Sugar miller eyes railroad project in Negros

Victorias Milling Co. Inc. (VMC) plans to spearhead a new railroad project in Negros Occidental to transport sugarcanes and passengers that, in turn, can reduce the transportation costs.

It said the project could be developed in consortium with other sugar millers or as an unsolicited public-private partnership infrastructure project.

This was among the measures being mapped out by VMC, whose single biggest stockholder is the Lucio Tan group of companies, to unlock more efficiency in its business ahead of the zero-tariff regime under the Asean [Association of Southeast Asian Nations] Free Trade Area starting 2015, said VMC chairman Wilson Young.

Young, who is also managing director of Tanduay Holdings Inc., told reporters after VMC’s stockholders’ meeting that the company was also looking at improving milling volume through “corporate farming” or a partnership agreement with large-scale sugar farm operators, who lease vast tracts of land from owners. Such a formula is seen putting the sugar mill in better control of sugarcane supply for milling given that the land reform law in the country prevents it from owning vast landbank for farming.

VMC, which is now in its 8th year or halfway through its creditor-driven rehabilitation program, may also benefit from engaging in sugar trading. But heeding lessons from the past, Young said such trading would only be to square off position—such as to fill supply contracts with industrial users—instead of any speculative play on commodity prices.

During Tuesday’s stockholders’ meeting, VMC suggested some amendments to its charter to give it the flexibility to engage in businesses other than its primary sugar business. But not all suggested amendments were passed as one minority stockholder representing a fund that has acquired a significant stake in VMC requested for more time to study the proposed changes that suggested diversification outside of its core business.

But Young explained that in the case of the proposed railroad project, this was something that VMC could undertake without having to amend its charter, although he noted that this was still on the drawing board.

In the past, VMC operated a 130-kilometer railroad to transport its products using trains but discontinued this as part of the rationalization of operations. But as 40 percent of the company’s operating costs were from the transportation of canes, Young said VMC was now looking at the possibility of reviving the rails.

“But this time we will do it in partnership with other mills,” he said, adding that VMC has yet to start discussions with other sugar millers in the area like those operated by Hawaiian Philippines, Lopez Sugar and First Farmers.