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MEXICO CITY, May 29 (Reuters) - Mexico's beleaguered sugar sector
needs to cut output by 6-to-7 percent and consolidate so that there
are just four or five well-capitalised players, a top industry
official said, according to a newspaper report on Monday.
``Mills as a whole need to cut output by 6-to-7 percent to
stabilise the market,'' Juan Gallardo Thurlow, 70-percent owner of
Mexico's second biggest mill, told El Financiero daily. He estimated
that it would take two years to stem production.
The world's eighth biggest sugar industry is saddled with
billions of dollars in debt and has long been in crisis due to low
and volatile domestic markets, caused mainly by oversupply and a
lack of viable export alternatives.
Gallardo's Grupo Azucarero Mexico (GAM) has suspended repayment
of $125.9 million debts and is in merger talks with three Mexican
mills, including the third biggest, Beta San Miguel.
The executive said Mexico's sugar business, which owes an
estimated $2.6 billion overall, was ripe for a shake-up.
``Mills need to undergo a process of consolidation so that there
are just four or five solidly capitalised players in the market,''
said Gallardo. There are currently 14 groups that own 56 mills in
Mexico, plus four independent producers, according to the
agriculture ministry.
Domestic sugar prices in the last three years have dropped more
than 30 percent in real terms due to oversupply, while costs have
risen sharply.
GAM's total liabilities in March were about $370 million. This
included $68 million held by U.S. bondholders, $40 million owed to
government import-export bank Bancomext, and $10 million to Mexican
financial group Inverlat .
The firm also owes money to 3,000 employees and 25,000 cane
suppliers.
GAM has secured a $52 million credit facility from four foreign
banks, El Financiero said. Gallardo named the lenders as Cargill,
Rabobank, Societe Generale and KBC.
The credit would allow GAM to start paying back $118 million in
long-term debt through a programme which may include bonds
convertible to shares, he said.
Trade in the company's shares was stopped on May 10 until further
notice, Mexico's stock exchange said. The stock has not traded since
Jan. 10, when it closed at 1.8 pesos (19 cents).
GAM is 70 percent owned by Gallardo, 10 percent owned by
U.S.-based Equity Group Investment, while the remaining 20 percent
is listed.
Mexico is seen producing 4.8 million tonnes of sugar this year
and consuming 4.2 million tonnes.
($1 equals 9.53 pesos)
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