Suedzucker performance improves despite weak sugar prices

Suedzucker, Europe's largest sugar producer (it produces beet sugar which is table sugar or sucrose, extracted from the sugar beet plant), reported 3Q earnings improvement, driven by its non-sugar businesses such as biofuels, starch and fresh fruit (protecting itself against a weak EU sugar market).

Suedzucker warned that the EU sugar market is likely to remain depressed and hence forecasts a fall in operating profit from the previous year.

80% of world sugar production comes from sugarcane (grown in tropical and subtropical regions) and 20% comes from sugar beet (grown in temperate climates like EU, Russia, UK, US). 

Sugar beet is very important for Europe's sugar supply.

Worldwide sugar production is roughly 181 million tons (2024/25).

Germany Banning Russian Oil Imports by End 2022

Germany has announced a ban on Russian oil imports, halving demand by summer and going to zero by winter.  

One quarter of Germany's oil imports currently come from Russia.  

Natural gas (40% of Germany's needs come from Russia) will be phased out post the oil ban. The 9.5 billion euro pipeline, Nord Stream 2, between Russia and Germany, will now no longer be used having been suspended 2 days before the Russian invastion of Ukraine on February 24th, by German Chancellor Olaf Scholz (successor of Angela Merkel). 

Importing LNG is one option but has been tricky due to the lack of regasification facilities in Germany. The leasing of FSRUs in the short term (Floating Storage and Regasification Units) is one option being explored, and Wilhelmshaven, coastal town facing the North Sea, has been identified as one location.

Employers and unions have resisted an immediate energy import ban due to loss of jobs. The UK will also phase out Russian oil imports by the end of 2022. 

Separately, the EU announced a ban on Russian coal imports on 7 April which will take effect in August (Russia is Europe's largest supplier of thermal coal - which is used in coal-fired power stations).

US Natural Gas Exporters to Meet German Buyers

Meetings will take place in Berlin as Europe attempts to wean itself off Russian gas. Germany in particular depends on Russia for about 50% of its gas supplies making the American option important. LNG terminal developers in Germany are hoping this will help accelerate planning approvals.

LaSalle Investment Management's Encore+ Aims to "set new standards" in Sustainability

Encore+ will work with Accumulata Real Estate Group to build a seven-floor hybrid timber office block, in Munich's Westend district, on a site acquired in 2019, on Elsenheimerstrasse. It will include an environmentally friendly building management system. Key players include David Ironside at Encore+ and Daniel Manta, project manager at Accumulata.

Ernst and Young unable to locate $2.1bn of cash in German Wirecard

The $2.1bn corresponds to 1.9 billion euros. Shares of the Munich-based company (Germany's largest fintech) dropped 62%. Its financial statements release due June 18th has been postponed.

Christian Sewing Presses "Restart" for Deutsche Bank, Casting off Equities, Capital Crunching Fixed Income and Shoving 7.4bn RWA into "Capital Release" Unit

Deutsche CEO Christian Sewing has stated "We are doing what is necessary to unleash our true potential...We are building on our strengths. This is a restart for Deutsche Bank".

Sewing replaced outgoing German-speaking British Chief Executive John Cryan on 8 April 2018. One year into the CEO role Sewing has unleashed a radical restructure of the Deutsche Bank.

New Board members effective 1 August 2019 will be ex-McKinsey consultant Christiana Riley, Bernd Leukert who is a member of the Supervisory Board of Bertelsmann SE and held various executive roles at SAP and Stefan Simon, a lawyer, bringing experience in corporate law, corporate governance and compensation oversight (he is also an honorary professor at the University of Cologne).

A major part of the restructuring will be exiting the Equities Sales and Trading business and reducing capital consumed by the other businesses especially Rates. A preliminary agreement has been struck with BNP Paribas to provide continuity of service for electronic equities clients with a view to moving technology and staff across in due time. Deutsche's electronic equities and prime brokerage is mainly US-based. Several hedge funds have pulled out of Deutsche's prime business following a series of fines.

As part of the "restart", 74 billion euros of risk-weighted assets will be moved into a Capital Release Unit (CRU) for wind-down. A new CET1 target ratio of 12.5% has been targeted along with a fully loaded leverage ratio of 5% from 2022. There will also be a reduction in headcount by 18,000 full time employees. 13 billion will be invested in technology in the next three years.

Bamberg-born Reinhard Ploss' Infineon to Acquire AMD-Alumni Formed Cypress Semiconductor for $10bn

This makes Infineon the top automotive IC supplier in the world.

Last year it bought Siltectra for 125m euro, a 2010-founded specialist in wafer treatment technologies.

Bamberg-born Reinhard Ploss is Chief Executive of Infineon, shares his birthplace of Conrad III of Germany, and studied Process Engineering at the Technical University of Munich.

Cypress Semiconductor has a range of products including NOR flash memories. Oshkosh, Wisconsin born T.J. Rodgers was a founder of Cypress Semiconductor along with other alumni from AMD.

Infineon has an interesting background. It was founded as recently as 1999 and was a spinoff of Siemens AG's semiconductor operations on the premise that public financing for the semiconductor business specifically was more practical than relying on Siemens' internal financial resources.

The subsidiary prior to spinoff was called Siemens Semiconductors.

Apple's Big DC Plans - $10bn over 5 Years

Apple is investing big in US DCs.

This includes plans to build a 133 acre campus in Austin, Texas and another build-out in Waukee, Dallas County, Iowa. Tax breaks are helping incentivise investment.

Existing capacity in Maiden, North Carolina; Mesa, Arizona and Sparks, Nevada will be expanded.

Outside of the US, back in July 2017, Apple announced it was building a second DC in Denmark, after their initial one in Viborg (166,000 square metres), with go-live in Q2 2019, shortly after Facebook a similar announcement in January. The DC will be located in Aabenraa in Southern Denmark near the border with Germany and will be powered 100% from renewable energy from day one. The Danish Foreign Ministry was said to have worked with Apple for three years in line with its Invest in Denmark program prior to its investment.

Apple's additional DC capacity will be used to power the iTunes store, Maps, iMessage and Siri.

Merkel Will Not Absolve More Greek Debt

The German Chancellor stated that there had already been voluntary debt forgiveness.  Greek debt currently stands at 315 billion euros, about 175% of GDP. According to Open Europe, 60% of Greek debt is owed to the Eurozone, 10% to the IMF, 6% to ECB and the rest to other sources, including foreign banks.

Angela Merkel's Conservative Party wins a Third Term

Her party (CDU, Christian Democratic Union) took about 41.5% of the vote. She will retake here position as Chancellor of Germany (the German title of the head of government, also known as Bundeskanzler - Federal Chancellor). The CDUs principles are based on a school of political thought known as Christian democracy.

The BUNDESBANK wants its gold BACK

The German Bundesbank, second largest holder of gold in the world after the United States, has decided at least half its gold should be in its own vaults. Part of this comes with pressure from the German Precious Metals Association. Apparently, last year the U.S. Federal Reserve had refused to allow Germans to verify their gold held in US vaults (reported in Der Spiegel).

Deutschland retains S&P AAA Rating

Rating for long-term debt, maintained thanks to "highly diversified and competitive economy". Merkel says German economy is "very sound". Debt is currently 80% of GDP. The German economy is the world's third largest exporter (includes exports to the EU). This includes exports of automobiles from Volkswagen, Daimler and BMW, which constitute around 9% of exports by value.

Eurozone Concerns: Bafin's Ban and its Implications for the FX and the Eurozone

Euro setting new lows, falling further (1.2163) as Germany bans short-selling - reason given was bond volatility and also widening of credit spreads. Bafin's (German regulator) doesn't German firms in the UK (e.g. Deutsche Bank London won't be affected according to the WSJ).

But what did the short-selling ban really mean? It covered shares, mainly of financial companies (e.g. Allianz), but not futures or long puts (arguably insurance, rather than short-selling). It also covered naked short-selling of euro-zone country debt, and naked sovereign CDS for Eurozone i.e. not for hedging of default risk.

Note to the curious: the Ba in BaFin stands for Bundesanstalt (Federal Agency) and Fin stands for Finanzdienstleistungsaufsicht (Finanicial Services Supervision).

Markets: P-Notes and Kangaroo Notes (The Basis Swap Story)

Aggressive SocGen has been banned from dealing in ODI (offshore derivative instruments) and P-Notes (participatory notes) in India following an inquiry by SEBI. In 2008, RBI called for ban on issuance of P-Notes, however foreign investors reacted sharply and the stock market almost crashed. For a background to central banking in India please see the RBI's website. In a nutshell, the RBI was set up in response to the Hilton Young Commission (Hilton Young was a British politician who was educated at Eton and University College London). The RBI was also the central bank for Burma but it seceded from the Indian Union in 1937. The RBI however continued to act as the central bank for Burma until Japanese occupation.

And now to the extraordinary rise in "kangaroo bond" issuance amongst stylized banks.

Bloomberg reports the EIB is seeking (update:has sought) assistance with Australian local banks to help it issue kangaroo bonds (AUD notes sold by foreign issuers in Australia). Certainly the currency has been talked about a lot recently, but why would the Luxembourg lender raise money in AUD? The reason is the extraordinary story of the basis swap (an interest rate swap involving the exchange of two floating rate instruments) and EIB is by no means isolated in their desire for kangaroo issuance (other names include KfW and Nordic Investment Bank). EIB's issuance of A$1.5bn will be the largest tranche issued by a kangaroo issuer, with April 2015 maturity (i.e. 5 year).The bonds are priced at Commonwealth government bonds + 83bps. What's the big driver behind all this kangarooing around? The USD-AUD basis swap has been up to 35bps wide for 5 years, making margins paid by the K-issuers look good, relative to LIBOR - and further issuance should stop the widening. The cause of the chasm in the basis swap is due to Ozzie banks raising debt offshore, such as ANZ bank which raised a billion EURs for three years in the Euromarket (57bps over midwaps).

For those that may not remember KfW, they gained the moniker of "Germany's dumbest bank" when they transferred 300 million EUR to Lehman on the day it filed for bankruptcy. But was it so dumb? Could the administrators have demanded that money after taking over Lehman Brothers?
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