Suedzucker AG slid to a 15-month low after Exane BNP Paribas predicted that the end of the “highly regulated” European sugar market will cut earnings at the continent’s biggest supplier of the dietary staple almost in half by 2018.
Suedzucker dropped as much as 7.1 percent in Frankfurt trading to 22.94 euros, the lowest intraday price since May 2012. The shares traded down 5.8 percent at 10:43 a.m. as volumes exceeded the three-months daily average.
The European Union sets limits on producer sales and imports of sugar, which props up prices. The EU will abolish the quotas system by 2017 as part of a wider reform of the common agricultural policy announced on June 26.
“The new EU sugar world will be structurally less attractive for both investors and industry participants,” Jeff Stent, a London-based analyst at Exane BNP Paribas, said in a report today. “Suedzucker will likely require material restructuring and capital expenditure to compete in the new world.”
Stent estimated that earnings before interest, tax and amortization in 2018 will be 45 percent below 2013 levels.
Stent lowered its rating on the Mannheim, Germany-based company to underperform from neutral and cut the target price by 46 percent to 15 euros.
The stock has dropped 23 percent this year, valuing the company at 4.75 billion euros ($6.26 billion).