Soybeans are proving sweeter than sugar, at least in the eyes of Ukrainian crop processors, Astarta Holding revealed, as the beet-to-dairy group unveiled a return to the black which lifted its shares to a six-month high.
The company, Ukraine’s largest sugar producer, revealed its share of the country’s market had grown to 25% last year as rival plants shut up shop in the face of a decline in domestic sugar beet output and unrest which has depressed local demand too.
A further 12 Ukrainian sugar processing plants shut last year, reducing the total to 36 – less than half the 77 in operation in 2011, before the onset of conflict in the east of the country, and the drop in world sugar prices.
And the trend has further to go, as “more outdated sugar mills are being scrapped”.
“We see good potential for further market consolidation as unsystematic players are leaving the business,” Astarta said.
‘Build-up of processing capacity’
However, in soybeans, Ukraine is growing both its production and processing capability, encouraged by the country’s proximity to the European Union – by far the biggest soymeal importer, which purchases estimated by the US Department of Agriculture at 20.7m tonnes in 2015-16.
The second ranked importer, Vietnam, is forecast to buy 4.6m tonnes.
“Synchronously, with the growing production of soybean in Ukraine, there is an ongoing build-up of soy processing capacity in the country,” Astarta Holding said.
“This creates competition for soy between processors and exporters,” the group said, reporting a small decline, of 1 point to 22%, in its share of the Ukrainian market, although enough to keep it comfortably as Ukraine’s top crusher.
The comments follow forecasts earlier this week from the USDA’s Kiev bureau that Ukrainian soybean sowings will rise by a further 150,000 hectares this year to a record 2.30m hectares – extending a trend which has lifted seedings from just 61,000 hectares in 2000.
Production will hit an all-time high of 4.60m tonnes, of which 1.74m tonnes will be consumed domestically, a rise of 110,000 tonnes year on year.
However, Astarta Holding showed in the results the downside of increased competition in soybean crushing, with its operating profits in the division falling 48% to E9.57m in 2015, a decline also reflecting depreciation in the hryvnia against the euro.
By contrast, in sugar, the group’s operating profits soared 60% to E48.6m, helped by growth to 34,000 tonnes in the group’s exports, largely to the EU, as Astarta exploited trade competitiveness enhanced by hryvnia weakness.
Back into the black
Strong exports also helped the company’s grain-growing division expand operating profits too, by 30% to E59.1m.
“Approximately 84% of total crops sold, in volume terms, were exported,” compared with 55% in 2013, Astarta said.
The group reported earnings for 2015 of E15.0m, compared with a E68.1m loss a year before, despite a drop of 10.8% to E314.0m in revenues, reflecting weakness in the hryvnia and crop prices.
“Astarta delivered a sound set of both operational and financial results… amidst depressed prices for soft and agri-commodities,” said Viktor Ivanchyk, the company’s founder and chief executive.
Astarta shares, which are listed in Warsaw, touched 39.50 zloty in early deals on Wednesday, their highest since September, before easing back to 37.90 zloty, a rise of 1.5% on the day.
(Source – http://www.agrimoney.com/news/ukraine-grows-as-soy-crusher—as-sugar-margins-turn-sour–9458.html)