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Down-beet: Food giant sees hit in sugar revenues

PUBLISHED: 10:44 25 February 2019 | UPDATED: 13:29 25 February 2019

AB Sugar expects revenues to be hit as the industry copes with a price slump  Picture: SU ANDERSON

AB Sugar expects revenues to be hit as the industry copes with a price slump Picture: SU ANDERSON

A food giant says it expects to take a hit on its sugar revenues as a result of lower prices.

Sugar beet BEING delivered to the British Sugar factory in Bury St Edmunds  Picture: SU ANDERSONSugar beet BEING delivered to the British Sugar factory in Bury St Edmunds Picture: SU ANDERSON

The UK campaign, or sugar beet harvest, is now in its final stages and has continued to progress well, with good harvesting conditions and a strong operating performance at all of its factories, which include ones at Bury St Edmunds in Suffolk, Cantley and Wissington in Norfolk and Newark in Nottinghamshire.

But the amount of crop grown has been shrunk after the price slump, with the crop area for the 2019/20 season expected to be between 5% and 10% lower than this year.

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AB Sugar is part of Associated British Foods, which said it expected sugar revenue to be lower for the first half of the year than last year, in line with its previous expectations. As a result, it is anticipating a ‘marginal’ loss.

The company, issued an update prior to entering a close period for its interim results, which will be announced on April 24, said lower European Union (EU) contracted sugar prices was hitting its UK and Spanish businesses.

The British Sugar factory in Bury St Edmunds  Picture: SU ANDERSONThe British Sugar factory in Bury St Edmunds Picture: SU ANDERSON

“As a result, in the first half AB Sugar will record a marginal loss, but operating profit for the full year remains in line with our expectations,” it said. “EU stock levels have been tightening during 2018/19 as a consequence of the lower production in the current campaign. A reduction in the European crop area for the 2019/20 season is expected, and so stocks will remain low which should further underpin the current upward trend in EU sugar prices.”

UK production this year will be some 1.15m tonnes compared to 1.37m tonnes last year when beet yields reached record levels, it said. Sales for this year are now largely contracted, it added.

In northern Spain, the campaigns at Miranda and Toro are now complete and processing at La Beneza has started, with production from beet at some 300,000 tonnes, lower than last year due to adverse weather.

“The beet sugar shortfall will be compensated by increased production from the refining of cane raws at Guadalete which is expected to yield 170,000 tonnes. Reduced beet prices for the 2019/20 campaign have been notified, and volumes will be contracted with growers this spring. The benefit of these reduced costs will be seen next financial year, and is expected to be partially offset by a reduced crop area.”

Other than the expected reduction in sugar revenue, the company said it expected to deliver sales growth in all its businesses, which include grocery and ingredients arms.

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