Singapore agribusiness group Olam International is to invest in its first sugar mill in Brazil through the acquisition of Minas Gerais-based Usina Açucareira Passos (UAP).

Olam will pay US$128.6m for the sugar millier and invest $111.5m over the next five years to expand capacity and boost output, it said yesterday (29 May). The investment will be funded internally and with borrowings, it said.

UAP owns and operates a sugar mill in Passos, in the southern state of Minas Gerais, Brazil’s second-largest sugarcane growing area. The mill’s cane crushing capacity is 1.75m metric tonnes per annum with an output capacity of up to 200,000 metric tonnes of sugar per year.

The mill’s capacity will expand to 3m metric tonnes annually from 1.75m tonnes, Olam said, through the expansion of cane cultivation and additional renovation and refurbishment of agricultural equipment.

“Over the past three years, we have made and committed several investments in sugar, including two sugar mills in India and two sugar refineries – one in Indonesia and one upcoming in Nigeria. Brazil is the largest and one of the most cost competitive producers of sugar in the world, and is integral to executing our sugar strategy,” said Olam president for sugar Devashish Chaubey.

Olam said the investment is expected to be earnings accretive from the second year of operation.