Sudzucker confirms 06/07 profit forecast

By staff reporter

- Last updated on GMT

Related tags European union

Sudzucker believes its confirmed profit forecast for FY 2006/7
underlines the group's relative strength within a tough trading

Based on group sales of €5.7bn and an expected group operating profit of about €420m in FY 2006/07, the firm believes it has coped well with the ongoing upheaval within the EU sugar sector.

"Group accounts (IFRS) will reflect the current development within the EU sugar regime with an extraordinary write-down on Goodwill (impairment loss) within the sugar segment of €0.5bn," said the company.

"As a consequence the net loss for FY 2006/07 (FY end 28th of February) is expected to reach €0.2bn."

Sudzucker said that with an equity ratio exceeding 40 per cent, solid financial ratios will be maintained.

To underpin this fact, net financial debt of Südzucker group (excl.

hybrid bond) will be reduced (as of 28th of February 2007) to a level of about €0.8bn from €1.2bn in the previous year.

"The reform of the sugar market regime and the subsequent change of the framework has already led to the closure of the refinery site in Marseille (France)," said the company.

"Beyond our consistent structural improvements over the last years - e.g. pre-campaign 2006 closure of three sugar factories (Austria, Poland and Slovakia) - we currently elaborate on a substantial restructuring concept across the group to improve the sustainable profitability of the sugar segment."

With a volume of 2.2 million tons until the end of marketing year 2007/08, the voluntary return of sugar quota to the EU restructuring fund has not reached the EU Commissions target of 5 million tons and therefore is insufficient and clearly below expectations.

Consequently, to reflect the emerging quota excess within the marketing year 2007/08 the EU Commission has decided - depending on the quota reduction so far - to temporarily reduce the production of quota sugar (pre-emptive temporary withdrawal).

The temporary withdrawal for member countries not having returned quota to the restructuring fund will amount for 13.5 per cent.

In the event of doubts about a balanced market until October 2007, EU Commission has announced a further volume reduction for the marketing year 2007/08 (additional temporary withdrawal).

In the event of a continued EU Commission policy to levy a restructuring charge for non-produced quota sugar, profitability for the European sugar industry (in the next two years, but especially in 2007/08) will be significantly affected.

"This development will also effect Südzucker group," said the company.

"Against this background and in combination with an additional high withdrawal in October 2007, we expect a circa break-even result (FY 2007/08) within the sugar segment."

On the other hand Südzucker group expects within its dynamic development of the segments special products - especially driven by the bioethanol and functional food divisions - as well as fruit profitability to increase substantially.

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