Sugar giant Sudzucker experiences profit drop attributable to price reductions - Decrease in Profits for Sugar Company Attributed to Price Drops
In a recent announcement, Sudzucker, the European sugar and food company, reported a significant drop in profit for the first quarter of 2021. The decline was primarily attributed to a steep drop in global sugar prices.
The company's earnings before interest, taxes, depreciation, and amortization (EBITDA) fell from €230 million to €96 million, and revenue decreased from €2.55 billion to €2.15 billion year-on-year. Sudzucker has also warned of further declines in the current second quarter, but the company's forecast for the current financial year (end of February) remains unchanged.
Several factors contributed to the decline in global sugar prices, which impacted Sudzucker's profitability. Improving global supply, favourable weather conditions in major sugar-producing regions, a shift in ethanol production, lower demand from key importers, and lower ethanol prices all played a role in the price drop.
Better weather conditions in countries like Brazil, India, and Thailand led to expectations of increased sugar production. For example, the US Department of Agriculture projected a 4.7% year-on-year increase in global sugar production in 2025/26, driven especially by India, Brazil, and Thailand. This improved supply outlook exerted downward pressure on prices.
The end of adverse weather patterns like La Niña allowed for better yields in top-producing regions, resulting in more sugar available in the market. In Brazil, where ethanol is often made from sugar, there was growth in corn-based ethanol production, which further increased global supply.
Reduced sugar imports by countries such as China, Indonesia, and Bangladesh weakened demand, adding to the downward price trend. Lower ethanol prices also affected sugar prices because ethanol and sugar markets are connected. Lower ethanol prices reduce sugar's attractiveness as a feedstock for biofuel, increasing sugar supply available for the market.
Sudzucker's bioethanol subsidiary, Cropenergies, also contributed to the losses. Cropenergies operates one of Europe's largest ethanol plants at the Zeitz site, where Sudzucker employs 320 people.
Despite these challenges, Sudzucker still expects the significantly fallen sugar prices in the EU to recover by October. The company is optimistic about the future, hoping to navigate the difficult market conditions and maintain its competitive position.
The Community policy for agricultural subsidies and the employment policy in Sudzucker could be revised to address the increased supply of sugar, caused by improved weather conditions in key producing nations like Brazil, India, and Thailand. This oversupply, combined with lower demand from key importers and a shift in finance from sugar-to-ethanol production in the industry, has led to a steep drop in global sugar prices, affecting Sudzucker's employment policy for its workforce, including those at the ethanol plant operated by its subsidiary, Cropenergies.
