Expectations that low sugar prices will fail to recover in the near-term prompted Europe's largest refiner Suedzucker to cut its full year earnings forecast on Thursday, sending its shares down as much as 8 percent. Suedzucker now expects group operating profit of 25 million euros to 125 million euros ($29.29 million to $146.46 million) in its current 2018/2019 financial year, down from a previous forecast of 100 to 200 million euros, the company said in an advance release of its quarterly earnings.
The company made an operating profit of 445 million euros in the previous year. "The main reason for the reduction is low sugar prices," a Suedzucker spokesman told Reuters. "World sugar market prices remain low and European Union prices are also at a low level despite a drought which hit sugar beet crops in some regions."
"We are not seeing any support from the world market for EU prices. The world market is not showing any overall positive price trend." Suedzucker shares were down 4.7 percent at 11.78 euros by 1138 GMT, having recovered some of their earlier losses. The company now expects 2018/19 group sales revenues of 6.6 to 6.9 billion euros, against its previous forecast of 6.8 to 7.1 billion euros and the previous year's 7.0 billion euros.
"Looking into the second half of this year, we have completed some contracts but others are awaiting conclusion with our customers," Suedzucker's spokesman said. "But we now expect that for the near future there will be no substantial improvement in the very low sugar prices."
Raw sugar futures hit 10-year lows in August on large global supplies and as a weak currency in exporter Brazil weighed. World prices did recover slightly in early September partly after a drought and heatwave threatened some European sugar beet crops.
Suedzucker also said on Thursday that in the second quarter of 2018/2019, to Aug. 31, group operating profit "significantly decreased" to 62 million euros from 128 million euros in the same year-ago quarter. Quarterly revenues were little changed at 1.73 billion euros.
The fall in earnings was due to its sugar and CropEnergies bioethanol businesses, it said. Prices for bioethanol and saccharification products, which are sugars made from starch, are also depressed, the spokesman added. Suedzucker publishes its full first half year 2018/19 results on October 11.
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