Our Experts Comment the Times Series

See All the Comments

Outlook Unchanged

11 July 2019 by jbchevrel

Suedzucker (SZUGR) CDS underperformed the EUR HY space today, with the 5y spread going wider +4bp while CrossOver fair value is about flat. Intra-day SZUGR was even +7 vs XO FV -3. The European sugar company printed EBIT at €47m, which is down -40% YoY, but still ahead of the consensus number of -€15m. The Sugar division keeps losing traction and weighing at a group level, generating an EBIT of -€36m which is to be compared with +€8m in the same period last year. Other divisions saw their margin increase, measured by EBIT (Special products & CropEnergies) or stagnate (Fruit). As far as cash flow, FCF came €22m after dividends, affected negatively by both lower earnings and higher capital expenditure. Against that backdrop, the group’s net debt was stable, a tad up (+€111m) to a total €1.2b, largely the impact of the IFRS-16 enforcement. Although that looks like a beat for this quarter, the fact that management didn’t change its outlook explains the underperformance today. The stock also opened -4% on Xetra, before paring most of that move. Indeed, the Baa3n/BBB-n rated company confirmed its outlook for this fiscal year, with revenues keeping the range of [€6.7b,€7.0b] and consistently EBIT staying in [0-€100m]. This is despite a stabilization in sugar prices, as indeed EU white sugar prices seem to have found a floor above €300 per metric tonne in the first half of this year. Elsewhere it was a session marked by rates selling off aggressively in the belly of the DM curves (10y Bund +8bp 10y UST +7bp 10y Gilt +8bp), preventing risk to rally much further (SPX back to 2,990 SX5E closed below 3,500).