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HAMBURG, July 10 (Reuters) - Suedzucker (Other OTC: SUEZF - news) , Europe's largest sugar producer, posted operating profit in the first quarter of 96 million euros ($130.7 million), down from 220 million euros the previous year.
The main reason for the earnings drop was sinking sales of sugar inside the European Union's protected quota system, especially in southern and eastern European markets, Suedzucker said.
Analysts say European sugar prices have fallen sharply in the past year, hurting producers and refiners, with the European Union allowing more imports to increase sugar supplies and due to the planned end to the EU's restrictive sugar quotas in 2017.
Suedzucker said on Thursday it expects second-quarter group operating profit significantly below the year-earlier level.
Sales for the first quarter for the 2014-15 fiscal year started 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 about 7 billion euros and sees operating profit falling to about 200 million euros.
A Reuters poll of analysts had forecast mean first-quarter earnings before interest and taxes (EBIT) of 79.2 million euros, net profit of 32.7 million euros and revenue of 1.802 billion euros.
Sudzucker had on April 8 warned it expected revenue and profit to decrease in its current financial year due to a difficult environment on the European sugar and bioethanol markets.
"Export prices for non-quota sugar were less than last year as world market prices retreated," the company added. "In the sugar segment we expect a significant drop in revenues in fiscal 2014-15."
The company said it expects "a significant decline in operating profit, mainly due to the increasing deterioration of the economic environment in the EU sugar market."
($1 = 0.7345 euros) (Reporting by Michael Hogan and Maria Sheahan; Editing by Prateek Chatterjee and Matt Driskill)