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Mon 21 Feb 2011 03:31 PM

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Saudi's Savola puts sugar refinery expansion on hold

Sugar premiums have been badly hit by rising global food prices, refinery operating at a loss

Saudi's Savola puts sugar refinery expansion on hold
SWEET PRODUCE: Savola Group has put its Jeddah sugar refinery expansion plan on hold until white sugar premiums recover (Bloomberg Images)

Saudi food company Savola Group has put its Jeddah sugar refinery expansion plan on hold until white sugar premiums recover, the company's vice president for central buying said.

Savola, which owns the Middle East's biggest sugar refining business and produces edible oil, had plans to expand its 1.2 million tonne per annum sugar refinery to 1.5 millon tonnes, however low demand stemmed by higher prices has taken a toll on refineries' profits worldwide.

"We had plans to expand to 1.5 million tonnes but we will have to wait until the market recovers to do that," Kamal M Shukri saidin an interview on the sidelines of an industry conference in Dubai.

The Jeddah refinery is still operating at full capacity, despite losses. The executive however declined to reveal the extent of losses.

"The situation is for sure hurting us, but we feel like we have a social obligation to the Saudi community and government to continue our production despite any losses," he said.

The firm has another refinery in Egypt with a capacity of 750,000 tonnes which was forced to shut down for a "few days" due to the nationwide protests that started on January 25 and led to the end of long time president Hosni Mubarak's rule.

"We had to shut down for a few days, but now we have resumed operations and production is at around 2,100 tonnes per day," said Shukri.

Last year Egypt had imposed a price ceiling on white sugar in an effort to contain food inflation which lead Savola to limit its sales to the domestic market, Shukri added.

"Almost all of the sugar produced in Egypt is for exports now because we cant afford to sell at a loss," Shukri said.

Raw sugar futures fell further from a 30-year high hit earlier this month, trading in a tight range, as price moves remained choppy and markets were pressured ahead of next month's harvest in top grower Brazil.

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