Europe's largest sugar producer Südzucker said it expects lower annual earnings largely because of high production costs and weak sugar prices.
The German company affirmed a forecast made on 15 April that its fiscal 2024/25 group operating profit would fall to between €500 million and €600 million ($544 million to $652 million) from €950 million in the year that ended in February.
The operating result in its core sugar segment is expected to be between €200 million and €300 million, down from €558 million, it said.
'For the 2024 (production) campaign, we expect a decrease in production costs,' the company said. 'However, the anticipated decline in sugar prices on average over the fiscal year is likely to have a negative impact on the result.'
Sugar Production
Sugar futures hit 18-month lows on Tuesday (14 May) on expectations of high sugar harvests in Brazil.
CEO Niels Poerksen told Reuters after an online press conference that the world 2023/24 season sugar market was expected to have a larger supply surplus than the previous season, with production increases expected in Brazil and the EU. This could weaken prices.
However, the pressure from rising sugar production costs was expected to reduce.
EU sugar demand remains stable overall, he added.
Challenges
Südzucker's bioethanol sector faces challenges from low ethanol prices despite strong demand, partly because of continued imports to the EU.
'The ongoing war in Ukraine continues to exacerbate the already high volatility on the sales and procurement markets,' Südzucker said.
'The future impact of the negative influences stemming from the EU’s extended duty-free access for agricultural imports from Ukraine, which is now limited in terms of volume, remains uncertain,' it added.
'The implications of the war that broke out in the Middle East last October are likewise difficult to assess.'
