Südzucker, Europe's largest sugar refiner, has forecast a strong increase in earnings in its new financial year despite the coronavirus pandemic casting doubt on expectations its core sugar market will improve.
The company and other European producers have suffered in recent years from the double blow of low sugar prices and EU market liberalisation which exposed them to depressed world markets.
Südzucker said operating profit in its 2020/2021 fiscal year which began in March would likely rise to between €300 million to €400 million ($325.9 million to $434.5 million), from €116 million in the year to the end of February.
'A Significant Improvement'
“We are expecting a significant improvement in the financial performance of the sugar sector...but this will depend on the impact of the coronavirus, as we cannot forecast the impact of the crisis on our operations,” a Südzucker spokesman told Reuters.
After last year announcing the closure of sugar factories in Germany, France and Poland because of the slump in prices, Südzucker said it expects sales in the new financial year to rise to €6.9 billion to €7.2 billion from €6.7 billion in 2019/20.
"We are hopeful of a normalisation of the sugar market with expectations of a global production deficit this year," the spokesman said. "This is expected to support sugar prices, depending on the impact of the coronavirus."
EU sugar prices were reported at about €370 a tonne in February, up from around €300 a tonne for much of 2019, he said, while the International Sugar Organisation on 28 February forecast a global sugar deficit of 9.44 million tonnes in the 2019/20 season, the largest shortfall in 11 years.
In an advance release of its 2019/2020 results, a financial year which ended just before the coronavirus took hold in much of Europe, Südzucker proposed a dividend of €0.20 per share. Full results will be announced on 14 May.
Huge Increase In Retail Demand
The spokesman said the company had seen a huge increase in retail demand as the public rushed to buy staples ahead of coronavirus lockdowns, as well as greater demand for food additives, especially for baby foods.
"The question is now whether consumers will start to use up the food they have bought or continue purchasing, this is one of the unknown factors."
Südzucker's green fuel unit CropEnergies is experiencing reduced demand for bioethanol for blending with gasoline as the coronavirus shutdown reduces car use, although demand for disinfectants and hand sanitisers has significantly increased.
“At the moment we cannot forecast what impact the transfer of production from fuel bioethanol to the disinfectant market will have on our earnings,” the spokesman said.
