(Oct 10): Europe’s sugar companies are facing revenue pressures, after last year’s stellar performance, as increased supplies are pushing down prices and hurting their bottom line.
Suedzucker, the largest producer of the sweetener in Europe, saw an 81% drop in operating profit for its sugar unit in its first-half financial report, citing falling prices in the European Union (EU) and higher exports from the bloc to the world market. That comes after the company issued a profit warning in September as it entered new contracts at lower prices.
Austrian sugar manufacturer Agrana saw its operating profit fall by 49%, adding that it expects the coming months to remain challenging. “The currently very adverse market situation will have a negative impact on the earnings of the Agrana Group for the 2024|25 financial year,” according to chief executive officer Stephan Büttner.
Europe’s higher harvest, along with improved outlooks elsewhere, including Thailand and India, has weighed on white sugar prices across the world. Futures have fallen about 4% in London this year, with the premium for white sugar trading below US$85 (RM363.92) a tonne.
Associated British Foods plc issued a profit warning last month saying oversupply knocked prices even more than the company anticipated.
Strong harvest forecasts in Europe, along with an increase in imports from Ukraine, have amped up supply and driven down sugar prices across the continent. The EU’s sugar output is expected to rise more than 6% in the 2024-25 season driven by an increase in planted area and better sugar beet yields.
Average sugar prices in the EU have fallen about 8% this year, according to European Commission data. However, later-dated contracts are attracting much lower prices and most producers are forced to sell below production cost, according to Claudiu Covrig of Covrig Analytics.
Prices:
Raw sugar futures were up 0.3% to 22.11 cents a pound at 10.15am in New York, while white sugar rose 0.1% in London
Cocoa futures fell 0.23% in New York and 0.17% in London
