RHI says still keen on selling Batangas sugar mill

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By Arra B. Francia, Senior Reporter

ROXAS Holdings, Inc. (RHI) is negotiating with local firms for the sale of its Batangas sugar mill, after its deal with Gokongwei-led Universal Robina Corp. (URC) fell through due to regulatory restrictions.

RHI Chief Finance Officer Celso T. Dimarucut said Tuesday that three companies have expressed interest in purchasing the assets of Central Azucarera Don Pedro, Inc. (CADPI) in Nasugbu, Batangas.

“Right now there are some ongoing discussions and due diligence…Hopefully we will be able to do something within the year, before our fiscal year ends in September,” Mr. Dimarucut told reporters after RHI’s annual shareholders’ meeting in Makati yesterday.

Mr. Dimarucut said the companies are not players in the sugar industry, but have products that are very close that would allow them to expand their portfolio.

Tycoon Lucio Tan, Sr.’s Tanduay Distillers, Inc. disclosed in March that it is conducting due diligence for CADPI, since this will give it access to its own source of molasses — a necessary raw material for manufacturing alcohol.

RHI expects the due diligence process to be completed within two months, after which the transaction will have to be presented to the Philippine Competition Commission (PCC).

CADPI’s assets are valued at P6.5 billion, according to RHI’s annual report. Mr. Dimarucut, however, noted that URC’s purchase price was higher than the book value.

URC failed to get the PCC’s approval for the acquisition of CADPI last February, as the competition watchdog cited how the transaction will result to a monopoly that may be harmful to sugarcane farmers.

Proceeds from the sale of the Batangas facility will be used to help bring down RHI’s debt of about P11 billion, since the company has incurred several loans to support its production.

“Whatever proceeds we get from that sale we will use that to bring down the debt. But there will still be some residual amount that is needed for the regular working capital,” Mr. Dimarucut explained.

Sought for an outlook for the year, Mr. Dimarucut said they expect to incur a net loss. RHI booked a net loss of P197 million from October to December 2018, the first quarter of its fiscal year 2019. This came amid a 127% increase in revenues to P2.27 billion.

RHI President and Chief Executive Officer Hubert D. Tubio echoed the same sentiment, saying he expects sugar production to be less than the three million 50-kilogram bags it posted in crop year 2018.

“It’s a continuation of what we see from last year because of the effects of weather condition. I think it’s more particularly pronounced in the area of Nasugbu, Batangas where I think most of the fields are not irrigated, so it’s really heavily dependent on rains,” Mr. Tubio explained.

Mr. Tubio cited how the whole district of Batangas has generally seen a drop in production last year to 1.15 million tons from 2.3 million tons before. Of this, CADPI milled about 813,000 tons — the lowest in 31 years.

“That is the biggest challenge not only for us, but also for the planters and the government…Our hope is the government will help us, particularly in the area of irrigation, where the area of Nasugbu is wanting,” Mr. Tubio said.