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| Annual report 2007/08 Abstract |
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Sugar segment |
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Performance of the sugar segment
The sugar segment's numbers relate to Südzucker AG, Südzucker
Polska, Südzucker Moldavia, Raffinerie Tirlemontoise, Saint Louis
Sucre and AGRANA. These companies produced 4.6 million tonnes of sugar
in thirty-nine sugar factories and two refineries. The plants are
located in Germany, Belgium, France, Poland, Austria, Slovakia, the
Czech Republic, Hungary, Moldavia and Romania. Südzucker is by
far the largest sugar producer in Europe, with a 24 % share of the
EU's sugar quota. Agriculture and animal feed are two other key areas
that belong to the segment.
Key figures for the sugar segment
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2007/08 |
2006/07 |
| Revenues |
€ 3,464.1 million |
€ 3,542.8 million |
| EBITDA |
€ 212.8 million |
€ 412.5 million |
| Depreciation of fixed assets and intangible
assets |
(€ 152.3 million) |
(€ 153.2 million) |
| Operating profit |
€ 60.5 million |
€ 259.3 million |
| Restructuring/special items |
(€ 20.3 million) |
(€ 108.7 million) |
| Goodwill impairment loss |
- |
(€ 482.4 million) |
| Operating profit (loss) net of restructuring
and goodwill impairment loss |
€ 40.2 million |
(€ 331.8 million) |
| EBITDA margin |
6.1 % |
11.6 % |
| Operating margin |
1.7 % |
7.3 % |
| ROCE |
2.2 % |
9.6 % |
| Capital expenditures on fixed assets |
€ 138.7 million |
€ 139.4 million |
| Capital expenditures on additional quotas |
€ 2.9 million |
€ 158.8 million |
| Capital expenditures on financial assets |
€ 53.0 million |
€ 5.3 million |
| Total capital expenditures |
€ 194.6 million |
€ 303.5 million |
| Employees |
10,043 |
10,885 |
Revenues | The sugar segment's revenues fell to €
3,464 (3,543) million. This decline is above all due to a dramatic
drop in sugar exports in the first half of the financial year. A significant
amount of C-sugar was exported for the last time in the first half
of 2006/07 following a bumper harvest. This market is no longer accessible
following the lost WTO panel case. The industrial sugar business,
which is now operating year-round, has already contributed satisfactorily
to sugar sales, but was unable to offset the missing C-sugar exports.
The EU commission significantly restricted quota sugar exports in
the second half of 2006/07, which led to lower revenues. The restrictions
were not as severe during the second half of 2007/08.
Operating profit | The sugar segment's operating
profit fell to € 61 (259) million in 2007/08. This dramatic decline
in 2007/08 was in accordance with forecasts and was driven by the
continued restructuring phase of the sugar market regulation reforms.
The results of restructuring and special items were once again negative
at € -20 (-109) million. This is primarily attributable to the
disposal of the acquired sugar quotas and the charges due to factory
closures, which could not be fully offset by the restructuring assistance
provided by the EU. Income from operations reached € 40 (-332)
million.
Sugar produced from beets and
by refining
For the 2007/08 campaign, Südzucker Group produced 4.30 (4.24)
million tonnes of sugar from 28.22 (27.54) million tonnes of sugar
beets grown on 438,500 (444,900) hectares and processed in 39 (40)
sugar factories. An additional 0.28 (0.36) million tonnes of cane
sugar were refined at the refineries in Marseille/France (Saint
Louis Sucre) and Buzau/Romania (AGRANA). The group produced a total
of 4.58 (4.60) million tonnes of sugar, almost the same as last
year.
Beet processing in 2007 started first at Südzucker AG in Germany
and at the Raffinerie Tirlemontoise in Belgium on September 15.
The longest campaign, 117 days, was at AGRANA's Sered factory in
Slovakia. The shortest campaigns, which lasted only 59 to 70 (70
to 75) days due to an unusually dry summer, were in the eastern
countries of Moldavia, Romania and Hungary. The group average was
90 (86) days.
Sugar sales
The consolidated total amount of sugar sold by all group companies,
including the industrial sugar production not governed by sugar
quotas, declined to 4,592,600 (4,859,900) tonnes in fiscal 2007/08,
down 5.5 % compared to last year. This drop was due to the market-regulation-driven
58 % decline in exports, which could not be offset by the 3.4 %
increase over the prior year in EU common market sales.
The quota returns associated with the sugar market regulation reforms
have changed the European sugar market forever. Some countries,
such as Italy, Spain and Greece will have a shortage and will no
longer be able to fulfill their demand for sugar from their own
production. EU sugar producers and increasing imports from ACP countries
and LDCs will satisfy this demand.
Südzucker Group has significantly increased its share in the
markets where there is now a shortage and together with several
powerful sales partners, is represented throughout Europe.
The greatest challenge in the new market environment is logistics,
because it has a major impact on customer satisfaction and costs.
Südzucker Group has successfully introduced new initiatives
in this area.
The EU sugar market is still suffering from the turmoil caused
by the new sugar market regulations. For example, prices in central
and eastern Europe have dropped back below the reference price level
after recovering at the beginning of 2007. Furthermore, the quotas
returned to date, for example by Eastern sugar, have not yet led
to a market equilibrium in these economic zones. The battle for
future market positions dominates events in Italy and Spain; neither
is there any indication of reduced market tension in France, Belgium
or Holland.
Sales of industrial sugar, which have been aggressively promoted
as a result of the market regulation reforms, are developing very
satisfactorily. Shipments tripled in comparison to last year. Südzucker's
priority is to ensure that the new industrial sugar business is
sustainable.
Sugar market regulation
The sugar market regulation enacted on July 1, 2006 will be in force
until September 2015. The political goal is to comply with WTO requirements
and bilateral trade agreements, while at the same time improving
the European sugar sector's competitiveness. EU sugar and beet prices
will fall, and about 6 million tonnes less quota sugar will be produced.
A restructuring fund supported by the sugar industry has been established
to compensate individual companies that voluntarily decide to reduce
their EU quota production. Inefficient sugar producers therefore
have an opportunity to return their quotas, and be reimbursed for
doing so. The first two years since the introduction of the restructuring
fund have demonstrated that the concept is viable in principle.
However, since only 2.2 million tonnes of quota were returned to
the restructuring fund during this period, the EU Agricultural Ministry
decided to improve the concept, whereby the EU commission had received
applications for restructuring assistance for a total of 4.84 million
tonnes of quota by the end of February 2008. The gap to reach the
EU commission's target of 6 million tonnes of quota returns is therefore
now only 1.16 million tonnes. Sugar companies returning quotas in
the amount of at least the previous year's preventive market withdrawal
during the first wave were given the opportunity to return additional
quotas, for which they would receive compensation, during a second
wave ending in March 2008. The total quota returns subsequently
rose to 5.64 million tonnes, leaving about 0.36 tonnes to reach
the goal of 6 million tonnes returned.
Südzucker Group has so far returned 0.61 tonnes of sugar quota
to the restructuring fund for 2008/09. The company has applied to
the restructuring fund for compensation for a further 0.26 million
tonnes of sugar quota for the 2008/09 sugar marketing year; i.e.,
a total of .87 million tonnes or 21 % of the quota, in order to
avoid non-compensated reductions in 2010/11.
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