Investing.com -- S&P Global Ratings has downgraded German agribusiness group Suedzucker (ETR: SZUG ) to ’BBB-/A-3’ from ’BBB/A-2’, due to slower than expected deleveraging prospects. The rating agency also downgraded the company’s senior unsecured debt instruments and programs, as well as its outstanding €700 million perpetual, deeply subordinated hybrid notes.
Suedzucker’s fiscal 2025 results, which concluded on Feb. 28, 2025, showed a material deterioration in credit metrics from fiscal 2024 levels. This was largely due to a significant drop in EBITDA generation in the sugar segment. S&P Global Ratings now predicts stable credit metrics for fiscal 2026, rather than an improvement, with adjusted debt to EBITDA of 4.5x-4.6x and funds from operations (FFO) to debt at 17%-18%.
The agency believes that it will take longer for the company’s credit metrics to recover to previous levels, partly due to a volatile trade policy environment in end markets. However, S&P Global Ratings expects that Suedzucker will be able to deleverage by fiscal 2027 to below 4.0x adjusted debt to EBITDA. This is thanks to the stability of profits from its businesses outside sugar and ethanol, cost- and cash-saving measures within sugar and ethanol activities, and a gradual recovery in sugar profits due to the commodity cycle.
For fiscal 2025, Suedzucker’s credit metrics were in line with S&P Global Ratings’ previous base case but were weak for the rating, with adjusted debt to EBITDA at 4.5x and FFO to debt at 13%. For fiscal 2026, the agency has revised down its forecasts and now projects adjusted debt to EBITDA to remain largely stable at 4.5x-4.6x with cash FFO of about 17%-18%.
Suedzucker’s revenue is expected to decline by up to 5%-6% to about €9.1 billion due to expected lower plant acreage volumes in sugar, lower contracted prices from October 2025 through to October 2026, and ongoing weakness in ethanol market prices. In fiscal 2026, the Sugar segment’s revenue, which represented about 40% of total revenue in fiscal 2025, is forecasted to decline by up to 25% year on year.
Suedzucker’s credit metrics are expected to gradually stabilize over the next 12-18 months, with a rebound possible after fiscal 2027. The company has been in a group-wide cost-cutting mode since its first profit warning in September 2024. In March 2025, its Agrana (VIE: AGRV ) subsidiary announced permanent closures of two sugar processing factories, in Austria and Czech Republic, while pausing operations at a refinery in Romania to support domestic prices.
Despite operating challenges, Suedzucker remains well funded with no large refinancing needs until October 2027 when its €400 million sustainability-linked notes are due. The group has been proactive in refinancing its bank credit lines and senior notes maturities with notably the €500 million senior unsecured notes due November 2025 already refinanced with a new €500 million long-term senior notes issuance in January 2025.
The stable outlook reflects forecasts that Suedzucker’s cash flow and credit metrics should worsen in fiscal 2026 versus fiscal 2025 but then improve from fiscal 2027. The company is taking measures to improve its fixed cost base and cash conversion, increase business diversification in less cyclical activities, and pursue a supportive financial policy with markedly reduced shareholder distributions.
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