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Sweet Pain

24 September 2018 by lberuti

While SZUGR ( Suedzucker AG ) had benefitted from the general move tighter ahead of the roll, it looks like a completely different today and the relentless widening of its 5-year risk premium resumed in earnest last week. On Thursday, the company cut its profit forecast, citing a “difficult environment” which sounds like an understatement. Europe’s sugar industry is suffering from the lowest prices in a decade. The market is in oversupply because of record crops in India and Thailand, while at the same time prices are further depressed by the fall of the currency of the world’s biggest exporter, Brazil. Raw sugar prices have fallen off a cliff since the beginning of the year. They have plunged 22%. White sugar, into which European beets are processed, has dropped 16% in 2018. SZUGR is particularly vulnerable to these swings as 30% of its core sugar sales are based on spot price, mostly in Europe. The company’s operating profit could plunge by more than 75% in the fiscal year ending in February 2019. Since the January 1st, SZUGR’s 5-year risk premium has tripled.