Benedikt Knüttel/Südzucker

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Lower sugar price sour for Südzucker results

July 11, 2024 - Eric de Lijster

For Südzucker, the results from sugar taste a bit sour. The German food concern, also active in other areas such as starch, fruit, and biofuels, saw the sugar operating result decrease significantly in the first three months of the fiscal year 2024/25. Südzucker has issued a profit warning for the current second quarter.

Südzucker has a broken fiscal year, starting on March 1. In the first three months, until the end of May, the company was able to significantly increase sugar sales: by 16% to just under €1.08 billion. Südzucker, one of the world's largest sugar producers, was able to sell much more sugar in these months, partly because the European Union was very competitive in the global market. The higher sales were driven by lower sugar prices, limiting a positive impact on profits. Higher production costs in the 2023 beet campaign weigh heavily on the operating result, Südzucker reports. The operating result has decreased by 65% to €59 million in the first three months of the fiscal year.

Higher sugar beet acreage
Südzucker has expanded the sugar beet acreage for this year's campaign among growers, without specifying a specific figure. In most cultivation areas, sugar beets were sown between late March and mid-April, on average two weeks earlier than last year. Especially in Belgium, there were more problems due to persistent rainfall. The sowing in June of this year was not yet completed there. Südzucker expects an overall average sugar beet harvest for this campaign year.

Südzucker is also active in wheat starch products, biofuels (ethanol), and animal feed products. The company is facing lower prices and consequently under pressure operating results in these activities as well. In the Fruit division, where the company sells fruit preparations and fruit juice concentrates, Südzucker was able to present increasing sales and a better operating result.

Profit warning due to wars
The food concern had to issue a profit warning for the second quarter of the fiscal year, from June to August. Südzucker expects a significant decrease in results due to the future impact of the expanded duty-free access by the EU for agricultural imports from Ukraine. This is in addition to the higher volatility in the buying and selling markets brought about by the ongoing war in Ukraine. The implications of the war in the Middle East between Israel and Hamas during this period are also difficult to assess, Südzucker explains.

Eric de Lijster

Eric de Lijster is the director of Market Research & PRA at DCA Market Intelligence. As a scion of a farming family, farming blood runs through Eric's veins. He considers himself a generalist but with a passion for economics, trends, markets, and marketing.