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CropEnergies shares dip as ethanol downturn clouds outlook

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Shares in CropEnergies tumbled more than 7% after the bioethanol group braced investors for a drop in earnings in its next financial year, citing expectations of a "significant" drop in ethanol prices, amid weak energy markets.

The German-based group, whose sites including the mothballed Ensus plant in northern England, stood for the year to February 2016 by operating profit expectations upgraded in November to E70m-90m.

However, for the 2016-17 financial year, starting in March, CropEnergies forecast operating profits of E30m, assuming ethanol prices pan out as futures currently predict, although E70m was achievable if values matched last year in allowing the group to achieve prices ahead of the futures curve.

'Significant price decline'

"Business performance will again predominantly depend on price developments in the bioethanol markets," CropEnergies said.

"The forward prices for bioethanol in Europe for the 2016-17 financial year are currently showing a significant decline, though trading liquidity is low."

Data from CME Group and Platts shows spot values in Rotterdam, including duty, at E585.85 per cubic metre, below levels above E640 at the end of November, and with futures suggesting a drop to 484.00 in a year's time

CropEnergies shares dropped to a three-month low of E4.51 in early deals in Frankfurt, before recovering some ground to stand at E4.566 in mid-morning deals, a drop of 6.2% on the day.

The shares stood above E6 in mid-November, when the group unveiled its improved forecast for 2015-16 operating profits.

Back in the black

For the September-to-November quarter, CropEnergies unveiled earnings of E11.85m, a marked reversal from the E3.37m loss a year before.

While revenues dropped 24% to E167.6m, a reflection of the mothballing of Ensus, the costs saved - at a time when margins were also receiving a boost from elevated ethanol prices and depressed grain values – allowed operating profits of E23.73m.

A year before, the group, which is controlled by German sugar giant Suedzucker, achieved an operating loss of E1.72m, with lower debts and interest payments also supporting earnings.


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