Agrana cautioned of a hit to profits in the second-half of its financial year as the starch-to-fruit juice group negotiates disappointing European harvests of crops from cherries to corn.

The Austrian-based group said that earnings for the March-to-August half soared 28% to E99.6m, boosted by a firm performance in particular in sugar, for which "sales to resellers were especially strong", as was the market for industrial use of the sweetener.

Group revenues rose 25% to E1.60bn.

However, a rise of operating profits of 21% to E142.5m would be cancelled out by setbacks expected in the second half of the financial year, to leave the annual result flat.

The caution reflected a forecast of "high volatility in raw material and selling prices… in combination with reduced crop yields" in a number of the agricultural commodities that Agrana purchases, for conversion into products from ethanol to starch.

Corn hit

The sugar division, which has processing plants in five countries, faced the prospect of a beet crop which will "for weather reasons… fall short of last year's output", despite a rise of 10,000 hectares to 103,000 hectares in plantings.

In Austria itself, the national beet yield is expected to drop by 2.9% to 70.0 tonnes per hectare for the newly-started harvest, with lower sugar content too, a US Department of Agriculture report this week said.

Steeper drops expected elsewhere in Agrana's footprint, including the Czech Republic, where beet yields will drop more than 17% to 59.0 tonnes per hectare, the USDA report showed.

The group said that its sugar revenues for the full year "will rise at a solid rate, although without further growth in earnings".

'Strongly risen raw material prices'

Meanwhile, the ethanol and starch division faced "strongly risen raw material prices", after well-documented damage to the eastern European corn crop from drought which would cut Hungary's crop "to only about 50% of last year's production".

The volume of wet corn processing at Agrana's Hungarian plant "will be significantly less than the prior year's 210,000 tonnes".

And the group's potato crop used for conversion into starch "is predicted to reach about 85-90% of the contracted amount", so reaching about 230,000 tonnes, "as a result of partly unfavourable weather, notably late frost in the spring and dry conditions in the summer".

The dryness contrasts with the damp which has hurt potato yields further west, notably in the UK, which is set for its worst harvest since 1976.

Fruit cocktail

The fruit segment faces the challenges of higher blackberry and cherry costs "on a sub-par harvest in Serbia and mediocre crop volume in Poland", although given the dearth of fruits the division buys, the division often faces a poor harvest of some raw materials.

Indeed, overall "quite satisfactory" fruit harvests in China, Europe and North America have allowed fruit prices to "stabilise" after being lifted last year by a succession of poor crops, and by "robust" and continuing Latin American demand.

"While purchasing prices for strawberries and sour cherries were very high [in the first half], prices for currants, raspberries and blueberries were – in some cases significantly – below prior-year levels," Agrana said.

Market reaction

In Vienna, where Agrana shares are traded, investors gave the group's statement a cautious welcome despite the warnings of lower second-half profits, lifting the stock by 0.6% to E91.89 at the close.

Analysts have been factoring in a drop in full-year operating profits, by 13% to E189m.