27 September 2011
Sugar production in Ukraine increased by 35% y-o-y to 300 ths mt of sugar, as of September 26, according to data released yesterday by industry association Ukrtsukor (via Interfax). Yegor Samusenko: The production figure generally confirms our expectations of 2.1 mln mt of sugar production this year, which combined with importing 0.26 mln mt of cane sugar, should create a sugar oversupply on the domestic market. This is already seen in domestic sugar prices, which fell 28% from their peak this year to USD 677 per mt as of September 26. We expect sugar to fall and stabilize at around USD 600 per mt . While this sugar price correction will have a limited effect on Astarta`s (WSE: AST PW, HOLD) earnings in 2011, it should lead to a drop in its EBITDA margin next year from an expected 40% in 2011 to 32% in 2012, according to our estimates. We confirm our HOLD recommendation on the stock with a target price of PLN 75, upside of 5%.