Germany's second largest sugar refiner Nordzucker expects to turn a profit in 2020/21 after a major cost overhaul and plans further expansion beyond Europe after its recent investment in Australia, the chief executive said.
The company's projected return of profitability could signal a change in fortunes for an industry mired in losses since the liberalisation of the European Union sugar sector in 2017 that left producers exposed to a depressed world market.
Last month, unlisted Nordzucker posted a first-half pre-tax loss of €12 million ($13.2 million) for 2019/2020 after reporting a €36 million loss for the 2018/19 full year.
Nordzucker CEO Lars Gorissen told Reuters a full-year loss was on the cards for 2019/20, following the first half performance.
'Efforts To Increase Efficiency'
"By 2020/21, we will firmly be back in the black. This is due to our efforts to increase efficiency in all areas and reduce overhead costs across the group," he said on the sidelines of an ISO sugar conference in London this week.
"The European market is still under a lot of pressure - even with better prices (compared with last year). That is not going to change, but we are positioned in 2020/21 to deliver a solid black figure," he said.
Südzucker, Europe's largest sugar refiner and Germany's top player, said last month it was likely to post an operating loss of €200 million - €260 million in its current financial year against a previous forecast of a loss of €200 million - €300 million.
In November, French sugar group Tereos posted a narrower loss in the first half, underscoring the fragile market, which slumped to its lowest level in a decade in December last year due to oversupply.
Australian Acquisition
Nordzucker completed its purchase in August of a 70% stake in Australia's second largest sugar producer Mackay Sugar and was the group's first deal in 10 years since the acquisition of the sugar business of Denmark's Danisco.
Gorissen said this was its first transaction outside Europe and their first move into cane sugar production.
"It positions us where we want to be. We now have a very good structure with three sugar factories and 70,000 hectares of cane growing area in Australia," he said.
"The facilities, together with Mackay’s position, will give us access to markets in Southeast Asia and Australia too."
Gorissen said their plan was to deepen their presence in cane sugar markets, which would "take a few years".
"Further acquisitions going forward are expected to be part of that, but that will only happen with time," he said, adding that the group's capital position was firm.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.
