20 December 2011
Astarta (AST PW), Ukraine’s largest sugar producer in Ukraine, finished its sugar production season with output of 370 kt of white sugar, up 85% yoy, the company reported yesterday. Astarta processed 2.6 mmt of sugar beets, up 65% yoy. The average sugar extraction ratio was 14.5% this season, up from 12.7% a year ago. The sugar production season in Ukraine typically lasts from September to early December or January. Yegor Samusenko: The reported figures are in line with management guidance. This sugar production season has been notable for both the high yield of sugar beets (Ukraine’s average was 36 t/ha, up 21% yoy) and high sugar extraction ratio (latest reported average for Ukraine was 13.4%, up from 11.2% last season). This should lead to Ukraine producing around 2.4 mmt of sugar this season, according to our forecast, which will lead to record stocks at the end of the 2011/12 season (we forecast it at 37% of annual consumption). As a result, we expect the domestic sugar price to be on par with LIFFE this season (vs. a historical premium around USD 100/t). Given that at current price levels, the least efficient producers are effectively selling their sugar at cost and still have to lock up significant working capital in inventories, we expect a new wave of consolidation on the sugar market soon. We anticipate market leaders, namely Astarta, Kernel (KER PW), Agroprodinvest, Ukrlandfarming and Mriya (MAYA GR) to consolidate up to 75% of the market in 2012-2013, from 40% in 2010. See our Astarta note dated November 17, 2011 for details.