Danisco Sugar beats Q3 expectations

By staff reporter

- Last updated on GMT

Related tags: Sugar, Euro, Danisco sugar

Danisco has reported a better-than-expected Q3 for its sugar
division due, despite a challenging market and lower prices.

The Danish group yesterday reported revenue of DKK 1,739m (c €233.2m) from sugar for the quarter ended January 31, up 10 per cent on the prior year period, and an EBIT margin of 7.1 per cent, up from 5.0 per cent last year. It said the positive report was due to "better industry, non-quota and non-EU volumes, albeit at generally lower prices".​ In addition, it has lifted its long-term financial targets for the division. Once the EU sugar reform has been completed it expects revenue of at least DKK 6bn (€0.8bn) and EBIT margin of at least 10 per cent. "The main reason for our long-term upgrade is the greater clarity that we see regarding the EU sugar reform,"​ said Danisco. This clarity comes as a result of the European Commission's announcement of "substantial"​ voluntary quota surrender across the EU, and targets for further reductions that are expected to create more of a balance between supply and demand. Sugar reform was introduced in Europe in 2006 with the aim of improving competitiveness and market-orientation of the EU sugar sector and guarantee its long term future. Under the programme, financial incentives are offered to the less competitive producers to leave the market. The goal is to reduce the volume of sugar on the market by six million tonnes by 2010. As for Danisco's quota, it expects to announce a cut of 5 per cent before the end of this month, subject to the conclusion of talks with growers. Danisco is planning to spin off its sugar division into a separate business by the end of this year - a move announced last year and initially planned for 2010 in order to let shareholders better target their investments, and the companies to have the best development opportunities. The better prospects have, however, allowed it to advance its plans. "Our primary objective remains an independent listing of Danisco Sugar; we expect this to happen by the end of the current calendar year, unless an outright sale of the business proves to be more value-enhancing". ​ It is hoping that such a spin-off can be tax-free, with current shareholders receiving one Danisco Sugar share for every Danisco share. For full year 2007/8 Danisco is now predicting EBIT of DKK 600m (c €80.5m) from Danisco Sugar. Its earlier forecast was DKK 500m (c €67.1m). Anticipated revenue remains at DKK 6.75bn (c €0.9bn). It has also provided a preliminary outlook for sugar for 2008/9 at this stage, "in order to enhance transparency":​ revenue of around DKK 7bn (c €0.94bn) and EBIT of between DKK 400m and DKK 450m (c €53.6m and €60.3m).

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