Suedzucker posts higher third quarter profit despite sugar losses

HAMBURG (Reuters) - Suedzucker SZUG.DE, Europe's largest sugar refiner, on Tuesday confirmed an improvement in quarterly earnings as stronger bioethanol demand helped offset continued losses from its sugar business.

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

The company confirmed an operating profit of 39 million euros ($43.43 million) in the third quarter to November 30 against an operating loss of 23 million euros a year earlier.

“The EU sugar market remains desolate with prices too low for profitable production,” a Suedzucker spokesman said. “World market prices are rising and we expect an improvement in EU sugar prices but this could take around 18 months.”

Suedzucker reaffirmed its December forecast for a 2019/20 consolidated group operating profit of between 70 million and 130 million euros against 27 million a year earlier.

But low sugar prices mean it still expects a full year operating loss in its sugar business of 200-260 million euros following a loss of 239 million the previous year.

The expected improvement in group results was largely due to strong performances in bioethanol and special products, which range from pizzas to starch, with the green fuel unit Cropenergies CE2G.DE performing well.

Europe’s sugar producers are suffering from the double blow of low sugar prices and EU market liberalization which exposed them to depressed world markets.

Raw sugar prices hit 14-month highs in January but still struggle to move far the 10-year lows seen in 2018 because of large global sugar supplies.

EU prices in the third quarter were around 312 to 328 euros a ton, Suedzucker said, well below the 500 euros per ton in late 2017 just before the price collapse started.

“World market sugar prices have increased recently following forecasts of a production deficit,” the Suedzucker spokesman said. “The EU will need to import sugar at higher world prices.”

The current EU sugar beet crop is expected to be smaller than the previous year following a hot 2019 summer, requiring the EU to import.

“But in the EU, sugar producers generally have long-term sugar supply contracts of about a year. So European producers will not feel immediate benefit from the stronger world market.

“We are hopeful for a turnaround in the sugar sector but this financial year will see continued losses from sugar production because prices are simply too low,” the spokesman said.

Suedzucker in 2019 announced closures of sugar factories in Germany, France and Poland.

Reporting by Michael Hogan; editing by Michelle Martin and Jason Neely