Back in the black, Biosev sees long positive cycle for sugar
SAO PAULO Feb 11 (Reuters) - Brazil's sugar and ethanol group Biosev SA believes sugar prices will remain strong, the chief executive of the world's second largest cane processor said on Friday, citing dismal prospects for expanding production capacity.
Biosev, controlled by French commodities trader Louis Dreyfus, posted on Thursday its first quarterly profit since 2013, as revenues from sugar and ethanol sales soared compared with a year earlier.
"When you look at the sugar production costs for the main producing countries, only Brazil has a cost that is below the international benchmark," Biosev Chief Executive Officer Rui Chammas told Reuters in an interview on Friday.
"So, Brazil would be the country with an incentive to increase output. But this will take some time, allowing the positive cycle for sugar prices to last longer," he said.
Brazil's sugar industry is still heavily indebted and the lean years of low prices, which discouraged major investments, are still fresh in the sector's memory.
Sugar prices recovered last year from a long downward cycle, when large annual surpluses kept prices low.
Moreover, the Brazilian government kept gasoline prices artificially low for years up to 2015, squeezing profit margins for ethanol producers.
Brazil's investment bank Itau BBA estimates the sugar sector debt load at close to 100 billion reais ($25.1 billion).
Biosev says its sugar production cost is currently at 9.5 cents per pound, compared to New York's 13.16 cents per pound in mid-day trading on Friday. Continuación...