Suedsucker's remains confident about the EU sugar industry's future, as its first quarter interim report, published today, revealed.
Wide reaching sugar reforms, which came into effect this month, have transformed the sector, and the Germany-based company believes that this has brought opportunities as well as challenges.
"The European Council of Agricultural Ministers adopted the new single market regulation for sugar on 20 February 2006," said the company today.
"Despite the severe price reductions the new market regulation gives us a long-term perspective."
The EU sugar reforms feature a number of concessions designed to give European sugar producers a viable future. First there was the climb-down from the original proposed 39 per cent price cut to a figure of 36 per cent, and most significantly for sugar producers, there was agreement the sector would be compensated for, on average, 64.2 per cent of this price cut.
"All in all, we anticipate a higher production volume for the Suedzucker Group than at present," said the firm.
"With industrial sugar production, the volatile C sugar business will be replaced by stable EU business."
Suedzucker also claimed that it was well positioned in the best beet-growing regions of Europe and should therefore continue to be competitive. Based on good reference volumes, the company believes it can capture over one-fourth of the new additional quota of 1 million tonnes and increase its quota from 3.8 to 4.1 million tonnes.
Reform of the EU sugar regime has been a long time coming, and Suedzucker has already put in place necessary changes. The company said that the rising quota proportion provided for in the new market regulation and higher stable intra-European sales of quota and industrial sugar instead of world market exports would enable Suedzucker to offset the negative impact of the price reduction by its own efforts through the cost-cutting measures that have also been initiated.
In addition to giving a positive outlook on the European sugar business, Suedzucker's interim report also highlighted the fact that a separate fruit segment has been created in response to the growing importance of this particular sector.
Integration of the fruit business is proceeding according to plan, said the company.
Overall, group revenues rose by €216.2 million, or 17.3 per cent, to €1,468.5 million in the first quarter of the 2006/07 financial year. Revenues in the sugar segment in the first quarter of 2006/07 were up by €49.2 million, or 5.4 per cent, to €961.0 million.
This growth was on the back of the positive market development in the East European EU markets, which was reinforced by intervention sales in Hungary and the Czech Republic. Exports grew again versus 2005/06 but, owing to a strong shift from quota to C sugar exports, this was not reflected in higher export revenues.
For the full year 2006/07, Suedzucker expects group revenues to rise by 5 per cent from €5.3 to 5.6 billion due to a double-digit increase in the special products and fruit segments despite a slight decrease in sugar segments revenues.
"Judged from today's vantage point, there will be a positive swing in restructuring costs and special items, which showed a high negative amount last year," said the company. "Income from operations will therefore see a significant improvement."