October 25, 2019 / 2:31 PM / a month ago

Suedzucker raises earnings outlook on better ethanol demand; sugar still weak

HAMBURG (Reuters) - Suedzucker, Europe’s largest sugar refiner, on Friday raised its forecast of operating profits in its current financial year as environmental concerns have boosted demand for biofuel ethanol enough to partially offset weakness in the sugar sector that is slumping due to a global glut of the sweetener.

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

“We are seeing robust demand for bioethanol in several European countries,” a Suedzucker spokesman said. “In the current debate about protecting the climate, the message is getting through that bioethanol is a good method of reducing CO2 and dust emissions in cities.”

“We are hopeful this trend will continue. The sugar outlook is improved slightly but unfortunately the overall sugar market remains depressed.”

The company now expects group 2019/20 operating profits to reach 50 million euros to 130 million euros ($55.50-$144.3 million) against its previous forecast of zero to 100 million euros and 27 million euros operating profit in the previous year.

The main improvement will come from its CropEnergies bioethanol unit, now expected to achieve operating profit of 70-90 million euros, up from its previous forecast of 50-75 million euros.

Suedzucker now estimates its core sugar sector will post an operating loss of 200-260 million euros against its previous forecast of a loss of 200-300 million euros.

“We have taken measures on cost reduction (in the sugar sector) while we are seeing a moderate improvement in sugar spot market prices in Europe which is being reflected in new contracts we are signing,” the spokesman added.

Europe’s sugar producers are still suffering from the double blow of low sugar prices and European Union market liberalization that has exposed them to depressed world markets.

Suedzucker also warned it would see “a significantly negative impact” from business development of British commodity trading company ED&F Man Holdings in which Suedzucker has a shareholding of about 35%.

Suedzucker on Oct. 10 also posted a fall in earnings as sugar prices remained depressed. Germany’s second largest sugar refiner Nordzucker on Friday also posted a pre-tax loss of 12 million euros in the first half of its 2019/20 fiscal year.

The European Union liberalized its sugar market in 2017, ending its system of guaranteed minimum prices and protected production quotas. That gave European producers more freedom to expand and export but left them exposed to collapsing world prices.

Reporting by Michael Hogan, editing by David Gregorio

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