Suedzucker hailed a “positive” 2022-23 world sugar market outlook, as it forecast a round of price rises from October to drive its operations in the sweetener back to profit – after a fourth successive, and unexpected, annual loss.
The German-based starch-to-ethanol group, which is Europe’s largest sugar producer, said that although world production of the sweetener will increase next season, to avoid a third successive annual deficit, it will only marginally exceed consumption.
This will prevent a rebuild of inventories shrunk to a “very low level” by the output shortfalls, with the world stocks-to-use ratio for sugar, a key pricing metric, actually to shrink further in 2022-23, by 0.5 points to 36.4%, the group said, quoting IHS Markit forecasts.
In 2018-19, before the run of deficits, the ratio stood at 42.1%.
‘Significantly raising prices’
With output and demand “in balance in the 2022-23 sugar marketing year, and inventories remaining at a low level, the world sugar market should remain positive”, Suedzucker said.
In its home European Union, prospects were enhanced by the potential for a decline in output, of some 400,000 tonnes to 16.5m tonnes, “amid average [beet] yields” – keeping the bloc as a net importer, a dynamic which tends to support prices in the quest to attract supplies from the world market.
“Since the EU is thus expected to remain a net importer… Suedzucker expects a positive market environment”.
This would enable the group “to pass on sharply higher raw material and energy costs to the market by significantly raising prices for sugar effective October 2022”.
From October, “we expect the already significantly higher EU spot prices to enable use to conclude substantially improved customer contracts”, Suedzucker said, in a statement which signals another upward inflationary pressure ahead.
However, the group revealed it had already itself been caught out by such forces, as it noted for its 2021-22 year, “in some cases sharp cost increases for energy, packaging materials and raw materials” since the autumn
With sales volumes for the year, which ended in February, up 6.2% at 6.5m tonnes, “below expectations”, the group said that its “target of an operating profit was not achieved”.
Suedzucker, which in February had guided to a sugar operating profit of up to E30m, unveiled an annual operating loss of E21m for the division, which has now lost E624m over four years.
Factoring in one-off items, and continued setbacks at ED&F Man, the division has lost E1.71bn, pre-tax, over that period.
Back in the black
At a group level, Suedzucker revealed earnings of E122m, compared with a loss of E53m a year before, helped by improvements at its CropEnergies ethanol business, where raised volumes drove a 45% jump to E731m in revenues.
Suedzucker restated a forecast last month that it will achieve group ebitda of E660m-760m in its current financial year, compared with E692m last year, on revenues up to E8.7bn-9.1bn, from E7.6bn.
The sugar division was expected to record an operating profit of up to E100m, on a “significant increase” in sales from E2.62bn achieved in 2021-22.