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HAMBURG, July 10 (Reuters) - Suedzucker (Other OTC: SUEZF - news) , Europe'slargest sugar producer, posted operating profit in the firstquarter of 96 million euros ($130.7 million), down from 220million euros the previous year.
The main reason for the earnings drop was sinking sales ofsugar inside the European Union's protected quota system,especially in southern and eastern European markets, Suedzuckersaid.
Analysts say European sugar prices have fallen sharply inthe past year, hurting producers and refiners, with the EuropeanUnion allowing more imports to increase sugar supplies and dueto the planned end to the EU's restrictive sugar quotas in 2017.
Suedzucker said on Thursday it expects second-quarter groupoperating profit significantly below the year-earlier level.
Sales for the first quarter for the 2014-15 fiscal yearstarted March 1 fell to 1.77 billion euros from 1.97 billion.Net earnings were 77 million euros, down from 168 million euros,Suedzucker said.
The company still expects full-year 2014-15 revenue at about7 billion euros and sees operating profit falling to about 200million euros.
A Reuters poll of analysts had forecast mean first-quarterearnings before interest and taxes (EBIT) of 79.2 million euros,net profit of 32.7 million euros and revenue of 1.802 billioneuros.
Sudzucker had on April 8 warned it expected revenue andprofit to decrease in its current financial year due to adifficult environment on the European sugar and bioethanolmarkets.
"Export prices for non-quota sugar were less than last yearas world market prices retreated," the company added. "In thesugar segment we expect a significant drop in revenues in fiscal2014-15."
The company said it expects "a significant decline inoperating profit, mainly due to the increasing deterioration ofthe economic environment in the EU sugar market."
($1 = 0.7345 euros) (Reporting by Michael Hogan and Maria Sheahan; Editing byPrateek Chatterjee and Matt Driskill)
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