The world's largest sugar producer shuts down a large Brazil plant in order to reduce debt

Raizen SA, world's biggest sugar producer, announced on Tuesday it would shut down one of its largest mills in Brazil for an indefinite time period, the Santa Elisa Mill, as part of the company's ongoing efforts to reduce a heavy debt burden.

Raizen, controlled by Shell SA and Brazilian conglomerate Cosan SA said it has entered agreements with six sugar firms to sell 3.5 millions metric tons sugarcane which will be processed at the Santa Elisa Mill.

Raizen said that the sale of sugarcane will bring in 1.045 bn reais (188.18 mn dollars) which it will use to reduce its debt of more than 30 bn reais.

Santa Elisa was an important historical landmark for the Brazilian sugar industry. The Santa Elisa mill was established 90 years ago, in the main sugar belt Ribeirao preto. It helped Brazil consolidate its position as the largest sugar exporter in the world.

In the 1970s, its former owners led the political movement to create Brazil's Proalcool ethanol program at a time of record-high oil prices.

CEISE Br, a group of equipment manufacturers for the sugar and alcohol industry, has expressed concern about the closure of Santa Elisa.

It said that there were concerns regarding the impact of the action on the industry. This was particularly true for ongoing contracts in the industry for technical support, maintenance and the supply of equipments to the current crop.

In an effort to reduce debt, Raizen has sold one of its factories in May. It also offered assets to Brazilian competitors.

The company's troubles come at a time when sugar prices are weak, as benchmark raw sugar futures have hit a 4-year low on the ICE Exchange in June.

(source: Reuters)