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1. Mathijs80 8 april 2014 19:33

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   •    Mathijs80

     Lid sinds: 15 feb 2006

     Laatste bezoek: 09 aug 2024

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   www.ft.com/intl/cms/s/3/881836b6-bf1e...
   
   April 8, 2014 6:03 pm
   Südzucker: bitter slide
   Europe’s largest sugar producer hit by high costs and low prices
   Things are not sweet in the world of sugar. Prices are sliding and the decline has dissolved operating profits for the German sugar producer Südzucker. On Tuesday, management warned that it expected even lower sugar prices this coming year. Customers want to pay less even before contract talks for the coming year, beginning in October. The shares dropped by nearly a fifth, their worst daily performance since the company listed in 1998.
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   Yes, sugar in Europe is a strange market in the first place. It is protected by the EU via import duties which, at about €330 per ton, nearly double the world price. Thus even though the world price for white sugar has halved since mid-2011 to about $460 per ton, EU prices have actually risen, to $862. Meanwhile, excess supply persists throughout the world. In Europe alone sugar inventories are now just over 12m tons, up over 11 per cent from the previous the year.
   Worse, Südzucker is effectively a price taker. The EU since 2006 has allowed some sugar imports from less-developed economies tariff-free, mostly from Africa. Meanwhile European exports are restricted. Thus, any weakness in ex-EU prices can impact prices on the continent. Moreover, although Südzucker aims to run its sugar plants for a minimum of 100 days each season, this year’s 102 days lies well below last year’s 112. So it has had to deal with higher operating unit costs as well as lower sugar prices.
   And, yet, deep-value hunters may find Südzucker suits their tastes. At 5.5 times, the shares trade at the bottom of a 10-year range on the multiple of enterprise value to estimated earnings before interest, tax, depreciation and amortisation. And it ranks as one of the cheapest food companies globally. Südzucker may need more than a hint of seasoning, but is perhaps worth a nibble.