNT commercial television that, for the time being, the decision has been taken for a year. He added that the company would decide on further operation later, depending on how the EU sugar reform develops.

Freifalts said that sugar mill managers were influenced by Prime Minister Aigars Kalvitis' words, which highlighted the importance of the sugar industry for Latvia, as well as taking into account the latest talks with the Agriculture Ministry.
The representative also expressed hope that, by continuing production, the sugar mill would not suffer losses. JCF previously decided to stop production as it had been calculated that the plant would lose 2.2 million lats (3.13 million euros) this year, if it continued production according to the existing quotas. This did not include growth of other costs such as rising natural gas prices, the need to raise salaries to workers, etc.

Jelgavas Cukurfabrika earned 630,400 lats in profit on 14.522 million lats in net turnover in the last fiscal year, which lasted eight months and ended in August 2005. This was because the company decided to change its fiscal year so that it would start on Sept. 1 and end on Aug. 31 the following year.

Since Latvia's two sugar companies have decided to keep up production, they will have to cut output by 8.6 percent. If they had decided to shut down, they would be entitled to generous compensations from the EU.