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Suedzucker stands by hopes for sugar recovery - eventually

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Suedzucker stood by expectations for a recovery in its fortunes ahead, "despite the ongoing difficult conditions" in its main markets, including sugar, which dragged annual earnings down 81%.

The German-based group, Europe's largest sugar refiner, said that it had a "cautious" outlook for 2015-16, citing a "continuation of the extremely low prices for sugar and ethanol which already weighed on profits" in its last financial year.

For the year to the end of February, Suedzucker reported earnings of E74m, down from E347m the year before, on revenues down 10% at E6.78bn, as it grappled with rapidly falling sugar prices, depressed in the Europe Union by the prospect of the lifting of production quotas in 2017, besides by the weak world market.

"The difficult situation in the European sugar and bioethanol markets has led to a turning point for Suedzucker Group after years of record profits and revenues," the company said.

No price turnaround

"We do not foresee a turnaround in sugar prices in the near term," the group added.

However, it stuck by a forecast nonetheless of its operating profits, which slumped by 71% to E181m last year, returning to E550m in the medium term "despite the ongoing financial conditions.

"We are certain that the markets will rebound, because at current prices uncompetitive manufacturers can hardly be profitable," Suedzucker said.

"This will reduce volumes in the market and thereby improve the price situation."

Sugar recovery

Global sugar output will, led by Brazil, fall in 2014-15.

"Market analysts are forecasting this trend to continue in Brazil, and even strengthen, since the current low price of sugar will not cover rising production costs during the 2015-16 campaign year either."

With world sugar demand rising, "it is expected that inventories will be reduced, which will form the basis for a recovery of world sugar market prices".

World market sugar prices "are expected to recover slightly over the course of the year", assuming a stabilisation in exchange rates between the currencies, such as the real and the dollar, of major sugar countries.

Revenues to drop

Nonetheless, Suedzucker continued to forecast a further drop in operating profits in the financial year which started in March, to E50m-150m, on revenues of E6.0m-6.3m.

While revenues in sugar and ethanol operations will drop "substantially", those of the group's fruit division will at least match those of last year.

Suedzucker shares closed down 0.6% at E14.365 in Frankfurt.

By Agrimoney.com

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