(Adds detail, background, company spokesman comment)
HAMBURG, July 12 (Reuters) - Suedzucker reported a 49 percent drop in first-quarter operating profit on Thursday which Europe’s largest sugar refiner blamed on a slump in prices.
Operating profit for the March-May quarter fell to 78 million euros ($91.14 million) from 153 million a year earlier.
Sales fell to 1.741 billion euros from 1.783 billion.
“The decline was driven mainly by the predicted significantly weaker sugar segment growth,” it said. The group has been increasing exports but this failed to offset lower prices, it said.
Operating profit in its core sugar business fell 85.9 percent to just 8 million euros.
The European Union liberalised its sugar market in September 2017, ending its system of guaranteed minimum prices and protected production quotas. This gave producers freedom to expand and export more and linked EU prices to world markets.
But a worst-case scenario emerged, with European producers exposed to global prices which have fallen about 40 percent since early 2017 in an oversupplied world market.
EU sugar prices have fallen by more than 12 percent since market deregulation.
“We are currently facing low prices in both world and EU markets,” said a Suedzucker spokesman. “The EU market cannot take up large new sales volumes ...we were able to increase our export volumes outside the EU by tonnage but at lower prices.”
“The higher export sales volumes were not enough to compensate for the low prices. Our strategy for this year remains to defend our market position in Europe and continue to expand exports.”
“We expect a sugar harvest of similar volumes to last year which will support this strategy.”
The group’s sugar beet cultivation area for 2018 contracted from farmers is 435,800 hectares, down from 445,000 hectares last year.
Planting began relatively late in early April but very warm temperatures in Germany with mostly adequate rainfall accelerated beet growth and compensated for the delayed planting.
The company repeated it expects 2018/19 group sales of 6.8 to 7.1 billion euros with operating result falling considerably to 100 to 200 million euros against 445 million euros in 2017/18.
It expects a full year operating loss in the sugar sector of between 100 and 200 million euros against an operating profit of 139 million in the previous year.
“The severe drop in sugar prices to a historic low can by no means be offset by lower production costs and sales volumes,” it said.
$1 = 0.8559 euros Reporting by Michael Hogan and Caroline Copley; editing by Jason Neely