Tonnes of sugarcane crushed
Tonnes of sugarcane harvested
Tonnes of refined sugar produced
Tonnes of total materials transported
GWh of electricity exported to the grid
Total number of employees
Million litres of bioethanol produced
Shareholding in KISCOL
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|(Loss)/earnings per share (Rs)||(6.32)||1.97||3.45|
|Dividend per share (Rs)||2.00||2.00||2.50|
|Return on equity (%)||(3.86)||1.51||2.61|
|Net Asset Value per share (Rs)||163.85||130.82||131.87|
|Effective tax rate (%)||N/A||11.36||13.93|
|No of Ordinary Shares ('000)||67,012||67,012||67,012|
|Area harvested (hectares)||2,419||2,575||2,540|
|Cane production (tonnes)||209,257||229,961||250,128|
|Sugar produced (tonnes)||20,230||24,826||26,263|
|Sugar accrued as planters (tonnes)||15,779||19,364||25,537|
|Sugar yield per hectare (tonnes)||8.36||9.64||8.74|
|Area harvested mechanically/total harvest area (%)||75||71.16||72|
|Sugar refined and sold (tonnes)||183,938||179,189||191,076|
|Sugar accrued (@ 98.5 pol) as miller (tonnes)||21,969||25,894||27,550|
|Sugar produced by the mills (tonnes)||100,914||118,480||125,051|
|Cane crushed (tonnes)||1,054,689||1,163,482||1,399,547|
|Molasses used (tonnes)||60,136||70,693||74,333|
|Bioethanol produced (million litres)||17.9||20.4||19.9|
We have identified that the values of an Omnicane leader are based on three pillars: Accountability, Innovation and Sustainability.
Omnicane Group has known one of its most difficultyears for a very long time in 2017, as the sugar sectorwent through a turmoil following the drastic decreasein that commodity’s price. Indeed, the end of the sugarproduction quota in Europe took effect in September2017. All beet sugar producers have consequentlyincreased their production, which brought about a steepdecline in the sugar price on that market. In addition,Europe is now exporting sugar on the world market,whereas it has historically been a net importer of sugar.This has contributed in putting further pressure on amarket that already has a surplus.
The result for us, after taking on board unfavourable foreign exchange currency movements, is a record low sugar price of Rs 11,000 per tonne (ex-Syndicate). At this price level and despite short-term financial assistance of about Rs 2,350 per tonne, the major sugar producers in Mauritius are recording massive losses – as is also the case for European producers. Whilst Omnicane has made substantial investment in the sugar reform process to tap into the refined sugar market, we have to concede that based on current market conditions our sugar segment is not financially viable.
This situation requires that bold measures be taken urgently if we want to survive in this competitive market. This battle can only be won by the implementation of several measures, with the contribution of the authorities being a key factor. Omnicane as a major sugar producer, and institutions like the Mauritius Chamber of Agriculture have together made representations to the authorities in that respect. I am confident that the right mix of courageous measures will be taken to ensure the sustainability of the cane industry. These include not only operational measures but also geopolitical ones, comprising of discussions with the regional economic blocks like COMESA and SADC or bilateral agreements with other specific countries to facilitate access to more remunerative markets.
The performance of the energy and hospitality sectors was in line with expectations. An independent land revaluation exercise was carried out during the year in connection with our property development operations. It generated a revaluation surplus of Rs 2.5 billion for the Group. Most of this surplus comes from the land situated in the Mon Trésor Smart City. This confirms that all the work done so far at Mon Trésor, including the master planning, the preliminary infrastructure works and the completion of the new access road to the airport, is bringing a lot of value to the Group.
On the international front, we are focusing on bringing the KISCOL sugar project to its full cruising speed, which should be achieved in the next two years, whilst we target the first phase of the hydro-electrical project in Rwanda to be completed in August 2018. In UK, we are supporting financially our associate company RGF in completing its production capacity expansion programme, which we are confident will bring much value subsequently.
We continued with our strategy to raise bonds, whichrepresent the right financial instrument for the Group.We have successfully raised Rs 2.5 billion of bondsthrough a private placement repayable mainly in fiveto seven years. This has contributed to change thedebt profile of the Group. We are once again delightedthat our financial partners have trust in the future of Omnicane.
As the Group expands, we want to ensure that our talents are given the right tools to enable them to be more results-oriented. In this respect, I am glad to say that we have embarked since June 2017 in an ambitious leadership programme with RBL (Result Based Leadership), a known US firm in this field. We have identified that the values of an Omnicane leader are based on three pillars: Accountability, Innovation and Sustainability. We are already feeling the benefits of this programme, which has created a new momentum and synergy within the different entities of the Group.
As we mentioned last year, regarding governance, the Board had taken good note of the requirements of the new Code of Corporate Governance of Mauritius (2016) and that we are fully committed to work towards the implementation of its provisions. I am pleased to say that we have progressed well and that we have moved in the right direction in terms of gender diversity on the Board in 2017 with the appointment of Mrs Valentine Lagesse. Valentine has an extensive experience in the property sector and is already contributing a lot in respect of our Mon Trésor Smart City development. The Board also now has a more effective tool to monitor risk thanks to the Enterprise Risk Management (ERM) framework, which has been fully implemented across the Group during the year under review. This framework enables the Board and Management to have a more consistent approach to risk management and, consequently, take necessary preventive actions to address these risks.
I would like to thank Mr. Sunil Banymandhub for his valuable contribution as Chairperson for the last eight years. During his tenure, Omnicane has expanded the reach of its business activities and successfully completed the industrial development of the cane cluster. I would like to take this opportunity to thank my fellow Board members for their unconditional support, the Chief Executive Officer, Jacques M. d’Unienville as well as the top management team and all employees ofthe Group, for their contribution.
Non-executive Chairperson (Resigned on 25 April 2018)
Chief Executive Officer
Chief Finance Officer
Non-executive Director (Alternate directors: Imalambaal Vythilingum-Kichenin)
Non-executive Director (Appointed as Chairperson on 25 April 2018)
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|Cane Growing||Sugar Milling||Energy||Logistics||Hospitality||Land Development|
Official inauguration of new southern highway by the Hon. Pravind Kumar Jugnauth, Prime Minister of the Republic of Mauritius
Tropica Dingue 2017 at Mon Trésor
Seminar on equal opportunity for senior managers
Handing over of title deeds for phasing out of sugar camps by the Hon. Pravind Kumar Jugnauth, Prime Minister of the Republic of Mauritius
Annual crop prayers at Amma Tookay temple at Camp Diable
Transport of first consignment of green cement from Carbon Burn-Out unit to Lafarge
Omnicane Horse Racing Day 2017
Breakfast meeting with potential investors for Mon Trésor Business Gateway & Property Development
Visit of delegation from Bonsucro at La Baraque cluster
Beach volleyball tournament at La Cambuse beach organised by Grand Port District Council and sponsored by Omnicane Foundation
Training for Omnicane employees on Road Safety by the Mauritian Police Force
Process communication training for senior managers
Visit of representatives from the Bank of China at La Baraque cluster
Omnicane Award 2017 which theme focused on welfare state was won by the team from Royal College Curepipe
Results Based Leadership(RBL)Training on leadership attributes : Accountability, Innovation & Sustainability
From the sugarcane cultivated, our sugar mill produces raw sugar for the refinery, bagasse for the cogeneration power plant, and molasses for the bioethanol distillery.
With the raw sugar manufactured by our sugar mill and other sugar producers, our refinery produces refined white sugar, the bulk of which is exported to Europe.
Using the bagasse produced by the sugar mill during the crop period and coal outside the crop period, our main cogeneration power plant generates steam and electricity for the cluster and electricity for the national grid.
Using the molasses produced by the sugarmill, our distillery produces bioethanol, a source of biofuel, while its by-product (raw gas) is transformed into food grade carbon dioxide, and its residue (vinasse) is used to produce liquid fertilisers.
With the residues (coal fly and bottom ash)collected from the cogeneration power plants, our carbon burn out unit produces cement additive for the construction industry.
Of the same type as the first but smaller, our second power plant uses coal and woodchips and caters mainly for the distillery’s requirements in both steam and electricity.
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The results of Omnicane and also those of other sugar producers were adversely affected by the sugar price drop. Can you explain to us the fundamentals of this situation?
Indeed, 2017 has been one of our worst years, mainly because of the sugar segment’s results. As you know, our main market for sugar is Europe. Due to sugar quota regulations, the beet sugar producers there had to limittheir yearly production, up to September 2017. Now thatthe quota system has been dismantled, we have witnessed a marked increase in European sugar production, and thishas put a lot of pressure on the price of that product. Europe is now a major exporter of refined sugar and as the other leading sugar producers globally also had good crops, the international price of the commodity reached a low of USD361 /tonne. It is estimated that the sugar surplus for the next crop, that is the one for 2018/19, will be of about 13 million tonnes and that the price of sugar could remain low for the next two years, everything else being equal.
To what extend has this decrease affected the results of Omnicane?
Our sugar segment’s results show an increase in operationalloss of Rs 213.5 million, which is mainly caused by the drop in sugar price from Rs 15,500 per tonne in 2016 to Rs13,350 per tonne this year. However, excluding short-term compensation received from various sources, the MSS priceis at only Rs 11,000 per tonne. The effect has been two-fold:first a decrease in revenue of Rs 83.1 million for 2017 and secondly a decrease in standing canes of Rs 64.1 million.In addition, the production of sugar accruing to the Group fell by 14.7% (that is some 6,496 tonnes), translating into an additional Rs 101.3 million of lower profit.
At the present price of that commodity, the sugarsegment is not financially sustainable. What is the wayforward to bring back the price at a viable level for thesugar community in Mauritius?
The sugar industry has gone through a lot of crises in the past. The common denominator in finding ways to emerge from these has been the close collaboration between the sugar operators and the authorities, all sharing the same vision. The present crisis will not be different in that regard. We need a series of bold measures, which will ensure that we can be more competitive, make us more agile to adapt to the changing market conditions and encourage us to continue adding value not only to sugar but also the byproducts.
Can you share with us some of the critical factors thatcome to your mind?
It is clear that we need a new economic model. However, Ihave in mind three main measures that we can implement very quickly:
First, the regional market could be a quick win for us. Mauritius forms part of two important regional economic blocks, SADC and COMESA, where our products can be exported without tariff. If we have a closer look at these markets, we can see that there are specific countries that provide opportunities for exporting our sugar. For example, Kenya has a deficit market of about 300,000 tonnes and the price there is much higher than in Europe. We have to ensure that we have access to such markets, and for this we need the drive of the authorities to make things happen. We can in addition have some bilateral agreements with other countries like China, for us to access their market ata preferential rate.
A second measure pertains to the operating side. We must be at par with the other sectors in Mauritius, not only in terms of labour laws, but also regarding other traditional frameworks. We inherited those frameworks from the time when the industry was operating in a protected market, but they now hinder the structural changes that we urgently need.
Thirdly, there should be an increase the remuneration of bagasse used for the production of electricity to a price equivalent to that of coal. This is a long overdue adjustment,which would bring us at least at par with what is being done in other parts of the world. In some countries, the price of ‘green energy’ is in fact much higher than the price from traditional sources like petrol and coal.
Are there other measures that are important from an Omnicane perspective?
Our production model will need to be more agile andadapt to the changing market conditions. In this respect, we are making the required investment for new packaging equipment, which will enable us to take advantage of opportunities to sell raw sugar for direct consumption on the regional market. This will leave more spare capacity for the refinery, which in the future can be mainly dedicated to ‘toll refining’. For this model to be competitive with other sugar refineries of the world, we need a well-thought mechanism to be implemented for the importation, offloading, local transport of raw sugar and loading backon ships, of raw sugar.
On another note, during the sugar reform, we paid amassive amount, about Rs 1.5 billion, for closing five sugar factories and this was mainly financed through bank loans. To recoup part of this amount, we obtained land conversion rights, which we were not in a position to make realisable fully within our Group. However, these rights are tradeable since the start of 2017. We can realise them and reduce ourdebt burden, but only if we have a proper fiscal policy in place to support this realisation.
We see that sugar buyers are today very demanding interms of supply chain sustainability. Is this a threat or an opportunity for Mauritian sugar?
Mauritian sugar faces growing competition from producers globally and marketing of our product is indeed becoming an increasingly daunting challenge. As Mauritius is rapidly shifting from being a B2B exporter of sugar to a B2C one, customers are not only asking for quality at low price; they are also increasingly looking for products that have been responsibly produced. The supply chain sustainability is hence becoming one of the cornerstones of the 21st century’s sugar market. We are today already facing increasing pressure from large customers like Coca-Cola and Nestle, who want to be supplied with sustainably produced sugar as a result of their respective bold commitments to source 100% sustainable ingredients by 2020.
I believe that we do have the opportunity to maximise our unique selling points. We have the knowhow to produce quality sugar and we have a legal and institutional environment that is conducive to this. The environment mentioned here includes the commitment of all the stakeholders of the Mauritian sugar industry to offer sustainably produced sugar that is respectful of the social and environmental dimensions, while keeping a financially competitive edge.
What is the expected added value from adopting Bonsucro standards?
I have first to say that the energy segment has always delivered as planned. It is mainly driven by the two main power plants at La Baraque and St Aubin. I would like to congratulate the teams of these plants for this consistent achievement. We have added to this segment some other components, like the ethanol plant, the small energy plant and last year the Carbon Burn-Out (CBO) plant, which transforms coal ash into a cement additive.
The energy segment has been delivering good results year in, year out; though slightly lower ones in 2017than last year. How do you assess this segment and its potential for growth?
I believe that we do have the opportunity to maximise our unique selling points. We have the knowhow to produce quality sugar and we have a legal and institutional environment that is conducive to this. The environment mentioned here includes the commitment of all the stakeholders of the Mauritian sugar industry to offer sustainably produced sugar that is respectful of the social and environmental dimensions, while keeping a financially competitive edge.
The ethanol plant is today operating to produce a world class quality ethanol, certified by clients like Diageo. Discussions with the different stakeholders about the availability of molasses are going in the right direction and should ensure the viability of the ethanol plant in the future. Unfortunately, we had some technical problems at commissioning of the CBO plant and, pending some equipment changes that will be made in 2018, we will be working at a reduced capacity. On the positive side, the end product, a cement additive, is of very good quality and is already being mixed in cement by Lafarge.
The hospitality segment keeps improving its resultsand is posting for the first time an operating profit this year. What are the underlying factors of this trend?
The Holiday Inn Mauritius Mon Trésor hotel was indeed the first hotel of this type in Mauritius and it was a challenge to attract clients in the first years of operation. However, we have always kept faith in the potential of this hotel and we have now several cabin crews, airline transit passengers and businessmen who choose to stay next to the SSR International Airport during their trip. We achieved an average of 61.6% occupancy rate in 2017 and we are confident that, with the development of the Mon Trésor Smart City, this will improve further in 2018.
The results for international operations have been adversely affected by the effects of the investment made in associate company Real Good Food Plc. Can you give us some insight into the reasons for this result?
Real Good Food is presently going through a capacity expansion programme in some of its business segments. On the other hand, its operations were affected by a lower than expected demand and high one-off cost relating to a management restructuration. We have been called as one of the main shareholders to support the company for the completion of this expansion and we are confident that we will have better results once this is done. The new management has put in place a more robust structure and is closely monitoring the activities of each business segment.
You mentioned last year several projects that were in the pipeline in the Mon Trésor Smart City, particularly the Omnicane headquarters and Phase 1 of the residential project. Are these developments progressing well and have other projects there been earmarked?
Before going through the projects, I would like to mention that a lot of value has been unlocked for the Mon Trésor Smart City with the opening of the new motorway giving access to the airport. This is a good example of a successful public-private partnership; Omnicane provided the land required and the Mauritian authorities were in charge of the motorway construction. This, together with all the work we have done up to now to position Mon Trésor as a new property development destination, has significantly contributed to generate a revaluation surplus of Rs 2.5billion for our land. This was the main factor boosting our Net Asset Value to Rs 163.8 per share - a 25.2% increase over last year.
We must however invest in more infrastructure to give greater visibility to our development. We are in advanced discussions with the authorities for the construction works of a link road from the new motorway, which will drive us right to the heart of Mon Trésor. This road will have an entrance feature that will create a feeling of ‘grand arrival’ to the Smart City. We believe that this will help us boost the marketing of the residential phase, which has not yet reached the reservation target for construction works to start. We have bolstered our internal marketing team with the recruitment of experienced executives who will befocused on delivering our targets. On another note, we are also starting the construction of some critical amenities in this development’s freeport area to so that the first phase of that part of the project can start. We are collaborating with our partner Eris Properties and Momentum Africa Real Estate Fund for this.
We have heard a lot about film studios being one of the main features of the Mon Trésor project. Is this still in the pipeline?
It is indeed still very alive. We have signed an MoU with Babelsberg Film Studio from Germany. It is the oldest large scale studio in the world and one of Europe’s leading service providers for major motion pictures. Recent famous movies shot there include Bridge of Spies, Captain America: Civil War, Hunger Games and Inglorious Basterds. They have the know-how and the network in the cinema field to help us transform this project into reality. What we have learned is that to attract film production from the international market, we need a robust and clear film rebate scheme. The scheme in Mauritius is one of the best in the world in terms of the quantum of the rebate, but it still needs some fine tuning to iron out grey areas. We have conducted a roadshow with potential financiers including banks, pension funds and private equity partners and got a very positive feedback from them on the project. Omnicane will provide the land required and the other partners will inject cash for the equity part. If everything goes as planned, we hope that we can start construction by the end of 2018.
Projects on the African continent have been ongoing for some years now. How have these been performing in 2017 and what do you expect for 2018?
We have two projects in Africa: the Kwale InternationalSugar Company Limited (KISCOL) sugar project in Kenyaand the hydro-electrical one in Rwanda. In respect ofKISCOL, it was a difficult year as Kenya was hit by a severedrought at the start of 2017 and the date scheduled for the general elections delayed the start of the crop. Despite this, we have been producing 19,475 tonnes of sugar, all of which has been sold on the local market. We are working closely with our partners in Kenya, Pabari Investments, to ensure that we continue to improve the cane cultivation and bulk water supply. It is a bit early to estimate the cane supply for 2018. However, I can say that the potential of this project is huge and we now have to get a maximum of canes to the factory to reach our cruising speed in the next two years.
Regarding the hydro-electrical project in Rwanda, weare progressing well despite a lot of challenges at every stage. During the year we managed to sign an amended PPA with the Rwandan authorities and to sign a new EPC contract. The construction works are being carried out by VS Hydro. We are on schedule to start the first phase of the project, with completion of a first line of electricity production by the end of August 2018 in Rukarara. We are confident that at the end of this project, we will have the right credentials for developing other similar projects in the eastern part of Africa.
The Group announced during the year that it raised Rs 2.5 billion in the form of bonds. This seems to be a recurrent feature. Can you tell us more about the strategy and purpose for this?
The financial market is very dynamic and we have to ensure that we use the right financial instrument, which suits thecash flow expectations of the Group. Bonds are one of these instruments that are very adapted to the needs of our Group. As there is high liquidity on the local market, we have been able to raise funds at an efficient cost of capital.
What we see is that the Smart City development will take some time to generate revenues as we are still in the earlydays of the first phase of this development. This is why we have re-structured our debt profile with more bonds - and ahigher part of these repayable in the medium-to-long term, that is five to seven years. This will give us time to continue to create value in property development and complete the African projects.
Raising bond was a very important stage for us this year, with a lot of work done internally, including several roadshows carried out with investors and financial institutions. I would like to place on record our appreciation of the continued confidence of the investors’ community inOmnicane’s vision and plans.
All these activities and challenges require high quality human resources. You spoke last year of a Results-Based Leadership (RBL) development programme. Are you satisfied with what you have seen so far?
Last year we had some important changes in the management personnel and in our HR structure. We also knew that the Group would be facing difficult challenges and that we had to ensure that talents were not only retained but also righty equipped to deliver on the Group’stargets. The RBL programme fits really well as it is one which spans over a period of 14 months and which is bringing profound changes in the manner in which we work as a team within the Group, with a focus on results. We believe that the values of Omnicane’s leaders should be around Accountability, Innovation and Sustainability.
We have had three workshops carried out with the top management, each of them over three full working days.We have identified seven projects to be carried out during the training period with a defined purpose for each of them. At the end, the different teams will make a presentation to the Board of Omnicane. I am very pleased with what has been done up to now and I see many young talents already emerging during these workshops. In addition, as the projects involve people from different entities, this training is bringing a lot of synergies and momentum within the group.
Do you have any concluding remarks?
I would like to take this opportunity to thank Mr. Sunil Banymandhub, with whom I have worked closely during the last eight years. He has been instrumental in leading the Board on key initiatives such as our regional expansion, setting up of Enterprise Risk Management framework, and strengthening our Corporate Governance structure. Iwould also like to thank all our employees and stakeholders for their collaboration.
Mauritius forms part of two important regional economic blocks, SADC and COMESA, where our products can be exported without tariff.
As the Chairman and the CEO outlined in their report, this year has been indeed very challenging for the sugar industry across the world. With the end of sugar production quotas on the EU market (which is the main market for Mauritian sugar), beet sugar producers increased production significantly turning Europe from being a net importer of sugar to a net exporter. Sugar price for 2017 was as low as Rs 11,000 per tonne, before any adjustment for financial support which is well below the cost of production per tonne of sugar. We are working closely with all stakeholders and proposing bold measures to turn-around the industry into a sustainable one. The Mauritian sugar industry cannot compete with players on the world market with the current cost structure. A reform in the industry is vital if the country wants to maintain an organised agricultural sector.
(i) Financial strategy update: Restructure of borrowings
In line with the company’s strategy to match its long-term investments with financing over the long term, the company made a Private Placement Program that was a real success in terms of bids received from investors' interests for a total of Rs 4.42 billion were received and Rs 2.5 billion worth of bids were accepted by Omnicane Limited as follows:
The above, shall restructure the company’s short-term borrowings into longer terms to match with long-term cash flows receivable from projects.
This is reflected in the 2017 financial statements as depicted below:
(ii) Re-negotiation of finance cost in energy companies
During the year under review, Omnicane successfully completed the re-negotiation of interest rate charged by the consortium of banks on the outstanding loan balances for the energy companies. The re-negotiation helped in decreasing interest rates by a considerable amount over the loan life period. However, the benefits will only be reaped as from next year, as it is being the effective period when the new rates will be applied..
Key financial risks
The key financial risks for the Group are set out on pages 153 to 157 of the financial statements.
The sugar cluster was severely impacted by the fall in sugar price and the Group has recorded an operating loss of Rs 469.8 million for the financial year 2017. The cane growing activity was mostly impacted by the fall in sugar price. A total of Rs 384.4 million of operating losses came from this activity due to the reduced revenues recorded and the adjustment made on our standing cane value at the end of the financial year. The milling and sugar refining activities ended the year by posting operating losses of Rs 64.1 million. In addition to the fall in price, this activity was hit by a 108,793 lower cane tonnage recorded in the factory. As explained last year, we are still working closely with non-corporate and corporate planters in the area to help in maintaining cane tonnage, but with sugar price hitting the below sustainable threshold, cane land abandonment has continued for the year under review. From 2014 to 2017, cane tonnage fell from 1.21 million tonnes to 1.05 million tonnes which represents a net fall of 13% over the period.
The refinery was operating at cruising speed during the year but the MSS had difficulties in securing orders in the last quarter of 2017 and as a consequence, the plant had to reduce its production as from that period. Thus, the target of 200,000 tonnes of refined sugar was not met and only 187,000 tonnes were refined at the end of the financial year.
The energy operations results reached Rs 564.4 million (2016: Rs 579.3 million) mainly due to the reduced production of the ethanol distillery in 2017. The plant stopped production from mid-March to June of 2017 as it had difficulty to secure molasses from its suppliers. This was mainly due to the fact that part of the molasses produced in Mauritius was exported on the world market. However, at the start of the crop year in June of the same year, the distillery was able to secure all its molasses needed for its 2017/18 campaign as the country no longer exports molasses. The report of the Joint Molasses Allocation Committee shall determine the equal saturation of molasses for the distilleries on the island and clear any issue for the supply of molasses.
Operating profits on the power plants fell during the financial year mainly due to the fall in capacity fee following the refinancing of the loans. Operating profits fell however, this was offset against the fall in finance cost. On the other hand, during the year under review, major repairs were undertaken at the La Baraque plant for the decennial major verification of equipment and some parts were replaced based on experts’ opinion. This is as planned under the Power Purchase Agreement with the Central Electricity Board and the plant is compensated with a higher capacity fee to cater for this major exercise.
The 2016 figures was restated to include the results of the subsidiary REFAD in Rwanda. Pre-operational expenses of Rs 54 million was booked in the 2016 Statement of Comprehensive Income. The project is progressing well with the appointment of a new EPC contractor, VS Hydro (a Sri Lanka based company). The first line of 2 MW is expected to be operational as from August 2018.
The Group’s associate in the United Kingdom recorded a substantial loss during the financial year and an amount of Rs 155 million has been accounted in the financials, representing the share of associate’s results. The UK-based group faced major challenges with some divisions, which are pulling down results, and the Board has agreed to dispose of these small and non-core divisions as a mitigating measure. The company is currently undertaking a major strategic financial restructuring that shall smoothen its financials for the forthcoming years.
KISCOL, the Group’s Kenyan associate, delayed the start of its crop year 2017/18 as the country had to organise two presidential elections during the second half of year 2017. There was scarcity of employees during this period as most of them had to move to their birth country to vote. The political landscape was unstable during that period and it was more prudent to delay the start of the crop year. The mill started its operations in October 2017, when the election campaign was over and the country was back to a politically stable position. Kenya was also hit in the early months of 2017 by a severe drought that affected the crop. The share of results is limited to the equity investment in the company which was fully written-down in the prior year results. The shareholder’s loan to the company is tested on a yearly basis for impairment and at the end of the financial year, no adjustment was accounted for in the financials.
Exceptional items consist mainly of additional land conversion rights recognised on the investments the Group made in the distillery assets. As per the requirements of the Sugar Industry Efficiency Act, a proportion of 40% of the total investment attracts land conversion rights which was recognised during the current financial year. Profits following the disposal of two management contracts to Omnicane Management & Consultancy Limited have also been booked under exceptional items. The value was based on an independent valuation done by an external consultant.
Finance cost fell to Rs 557 million, which included the revaluation of the shareholder’s loan balance with the Kenyan associated company, KISCOL. A gain of Rs 95.6 million has been recognised against finance cost during the current financial year under review.
Loss per share of Rs 6.32 (2016: Earnings per share of Rs 1.97) has been recorded for the current financial year. As outlined above, the financial results have been severely affected by the adverse results from the sugar segment that were mainly due to the fall in sugar prices during the year.
Cash and cash equivalents improved by Rs 350.7 million during the year. A net positive cash flow from investing activities of Rs 465.8 million was recorded for the financial year, which includes Rs 773.5 million of proceeds received from land sales (for a total cost incurred of Rs 250.9 million as infrastructure cost). This comes mainly from the Highland Rose land development.
The Group raised borrowings totaling Rs 2.1 billion from banks and Rs 2.5 billion from bond-holders. These were mainly used to restructure the debt profile from short term to longer-term repayments.
Shareholders were paid dividends of Rs 2.00 per share (2016: Rs 2.00 per share) in March 2018 which was maintained despite losses being recorded during the financial year.
Total assets and share price
The Group revalued its land assets during the year and a net amount of Rs 2.56 billion was booked in the revaluation reserves, which represents the increase in value based on an open market valuation performed by Broll. The Group land assets now stand at Rs 8.8 billion as at 31 December 2017. Consequently, the Group’s net asset per share increased to Rs 163.85 (2016: Rs 130.82), which represents a net increase of 25% over last year’s amount.
The Group’s net debt fell slightly to Rs 10.4 billion compared to Rs 10.5 billion in 2016 and gearing ratio decreased from 54.59% to 48.65%. The fall was mostly due to the land revaluation exercise that increased significantly the equity base of the Group.
Indirect Economic Impacts (103-1, 103-2, 103-3, 203-1, 203-2)
Indirect economic impacts, while harder to quantify, include jobs affected indirectly by the operations, infrastructural development in the region where the Company operates and community development programs. During the year under review, there have been no significant indirect economic impacts of the activities and operations.
The sugar market shall remain in its present state and will affect our 2018 financial year as the Syndicate has asked Omnicane to limit its refinery production to 135,000 tonnes. In that respect, the plant will operate at below capacity and will only resume activities in March-April 2018. In line with the contract with the MSS, the refiners will ask for a compensation equivalent to the fixed portion of the premium which shall be around Eur 34 per tonne. The Syndicate has also asked the millers to increase production of DC raw sugar for a premium, which shall be marketed on regional markets. We will continue to work closely with all stakeholders to ensure that appropriate measures be implemented immediately to support the industry.
New IFRS 15 – Revenue from contract with customers
The new "IFRS 15 – Revenue from contract with customers" standard shall be effective as from January 2018. In that respect, our financials could be impacted with the proposed changes in terms of revenue recognition on our property projects. Previously, the Group recognised revenues and profits based on the amount of non-refundable deposit received from customers, which was reflected in the contract signed between both parties. Further to the adoption of the new IFRS 15, revenues can only be recognised when the entity has satisfied all its performance obligations under the respective contract. This could materially alter the way in which revenues and profits were accounted for in the past as now we will only recognize revenues and profits upon full completion of the respective projects and satisfaction of all performance obligations
We have witnessed the completion of the Carbon Burn-Out Unit annexed to our 90 MW main power plant at La Baraque.
The setting up and operation of the La Baraque industrial cane cluster translates our resolve to plan and execute our entire production as an integrated whole, for optimum flexibility, maximum efficiency, and, above all, minimal waste, notably by using one operation’s waste as another’s raw material.
In the energy segment in 2017, we have witnessed the completion of the Carbon Burn-Out unit annexed to our 90 MW main power plant at La Baraque. This project, since its inception, has been environmentally geared with the objective of transforming coal ashes into a valuable low carbon footprint green cement additive.
On the sugar side, our retail bagging plant is fully operational for the packaging and distribution of our retail sugar brand, Kara which is now available to local consumers across the island. At the level of the refinery, we are pleased to note progress in the refinery upgrading works which has just been commissioned in April 2018. This will increase the annual refining capacity from 200,000 tonnes to 260,000 tonnes of white refined sugar while improving the efficiency in terms of energy consumption thus ensuring that the refinery will be better prepared to take advantage of future growth prospects in the sugar market.
With innovation being part of Omnicane’s DNA, our team is continually exploring opportunities to further optimize our processes and to come up with new value added sustainable products for the benefit of our customers.
Power Plant Manager - Omnicane Thermal Energy Operations (La Baraque) Limited
Power Plant Manager - Omnicane Thermal Energy Operations (St Aubin) Limited
The strategy for our thermal power plants operations is to safeguard continuous availability to the national electricity grid at over and above 8,000 hours (as a power producer) and to ensure that Omnicane’s industrial cluster receives uninterrupted, sufficient and constant supply of electricity and of steam – the latter from La Baraque power plant only.
Year under review
The two main power plants at La Baraque and St Aubin produced a total of 864GWh of electricity (2016: 839GWh) and they exported 745GWh (2016: 720GWh) to the national grid. The consistent financial and operational performance of the Company’s energy segment is the result of rigorous maintenance planning to ensure that the power plants remain reliable and flexible operating units.
Thermal power plant – La Baraque
In 2017, our 90-MW coal-and-bagasse fired cogeneration plant at La Baraque produced 143GWh (2016: 162GWh) of electricity from bagasse and 444GWh (2016: 405GWh) of electricity from coal, resulting in a total production of 587GWh for the year. The smaller 3.8MW power plant at La Baraque produced 169,539 tonnes of steam and 21GWh of electricity intended for internal consumption within our industrial cluster, by operating for 8,125 hours
The La Baraque power plant provided electric power for 8,186 hours on the national grid in 2017, hence exporting 111.6GWh (2016: 125.5GWh) of electricity from bagasse and 400.7GWh (2016: 365.3GWh) of electricity from coal, representing a total exported electricity of 512.3GWh (2016: 491.1GWh). This 4.3% increase was due to higher demand from the off-taker.
The Carbon Burn-Out (CBO) project, which consists in the transformation of coal ashes into energy and a valuable low carbon footprint cement additive, was operational for 4,319 hours in 2017. While still in its commissioning phase, the unit produced 43,148 tonnes of steam and 1GWh of electricity. This CBO plant has the capacity to treat the coal ash generated by Omnicane’s power plants at La Baraque and St Aubin as well as that of Terragen at Belle Vue.
Thermal power plant – St Aubin
The 35MW coal-fired power plant at St Aubin produced 255.7GWh (2016: 251.4GWh) of electricity from coal and exported 233GWh (2016: 229.3GWh) of electricity to the national grid, with 8,091 hours of availability on the grid.
With an integrated management system comprising of ISO 9001 (Quality Management), ISO 14001 (Environmental Management) and OHSAS 18001 (Occupational Health & Safety) at both power plants, we are committed to meet and satisfy our customer requirements, ensure compliance to environmental regulations and maintain a safe working culture.
As a key supplier of steam and electricity to the cluster at La Baraque, the main challenge of the La Baraque power plant is to ensure uninterrupted supply of energy to minimise stoppages due to lack of steam or electricity.
Chief Operations Officer
The strategy for Omnicane’s agricultural operations is to optimise cane and sugar yields by adopting good agricultural practices and to increase mechanisation in its fields whilst reducing labour costs.
Year under review
In 2017, out of the 2,633 hectares (2016: 2,724 hectares) of land under cane cultivation, 2,419 hectares (2016: 2,575 hectares) were harvested from our two operational sites (Britannia and Mon Trésor). This harvest produced a total of 209,257 tonnes of cane (2016: 229,961 tonnes). Cane production thus decreased by 9% in 2017 compared to 2016. The reasons for the decrease are a severe drought in the first quarter of the year and excessive rainfall during the second quarter – both affecting plant growth and sucrose content of the sugarcane. Overall sucrose content stood at 11.27% for the year compared to 11.70% in 2016.
The Britannia region produced 94,642 tonnes (2016: 99,057 tonnes) of sugarcane from 959 hectares of land, representing a cane yield of 98.7 tonnes/hectare (2016: 100.16 tonnes/hectare) and sugar yield of 9.4 tonnes/hectare (2016: 10.1 tonnes/hectare). With its rich climate, relatively high soil fertility, favourable plant growth conditions and good agricultural practices, Britannia has always been the best performer island-wide in terms of average cane yield and sugar yield for the last few years.
The Mon Trésor region produced 114,615 tonnes of sugarcane (2016: 130,904 tonnes) from 1,460 hectares of land, equivalent to a cane yield of 78.5 tonnes/hectare (2016: 7.83 tonnes/hectare) and sugar yield of 7.8 tonnes/hectare (2016: 8.62 tonnes/hectare). These are slightly below the corresponding island average scores of 79.8 tonnes/hectare and 7.7 tonnes/hectare. Compared to Britannia, Mon Trésor is a relatively dry region and has been more affected in 2017. Effective irrigation compensate for the lack of rainfall.
It should also be noted that 157,046 tonnes of sugarcane, representing 75% of total harvest, have been harvested mechanically in 2017 compared to 71% in 2016.
Due to bad weather conditions and bacterial wilt affecting our potato cultivation, there has been a net decrease of 49% in the potato yield, with only 1,105 tonnes harvested in 2017 (2016: 2,158 tonnes).
There is increasing customer and regulatory requirements regarding sustainable agricultural techniques. Omnicane Agriculture is therefore currently implementing several principles pertaining to sustainability, such as environmental and waste management, social, labour and human rights best practices, and better health & safety guidelines. All are in line with the requirements of Bonsucro Production Standard and other requirements from supplier guiding principles.
Over the last five years, Omnicane agricultural operations have witnessed a net decrease of 2.4% in the area under sugarcane cultivation due to major property developments in the southern region of Mauritius. The Company’s aim is to maximise its cane yield in its remaining fields.
Operations Executive - Milling
RAW HOUSE OPERATIONS
With an optimal cane crushing capacity of 1.2 million tonnes of sugarcane per year, the strategy of Omnicane Milling (for its raw house operations) is to improve its operational efficiency whilst lowering its cost of production. Being the heart of our industrial cluster at La Baraque, our sugar factory produces plantation white sugar for our sugar refinery, bagasse for our cogeneration power plant and molasses for our bioethanol distillery.
Year under review
In 2017, our sugar factory crushed a total of 1,054,688 tonnes of sugarcane (2016: 1,163,482 tonnes) received from 12 corporate and 3,779 small planters in the southern catchment area of Mauritius. It produced 100,914 tonnes of plantation white sugar (2016: 118,480 tonnes) as main product. By-products output was 38,223 tonnes for molasses (2016: 40,167 tonnes) and 360,841 tonnes for bagasse (2016: 396,282 tonnes). The total sugar accrued to Omnicane Milling Operations Limited amounted to 21,972 tonnes in 2017 (2016: 25,943 tonnes).
The factory’s average daily crushing rate in 2017 was at 7,791 tonnes/day compared to 8,199 tonnes/day in 2016, following bad climatic conditions and reduced cane supply during the year under review. The climatic conditions and cane quality impacted on the sucrose percentage in the sugarcane which stood at 11.06 compared to 11.6 last year. The total mill losses were higher, at 1.64%, compared to 1.57% in 2016 and the extraction for 2017 ended at 9.48 (2016: 10.09). The Reduced Overall Recovery (ROR), which indicates the overall performance of the factory, was lower at 86.4 in 2017 compared to 86.6 in 2016. For comparison, the average island ROR for the four sugar factories in Mauritius stood at 86.59 in 2017.
Cane Management Service
Our Planters’ Advisory department is continuing its efforts to help small planters in the region providing cane to our factory to manage their fields - from husbandry to harvest operations. Since the start of the department’s cane management service in June 2015, a total of 119 hectares of land under sugarcane have been managed with the help of contractors. The positive response of the small planters’ community to this service is demonstrated by the signing of 47 new contracts (2016: 30 new contracts) in 2017, representing an additional area of 52 hectares of land to manage. This represents a total of 146 hectares of land under sugarcane cultivation to manage in 2017, equivalent to an increase of 36% compared to last year. A total of 7,294 tonnes of sugarcane have been harvested during the 2017 crop season.
Under the assignment by the Mauritius Cane Industry Authority (MCIA), the department also completed the cultivation of 10.71 hectares of neglected or abandoned lands at Deux Bras, under the Small Planters Regrouping Project. Following the request of individual planters, 10 hectares of land were also cultivated with sugarcane.
In line with section 27 of the MCIA Act (2013), all sugarcane planters should sign a contract with our sugar factory to commit their supply to the factory and in return benefit from the best operational conditions from the factory. Truck drivers are also required to commit themselves for the supply of good quality sugarcane to our factory. Cane contractors, who work under the Cane Management scheme, are required to sign an agreement, committing them to apply labour, health & safety and environmental best practices in the fields.
In order to increase customer satisfaction, our sugar factory is committed to achieving transition from ISO 22000 Food Safety Management to FSSC 22000 and to implementing the following ISO standards: ISO 9001:2015 (Quality Management), ISO 50001 (Energy Management) and ISO 45001 (Occupational Health & Safety). We are also currently working on implementing Bonsucro sustainability standards at our sugar factory and supply chain.
It has been noted that the sugarcane supply is decreasing every year due to the high cost of production and to smaller revenue caused by the low price of sugar. Our sugar factory is hence working on means to lower its cost of production to be more flexible in producing and bagging different types of sugars for value addition and to encourage small planters to remain in activity.
Operations Executive - Refinery
Our sugar refinery’s strategy is to improve its performance to produce high quality refined sugar that meets customer requirements and to be in line with international standards.
Year under review
In 2017, our refinery produced 184,243 tonnes (2016: 181,290 tonnes) of white refined sugar of standard 45 ICUMSA EEC II, EEC 1 and bottler’s grade. Delivery of the white refined sugar is done in 25 tonnes bulk containers or in 50kg and 1 tonne bags, depending on the client’s requirements. Despite an increase in production by 1.63% compared to last year, it should be noted that the refinery reduced its output by 50% as from October 2017 and stopped operating by mid-December 2017. This was due to reduced sales of our white sugar on the European market following the abolition of the ACP quota by the EU.
Although there was a decrease in demand for 25 tonnes containers from the EU, there was a growth in supply of 50kg -bagged sugar to the regional market. In 2017, 65,596 tonnes of 50kg-bagged sugar were exported compared to 47,640 tonnes in 2016. In addition, 24,300 tonnes of bagged sugar were sold on the Mauritian market.
It should be highlighted that our refinery has been awarded the BRC AA grade certification thanks to our enhanced food safety culture and product quality.
The refinery’s upgrading project with De Smet consultants is under progress and the plant is scheduled for commissioning by April 2018. The refinery will thus increase its annual capacity from 200,000 tonnes to 260,000 tonnes of white refined sugar while also achieving energy savings. With the additional capacity and improved efficiencies, the refinery will be better prepared to take advantage of any growth prospects in the sugar market.
The main challenge is to ensure sustainable operations despite variable sugar prices on the market.
With an optimal annual production capacity of 24 million litres of bioethanol, our distillery’s strategy is to deliver a quality and safe product to our customers while creating value addition from the process by-products.
Year under review
During the year under review, our distillery produced 17.9 million litres of bioethanol (2016: 20.4 million litres) from 60,136 tonnes of molasses (2016: 70,693 tonnes) obtained from our adjacent sugar factory. This decrease was due to lack of molasses and subsequent stoppage of the distillery from mid-March to June 2017. The distillery produced as by-products, 55,378 tonnes of Concentrated Molasses Solids (CMS) (2016: 66,375 tonnes) and 1,986 tonnes of carbon dioxide (2016: 1,879 tonnes), the latter being used in the beverage industry. Most of the neutral bioethanol has been supplied to the African market while the CMS has been sold to Island Renewable Fertilizers Ltd for fertilizer production and the carbon dioxide to Gaz Carbonique for producing food grade carbon dioxide.
With its double ISO 9001:2008 and ISO 22000:2005 certifications, the distillery is committed to deliver quality and safe products to all its customers, while maintaining a culture of continuous improvement in its processes.
Our main challenge is to procure sufficient molasses to sustain an optimal production capacity of bioethanol.
Logistic Operations Manager
The strategy for our logistic operations is to optimise transport services for sister companies and external clients whilst reducing operating costs. We are also committed to utilise the best available fleet of vehicles, maintained in good working condition.
Year under review
In 2017, Omnicane Logistics transported a total of 840,974 tonnes (2016: 787,458 tonnes) of materials for sister companies within the Group and for some external clients with an optimised fleet of trucks and trailers. This indicates a net increase of 6.8 % in the total amount of materials transported in 2017 compared to last year. This is mainly due to an increase in tonnage of coal transported for our power plants and more chopped sugarcane transported from Britannia to La Baraque.
It should be noted that regular maintenance of our vehicles is carried out so that they are more efficient and in order for them to be compliant with all relevant provisions of Road Traffic regulations.
The main challenge is to set up key performance indicators for the optimum running of logistics operations and monitor their associated running costs.
Holiday Inn Mauritius Mon Trésor hotel being part of the IHG brands, its strategies are to be recognisable by service and product quality standards, and to be consistent and coherent in the promotion of excellence, novelties and future development. We also aim at exceeding guest expectations and we target to position ourselves as a reliable business meeting point in the heart of Mon Trésor Smart City.
Year under review
In 2017, our commitment to increase business volume, visibility and revenue was demonstrated by a higher occupancy rate of 61.6% compared to 56.1 % in 2016. Along with the steep growth curve, we managed to deliver exceptional quality levels that were acclaimed by our guests on several review platforms. Holiday Inn Mauritius Mon Trésor successfully passed the IHG audit in 2017 with a rate of 89.7% in areas of security, cleanliness, condition, product and service. We were also awarded the prestigious TripAdvisor Certificate of Excellence 2017, which demonstrated our influence on traveller’s choice. We also provided weekly dedicated training sessions to our staff and closely monitored our operational departments to maintain our quality of services – thus creating the concept ‘home away from home’.
Holiday Inn Mauritius Mon Trésor is in full swing and continues to provide reliable and quality business meeting and conference services. Events hosting up to 300 persons can be easily held at the hotel. There has been an increase in residential seminars booked at the hotel, including conferences lasting up to seven days. With these unique selling propositions (USPs), we are partnering with African countries and China to sell our meeting venue.
In view of being a reliable stopover hotel, we have signed contracts with several airline companies such as KLM Royal Dutch Airlines, Saudi Arabian Airlines and Air Mauritius. We are also committed to using digital marketing and social media platforms to attract our customers.
With the new IHG Revenue Management System, historical revenue data can be provided and highly accurate segment level forecasts can be obtained for more effectiveness in optimising rate on a daily basis versus other competitors.
With increasing competition, the main challenge for our hotel is to ensure that we exceed guest expectations about their stay and that we provide satisfactory conferencing facilities to all our business partners, for fulfilling our long-term aspiration towards development and growth.
Head of Property Development
The larger part of our land bank provides for sugarcane growing, feeding our cluster for producing sugar, bio-ethanol and energy. After disposing of key land assets in the Highlands/Ebene areas, we are now focusing on developing the area of Mon Trésor, which is also the brand name of our Smart City project. Our strategy consists in “building to sell and building to lease” a range of profitable, harmonious and sustainable properties over relevant land stock during the next 15 years, in support of Omnicane’s overall business objectives.
Year under review
Year 2017 has seen the enactment of major initiatives that will lead to the transformation of Mon Trésor Smart City into a vibrant residential and business hub.
A major milestone for the year has been the construction of the Mon Trésor Business Gateway, a partnership between Mon Trésor Smart City and ERIS/MAREF, to be completed by the end of the first semester of 2018. This is the first dedicated area to be built within the boundaries of the Mon Trésor project. We have also decided to kick start the construction of the infrastructures and the entrance of the Freeport zone, in response to requests from prospective users for a closer timeline in the future availability of these facilities.
The residential part of the project has also made progress, with the launch of the first phase of our Smart City offering a range of residential products to locals and foreigners with scalable budgets. The first phase of our residential offerings, with unique leisure amenities such as green walking, cycling and jogging tracks, a central park, a forest promenade, access to the beachside, sports facilities and a beach club, hit the market in August 2017.
Concurrently, we completed one of the country’s largest residential land projects, Highland Rose, along the planned timing and budget. We also launched Fairview, a 432-plot, 57-acre estate in Mare d’Albert. Sales targets were met, confirming the increased demand for residential products in that region. This boosted our confidence in the lifestyle projects planned for development in the medium term to long term. Phase II of Fairview is contemplated for 2018/2019.
The construction of the New Airport Highway was completed in July 2017 and the road was inaugurated by the Honourable Pravind Jugnauth, Prime Minister of the Republic of Mauritius, in August 2017. State-of-the-art construction methods have been deployed in building this road, which has opened up a future-proof, scalable access to the airport passenger terminal and to its newly created cargo zone. It also enhances Mon Trésor’s access to a major road network.
Also, discussions on the design of the facilities and for the structuring of the studio project have moved in their final stages at end of the year. Various workshops in Potsdam, Germany and in Mauritius gave rise to an MoU with Berlin-based Studio Babelsberg, the oldest studios in the world, for the transformation of Mon Tresor sugar mill into a phased development of facilities of global appeal. A first phase will involve the creation of 6,000m2 of sound stages, a similar zone of production offices, supported by 2,500m2 of workshops for set construction. The Government is putting the final touches to the Rebate Scheme, key competitive element for attracting global productions to our shores, thus kick-starting a new industry.
The Mon Trésor Smart City is an exciting project – but also a very challenging one. The international airport at one end, pristine beaches on the other, tree-lined boulevards and a tropical forest in the middle, are already there to assist us in keeping our promise for a new experience in living and working. However, with the attractiveness of such a remote area, comes its perceived remoteness. The lack of direct access to these features and their lack of visibility from the main road networks make of Mon Trésor a hidden gem. We could better unlock this potential with proper road access.
We have identified a marked demand from airport operators for serviced land in the vicinity. A project for land development near the Holiday Inn Mauritius Mon Trésor Hotel in 2018 is thus being considered. It will target companies and individuals seeking to relocate to a best-of-class freehold development at the doorstep of the international airport.
Essential to the attractiveness of Mon Trésor is the availability of a retail offering geared towards the transient tourists’ flow in and out of the country and to the 4,500 members of staff and personnel of the airport and its surroundings. This will fill a presently unmet demand for shopping which results from a sparse captive market. Such demand has been validated through market surveys, which also highlighted the importance of the optimal sizing of the project. This is being determined in conjunction with our partners and the outcome will be the development of a key shopping destination, fueled by growing airport traffic and neighbouring activities.
Group Chief Sustainability Officer
Group Human Resources Manager