WENTWORTH — Even before the sugar dust ignited in February, destroying
part of the factory, killing 13 and injuring dozens in one of Georgia's
worst industrial accidents, Imperial Sugar's business had soured.
Sales for the maker of Dixie Crystals dipped 8 percent the last
fiscal year. Profit dropped nearly 50 percent in the fourth quarter
alone. Imperial's stock declined by half since last April.
STEPHEN MORTON/AP file
|Firefighters fight a fire Feb. 8, 2008, at the Imperial Sugar Company after an explosion ripped apart the plant.
|Thirteen flags for 13 victims serve as a memorial at the front gate of the Imperial Sugar Refinery Plant.
Stephen Morton/ Special
|An Imperial Sugar worker talks on his radio in the plant warehouse as he watches the sugar elevator and silos being torn down.
• Headquarters: Sugar Land, Texas
• Refineries: Port Wentworth, Ga., and Gramercy, La.
• 2007 production: 2.6 billion pounds
• 2007 revenue: $876 million
• 2007 profit: $40.2 million
NOTE: Yearly figures for the fiscal year.
Presciently, the company's previous two annual reports cautioned
that damage to its refinery "would have a material effect on the
company's business, financial condition, results of operations and cash
No company withstands an Imperial-like disaster with its bottom line
unscathed. Yet Imperial's road to financial redemption faces a slew of
challenges — potential wrongful death lawsuits, two federal
investigations, a volatile commodity market, new domestic and
international competition — that would burden the soundest of
Still, "there's a sense of optimism that we have the strength to
rebuild and to continue our participation in the U.S. sugar market,"
CEO and President John Sheptor said in a recent interview.
Demolition and cleanup continue at the closed factory alongside the
state port on the Savannah River. Imperial has rehired 275 workers to
clean up debris and equipment. Sheptor expects to refine sugar by
year's end, good news for Port Wentworth's 3,500 residents.
"Most everybody knows somebody, or is friends with somebody, who
works at the sugar refinery," said Tim Holbrook, who ran the factory's
deli. "The community is very much in shock and awe. Everybody hopes
they recover and come back into their fullness. They are very much a
part of this city of Port Wentworth."
Starting out in 1916
Four hundred people moved from Louisiana sugar country to coastal
Georgia in 1916 to build the factory and refine the raw material
ferried upriver from the Atlantic Ocean. Imperial bought Savannah Foods
in 1997, doubling the Sugar Land, Texas-based company's size to become
the largest refiner in the country.
Imperial also gobbled up beet sugar processors in California,
Colorado, Michigan and Wyoming, creating a nationwide refinery and
distribution network supplying Piggly Wiggly, General Mills, Wal-Mart
Imperial's profitability depends greatly upon the price of its most
basic ingredient, sugar cane or sugar beets. The U.S. government
effectively controls the domestic price, which was nearly double the
international price Friday.
"The government basically sets the price of sugar by limiting
imports and restricting who can produce sugar within the United
States," said Brian Riedl, a federal budget analyst with the
conservative Heritage Foundation in Washington. "The government
restricts supply and, therefore, raises the price."
Imperial and other sugar refiners, such as Domino Foods, suffer from
consumers' shifting tastes — the Atkins Diet craze slimmed profits —
and competition from artificial sweeteners. Buffeted by raw material
prices, heavy debt, poor sales and steep energy costs, Imperial filed
for bankruptcy protection in January 2001.
Seven months later, Imperial exited Chapter 11 and took a buzz saw
to its operations, shedding sugar beet operations in California and
Colorado and Michigan.
Then Hurricane Katrina hit — which provided a healthy boost to the company's bottom line.
The August 2005 storm wiped out a Domino refinery, the country's
largest, in Chalmette, La. Imperial took some of Domino's business.
With a major supplier knocked from the game, refined sugar prices
Imperial's sales and profits soared. Its stock reached $34.35 in May 2006.
"We really had very strong years in fiscal 2006 and 2007," Imperial
CFO Hal Mechler said in an interview. "Then, market dynamics being
market dynamics, Domino restored capacity and high prices
begat new supply. So we saw increases in acreage planted in sugar
beets, production and supply rise, and prices and margins eroded back
to such a thing called normalcy."
Imperial produced 2.6 billion pounds of sugar in fiscal 2007 at its
Georgia and Louisiana plants. Port Wentworth alone, the country's
second-largest refiner, supplied 9 percent of the nation's refined
Still, Imperial's nearly 50 percent drop in profit for the fourth
quarter of 2007, which ended in September, was followed by a 28 percent
fall the following quarter. Imperial's stock closed at $21.58 per share
on Feb. 7 of this year.
"They were in OK shape," said analyst Hamed Khorsand with BWS
Financial in Los Angeles. "They were a business with cash on their
balance sheet. We had an outlook for them to be slightly profitable."
Within four hours of the market's close, though, Imperial Sugar's
refinery in Port Wentworth blew up. So too would the company's
well-laid recovery plans.
Thirteen American flags stood sentinel outside Imperial's gate one
recent morning, each honoring a victim of the refinery blast. Makeshift
shrines — plastic flowers and plastic-wrapped prayers — book-ended the
Dixie Crystals sign. Church marquees along Port Wentworth's two-lane
main drag claimed "We Are One" and "Our Prayers Are With The Families."
On the evening of Feb. 7, Gregory Long, Port Wentworth's fire chief,
had just ordered dinner at a nearby steakhouse when his beeper began
chirping incessantly. He canceled his order and raced toward Imperial,
smoke and an orange glow visible from three miles away.
"It was total, complete devastation. It looked like a bomb went
off," Long said. "But we still held out hope that we were going to
rescue everybody. If they were still in there, we were going to get
The packaging area was demolished, CEO Sheptor said, but the
refinery area suffered "limited damage." In all, 12 percent of the
factory was destroyed.
Meanwhile, investigators with the Occupational Safety and Health
Administration and the U.S. Chemical Safety Board pick through debris,
interview employees and check Imperial's files.
Six weeks after the explosion, Imperial shut down part of its
Louisiana refinery, fearing combustible dust could explode there as it
did in Port Wentworth. (It returned to operation a week later.) OSHA
later fined Imperial $36,000 over safety violations in Louisiana.
It could be another six weeks before Port Wentworth's debris is
carted off, Sheptor said, time enough to further the town's economic
slide. The city's few restaurants, gas stations and convenience stores
suffer without visits from the factory's employees. Holbrook, who ran
the Dixie Deli inside the factory, said he has experienced "a
significant loss in revenue."
Imperial continues to pay its 371 employees. About 275 of them are
back on the job. Sheptor said the company could begin refining sugar
for sale to bulk customers by year's end. Although he vows to rebuild,
albeit likely with fewer workers, locals fret.
"We're keeping our fingers crossed — I don't even want to think
about it closing," said Long, the fire chief. "It would be devastating.
It would put an economic hardship on the city."
Production off by half
Port Wentworth better have a backup plan. The sugar industry, like
virtually every American industry, is under siege from lower-wage,
offshore competitors. And a business dependent upon high raw material
costs and a fickle public faces even greater challenges.
Although the Louisiana refinery picks up some of Port Wentworth's
slack, Imperial's production is off by half since the explosion. To
keep some regular customers happy, Imperial is forced to buy sugar from
competitors to fill orders. Still, Sheptor acknowledged, some clients
must find sugar elsewhere. Domino and others fill the void.
Cleanup, reconstruction and payroll combined with less revenue hurt
the bottom line, said analyst Jonathan Lichter with Sidoti & Co. in
"Obviously, in the near term their costs will be pretty high. It's
going to be a little rough for them," Lichter said. "They'll not be
profitable for the next couple of quarters."
Analyst Khorsand expects Imperial's stock to trade at $9 per share
within a year's time. Friday, the stock closed at $15.70, near its
More ominously for Imperial, and Port Wentworth in particular, is
food-processing giant Cargill Inc.'s entry into the refinery business.
Cargill and a Louisiana sugar co-op — which now supplies Imperial's
Louisiana factory with 90 percent of its cane — expect to soon begin
construction of a refinery to compete with Imperial.
Once the new refinery comes on line, the co-op will stop supplying Imperial.
"Given Cargill's size, Imperial could be pushed out of the market.
It's a valid fear because Imperial has one of the highest cost
structures in the industry," Khorsand said. "The tossup right now is
what [Imperial] will do with its Savannah plant."
Imperial entered into a joint partnership with a Mexican sugar
refiner last year to help parry Cargill's thrust. The company hopes to
tap the Mexican market via its partnership with Ingenios Santos S.A. de
C.V. And, with tariffs on Mexican sugar recently abolished, Imperial
could use the imported sugar to supply factories in Louisiana and
Free trade, though, is a two-way street. Other Mexican refiners can
now sell tariff-free sugar in the United States. Imperial CFO Mechler
said Mexico, like the sugar industry in general, offers "threats and
"And, frankly, our focus is to get back to where we were" before the explosion, he said.