A drastic drop in prices in the European sugar market has hit the sugar giant Nordic Sugar hard. Earnings have been under pressure in the latter half of 2024. Therefore, the recent financial statement is not as good as it could have been. And the coming financial year is expected to be the worst in several years.
These are the challenges facing CEO Jannik Olejas. The director, who took office six months ago, is looking into a tough year.
According to Jannik Olejas, the price drop in the EU market has been sharper and has come faster than expected. This is due to a combination of high production, lower consumption, and increased competition from imports.
- Last year, there was a good harvest in Denmark and the rest of Europe, so there is plenty of sugar on the market. At the same time, consumers are holding back, and imports from Ukraine have been opened. This pressured prices, he says.
Maintaining investments
The falling prices have already left clear marks in the financial statement for 2024/25. The operating result - measured as EBIT - landed at 514 million DKK, but in the new financial year, Nordic Sugar only expects between 15 and 50 million DKK. Revenue has fallen from 3.5 billion DKK to 3.165 billion DKK, while the year's result after tax was 565 million DKK.
Despite the pressure, equity has grown to 3.6 billion DKK, and the company has chosen not to pay out dividends. Instead, they are maintaining investments. During the year, 231 million DKK has been invested, including in green transition and production equipment. Both factories in Denmark - in Nakskov and Nykøbing Falster - have been converted from oil to natural gas and prepared for biogas. At the same time, beet pulp is part of an agreement with Nature Energy for biogas production.
Ready to adapt
He acknowledges that operating income is falling significantly but emphasises that the company is ready to adapt.
- We are facing a significant drop in earnings, but we are not wavering. As mentioned, prices play a big role, but there are also many things we can focus on ourselves that impact our results. We are focusing on production, procurement, and sales, where our already initiated Excellence initiatives are all expected to contribute positively. The market is tough, but it must not become a comfort zone for us, he says.
The mentioned Excellence initiatives include an internal streamlining of the company's core areas - especially in production, procurement, and sales - where the goal is to achieve savings and improve earnings, regardless of market conditions.
The assessment is that European sugar production in 2025 will be lower due to area adjustments, resulting in a better balance between supply and demand. Thus, the assessment is also that the price floor is behind us.
- We believe that the market will find a better level and that the bottom has been reached. We are well-prepared and optimistic about the future, says Jannik Olejas.
