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Msg  5049 of 20969  at  5/2/2008 2:15:37 PM  by


 In response to msg 5044 by  gabby
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Re: Ethanol / from CZZ mb Sugar refinery near Savannah determined to rebuild

Great thread, great.

CZZ is a hedge on the ehtanol factor for  ferts: if corn -> ethanol supports and legislation are reduced, then sugar will rise.
No way will we burn ethanol from domestic sugar that is half taxpayer dollars - PLEASE tell me there's no way.
Extremely unlikely that loss of ethanol subsidies will cause damage to ferts, BUT there will be a perceived threat.

Haven't seen too much on the Cargill planned refinery.  Article below is more review, underlined sections that are kinda new to me.

Sugar refinery near Savannah determined to rebuild

The Atlanta Journal-Constitution
Published on: 04/13/08

PORT 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.

Firefighters fight a fire Feb. 8, 2008, at the Imperial Sugar Company after an explosion ripped apart the plant.
Stephen Morton/Special
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 flows."

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 corporations.

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 and others.

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 skyrocketed.

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 sugar.

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.

'Complete devastation'

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 them."

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 New York.

"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 52-week low.

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 Georgia.

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 opportunities."

"And, frankly, our focus is to get back to where we were" before the explosion, he said.

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