High corn, potato prices send Agrana profits lower

Agrana, which in October cautioned of a dent to its performance from higher crop prices, revealed that the slowdown had hit slightly more than analysts had expected, with profits at its starch operations tumbling 55%.

The fruit concentrates-to-sugar group revealed a 25% drop to E39.1m in earnings for the September-to-November period, as the impact of high prices of raw materials such as corn and potatoes fed through.

"As expected, the market setting in the third quarter was challenging, characterised by higher raw material costs and by price pressure," Johann Marihart, the Austrian-based group's chief executive, said.

While revenues rose 17.8% to E786.2m, spurred by volume gains in fruit preparations, and exceeded market expectations, operating profits fell 23% to E61.7m, behind the E64m forecast by analysts.

'Continuing difficult environment'

Mr Marihart flagged a "continuing difficult environment", particularly in the starch business, which is suffering "increased price pressure" in the current, December-to-February period, the fourth quarter of Agrana's financial year.

"Although Agrana anticipates stable market demand for starch products, and a sound revenue trend, the higher input costs will weigh on margins," the group said.

European prices of potatoes, which Agrana uses as one raw material for making starch, have been sent soaring by poor harvests in western countries.

The Austrian starch potato harvest, particularly important for Agrana, while less affected fell 7.2% to 219,000 tonnes despite higher plantings.

Meanwhile, the group's Hungarian corn-based starch operations, which consume 1m tonnes of the grain a year, saw volumes processed in the latest quarter slump 26% to 160,000 tonnes "as a result of drought" which cut the domestic corn yield by some 40%.

Fruit saviour

However, Agrana restated expectations of revenues of E3bn in the year to the end of February, a rise of some 15%, and that operating profits would come in "approximately in line" with those the year before.

Agrana shares recovered from early losses to close 0.6% higher at E98.45 in Vienna.

The group forecast that profits in sugar would also decline in the December-to-February quarter, thanks to higher raw material costs.

A hot and dry summer cut the group's Austria-focused beet harvest by 7% to 5.5m tonnes,  despite higher sowings, while also cutting the sugar content to "below average" levels.

However, a "positive trend" in fruit preparations, which saw divisional operating profits near-triple to E13.4m in the latest quarter, is set to continue for the rest of the financial year, as strong sales in the likes of Brazil and the US more than make up for weakness in the European market.

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