Südzucker is one of the leading companies in the food industry with its sugar, special products, starch, CropEnergies and fruit segments.
S&P Global Ratings’ analysts are revising their outlook on the long-term ratings to stable from negative and affirming their ‘BBB-/A-3’ issuer credit ratings on Suedzucker. They have also affirmed our ‘BBB-‘ issue ratings on the senior unsecured debt and our ‘B+’ issue rating on the group’s hybrid debt.
A short-term uplift in operating performance is likely to come from Suedzucker’s sugar activities. S&P Global Ratings’ outlook revision reflects their view that the current strong uplift in operating performance is more than a temporary improvement and is, in fact, more structural. Suedzucker’s sugar business (34% of revenues) was loss making in fiscals 2019 and 2020, pressuring the group’s credit metrics and the ‘BBB-‘ rating. This year, however, the group is benefitting from positive short-term factors such as high sugar prices in Europe driven by lower supply. This has enabled it to contract with its main clients at higher prices.
“By implementing its 2026 PLUS strategy,” writes DZ BANK Research, “Südzucker aims to transform itself from a large-scale processor of agricultural raw materials into a leading partner for plant-based solutions.”
After a weaker start to FY 2021/22, SZU – driven by the again “EBIT positive” sugar business – delivered a significantly stronger 2Q. “As a result,” concludes DZ BANK Research, “Südzucker now sees itself back on track to reach the midpoint of its adj. EBIT guidance range (EUR 300-400 million) at mid-year – despite the ongoing Covid pandemic and increasingly difficult cost inflation.”
The sugar business, long in crisis, looks forward to at least 12-18 positive months given generally rising raw material prices, solidly negotiated sugar prices and the earnings thrust of the recent restructuring. DZ BANK Research believes that the ethanol business should, in their view, encounter a more predictable – and still constructive – input/output price environment again by April/May 2022 at the latest: “We consider the current margin pressure in the specialties and starch businesses to be temporary. However, we believe that further ‘repair work’ is required in the fruit business and in the investment in ED&F Man.”
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