Sugar and Ethanol industry in Brazil witnesses large acquisitions and investments with forecasts for exceptional growth

With the planned acquisition of the Mandu Mill in Sao Paolo state, Acucar Guarani SA will be Brazil’s third biggest sugar and ethanol group. The group’s CEO announced the plans today marking the continued acquisition of smaller companies by bigger ones, currently widespread in the Brazilian ethanol industry. According to industry analysts, almost half of the 400 mills in the country are ready for acquisition.



The company’s CEO further said that it was prospecting for other opportunities that may come up and the company would most likely take part stating that it was ready for any future acquisitions. Guarani, a French owned company controlled by Tereos Sugar group, is the country’s fourth largest sugar producer and the sixth biggest ethanol producer. According to the announcement, the acquisition investment for Mandu mill will cost it $188 million and would increase its processing capacity to about 20.6 million tonnes of cane per annum.



In the investment plan, Guarani will assume Mandu’s estimated $139 million debt and it comes one month after state owned giant oil company, Petrobas, purchased a 45.7% stake in Guarani for an estimated $872 million in a bid to expand its biofuels division. Petrobas is currently in a quest to become a global leader in the biofuels industry and is targeting a projected 3.9 billion litres by the year 2013 but with its relatively limited experience in the cane, sugar and ethanol industries, Petrobas has instead preferred buying minority stakes in other companies to meet its expected target.



The Mandu mill to be acquired by Guarani has a crashing capacity of 3.5 million tones of cane per annum and is expected to be increased with little investment to 4 million tonnes. The Mandu production output has tended to split between the two industries with 60% for ethanol and 40% for sugar. Guarani expects that Mandu’s sugar production this year will reach 200,000 tonnes with an ethanol output of 175 million litres, and about 12 MW of electricity will be generated from the burning of cane bagasse.



Guarani’s annual ethanol production stood at 490 million litres of ethanol per year before this acquisition of Mandu. Guarani group has five mills located in the North and Northeast of Sao Paolo state, one of the biggest states in the country in sugar production with about 60% of Brazil’s cane output. Subsequently, Brazil has emerged as the world’s largest exporter of ethanol from sugar cane farming, prevalent in the country.



June 3, 2010.