The continued low commodity price of sugar has impacted half year results at Südzucker AG, saw operating profits in its sugar segment fall to €3 million for the period, compared to €111 million a year earlier.
In the second quarter alone, the group actually posted a loss of €6 million in its sugar segment, compared to a profit of €47 million the previous year.
The group said that lower sugar sales revenues caused 'sharply reduced' results in its sugar segment, which saw its revenues fall to €1.39 billion (2017: €1.52 billion), despite substantially higher sales volumes in exports and in the EU, driven by significantly lower sales revenues.
'As expected, the higher sales volumes were by far not enough to offset the once again substantially reduced sales revenues,' the company said. 'Last year, sales revenues rose in the first half of the fiscal year, but they have been on a steep downward trend since October 2017.'
Topline Growth
Overall, the group posted consolidated group revenues of €3.475 billion for the period, down from €3.493 billion for the same period last year.
The group's operating profit dropped quite considerably in the period, falling to €139 million (compared to €282 million a year earlier).
In the second quarter alone, revenues stood at €1.73 billion (2017: €1.71 billion), while operating profit stood at €62 million (€128 million).
Südzucker said that its sugar beet production for the half was marked by drought, resulting in a 'below-average yield' expectation.
In addition, its CropEnergies business was impacted by 'significantly lower' ethanol revenues, with the segment posting revenue of €349 million (€428 million).
Its Fruit business saw revenues up slightly, to €612 million (€600 million), with higher volumes offsetting sales revenues in the fruit preparations division.
Full Year Forecast
Looking ahead to the remainder of the coming year, the group said that the outlook in the sugar segment is 'very uncertain in the difficult current market environment and as a result of the drought in Südzucker’s main cultivation regions'.
It cited the 'difficult market environment' in sugar, sweeteners (starches) and ethanol as likely to impact its performance.
Analyst Comment
Commenting on the business' performance, Roland French of Goodbody Stockbrokers said, "Pressure from surplus European production (SMY 2017/2018), weak global benchmarks and poor crop conditions mark a perfect storm for European sugar processors – possibly prompting the next phase of liberalisation to include a more radical review of operational footprint.
"While we see upside risk to our FY2019 forecasts (low base), the focus of investors remains the duration of European sugar market dislocation and what might materialise as a ‘normalised’ mid-cycle sugar price."
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. To subscribe to ESM: The European Supermarket Magazine, click here.
