Cuba Cane Sugar Corp.

Manuel Rionda had for around four years thought about combining a significant number of existing sugar mills under one ownership.  In a casual conversation with Alfred Strauss of J. & W. Seligman on September 1915, Rionda told Strauss that Cuban sugar mills could be had at favorable prices, the idea was shared with Charles H. Sabin of Guarantee Trust Co. of NY and the rest is history.  Although Edwin F. Atkins had beat him to the punch when he organized the Punta Alegre Sugar Co. a month earlier, the Cuba Cane Sugar Corp. was incorporated in New Jersey on December 31, 1915 with a capital of $50 million by Manuel Rionda and family members who owned 27% of the initial shares outstanding.  Also part of the initial investors that provided financial backing to the venture were J & W Seligman & Co. who owned 7%, J. P. Morgan & Co. 15% and National City Bank 4%.  Other names prominently associated with the firm were Atty. Alfred Jaretzky of Sullivan & Cromwell, E. W. Stetson, Irénée Dupont de Nemours and Matthew Chauncey Brush.  Upon its organization, the Cuba Cane Sugar Corp. became the single most important sugar company in Cuba. 

In his original plans, Rionda had set eyes on eleven sugar mills, Cuba Cane’s initial acquisition consisted of the following seventeen, ten of which were in his original list. Central Asunción was one of the initial sugar mills acquired in 1915 but was almost immediately sold.

  1. Central Álava - Established in 1836 as Trapiche Regalado by Spaniard Ignacio de Mendiola, was acquired by Julián de Zulueta Amondo (1814-1878) in 1845 who converted it into a central sugar mill. Was acquired by Cuba Cane Sugar Co. in 1915 from the Zulueta family

  2. Central Conchita - Established in 1823 by Bartolomé Casañas, by 1880 under the ownership of Domingo Aldama was one of the largest sugar mills in Cuba, in the early 1900s it belonged to Juan Pedro Baró who sold it for 3,500,000 pesos to José (Pote) López Rodriguez in the 1910s who sold it to Cuba Cane Sugar Co, in 1915 for 6,000,000 pesos

  3. Central San Rafael

  4. Central Feliz - Acquired from the New York Sugar Manufacturing Co. who had acquired it in 1906, it was dismantled in 1916

  5. Central Jagüeyal - Bought from José Miguel Tarafá’s Jagüeyal Sugar Co. for $4 million in 1916

  6. Central Jobo - Was established in 1833 by Spanish immigrant Ildefonso Lavín, was acquired from Pedro Laborde for its lands, was dismantled in 1920 and its machinery installed at Central Morón

  7. Central La Julia - Located in Batabanó Havana Province, was established in 1872 by Julia Roca de Caruso, was bought from Pedro Laborde for $4 million

  8. Central Lequeito - Established in 1847 by Agustín Goytisolo, was owned from 1905 to 1912, was acquired in 1916 from Cía Azucarera Central Lequeitio, its last grinding season was 1921-22

  9. Central El Lugareño - Was established in 1891 by Dr. Merchol Bernal Barona and Bernabé Sanchez Adán, between 1908 and 1917 was owned by Sociedad Anonima Central Lugareño owned by Galbán & Cia., was acquired by Cuba Cane Sugar Co. in 1916

  10. Central Maria Victoria - Was established by Spaniard Sebastián de Ulacia in Cienfuegos, in 1914 belonged to also Spaniard Miguel Diaz, its last grinding season was 1924-25 when it was sold, dismantled and reinstalled in Camagüey

  11. Central Perseverancia - Bought from Spaniard Miguel Diaz Pérez who had established it in 1892 

  12. Central Mercedes - Established in 1855 by Antonio Carrillo Albornoz, was acquired in 1901 by Cia. Cubana Central Mercedes whose principal shareholders were Miguel Arango, Regino Truffin and Ignacio Almagro.  Was acquired by Cuba Cane Sugar Co. in 1915 for $3.9 million

  13. Central Morón - When established in 1913 by José Miguel Tarafá was then the second largest sugar mill in Cuba, had a distillery and its own airport, was acquired by Cuba Cane Sugar Co. from Tarafa for $4.35 million in 1916

  14. Central Santa Gertrudis - Bought from Victor G. Mendoza and Miguel Mendoza for $2.7 million

  15. Central San Ignacio - Was the smallest of Cuba Cane's sugar mills, was sold for $2,000,000 in 1920 to a group of colonos who had been supplying sugarcane to the factory 

  16. Central Socorro - Bought for $5 million from José (Pote) López Rodriguez who had recently acquired it from Pedro Arenal

  17. Central Soledad - Was acquired from the Punta Alegre Sugar Co. in 1915

These were not the only acquisitions made by Cuba Cane Sugar Corp.  In the summer of 1916 after the 1915-16 grinding season ended, Cuba Cane's Board of Directors voted to purchase two additional sugar mills.

  1. Central Stewart - Was built in 1906 as Central Silveira by Silveira Sugar Co. of which Juan Manuel Ceballos was president, with financing from the Duncan Stewart Co. of Scotland, manufacturer of its machinery, it was an immediate financial failure and by 1907 was in bankruptcy when it was acquired by The Stewart Sugar Co. who sold it in June 1916 to Cuba Cane Sugar Co. for $8.4 million, way in excess of its appraised value of $4.1 million.

  2. Central Violeta - Was a modern sugar mill established by Hannibal Mesa, Regino Truffin and Miguel Arango with production capacity of 200,000 bags annually, was acquired for $3,000,000 in May 1920 by Eastern Cuba Sugar Corp., incorporated in Cuba on October 1, 1920 as a wholly owned subsidiary of Cuba Cane Sugar Corp. Violeta was located in Camagüey Province near Central Morón and Central Lugareño, which made its location of particular interest to Cuba Cane.

  3. Central Aguedita 

Management wise, Leandro Rionda de la Torriente was removed from Central Francisco which was owned by Rionda personally and was made General Superintendent of Cuba Cane. José Rionda de la Torriente was put in charge of Central Stewart and the three other mills on the eastern part of the island.  All the mills on the western part, which were the majority, were entrusted to Miguel Arango who had also been made member of the Board of Directors.

Manuel Rionda’s vision to establish Cuba Cane was genial.  Involved in Cuban sugar as a trader since 1886, he realized the problem between the seasonality of sugar production and the year-round continuity of the sugar refiners demand.  During the grinding season between January and May, there was a glut of sugar in the market that would bring prices down, while beginning in the summer months and until the new grinding season when inventories were lower, refiners would bid up prices.  Many Cuban producers had no storage facilities or were in debt and/or obligated to sell their sugar as soon as produced.  Therefore, he thought that creating a consortium with the financial capacity to warehouse sugar until prices went up would benefit tremendously.

Timing was a big factor in the establishment and initial success of the Cuba Cane Sugar Corp.  Its original investors foresaw the increase in sugar prices as a result of WWI and the destruction of the beet fields and the beet sugar industry in Europe.  In 1915-1916 Cuba Cane Sugar Corp. acquired seventeen operating sugar properties at a cost of $48 million.  Shortly thereafter one was sold retaining sixteen operating sugar mills right upon their acquisition.  By 1918 Cuba Cane Sugar Corp. was the largest sugar enterprise in the world[1],  for the 1919 sugar season production accounted to 16.7% of total Cuban sugar production.[2]

Cuba Cane's First Annual Report to shareholders in 1916 showed a net profit of $12.17 million of which $2.3 million was paid in dividends.  The civil unrest and cane field burnings related to the 1916 elections resulted in a reduction of Cuba Cane's 1916-17 production.  The Second Annual Report to shareholders in 1917 showed net profit of $7.3 million down 40% from the previous year.  The Third Annual Report in 1918 was not a good one with net profit down to about $3 million.

In January 1919 the Board of Directors began to express dissatisfaction and lack of trust towards Rionda.  On March 7, 1919 General George Washington Goethals of George W. Goethals and Company, Inc. of 40 Wall St., NY was hired by the Board to investigate charges made by stockholder Henry Evans, the president of the Continental Insurance Co., questioning the relationship and transactions between Cuba Cane and Czarnikow-Rionda Co. and the salaries paid to Cuba Cane's officers.  The Report dated July 11, 1919 exonerated the Rionda's of any wrongdoing but criticized the company's managerial structure as incapable of handling and coordinating the company operations of its seventeen sugar mills as one extensive undertaking and recommended changes in management.

The Fourth Annual Report on November 1919 showed net profit of $7 million with $2.5 million added to the surplus account.  In the spring of 1920 Walter E. Ogilvie left the British owned United Railways and joined Cuba Cane to implement the changes recommended by Goethals.  The Fifth Annual Report in 1920 was a good one showing a $7 million increase in the surplus account.  It came amid the crisis created by the sudden and precipitous sugar price drop from 22.5¢ in May 1920 to 7¢ in October 1920.  Rionda all throughout thought that the hike in sugar prices that started in late 1919 later known as the "Dance of the Millions" would come down.  He did not hang on to sugar inventories waiting for higher prices and advised Czarnikow-Rionda's clients to sell as well.  Thanks to this strategy, Cuba Cane escaped the disaster caused by the crisis.

Although the 1920 Annual Report showed substantial gains in operating an net income due to the higher sugar prices, underlying numbers were not so favorable.  Production had dropped from 4.32 million bags to 3.76 million bags, production cost per pound had risen 85% from 4.6¢ to 8.5¢ and although prices had risen 91.6%, total revenues had risen only 54.9%.  In November 1920 Manuel, though its largest single shareholder, resigned to the presidency of Cuba Cane Sugar Co. but remained as Chairman of its Executive Committee, Walter E. Ogilvie was appointed as President.  Ogilvie's leadership contributed to the improvement of Cuba Cane's condition.  The $6 million loss of 1921 was followed by operating profits of $3.5 million in 1922, and $12.5 million in 1923.  Following Ogilvie as interim president was Charles Hayden.  In 1929 John Roy Simpson, a retired Army Colonel and experienced corporate executive who had climbed his way up at Western Electric, Filene's and Consolidated Oil, joined Cuba Cane as President succeeding the interim term of Hayden.  

In September 1922 its wholly owned subsidiary Eastern Sugar Corp. subscribed a $10 million bond issue guaranteed by Cuba Cane Sugar Corp., proceeds of which were to pay off all the floating debt of Cuba Cane Sugar Corp. and its subsidiaries coming up due.  Assets of Eastern Cuba Corp. were valued at $15,343,053 as of July, 31, 1922 and of the Cuba Cane Corp. at $100,438,250 as of the same date. In January 1923 upon arriving in Havana in his annual visit at the beginning of the grinding season, Rionda saw to it that Regino Truffin resign as Cuba Cane's Vice President and that he as well as Higinio Fanjul Rionda, Leandro Rionda, José and Manuel Arango resigned their positions in the company and be relieved of their responsibilities.  Rionda retained his seat on the Board though not in the Executive Committee.  Czarnikow-Rionda & Co. continued as brokers for their sugar.

Low sugar prices during the late 1920s caused the financial failure of the Cuba Cane Sugar Co., at the time the largest sugar producer in Cuba with $110 million in assets.  On October 1, 1929, the company went into the hands of a NY Federal Court appointed receiver.  With $25 million in debentures coming due and payable January 1, 1930, on December 24, 1929 the Federal Court in NY approved a reorganization plan which called for a new corporation, which came to be known as Cuba Cane Products Co., to  acquire all the assets of the Cuba Cane Sugar Corp. and assume all liabilities except outstanding debentures, distributing its own securities to depositing debenture holders and stockholders of the old concern.  Cuba Cane Products Co., Inc. was incorporated in Delaware in 1930.

In January 30, 1934 the properties of the Cuba Cane Products Co. passed to the hands of the four NY banks that were its mortgage holders through a forced sale to satisfy encumbrances amounting to some $4.125 million.  The banks agreed that the bond holders would have until May 15, 1934 to buy the properties from the banks at a price not to exceed the price paid plus interest and expenses.  Some of the properties then became part of the Cia. Azucarera Atlántica del Golfo.

___________________________________________________________________________
[1] César J Ayala - American Sugar Kingdom 87

[2] Guillermo Jiménez – Empresas de Cuba 1958 63