Germany’s second-largest sugar refiner Nordzucker on Tuesday was the latest European producer to report a slump in earnings following a collapse in prices.
It is reported by Reuters.
Unlisted Nordzucker said net profit fell to about 17 million euros ($19,6 million) in the nine months to end November 2018 from around 143 million in the same year-ago period. Sales fell 18 percent to 1,05 billion euros.
The results are the latest illustration of serious problems faced by Europe’s sugar industry. Germany’s and Europe’s largest sugar producer Suedzucker on Jan. 10 reported a quarterly operating loss, hit by the global collapse in sugar prices.
«Low sugar prices and slightly lower sales volumes are the main reasons for the earnings trend, — Nordzucker said, — The fall in prices for sugar on the world market, which is at its lowest level for about ten years, is attributable to substantial overproduction, particularly in India and Thailand».
Nordzucker repeated it expects a loss for its current full financial year and a larger operating loss is expected in the next year because of the sharp fall in sugar prices following EU market deregulation.
Raw sugar futures ended 2018 at their lowest in 10 years, pressured by heavy global oversupply.
The European Union liberalized its sugar market in September 2017, ending its system of guaranteed minimum prices and protected production quotas. This gave producers more freedom to expand and export, but a worst-case scenario emerged, with European producers exposed to collapsing world prices.
«The market situation within the EU has also been characterized by overproduction since the end of the quota system for sugar, — Nordzucker said on Tuesday, — As a result, prices for sugar have also fallen dramatically here and are currently around 35 percent lower than in the previous year».
Nordzucker is still considering acquisitions and is in talks to buy Australian producer Mackay Sugar.
«In order to make our results more independent of the European sugar market, we intend to enter the cane sugar production market, — Nordzucker added, — We are in concrete negotiations with a company in Australia».
A cost-cutting program is underway to reduce real estate, plant and personnel costs by 20 million euros each.
Last summer’s drought damaged sugar beets and Nordzucker said it processed about 14 million tonnes of beet this season in its 13 sugar plants, down from 17 million tonnes last year.