February 12, 2019 / 7:24 PM / a year ago

UPDATE 1-Brazil sugar firm Sao Martinho sees weather hurting new cane crop

(Adds comments from CFO, context)

By Marcelo Teixeira

SAO PAULO, Feb 12 (Reuters) - Brazilian sugar and ethanol company Sao Martinho SA believes below-average rains in December and January over the country’s main cane belt will take a toll, possibly preventing any production increase next season.

Sao Martinho, which is among the five largest sugar companies in Brazil, cut on Tuesday its estimate for cane crush growth in the new season that starts in April to 5 percent from 10 percent expected in December due to dryer weather in Brazil’s center-south.

The company was expecting to increase its cane crush next season to around 22.5 million tonnes after investments in renovation and because it has a significant portion of cane fields that will be ready for first cut, normally a more productive area.

“The sector as a whole will likely not grow at all,” said Sao Martinho’s Chief Financial Officer Felipe Vicchiato in a conference call with analysts. “The weather was unusual, too hot and dry in those two months that are very important for cane growth,” he said, referring to December and January.

Brazil’s new cane crop officially starts in April, but many mills could begin crushing in mid-March.

Sao Martinho reported a net profit of 228 million reais ($61.44 million) in the nine months of the 2018/19 crop year, 32 percent lower than in the same period a year earlier, due to smaller cane crush and lower sugar volumes and prices.

Vicchiato expects sugar prices to improve in coming months betting on expected reductions in production in India and Brazil. If that happens, mills might choose to earmark more cane for sugar production and not so much for ethanol, as was the case in the current season.

The company said it will only decide about the sugar and ethanol production mix in April, when the next crop starts, depending on market prices.

$1 = 3.7112 reais Reporting by Marcelo Teixeira Editing by Phil Berlowitz and Tom Brown

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