Südzucker Sees Tough Year On Weak Sugar Prices
The CEO of Südzucker, Europe's largest sugar refiner, said on Thursday trading conditions are expected to remain tough in the first half of its 2019/20 financial year because of low sugar prices but an improvement could be in sight from October.
Südzucker has been battling against a collapse in global sugar prices, which ended 2018 at their lowest in 10 years, pressured by heavy global oversupply.
The company on Thursday confirmed a slump in group operating profit in the full year 2018/19 to the end of February to €27 million ($30.2 million) from €445 million in the previous year.
Its sugar sector posted a 2018/19 operating loss of €239 million, compared with an operating profit of €139 million in the previous year. Südzucker made an advance results announcement in March.
'No Significant Positive Impulse'
CEO Wolfgang Heer said on Thursday the group sees no significant positive impulse for sugar prices despite forecasts by leading analysts F.O. Licht of a balanced world sugar market in 2018/19 and a small deficit in the next year.
"We expect, under the current difficult conditions, once again high operative losses in the first half of 2019/20," Heer said in the text of a speech at a news conference to present the group’s results.
"Despite this, on average in the financial year we expect a higher but still unsatisfactory sugar price," Heer said.
Because of reduced exports and a reduction in EU sugar inventories, the company expects improved earnings from October, he said.
Low sugar prices mean some European farmers are unwilling to grow sugar beet and this is shown by the 6% reduction in European beet planted area, Heer said.
Dry weather following last summer's serious European drought is also causing concern about sugar beets.
"A renewed dry period could massively hit the harvest and so cause significant reductions in sugar volumes," he said.
Südzucker said in January it will close sugar factories in Germany, France and Poland and cut production capacity by around 700,000 tonnes per year after the collapse in sugar prices.
Südzucker reiterated on Thursday that it expects group operating profit in the new 2019/20 year of zero to €100 million.
It expects another operating loss in its sugar sector in the new 2019/20 year of 200 to €300 million.