Surprise loss demoralizes Imperial Sugar investors

Shares in Imperial Sugar slumped more than 40% in pre-market trading after the sugar group unveiled a surprise loss, blaming strong competition and operational hiccups at a revamped refinery.

The sugar group fell $16.1m into the red for the April-to-June quarter, nearly three times the loss reported a year before.

The result equated to a loss of $1.35 a share – disappointing investors who had expected the group to report earnings of $0.52 a share, a second successive quarter in the black.

Imperial Sugar shares slumped 45% to $12.70 in pre-market trading ahead of official deals on the Nasdaq exchange.

Margin squeeze

John Sheptor, the Imperial Sugar chief executive, blamed the loss in part on "competitive pressure" in the US sugar market, both from domestic rivals and Mexican supplies. Mexico is the only sugar producer exempt from America's import quotas, under the Nafta agreement.

The rivalry had prevented the group from passing on in full the 34% jump, to $38.08 a hundredweight, in the average price it paid for sugar in the quarter.

The price Imperial Sugar obtained rose by a more modest 21%, to $47.77 a hundredweight.

And the market squeeze had continued, with the group's raw sugar costs in the current quarter likely to "see little relief, while sales prices thus far in the fourth quarter have only improved modestly", Mr Sheptor said.

'Significant interruptions'

Furthermore, the group's Port Wentworth refinery had suffered from operational setbacks in the parts of the plant which were not reconstructed following a fire three years ago.

"Port Wentworth refinery's progress toward full production rates was hampered by raw sugar quality and mechanical reliability, including significant interruptions in the steam boilers providing power to the plant," Imperial said.

The refinery had operated at an average daily melt rate of 4.5m pounds, some 25% down on levels before the blast.

"The company is reviewing potential operating and capital improvements, particularly in the utilities, raw sugar melt and water management areas of the refinery, to begin addressing mechanical reliability in these operations," Mr Sheptor said.

source: agrimoney