Astarta targets exporting 18 kt of sugar in 2011/12

Astarta (AST PW), Ukraine’s largest sugar producer, has already exported 3 kt of sugar this 2011/12 season (September – August) and plans to export a total of 18 kt, Interfax reported yesterday citing the CEO. The company produced 370 kt of sugar this season, up 85% yoy.

Yegor Samusenko: Historically, sugar is oriented to the home market, with only negligible export volumes. However, the combination of growth in acreage under sugar beets, yield improvement and growth in the sugar extraction ratio has led to sugar overproduction in Ukraine. We keep our view that export volumes will be tiny, the stock to use ratio at the season end will amount to record highs of 37% and that the domestic sugar price will average USD 610/t. We believe the reaction to Ukraine’s early production figures that first indicated a sugar surplus has been overly pessimistic: Astarta has fallen 33% since the September 26 announcement vs. the WIG-Ukraine’s 6% decline). We believe the fact that not only the sugar prices declined but sugar production costs were reduced is still being overlooked by the market. In addition, we expect Astarta, as a market leader located at the top of the efficiency curve to expand via acquisitions during 2012, as smaller and less efficient producers will not be able to maintain high working capital and be forced out of business. We maintain our BUY recommendation with a target price of PLN 98.6. See our company update dated Nov. 17, 2011.