July 18, 2019 / 8:21 AM / 5 months ago

Suedzucker sees no turnaround yet in tough sugar market

HAMBURG (Reuters) - Suedzucker (SZUG.DE), Europe’s largest sugar refiner, said on Thursday that trading conditions remained intensely difficult with low sugar prices and no turnaround likely for the company’s current financial year.

FILE PHOTO: A company logo of Suedzucker Group is pictured at the headquarters in Mannheim, Germany March 12, 2019. REUTERS/Ralph Orlowski

“Our group forecast for the current financial year still shows no visible turnaround,” CEO Wolfgang Heer told the annual meeting of Suedzucker shareholders.

“Sugar prices remain at a low level which does not cover costs.”

He said in an advance release of his speech that a restructuring plan in the company’s sugar business, which includes closures of sugar factories in Germany, France and Poland, was on schedule. But the first financial benefits will be seen in the second half of the company’s 2020/21 financial year.

Suedzucker had on July 11 reported a 40% drop in first-quarter earnings due to low global sugar prices.

Global sugar prices hit their lowest in 10 years in late 2018 amid heavy world oversupply and have only stabilised at depressed levels in 2019.

Suedzucker said in January it would close sugar factories in Germany, France and Poland and cut production capacity by 700,000 tonnes per year to save about 100 million euros annually.

Despite the tough current market, Heer said Suedzucker remained optimistic for the future.

The sugar business restructuring will focus production on the most cost-effective regions, he said.

Other European sugar producers have also announced output cuts.

“The moves to reduce volumes of sugar in the EU should reduce the excess supply and so reduce pressure on prices,” Heer said. “The global trend of rising sugar demand speaks for higher world market prices in future.”

Suedzucker’s Polish factory in Strzyzow will close at the end of the current 2018/2019 sugar production season, Heer told shareholders.

The Brottewitz and Warburg factories in Germany and the Cagny and Eppeville factories in France will close at the end of the next 2019/2020 sugar season, he said.

Heer defended the company’s decision to reject a plan from French farmers to buy the two French factories, owned by Suedzucker unit Saint Louis Sucre.

The sale would have hindered efforts to cut the over-production of sugar in the EU, Heer said. It would have created a new competitor for beet supplies to Suedzucker’s remaining French plants.

The two French sites are also still needed for sugar storage and the group’s animal feed business, he said.

Reporting by Michael Hogan; Editing by Michelle Martin and Jane Merriman

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