PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 12:40 UK, 12th Oct 2017, by Mike Verdin
Suedzucker shares fall, despite strong sugar output prospects

Shares in Suedzucker dipped to a 16-month low as the group, while restating upbeat hopes Europe's liberalised sugar regime, unveiled a slightly smaller rise in operating profits than investors had expected.

Shares in the German-based group, Europe's largest sugar refiner, dipped to E16.54 in early deals in Frankfurt, their lowest since May last year, before recovering some ground to stand at E16.83 in lunchtime deals, down 3.5%.

The loss followed the release of results showing operating profits of E127.8m for the June-to-August period a rise of 17.7% year on year, but shy of the E131m result that investors had expected.

Suedzucker revenues, while up 7.1% at E1.71bn, also came a little short of the E1.75 pencilled in by analysts.

Although operating profits in the key sugar division more than doubled to E47m, helped by a rise in exports, the so-called special products division saw a drop of 6.7% to E39m, undermined by a rise in raw material costs and depreciation charges.

Profit forecasts

Indeed, Suedzucker maintained its forecast for a "significant retreat" in operating profits in the special products division in the full financial year, to February, from elevated levels of last year.

However, it stuck too by expectations of group operating profits for the financial year hitting E425m-500m, at least matching last year's E426m result, "driven mainly by the significantly higher result in the sugar segment".

The sugar division, while poised to see revenues rose "moderately" from last year's E2.8n, will see its operating profits rise "considerably" from the E72m last time thanks to boost to productivity and enabled by the lifting this month by the European Union of sugar production quotas.

Suedzucker restated the prospect of "substantially improved capacity utilisation" and "corresponding economies of scale" thanks to the removal of EU production constraints.

Longer campaign

Indeed, the group, which had already revealed a rise of some 15% to 443,644 hectares in sugar beet area, flagged the prospect of an "above average yield" too, of about 79 tonnes per hectare, up some 5 tonnes per hectare year thanks to "plentiful rain and warm weather" over the summer.

The sugar content in beet was seen rising 0.5 points year on year to 17.7%, "also higher than the average of the past few years".

The increased crop would enable the group's beet processing plants "to beat their 120-day beet processing campaign target", a factor which "will further reduce sugar production costs" in spreading fixed costs over a larger volume.

The group forecast producing more than 5m tonnes of sugar at its beet plants.

'Critical factor'

US Department of Agriculture staff last month highlighted the determination of many EU sugar producers to extend their processing season, so cutting production costs per tonne, and realising expectations of a surge in EU sugar output in 2017-18.

Many processors had "vowed to increase production by up to 50% with the existing processing capacity", a USDA report said, identifying the importance of the weather-sensitive beet-slicing process in realising such ambitions.

"The length of the beet-slicing campaign is a critical factor limiting processing capacity and is limited by the winter frost period and the damage alternating frosting and defrosting does to beet and beet juice quality after extraction.

Beet-slicing campaigns have "varied from 85 to 135 days depending on the processor and the member state", the briefing said, estimating Suedzucker's native Germany as having the shortest, and the UK the longest.

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