July 11, 2024 14:28 GMT
Sudzucker (SZUGR Snr Unsec; Baa2/BBB) 1Q Results (3m to May)
CONSUMER STAPLES
It gave a 2Q profit warning yesterday (with no numbers) while affirming FY guidance (which is already a weak -30% yoy for EBTIDA). 1Q results today are pointing to run-rate around this qtr's level for the rest of the year. As we said we do think the co should run with recent earnings and ratings strength to refi the '25 early; we are not endorsing shorting the 27s (history says it will be fine) but 5Y CDS looks tight at +65.
- Group revenues were actually up +1.3% to €2.6b, helped by strong gains in sugar ($1.1b, +16.5%). It didn't translate further down; EBITDA down -35.4% to €230m on a sharp fall of -60% in sugar. Across its 5 segments only sugar and fruit (+3.5%) were up on headline while only special products (+9.7%) and fruit (+5.9%) rose on EBITDA. Fruit is ~15% of the group on sales and the lowest margin so it's strength is little help.
- Sugar headline strength (+16.5%) it says was achieved despite falling prices thanks to volume growth, in particular on exports outside the EU. It seems to be exaggerating "despite fall in price" here based on still elevated EU prices; {ECAGSUGA Index}. Though we do recognise the differential between aggressively tariffed EU and global prices (trades at 1.6x global sugar price). Not much detail given for the whopping 13% EBITDA margin fall outside "rise in production costs".
- It did note that the EU has restricted Ukraine sugar imports at 263k tonnes for 2024 and 190k for first 5-months of 2025; that compares to the 495k of supply it was able to flood the market with in 2023. These are limits in reference to the calendar year. It comes in place after EU let down normal tariffs (post-Russia invasion) for Ukraine - latter helped alleviate price pressures (to detriment of Sudz)
- Other segments trends of note; Special products margin actually increased 2% but headline was weaker on pricing. Cropenergies fall in headline (-20%) was blamed on lower ethanol prices and was not sufficiently offset by yoy volume growth. Similar drop in Starch revenues (-15%) again on prices but also hit harder on EBTIDA (-47%) on raw material costs not falling as much. Fruit strength seems to have been on sales volumes.
- BS looks fine; net debt at €1.6b which on FY guidance (ending Feb) of €0.9-1b EBITDA will leave it 1.7x levered; at lower end of recent years, raters were prepared to face a uptick in leverage next year when they gave it upgrades this year.
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