Sugar was a stellar performer in 2016 but struggled in volatile trading through 2017, losing more than 20% by mid-December. Larger supplies from Europe and lower import demand from China and other nations could keep prices in flux through the end of the year and into early 2018.
Sugar companies benefited greatly in 2016. The saying “a rising tide lifts all boats” applied to the stocks of all sugar producers. Sugar ended its five-year bear market and prices rose steadily. But 2017 was tough and there is disagreement about what 2018 will look like for the commodity and as to whether production will continue to meet demand or fall behind. Analysts expect sugar futures to decline modestly throughout 2018, but the commodity can be volatile, based on weather patterns and other factors. With the outlook mixed, we chose to highlight three stocks that surged in 2016 and either gained or held their own in 2017. Should prices rebound in 2018, these companies could benefit. All figures are current as of February 9, 2018. (See also: Sugar: A Sweet Deal For Investors.)
1. Cosan Ltd. (CZZ )
This is a Brazilian company. There is a consensus among analysts that the performance of sugar prices is largely dependent on what Brazil does. Unica, the Brazilian sugar industry trade association, has recently reported that producers have crushed more cane and produced more sugar than expected in the fall of 2017. This report weighed on overall sugar prices, as it suggested that production could outweigh demand.
That said, Cosan is well-positioned to prosper, partly because of its production of sugarcane ethanol. The company is protected somewhat from fluctuations in sugar prices because it operates these segments: sugar, fuel sales, natural gas sales, lubricants, land development and logistics for transport and storage of commodities (primarily sugar). It also distributes raw sugar.
Cosan is Brazil’s leader in manufacturing sugarcane ethanol. It distributes fuels through Shell service stations in Brazil. The company also distributes natural gas to industrial, residential, commercial and automotive customers. Cosan distributes lubricants through Mobil.
In addition to its service stations, the company owns 950 convenience stores and 67 airport terminals. The company is also heavily involved in research to develop new technologies for the industry. In short, this sugar company is extremely well diversified and is very likely to ride out any downturn in sugar prices. The stock is up 6% year-to-date, as of February 9, 2018.
- Market Cap: $2.78 billion
- Revenue: $3.85 billion (FY 2016)
2. Mawana Sugars Ltd.(MAWANASUG.BO)
This is another company based in India. The company owns Mawana Sugar Works, Titawi Sugar Complex and the Nanglamal Sugar Complex, along with a power plant that produces ethanol.
Mawana is involved in producing specialty sugars for the pharmaceutical industry. It also produces white sugar and refined sugar. The company produces 120,000 liters of ethanol a day, and distributes manure and fusel oil. The chemicals segment produces caustic soda, chlorine, and bleaching powder.
Annual revenue dropped around 20% in FY 2016. The stock has fallen 19% year-to-date, as of February 9, 2018.
- Market Cap: $39.6 million
- Revenue: $185 million (FY 2016)
3. Dharani Sugars and Chemicals Ltd. (DHARSUGAR.NS)
Dharani’s primary product is white sugar, but it also produces molasses. In addition, the company generates electricity and produces industrial-use alcohol. Its sugar plants have a capacity of 10,000 tons of sugarcane per day.
Annual revenue raised around 40% in FY 2016. Like the other stocks on this list, Dharani experienced a hike in stock price in September 2017. Since then, the price has been falling. The stock has fallen 18% year-to-date, as of February 9, 2018.
- Market Cap: $12.47 million
- Revenue: $79.17 million (FY 2016)
The Bottom Line
All of the stocks on our list are dependent on a single commodity: sugar. If you are considering investing in any of these companies, prepare to follow the sugar futures and be aware of weather patterns that could affect the growing of sugarcane.