A fewer 100 million zlotys failure kgs?

KGS (National Food Group) faces advanced losses in the next financial year 2024/2025 – alarmed Dr. Daniel Alain Korona, erstwhile president of Elewarr and typical of the “Korona” Agricultural Union (adventure of names) in the pages https://rzyciestolicy.com.pl

In the past week, you could buy sugar after PLN 2.24 in Ladybug (5+ 5 kg, regular price of PLN 4.49/kg including VAT, transport costs, store margin and acquisition price). A akin offer at 4 kg (2+2) offers Lidl in the coming days. On the London stock exchange, prices scope from 560 usd/t (approx. 2250 zł/t), in June Ukrainian sugar in the south of Poland was offered 560-620 euro (2400-2700 zł)/t. Without rising sugar prices, the National Food Group can have major difficulties in the future – read the article.

The KGS study for the year 2022/23 shows that net revenues from the sale of products and services, goods and materials amounted to PLN 4,606 billion, sales costs PLN 3.299 billion and realised margin of PLN 1,307 billion (30%). After deduction of another costs, the gross financial consequence amounted to almost PLN 579 million.

However, it is doubtful that specified a consequence could be repeated this year and even more so in the next 2024/25. The gross sales consequence planned for 2023/24 in the KGS study is 912,271 million, gross financial consequence – PLN 250,44 million, net – PLN 200,472 million net. But these numbers seem very controversial, due to the fact that already today, the sale of sugar by the KGB is not so profitable.

The GGS's gross in 2022/23 came from the sale of sugar – PLN 3.617 billion, which in production of the order of 900 1000 tonnes gives an average price of around PLN 4000/tonne of sugar. In fact, it was much higher. While in October 2022 it was PLN 3641, already in January 2023 – PLN 4408/t and until September 2023 it remained above PLN 4240/t.

Since then, the price has fallen importantly and present on net platforms, it is within 2.8-3 zł/kg (although you can find notices with lower prices for 2.5-2.6 zł/kg). Thus, at the level of 2022/23 production and at prices of 2,800-3000 PLN/tonne, the revenues of the KGB per tonne of sugar will be lower by at least PLN 1000-1200/t, i.e. revenues may decrease by more than PLN 0.9-1.1 billion.

In 2022, KGS paid for sugar beet PLN 236.95 a tonne (EUR 50). For the production of 1 tonne of sugar, about 7 tonnes of beet is needed, i.e. the full cost was over PLN 1658/tonne. presently at the price of 2023 – 46,5 EUR/tonne we receive the cost of natural material per tonne of sugar about 1403 PLN/tonne (counting by the euro rate – PLN 4.31).

The strengthening of the gold is not as favourable to the KGS, as it seems, due to the fact that on 1 side the stronger gold means a lower acquisition cost, but besides a decrease in gross (as much as 1/3 of the gross from the sale of goods is export).

As KGS reported _- The price of beet awarded for the sugar run in 2024 with a sugar content of not little than EUR 46,5 net per tonne

Thus, at the current price of the natural material of about PLN 1403 per tonne of sugar, the National Food Group must anticipate a decrease in income of PLN 0.65-0.85 billion. Given that in 2022/23 the gross profit was PLN 579 million, it should so be assumed that the financial consequence of KGS 2024/25 will be negative at PLN 100-300 million. But this is simply a very optimistic estimate, due to the fact that it assumes a sale price of PLN 2.8-3/kg (and not lower) and does not take into account increased costs for energy, wages, various services that have occurred in the meantime.

Thus, the financial consequence can be expected to be worse than the presented one, possibly even twice as advanced (i.e. up to PLN 600 million). Of course, they're just estimates.

This failure could be reduced if the contract price of sugar beet was reduced. German Pfeifer & Langen has already proposed a fresh price level for sugar beet for the 2025 – 30 euro/tonne period to discuss with growers. But it's a perspective. In the case of KGS, will growers agree to this level of prices (for which the price may be mediocre or even unprofitable) who have their representatives on the supervisory board of the company? Doubtful.

The situation will not change even the larger volume of sugar produced, i.e. from 2023/24 (1 million tonnes). Of course, these are only estimates; it cannot be excluded that there will be any change in the marketplace situation, but no 1 will warrant that for the better.

After all, the European Union wants to accelerate trade negotiations with Mercosur (South American Free Trade Zone), 1 of the members of which is the world's largest maker of cane sugar, Brazil. If an agreement is reached and the customs work on Brazilian sugar is reduced – 30% (currently over EUR 419/tonne for white sugar and EUR 399/tonne for natural sugar, of course outside the alleged quota), then ...

It would so be advisable for the National Food Group to prepare for a black scenario. However, there is no sound of anything going on in this direction.

Much of the activity of the KGB is now being absorbed by subsidiaries, many of which are in a very bad financial position and thus have become a burden. The situation has not improved (or even worsened) the absurd limitation of company autonomy for their full integration. The Department of Ownership Supervision did not emergence to the task and the Group authorities could not draw the right conclusions. The subsidiaries themselves have only become the subject of a individual game for stools and influences, alternatively than entities that could support the KGB in hard times.

The possible financial failure of respective 100 million zlotys in 1 year will not origin the fall of the KGB (own funds is PLN 4.214 billion) and possibly that is why nobody cares. Apparently, it's dominant to think it's gonna happen. but it won't.

source: https://rzyciestolicy.com.pl/73417-national-food-group-spectro-strat/