UK food group Associated British Foods, owners of British Sugar, say that the EU’s planned sugar reforms would have an impact on the operating profit of its sugar operations of some £10m (US$18m) in 2006/7 and some £40m in 2007/8 and thereafter.
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“However, we expect these effects to be in part mitigated by cost reductions in both the UK and Poland and the exploitation of new revenue opportunities including the processing of cane raws,” it said in a statement.
It broadly welcomed the European Commission’s plan. “We believe that these proposals provide a framework for an orderly adjustment to the EU sugar market,” it said.
The ABF businesses affected by these proposals are the sugar operations of British Sugar in the UK and Poland.
A number of key aspects of the Commission’s policy orientation paper published in July 2004 have been significantly modified, the company said. The proposed new regime will run from 2006/7 until 2014/15 with no mid-term review as originally suggested. There is a restructuring scheme, funded by a levy on the beet industry, designed to compensate marginal producers who would relinquish their quota with incentives for early redemption. It is anticipated that this scheme will deliver the reduction in EU production sought by the Commission. There are no mandatory quota cuts. These proposals are welcomed by British Sugar as one of the most efficient producers in the EU. In addition there is the option of purchasing 83,000 tonnes of quota for the UK beet sugar business and approximately 10,000 tonnes for the Polish business.
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By GlobalDataThe proposals include the restructuring levy, payable over 3 years commencing in 2006/7, and reductions in the reference price for sugar of 24% in 2007/8 rising to 29% and 39% in the subsequent years. The UK beet price will be reduced by 31% in 2006/7 rising to 47% in 2007/8 and thereafter. The current export producer levy will be removed and a lower “production charge” will be introduced from 2007/8. Exports of non-quota C sugar may be phased out over the next few years. British Sugar has announced its intention to build the UK’s first bioethanol plant, using this sugar, which is expected to commence production in early 2007.
