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Südzucker Swings To Operating Loss On Low Sugar Prices

Published on Jan 10 2019 9:58 AM in A-Brands tagged: Trending Posts / Sugar / Pricing / Südzucker / Suedzucker

Südzucker Swings To Operating Loss On Low Sugar Prices

Germany's Südzucker, Europe's largest sugar refiner, on Thursday reported a third-quarter operating loss, hit by the global collapse in sugar prices.

The group posted an operating loss of €23 million in the three months to Nov. 30, compared with an operating profit of €103 million a year earlier, with quarterly revenue dropping 5.1% to €1.71 billion.

Südzucker reiterated its expectations for group operating profit of €25 million to €125 million in the 2018/19 financial year, down from the previous year's €445 million.

It also repeated its forecast for full-year group revenue of €6.6 billion to €6.9 billion, against the previous year's €7 billion.

The group also has extensive non-sugar interests, from bioethanol to fruit and processed foods.

Südzucker shares fell 3.8% in pre-market trade.

Low Prices

“The main reason for the quarterly result are low sugar prices,” a Südzucker spokesman said. “The EU’s market liberalisation means that falling world prices also depress prices in Europe.

“Demand in Europe is almost stable, but prices are falling. World sugar demand is still rising but prices are low.”

Raw sugar futures ended 2018 at their lowest in 10 years, pressured by heavy global oversupply.

The European Union liberalised its sugar market in September 2017, ending its system of guaranteed minimum prices and protected production quotas. This gave producers more freedom to expand and export, but a worst-case scenario emerged, with European producers exposed to collapsing world prices.

Südzucker posted a third-quarter operating loss in its sugar business of €85 million, from an operating profit of €38 million a year earlier.

Forecast

The company forecasts that its sugar business will suffer a 2018/19 full-year operating loss of between €150 million and €250 million, against an operating profit of €139 million the previous year.

“We have seen a recovery in world sugar prices since October 2018, but we cannot see a full turnaround in the sugar market so cannot give an-all clear signal,” the spokesman said.

Südzucker said in July thatr it was reassessing its sugar sector strategy and considering new options to reduce costs.

The strategy examination and reassessment of its sugar operations "will be intensified”, the company said on Thursday.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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