Debt-free Cosun confident in 2017

There is robust confidence in the future of Suiker Unie. That is the feeling that can be clearly felt at the press presentation of Cosun's annual results on Thursday.

Suiker Unie is number 6 in Europe; five competitors are bigger. "However, that says nothing about our success in sugar," says CEO Robert Smith. 'Our three production locations are the most efficient in Europe, making us the cheapest.' This is a result of the 200 million euros that have been invested in the sugar factories in recent years, from equity and while an extra payment was made to the members in 2016.

Due to the capacity expansion, a longer campaign can be run and Suiker Unie can operate even more competitively. Smith also mentions the thick juice tanks at the Groningen location that offer more flexibility in the processing and sale of sugar and liquid form. 'The investments in energy saving have also led to enormous steps in energy consumption. This year will see a final cash injection of around 30 million euros in Groningen.'

The investments are part of the preparation plan for the post-quota era that will start in October. Smith says he is ready after five years of preparation. However, not all growers are convinced. Cosun would like to see all issued member delivery notes (LLBs) sown, but it will not come to that in 2017. 'The beet seed orders indicate an area of ​​84.500 hectares, while we were hoping for 88.000 hectares. That is why we will be issuing additional LLBs in 2017.' In May, Cosun dealt a final blow to that. The fact is that a jump from 72.000 hectares to 84.500 has never been seen before. This shows a strong confidence in the cooperative. Smith is convinced that the last step will also come.

The CEO is not concerned about the sale of the extra sugar. Last year, Suiker Unie processed 180.000 tons of cane sugar in the campaign to increase sales. 'The cane sugar import has created space for us to build up a position in England and Italy. We are now using this position to sell large quantities of beet sugar on the European market. The cane sugar yielded a few million, not much, but that was not the goal, it was to gain market position. And it worked.'

From 2017, Cosun will no longer purchase cane sugar and will fill the space created with beets. Smith: 'That was the reason for allocating 20 percent extra LLBs. In addition, our locations are more efficient in processing beets than in cane sugar. We want to make maximum use of the sales opportunities and the scaling up of the factories. We think we can pay a better beet price with that.'

Of course, the market should also be in favor of this, but Cosun sees that too positively. The increased sugar price in recent months will be reflected in the 2017 campaign. Expectations are good for the other months. 'Production is lower than consumption. The shortage continues to rise due to climatic conditions in India, Thailand and China, and top producer Brazil also has disappointing yields. Very favorable in the year that the quota will be removed.'

A price of around 21 cents per pound is seen as an average this year. 'In the EU, prices are lagging somewhat, but European stocks are shrinking. The EU stock is expected to be at a low level in September 2017, because sugar companies import less. There is a good chance that the price in the EU will continue to rise. That will certainly be the case at the end of 2017.'

However, the major benefits of the multimillion-dollar investments must come in 2018. Meanwhile, with a solvency of 65 percent, Cosun is debt-free and, in its own words, is on track. It remains to be seen how external risks such as Brexit and international trade will turn out. After the Netherlands and Germany, the United Kingdom is Cosun's most important market for sugar and potato products.

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