HAMBURG (Reuters) - Suedzucker (SZUG.DE), Europe’s largest sugar refiner, said it is suffering from the steep fall in sugar prices in recent months and plans to step up exports to try and compensate.
“The drastic fall in sugar prices to a historically low level can by no means be compensated by lower production costs and higher sales volumes,” Suedzucker said on Thursday in a statement about its annual results.
The EU liberalised its sugar market last September, ending its system of guaranteed minimum prices and production quotas, giving producers freedom to expand and export more and linking EU prices to world markets. But a worst-case scenario has emerged with European producers exposed to falling global prices in an oversupplied world market.
“Sugar production around the world has grown at a faster pace than consumption, the euro to dollar exchange rate is very unfavourable for us and world market and European sugar prices are currently heading in only one direction: down,” Suedzucker said.
“However, we believe that at current world market price levels, many producers cannot be profitable so volume and price adjustments are only a matter of time,” it said.
White sugar prices have fallen by about 40 percent since early 2017, with white sugar futures hitting more than nine-year lows in April and raw sugar at 2-1/2 year lows as the global supply glut weighed.
“In the course of the new sugar marketing year which started in October 2017, revenues for both sales in the EU and also for export have continually fallen, which is weighing ever more on the development of earnings despite lower production costs,” Suedzucker said.
The company confirmed its previous forecast that its sugar sector will make an operating loss of between 100 million euros and 200 million euros (87.4 million to 175 million pounds) in the financial year that began in March against an operating profit of 139 million in the previous year. The group has large non-sugar businesses ranging from biofuels to pizzas and starches.
The end of EU production quotas means new opportunities to export sugar and the company must advantage of these, Suedzucker said.
“To do so, we have identified attractive markets, among others the Middle and Near East, North and West Africa, eastern Europe and central Asia,” it said. “The Far East also always presents an opportunity.”
To boost exports outside the EU, Suedzucker has rented silo space in European ports, additional warehouses for packaged goods and has leased trains specially to transport its sugar.
Reporting by Michael Hogan, editing by Susan Fenton