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Getting Cambodia milling again

Getting Cambodia milling again

CEO TALK
By Ngoun Sovan

Politics is politics, business is business – it's not relevant – and we do business, not politics."


Why did Khon Kaen Sugar Industry Plc decide to invest in a sugarcane plant and plantation in Koh Kong province?

We realised that Cambodia has more available area for its agriculture base, a climate similar to Thailand ... suitable for sugarcane-growing.

Moreover, we were determined to develop an agriculture business and agro-industry in Cambodia to serve the ASEAN market and Asia.

Companies have gotten privileges under investment-promotion measures of the Cambodian government … 90-year concessions for sugarcane plantation areas of 20,000 hectares … in Koh Kong [province], [and] tax incentives.

The company has also gotten a privilege to export raw sugar to the EU under the EBA (Everything but Arms) quota.

We have confidence that – this project – it can contribute to and generate GDP growth, economic development, income distribution and employment in Cambodia.

Also it can promote close international economic [cooperation] between Thailand and Cambodia.

How much was invested in this new plant? Who are the joint-venture partners?
The investment cost for the sugar mill was about US$60 million. Koh Kong Sugar Industry Co Ltd was founded by three joint-venture partners – Khon Kaen Sugar Industry Public Limited, the Thai investor, holds 50 percent; Vewong Corporation, a Taiwanese investor, holds 30 percent; and Okhna Ly Yong Phat, the Cambodian investor, holds 20 percent of the common shares of the company.

What is the capacity of the plant and the output produced each month, and what is the export capacity? How many jobs were created at the new facility?
At present, the crushing capacity of the sugar mill is 6,000 tonnes of cane per day.

This sugar mill has a maximum capacity of 700,000 tonnes of cane per year. The expected raw sugar output is about 70,000 tonnes of sugar per year.

The expected refined sugar output is approximately 40 percent of raw sugar output in the future.

In the early stages, total raw sugar output shall be exported to the EU under the EBA quota.

The overall project, which comprises a cane plantation, cane harvesting, and sugar production, can contribute employment for Cambodian citizens for approximately 8,000 persons during the crushing season, and about 2,000 … [during] the offseason.

What are the challenges you face at the new Cambodia plant at the moment?
The shortage of skilled labour to operate the sugar mill and unskilled labour for sugarcane harvesting; unexpected cane output caused by climate variation in Cambodia; and how to achieve the development area of 20,000 hectares for the sugarcane plantation.

For now the plant can only produce brown sugar for the European market. When will it produce white sugar for domestic consumption?
We plan to produce raw sugar for export to the EU market under the EBA quota first, after that we will consider producing white sugar to serve domestic demand in Cambodia.

It depends on a suitable quantity of sugarcane output each year. Note: If we can run raw sugar consistently at 5,000 tonnes a day, then we are able to refine white sugar.

We expect to ship the first shipment of raw sugar to the EU market in May, 2010.

Does the plant plan to expand into other byproducts like ethanol? If so, how much more capital would be invested and what markets would you aim for?
Yes. We plan to build an ethanol plant for the next phase, which depends on an appropriate quantity of sugarcane [being] crushed each year.

The estimated investment cost for an ethanol plant is about $20 million.... We will export ethanol to the ASEAN, China, Japan and EU markets.

Are you concerned that the current political tensions between Phnom Penh and Bangkok will have an effect on your business operations in Cambodia?
Politics is politics, business is business – it’s not relevant – and we do business, not politics.

Given your recent expansion into Cambodia and Laos, what financial position is Khon Kaen currently facing?
Khon Kaen Sugar Industry Plc and its subsidiaries under the KSL Group, have been in the sugar business in Thailand [for] more than six decades.

We are the fourth-largest sugar-producing group in Thailand with a market share of cane-crushed volume of about 8 percent, and we also have four sugar factories in Thailand.

Apart from the sugar business, since 2006, KSL has expanded along the sugar value chain to maximise its utilisation of sugarcane.

New businesses include electricity generation … and ethanol production.

We have overseas projects which invest in sugarcane plantations and sugar mills both in Cambodia and Laos PDR.

We have a strong financial status with a low debt-to-equity ratio … rated by TRIS at “A-” status, which reflects the company’s long track record in the Thai sugar and sugarcane industry, diversification into sugar-related businesses, and a healthy balance sheet.

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