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UPDATE 2-Suedzucker profit falls on weak EU sugar sales

Operating profit at Europe's largest sugar producer Suedzucker fell by more than half in its fiscal first quarter, due to sinking sales inside the European Union's protected sugar quota system.

European sugar prices have fallen sharply in the past year, hurting producers and refiners, because the European Union has allowed more imports and also plans to end the EU's sugar output quotas in 2017, part of moves to liberalise production.

Sudzucker had warned in April it expected revenue and profit to decrease in its current financial year due to the difficult environment on the European sugar and bioethanol markets.

The company said on Thursday it expected operating profit to come in significantly below the year-earlier level in the second quarter as well.

"Export prices for non-quota sugar were less than last year as world market prices retreated," Suedzucker added. "In the sugar segment we expect a significant drop in revenues in fiscal 2014-15."

The company said it expected "a significant decline in operating profit, mainly due to the increasing deterioration of the economic environment in the EU sugar market."

Associated British Foods, among Europe's top sugar companies, in April also forecast weak profits at its AB Sugar business.

Suedzucker's shares rose more than three percent as the profit fall was less than expected. They were among the biggest gainers on Germany's midcap index.

Quarterly earnings before interest and tax (EBIT) slumped to 106 million euros ($145 million), from 232 million a year earlier, as revenue dropped in southern and eastern European markets in particular.

That beat the average estimate of 79.2 million euros, in a Reuters poll of banks and brokerages. Net profit after minorities dropped 63 percent to 77 million euros, also better than expected.

The company expects full-year 2014-15 revenue at about 7 billion euros and sees operating profit falling to about 200 million euros.

Suedzucker's shares have not recovered much from a 20 percent dive they took on April 8, when the company warned on profits.

Suedzucker's bioethanol unit, CropEnergies, on Tuesday also posted reduced profits due to low bioethanol prices.

($1 = 0.7331 Euros) (Additional reporting by Maria Sheahan; Editing by Matt Driskill and Jane Merriman)

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