High Sugar Prices Sweetened Nordzucker Profits
25 May 2017 --- Leading European sugar maker Nordzucker closed the 2016/17 financial year with net income of €99 million (US$111 million) with the increased sales and improved prices for sugar contributing factors to the strong performance.
Headquartered in Germany, Nordzucker is Europe’s second largest sugar manufacturer, producing sugar, liquid sugars and other specialities for the application in the nutrition, beverage and sweets industry, as well as other sugar specialities like refined sugar, icing sugar, lump sugar, preserving sugar, tea sugars and flavored sugars being a core part of the business.
The financial results show that earnings improved significantly, further strengthening its financial position. The company says it is ready for the “challenges of the market” and expects growth to continue.
Key factors include revenues up by 6% to €1,708 million (US$1,920 million), equity ratio increases further to 65% and a dividend proposal of €1.10 per share.
According to the company, cost savings from the efficiency program also had a positive impact and the sugar producer expects earnings to at least be at the same level again in the coming financial year.
The operating result (EBIT) came to €131 million (previous year: €16 million) and consolidated net income improved considerably year on year to €99 million (previous year: €15 million).
Speaking at the press conference on the financial statements in Braunschweig, CEO Hartwig Fuchs said: “We have achieved a lot, even if we haven’t accomplished everything yet. Nordzucker shares can once again be described as an investment that pays off. And we are very pleased about this.”
Upturn in Sugar Market
Global sugar consumption exceeded production in both the 2015/2016 and the current marketing year (each of which runs from 1 October to 30 September). This deficit has led to a fall in sugar stocks, causing sugar prices on the global market to increase significantly over the past year.
EU market prices eventually rose as well. Nordzucker says it was able to benefit from this and increase its volumes sold as a result of successful sales activities.
Sales of molasses were stable in terms of volume. However, cheap imports put pressure on prices. Molasses is used primarily in the yeast and alcohol industries as well as for animal feed.
The company continued to successfully optimize its processes throughout the Group in the past financial year. The program is generating cost savings in all areas, with a focus on procurement and administration, for example. The “FORCE” efficiency program has already led to cost savings of more than €30 million (US$33.7 million) over the last two years. The target is €50 million (US$56.2 million).
Nordzucker has a stable net assets and financial position. Equity rose to €1,375 million (previous year: €1,278 million). The equity ratio also improved to 65% (previous year: 63.5%), which is well above the target figure of 30%. The company remains debt-free, and its net capital investments went up significantly to €308 million (US$346 million).
Nordzucker continues to invest heavily, spending €84 million (US$94 million) in the past financial year. The capital expenditure was focused on areas that affect customers directly such as service, quality, logistics and IT, as well as on further improving the plants’ performance and energy efficiency. Capital expenditure of €87 million (US$97.8 million) is planned for the current financial year.
Focusing on the future outlook, the company says that with its capital resources, Nordzucker is well prepared for further growth and even in the difficult market environment, the company can gain market share and take advantage of growth opportunities.
The end of the European sugar market regime in its current form in October 2017 will herald a sea change, says Fuchs who is optimistic about the outlook.
“We need good ideas and courage. We have these, and we are certain that beet has a future and will remain competitive. Increased sugar yields and flexible growing conditions beyond 2017 will ensure a solid economic foundation for farms in the long term. Together with our growers, we have laid the groundwork for the future success in a free market.”
“Demand in the EU is stagnating. We will play an active role in shaping consolidation within the European sugar market and seize opportunities on the global market – step by step and acting with good judgement,” adds Fuchs.
“With sustainable production and a high level of service and quality, we can provide our European and international customers with genuine added value. We will take advantage of our specific export opportunities and open up international markets.”
The changes in the market make it more difficult to predict future earnings, according to the company, however Nordzucker expects its overall earnings in the current financial year to be at least on a par with the previous year’s level.
