SunOpta to extend oil refining capacity with new JV

By Chris Jones

- Last updated on GMT

Related tags Sunopta Petroleum Refinery

Canadian natural ingredients company SunOpta has clinched a deal to
begin construction of a new organic and natural oil refinery in
Colorado in a joint venture with Colorado Mills - in spite of its
financial and legal worries.

SunOpta is currently facing a number of class action lawsuits in New York over its alleged failure to correctly inform shareholders of accounting irregularities which, the claimants suggest, under-estimated the value of asset write downs. But today's indicates it is business as usual for the company, with the decision to join forces with the Colorado Mills company to build the new refinery, which will operate under the name of the Colorado Sun Oil Processing company. SunOpta and Colorado Mills will jointly own and operate the plant, which will be located in Lamar, Colorado, adjacent to Colorado Mills' existing oil processing facility. Once operational later this year, the site will be capable of refining approximately 35 million pounds of natural and organic sunflower, soybean and canola oils each year. This is not the first time that SunOpta has worked closely with Colorado Mills, which in 2006 financed an expansion of its existing facilities to increase organic oil seed crushing capacity to meet SunOpta's growing organic oil requirements. It is as a result of this successful partnership that the new venture has been agreed. "The joint venture will refine existing crude vegetable oils for both Colorado Mills and SunOpta, and provide cost efficiencies and increased capacity to service fast growing markets,"​ the Canadian firm said. Demand for organic and natural oils in North America has been growing steadily - on the back of repeated health claims for oils such as sunflower and the wider upswing in support for all things organic - and SunOpta said that the new refinery would allow the company to "meet that growing consumer demand".​ Allan Routh, president of SunOpta's grains and foods group, said that "the benefit of consuming healthy natural and organic oils and avoiding oils containing transfats has generated tremendous demand for our vertically integrated oil products"."Joining forces with Colorado Mills to operate this joint venture will position SunOpta to continue to meet increased demand and cost-effectively grow our healthy oils business." "As volumes have grown, it has become increasingly difficult to cost effectively manage production through third parties, thus driving the opportunity to establish internally controlled operations,"​ he added. As part of the joint venture agreement, SunOpta will market the majority of the refined oil from the venture and expects to generate incremental revenues of approximately $10m, the company said. SunOpta has also broken its silence on the class action lawsuits brought against it by firms representing disgruntled stockholders who claim they were misled after an over-valuation of SunOpta's berry stocks. According to one of the law firms involved in the action, the company "shocked investors" when it reported its anticipated financial results for 2007. It says this was the first time it had disclosed that it expected to incur material write-downs and provisions in the range of $12m to $14m, which were attributed to write-downs of inventory within the SunOpta fruit group's berry operations, as well as difficulties in collecting for services and equipment provided to a bioprocess customer. The Toronto-based firm said on January 24 that it expected sales for fiscal 2007 to be slightly over $800m, more than its original estimations, but that earnings would be no more than $0.12 to $0.14 per share as a result of the $12 to $14m pre-tax write-downs. SunOpta last week said that it was "aware of a number of class action claims filed against the company and certain of its officers and directors"​ and that it had "engaged outside legal counsel to vigorously defend itself against these claims".​ At the same time, it confirmed that its internal investigations had identified the cause of the over-valuation, and that it was satisfied that actions taken will result in improved processes and address the causes that led to the write-down. The company has "commenced an investigation into processes within the berry operations and has retained independent legal counsel and accountants to assist with this matter​", it said in a statement.

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