Investor Relations

Annual report 2007/08 Abstract
Group report

Fiscal 2007/08 was a year of challenges for Südzucker. It demanded a high degree of flexibility to limit the influence of short-term factors, while at the same time building a base to maintain and strengthen our long-term corporate strategy.

As the European market leader in the sugar segment, we have set a clear example for the European sugar business with our participation in the EU quota repurchase program. The choice was made easier for us after the EU agricultural ministry improved the 2006 sugar market reforms in fall 2007 and created significant incentives for beet growers and the sugar industry. The 2008/09 quota returns program was divided into two "waves". The first wave consisted of a voluntary quota surrender to the end of January 2008 in the amount of at least the preventive market withdrawal for the 2007/08 sugar year, which was 13.5%. We took advantage of this ruling and instituted a group-wide return of 0.61 million tonnes of sugar quota to the funds during the first wave. After the commission published the total of the quotas surrendered during this wave, we were able to establish the amount we would surrender in the second wave. Here the group-wide total was 0.26 tonnes, for a grand total of 0.87 tonnes or 21% of the quota. We intend to address the associated elimination of quota beets with the offer of "industrial beets". These beets are not subject to the rules of the market regulations and the sugar produced this way may only be used for precisely specified non-food purposes.

These steps, which were planned in close cooperation with our beet growers, will enable us to largely avoid the non-compensated quota reductions for the 2010/11 sugar year, which were otherwise expected. This is because 5.64 million tonnes of the EU-wide quota reduction of 6 million tonnes of sugar called for by the commission have now already been returned.

This also means that the EU, which until now had been a net sugar exporter, will not be able to meet its demand for sugar. This clearly shows the substantial impact the EU production cut regulations have on Europe's sugar business. Südzucker anticipated this scenario very early on and by selecting appropriate alternative courses of action, was able to respond quickly and flexibly within the framework of the corporate strategy.

But Südzucker's journey has not yet ended. The shifts in the EU sugar market due to this restructuring have weighed on our results this year and will also be a burden next year.

We started a new chapter in 2006 when we established our bioethanol division. Our highly efficient factory in Zeitz, Germany and the new energy technology we are using at our Wanze, Belgium facility not only make us competitive, but also the European market leader. It will take years for other technologies to become mature enough to reach the manufacturing stage. Our approach here is that in times of climate change and increasingly scarce fossil fuel sources, companies that produce the right products over the long term are the most likely to enjoy market success.

We have merged the functional food division with the BENEO Group. We are working successfully on new generations of products that will be marketed worldwide. By developing and manufacturing specialty starches, we reduce our dependency on the global raw material prices in this sector. Innovations based on in-house research and development expertise are also what drive the continued successful diversification of the starch division's product mix.

In the fruit segment, we have established the global market benchmark when it comes to manufacturing top quality fruit preparations and fruit juice concentrates. We have faced the difficult challenges of the Chinese market by broadening our commitments there. This is exactly what is needed to generate opportunities that will result in future competitive advantages in the world market.

Again in fiscal 2008/09, forecasting is difficult because of the uncertainties associated with the restructuring phase of the EU sugar market. We expect to achieve consolidated revenues of € 5.6 to € 5.8 billion. Declining revenues in the sugar segment are expected to be offset by increasing revenues in the special products and fruit segments. We expect consolidated operating profit to be in the range of € 232 to € 260 million.

For fiscal 2009/10 we are now forecasting consolidated revenues at the 2007/08 level of € 5.8 billion and consolidated EBIT to be at least € 400 million.