$120m German investment to save Mackay sugar mills

Three of Australia’s biggest sugar mills are poised to be sold to German interests, leaving the industry in foreign hands.

Mossman cane grower and director of the Far North Milling Company Liza Giudice. Picture: Brian Cassey

Three of Australia’s biggest sugar mills are poised to be sold to German interests, leaving the $2.6 billion Australian sugar industry almost entirely in foreign hands.

The grower-owned Mackay Sugar, Australia’s second-largest sugar milling company, has agreed to sell a 70 per cent controlling stake in its three Mackay sugar mills to German sugar co-operative Nordzucker with a price tag of $120 million.

Nordzucker is one of the leading sugar manufacturers in ­Europe, owning 13 processing plants in seven countries turning sugar beet into 2.7 million tonnes of refined sugar annually for human consumption.

It is keen to buy into debt-ridden Mackay Sugar to gain a foothold in Asian markets, where sugar demand is steeply climbing, in stark contrast to declining ­European sugar consumption.

Both companies share similar histories as farmer-owned sugar producers since the mid-1800s, with Nordzucker opting for a controlling 70 per cent stake in Mackay Sugar rather than a complete takeover, a strategy designed to retain local grower involvement and commitment.

The deal remains conditional upon 75 per cent of Mackay Sugar’s 900 growers and shareholders supporting the sale — a vote will be taken at an extraordinary general meeting likely to be held in April — and Nordzucker obtaining Foreign Investment Review Board approval from the federal government.

The agreement also relies on Mackay Sugar disposing of its troubled fourth Mossman sugar mill north of Cairns before the transaction is completed as well as Mackay Sugar’s major financiers, Rabobank and NAB, agreeing to a restructuring of its $200m debt.

The federal government has pledged $20m and the Queensland government a further $25m to help canegrowers around Mossman and the Atherton Tableland buy back the former mill that Mackay Sugar bought in 2012 for $25m.

But the Mossman mill’s future — and that of the 90 farmers in the isolated district who supply it with cane — remains dependent on acceptance by both governments of a new “green” business case that repositions the ageing 120-year-old sugar mill as a new-age processor of cane into bio plastics and biopharmaceuticals.

Far Northern Milling director and local canegrower Liza Giud­ice told The Australian last year that, without a Mossman mill, the far north Queensland town, 100km north of Cairns, would wither, with 90 direct jobs, ­another 500 indirect jobs and 50 town businesses dependent on the mill’s survival.

Ms Giudice said local Mossman growers were tired of the uncertainty about their farming future as Mackay Sugar has threatened to close them down.

He said the local sugar cane producers were prepared to commit their own funds to help ­upgrade and reinvigorate the Mossman mill and turn it into an innovative biorefinery.

“We want to take control of our own destiny (as Far Northern Milling company) and secure our future as canegrowers,” Ms Giudice said in September.

“And the best way to do that is to go back to our roots and run the mill ourselves

“A cane farmer needs a local mill and a mill needs farmers.

“If we don’t work together and help each other out there won’t be a cane or sugar industry around Mossman anymore.”

The board of Mackay Sugar has unanimously recommended the Nordzucker proposal to its growers.

Mackay Sugar chairman and CEO Mark Day said yesterday the $120m cash injection by the German buyers was vital to return the three Mackay mills at Marian, Farleigh and Racecourse to peak reliability and profitability.

He expected the sale to be ­approved as growers have ­become increasingly aware in the past few years of the perilous state of Mackay Sugar’s finances, ­severely restricting its ability to carry out basic maintenance and upkeep of its four operating mills.

“This is the best option for the industry’s future and initial (grower) reaction has been good,” Mr Day said.

“This (sale) provides the funding needed to get the mills back up to top operating performance. Growers are well aware they need a reliable mill to process their crops efficiently and on time.”

In return for a 70 per cent shareholding in Mackay Sugar — and after the Mossman mill is offloaded — Nordzucker committed to contribute $60m in equity and provide a shareholder loan of up to $60m to the company.

The debt and equity contribution will be used to undertake overdue capital and maintenance works to significantly improve mill performance, which is running 10-15 per cent below peak ­capacity and sugar conversion ­ratios because of frequent breakdowns and mill closures.

The funding will also reduce debt and provide for a $2-a-tonne grower contribution made over the past few years to keep the mills running to be repaid, with the first tranche refunded to growers 30 days after a positive vote to majority sell the business to Nordzucker.

The CEO of Nordzucker, Lars Gorissen, said he was “fully convinced” Nordzucker and Mackay Sugar fitted together.

Before the latest deal, 15 of Queensland’s 20 sugar mills had already transferred from Australian to foreign ownership in the past decade.

The big Tully sugar mill south of Cairns is owned by Chinese government food giant COFCO.

Thailand’s giant Mitr Phol owns four MSF sugar mills clustered mainly between Cairns and Innisfail, while Asia’s biggest agribusiness, Wilmar, snapped up CSR and its dominant eight mills along the Queensland coast for $1.75bn nine years ago.

Bundaberg Sugar’s two mills belong to Belgian Finasucre, and German interests are likely to control Mackay Sugar’s three main mills. Only the Isis mill at Childers near Bundaberg — and now potentially the Mossman mill — will remain Australian-owned once the Nordzucker deal proceeds.

The Australian’s Global Food Forum, to be held in Sydney on Wednesday, March 20, will discuss the continuing influx of foreign capital into Australia’s agricultural and agribusiness sector. For program and speaker details and ticket sales see globalfood-forum.com.au.