Suedzucker expects higher profit although coronavirus an unknown factor

HAMBURG (Reuters) - Suedzucker, Europe’s largest sugar refiner, on Wednesday 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.

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

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.

Suedzucker said operating profit in its 2020/2021 fiscal year which began in March would likely rise to between 300 million euros to 400 million euros ($325.9 million to $434.5 million), from 116 million euros in the year to the end of February.

“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 Suedzucker spokesman told Reuters.

After last year announcing the closure of sugar factories in Germany, France and Poland because of the slump in prices, Suedzucker said it expects sales in the new financial year to rise to 6.9 billion euros to 7.2 billion euros 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 euros a tonne in February, up from around 300 euros a tonne for much of 2019, he said, while the International Sugar Organization on Feb. 28 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, Suedzucker proposed a dividend of 0.20 euro per share. Full results will be announced on May 14.

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.”

Suedzucker’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.

Reporting by Michael Hogan, editing by Kirsten Donovan