Noble wants to be sole owner of its Brazil cane ops

SAO PAULO - Noble's purchase of two cane mills in Brazil this week, the latest addition to its fast-rising cane processing capacity, reflects its go-it-alone approach that sets it apart from competitors that are partnering with local companies, the group's CEO said on Thursday.

Asia's biggest commodities trader has agreed to pay US$950 million for two sugar and ethanol facilities owned by Brazilian group Cerradinho.

'Cane operations are extremely important. Brazil has the world's lowest costs, and demand for energy, sugar is rising in emerging markets as well as for ethanol in the Brazilian market,' Noble's Chief Executive Ricardo Leiman told Reuters.

Brazil is the world's top sugar producer and exporter. Cane is also the feedstock for its huge ethanol biofuel production, that it has pioneered as a mainstream fuel that most new cars on its roads can burn.

Several companies that entered the cane sector over the last few years such as Royal Dutch Shell and state-run oil company Petrobras have opted to team up with local partners rather than go it alone.

Before closing the deal with Noble, Cerradinho spent four months negotiating with BP, which aimed for a 50-per cent share in the Brazilian group.

Experts say that some of Brazil's cane sector's unique characteristics, which require both agricultural and industrial know-how, is behind companies' decision to look for local associations.

But Hong Kong-based Noble, defined by Leiman as 'a global supply chain manager,' has adopted a bolder approach.

'We already have around four years of experience (in cane). We're over the learning curve. We prefer to learn (on our own) and be the big operators even if it takes longer,' Mr Leiman said.

Noble has operations in sectors ranging from coffee and cotton origination to ship management and from coal and iron ore mining to soy processing in several countries. In many cases, its operations are in tandem with partners.

Brazilian cane

With the addition of two more crushing units near its existing assets, all in Sao Paulo state, the firm expects its larger operations will begin to generate economies of scale.

'We created a cane cluster that should benefit from synergies in logistics and costs,' Mr Leiman said. All of them produce sugar, ethanol and electric energy from the burning of cane bagasse that is sold to the Brazilian grid.

Noble entered the sector in 2007 when it bought the Noroeste Paulista mill, in Sao Paulo state. It invested to expand its crushing capacity to 5 million tonnes from 1.3 million tonnes per year.

The group also built Meridiano mill, 60 km away from the existing one. This unit, whose construction has just finished, has a capacity of 4.5 million tonnes per season.

The two plants bought from Cerradinho have a combined capacity to process 8 million tonnes of cane per year, and are located about 100 km from the two others.

With the acquisition, the group has become one of the country's top 10 cane groups, with a crushing capacity of 17.5 million tonnes per season.

Sugar production capacity will jump to 1.34 million tonnes from 740,000 tonnes in its first two mills. Ethanol capacity will double to 600 million litres, and energy generation will grow to 750 megawatts per hour, from 450 mwh previously.

In Brazil, the group also operates a fuel terminal and warehouses. It also originates coffee and cotton, and is building a soy processing plant and a biodiesel factory. In October, it inaugurated new terminal in the port of Santos. -- REUTERS