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Hungary: Austrian Firm May Become Dominant Sugar Producer

By Sue Tapply

Vienna, 19 December 1996 (RFE/RL) -- The Hungarian monopoly commission has given the Austrian sugar and starch concern Agrana permission to take a majority holding in the Hungarian sugar company Magyar Cukor.

The move means that Agrana can go ahead with its plans to take more than a 50 percent share of the Hungarian sugar market, with a majority in seven of Hungary's 12 sugar factories.

According to the head of the Agrana concern, Johann Marihart, Magyar Cukor "wasn't doing so well," but in the coming year they plan to carry out "extensive restructuring" which he hopes will lead the new subsidiary back into positive figures by 1998.

Five sugar factories -- Acs, Ercsi and Sarvar in west Hungary and Sarkad and Meszohegyes in south east Hungary, none of which previously had any foreign associates -- are under the umbrella of Magyar Cukor.

The turnover for all five together is estimated to be 1,000 million schillings ($99 million) and they cover 31 percent of the market.

Agrana's first step will involve a 241 million schilling increase in capital which will go to EHCF Kft., Magyar Cukor's parent company. These funds will then be moved on to the newly acquired Agrana subsidiary, which currently produces 165,000 tons of sugar from 1.3 million tons of beet.

Agrana International AG, a 100 percent subsidiary of Agrana, signed a letter of intent with EHCF Kft for Magyar Cukor in October 1995. It already had a 51 percent interest in two Hungarian factories at the time.

The aim of the deal is to set up a structure ready to be competitive by the time Hungary joins the EU, and Marihart sees synergy potential between Agrana and EHCF in "raw material optimisation, production optimisation and common sales activities."

And he added that his steps matched the Hungarian government plans to privatize the sugar industry by 1996. They propose to introduce Hungarian sugar market rules along the same lines as those in operation within the EU, and aim to establish production quotas and a self financing export system. "These factors made Magyar Cukor a good strategic partner," said Marihart.

In March 1996 Agrana also took a 82.3 percent share in the Czech sugar factory at Hrusovany, and Marihart, and he added "we want to expand." He was looking for somewhere in the sugar beet growing regions around Ollmutz and hoping to increase his company's share of the Czech market from 15 to 30 percent.

The Hungarian sugar market is fed by 12 sugar factories and produces 400,000 tons of white sugar per year.

All of the Agrana concern's East European figures were positive, and already make up 30 percent of the Austrian-based concerns turnover.

Walter Grausam, Agrana board member, said Agrana was "using selective growth" to prepare the sugar companies for the future, and the Czech and Hungarian membership of the EU.