Sugar producer Roxas Holdings Inc. said it doubled its planned capital spending this year to P1.4 billion from an initial estimate of P700 million to support the expansion of its bioethanol business and improve the operational efficiency of sugar mills.
Roxas Holdings president Hubert Tubio said in an interview at the sidelines of the annual shareholders’ meeting the group would focus on rolling out immediate measures to enhance efficiency, increase production and reduce costs of milling facilities after the company faced operational challenges that affected its financial performance last year.
The company said of the P1.4-billion programmed spending for this year, P800 million would be set aside for sugar business while P600 million would be allocated for the expansion of bioethanol.
Roxas Holdings’ core net income dropped 74 percent to P169 million in the fiscal year 2015, due to costly competition for cane supply and deteriorating relationship with planters.
The group said in the first quarter of fiscal year 2016, covering the period October to December, it registered a net loss of P125 million, a turnaround from P9-million net income recorded in the same period amid operational challenges affecting two manufacturing plants.
“Management had identified and accepted the various concerns that seed initially trivial but which clearly inflicted a devastating effect to the company. Gleaning from the lessons of the past, RHI is implementing a proactive approach to overcome the address these issues,” Tubio said.
Aside from improving its relationship with sugar planters, Tubio said Roxas Holdings planned to develop greenfield projects where sugar cane plantation could be established. It is also considering financing large sugar cane farmers with contract to deliver their canes to the company’s sugar mills.
Roxas Holdings chief finance officer Celso Dimarucut said the company also focused on expanding its bioethanol business after this unit delivered P200 million in net income in 2015.
“Most of profits of the group in 2015 came from bioethanol because we have expanded it to a combination of acquisition and expansion of existing facilities. So significant amount of our capex should be going to full fill expansions and equipment needed of our bioethanol,” Dimarucut said.