UPDATE 1-Brazil Copersucar to triple sugar, ethanol output

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By Inae Riveras

SAO PAULO, Oct 1 (Reuters) - Brazil's largest and most traditional sugar and ethanol cooperative, Copersucar, said on Wednesday it had become a company, with plans to triple its production in the next 10 years.

Founded in 1959, Copersucar had the aim to sell sugar and ethanol produced by its 10 associate mills. The co-op has expanded its operations and become one of the world's biggest private exporters.

Today it has about 5 percent of the world sugar trade and, with its new legal status, will displace Cosan (CSAN3.SA) as the largest sugar and ethanol producing company in Brazil.

"(The sugar and ethanol) industry is expanding fast so it's important to grow to keep the relevance we always had," Copersucar CEO Luis Roberto Pogetti told Reuters.

He said that being a cooperative posed some restrictions to the plan. According to law, a cooperative's asset does not belong to associates, so if this company decides to leave the co-op it loses any investment made in a common asset.

"This makes it complicated for an associate to invest and also to attract new mills," Pogetti said, adding that associates will still have to commit 100 percent of their product to Copersucar.

The co-op was composed of 33 mills in Sao Paulo, Parana and Minas Gerais states, which now become the shareholders of Copersucar's newly created holding company, Produpar.

The company plans to raise its annual cane crushing capacity to 200 million tonnes by 2018, up from 70 million tonnes this season, and increase its local sugar and ethanol market share to 30 percent in 10 years from 14 percent currently.

It also intends to buy sugar and ethanol from independent producers to be sold on the domestic and international markets. Turnover from this business, which will reach $200 million this season, is expected to double in 2009/10.

Copersucar said it will not float shares at the moment and will accept the registration of new shareholders which were also sugar and ethanol producers.

VOLATILITY CONTROL

Pogetti said Copersucar's strategy of having long term supply contracts with foreign sugar and ethanol buyers will likely be strengthened in the future.

The company has commercial contracts with some of the world's biggest sugar refineries and also with final ethanol consumers.

"In a market of increasing volatility... it's part of our strategy to invest in long term relations," he said.

About 70 percent of Copersucar's ethanol exports are to final destinations. In sugar, 80 percent of its sales are to refineries, most of them in the North of Africa, Middle East and Asia.

In the current crop, Copersucar expects to sell a total of 4.3 million tonnes of sugar, up 22 percent from the previous season, and 3.8 billion liters of ethanol, up 18 percent.

The company's exports should reach 3 million tonnes of sugar, up 25 percent from 2007/08, and 1 billion liters of ethanol, nearly 50 percent more than last season.

Total sales are forecast to reach 5.7 billion reais ($2.9 billion), compared with 4.5 billion reais in 2007/08 season.

Brazil's booming sugar and ethanol industry has been going through an aggressive consolidation in recent years. Cane output is expected to double in 10 years but no more than 30 big groups will be in control of production, compared with around 200 currently.

($1 = 1.933 real) (Editing by Christian Wiessner)