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CropEnergies calls for clarity on EU ethanol policy, as it restarts UK plant

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Ethanol producer CropEnergies called on the European Union to update its biofuel policy, as it brings its UK plant out of mothballs.

CropEnergies, which is controlled by German sugar group Suedzucker, noted a "pleasing earnings situation" in its latest set of company reports, despite lower ethanol prices.

But the company said that clarity on European biofuel policy was needed.

Awaiting clarity

European ethanol markets are entering a period of uncertainty, as existing biofuel targets come closer to expiry.

Demand for European ethanol is driven by blending mandates imposed by the European Union, which fix the amount of ethanol that must be included in gasoline.

Currently those levels are only defined up until 2020.

CropEnergies said it was "imperative to define mandatory targets for the use of renewable energies and the reduction of greenhouse gas emissions in the transport sector for the period after 2020".

UK business restarts

The company did not comment on the EU referendum in the UK, and what a British exit would mean for its biofuel business there.

In May CropEnergies announced that the Ensus ethanol plant, in Wilton, would be bought back online, after being mothballed in February of last year.

"The modifications that have been carried out in the meantime to increase reliability and improve energy efficiency are to be tested intensively," said CropEnergies.

Falling consumption

Consumption of ethanol across Europe is expected to fall by 3% in 2016, thanks to lower consumption in Germany.

EU legislation means that some forms of ethanol count double toward mandated blend rates, due to more sustainable production methods, allowing for lower ethanol use in road fuel.

"CropEnergies' medium-term expectation is that the resolutions of the Paris climate summit and the EU decisions to increase the proportion of renewable energies in the transport sector will ensure further market growth," the company said.

Falling revenues, rising profits

As the company predicted last month, revenues fell by 15% in the three months to May 2016, to E167.5m. The fall in revenues was driven by lower sales volumes, with production down 1% year on year.

But net-earnings rose by E4.0m to E8.9m, thanks to the lower cost of grain feedstocks.

CropEnergies noted rising returns for wheat ethanol production, as ethanol prices tick up and wheat markets fall.

"The main contributory factor here was lower raw material costs," said CropEnergies.

Volatility ahead

"Since May 2016, the price situation on the bioethanol market has significantly improved, but considerable volatility is still to be expected," the company said.

As it reported last month, CropEnergies lifted its forecast for full year revenues to E640-700m, up from E625-700m.

And earnings hopes were lifted to E50m-80m, from E30m-70m.

"On the assumption that bioethanol prices will be below those achieved in the good previous year".

CropEnergies shares were up 0.3%, at E5.0250 in afternoon deals in Frankfurt.

By William Clarke

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