May 14, 2020 / 10:19 AM / 23 days ago

Suedzucker optimistic about profits despite coronavirus

HAMBURG (Reuters) - Suedzucker (SZUG.DE) on Thursday confirmed a forecast made last month for a strong profit increase in its current financial year on hopes cost savings, strong EU demand and rising sugar prices will lift its core business despite the impact of coronavirus.

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

Europe’s largest sugar refiner forecast in April that operating profit in its 2020/2021 financial year starting in March would rise to between 300 and 400 million euros ($324.3 to $432.4 million) from 116 million euros in the previous year.

Suedzucker said at the time the forecast was subject to the economic and financial impact of the pandemic. It also made an advance release of its 2019/20 results, which ended just before the coronavirus crisis took hold in much of Europe.

CEO Niels Poerksen said in a presentation on Thursday on the results that the pandemic had so far had a mixed impact.

Retail sales of sugar, frozen pizzas from its food division and sales of hand sanitizer from its Cropenergies (CE2G.DE) biofuels business had risen, but sales of bioethanol for fuel and food demand fell after restaurant and catering shutdowns.

Demand was expected to normalise, with retail panic-buying ebbing and restaurants in Germany and some other countries reopening, Poerksen said.

The company expects an improvement in the performance of its core sugar business in the second half of 2020/21, which will show the impact of higher revenues and cost savings, the presentation said.

Suedzucker and other European sugar producers have suffered in the past few years from the double blow of low sugar prices and EU market liberalisation, which exposed them to depressed world markets.

Suedzucker last year announced the closure of five sugar factories in Germany, France and Poland because of the slump in the sugar market.

The company said the restructuring was now finished with 700,000 tonnes of sugar production capacity closed.

No further sugar factory closures are currently planned, and the cost benefits from closures are expected in the second half of the financial year, Poerksen said.

Operating earnings from Suedzucker’s sugar business in 2020/21 are now forecast at between a loss of 40 million euros to a profit of 60 million euros, against an operating loss of 236 million euros in 2019/20.

EU sugar prices are rising and “the price increase is continuing”, the presentation said.

EU sugar demand is expected to be firm. The EU is expected to be a net sugar importer in the new season, with local production not meeting needs, Suedzucker said.

The EU’s 2020 sugar beet harvested area was expected to be smaller. Dry springtime weather in Germany had not been welcome for sugar beet and there are fears beet development may have suffered, Poerksen said.

EU sugar prices were reported at about 370 euros a tonne in February, up from just over 300 euros a tonne for much of 2019, the company presentation said.

Reporting by Michael Hogan; Editing by Michelle Martin, Jane Merriman and Jan Harvey

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