Nordzucker AG Interim Report. Financial Year 2007/08. Nine months

Transcription

1 Nordzucker AG Interim Report Financial Year 2007/08 Nine months March 1 November 30, 2007

2 Group figures and ratios Operating business Q3 2007/08 Q3 2006/07 9M 2007/08 9M 2006/07 Change absolute Revenues EUR m of which abroad % Total revenues EUR m Gross income EUR m EBITDA EUR m EBIT EUR m Net profit EUR m Cash flow from operating activities EUR m Investments in property, plant and equipment EUR m Investments in financial assets EUR m Balance sheet ratios as of 30/11 9M 2007/08 9M 2006/07 Change absolute Balance sheet total EUR m 1,684 1, Equity EUR m Equity ratio % Debt capital EUR m Financial liabilities EUR m Cash and cash equivalents EUR m Net debt EUR m (Cash and cash equivalents financial liabilities) Structure figures 9M 2007/08 9M 2006/07 Change absolute Number of plants (total) Number of plants abroad 9 5 4

3 Nordzucker markets and trends Highlights from the first nine months 2007/08 Contents Letter from the Management Board 4 Management Report 8 Financial and earnings situation 8 Revenues and earnings 8 Balance sheet and cash flow 9 Supplementary report 10 Outlook 11 Quota abandonment Nordzucker has decided to surrender 13.5 per cent of its German production quota. Its goal is to avert the disadvantages arising from a cut in quotas in 2010 (final cut) which will not receive any compensation and to achieve early stabilisation of the European sugar market. Nordzucker also plans to return quotas in Poland, Hungary and Slovakia as of January 31, Plant structure The return of quotas necessitates a further adjustment of production capacities. Therefore, the plants in Güstrow (Germany) and Szolnok (Hungary) will be closed after the 2007 campaign. No further market withdrawals The European Commission refrained from making further market withdrawals in October Markets were put under pressure from a significant sugar surplus in some areas. Our European focus allows us to meet market distortion in individual regions adequately. Beet yields at record levels In Germany in particular, the past campaign has seen record yields for beets, which were about nine per cent above the average for the past five years. Sugar harvest per hectare has also been much higher than in previous years. Income statement 12 Cash flow statement 13 Balance sheet 14 Statement of changes in shareholders equity 16 Financial calendar 17 Nordzucker nine-month report 2007/08 3

4 Dear shareholders, Hans-Gerd Birlenberg (born in 1954) Chairman of the Management Board of Nordzucker AG since 2007 and Member of the Management Board since 2006 Responsible for: controlling, finances and taxes, IT, communication, corporate development, sales Since October 1, 2007 we have been selling our sugar via our European sales company, Eurosugar, which is based in Paris. This marks a consequential step towards providing better service to the newly structured sugar market in Europe. Regional sales offices in Germany, France, Poland, Slovakia and two partners in Italy and Ireland enable Eurosugar to supply customers all over of Europe. As a powerful, international distribution company, Eurosugar has an optimal structure to react to market changes resulting from the reform of the EU sugar market regime. Uncertainties regarding future quotas and market access for LDCs (least developed countries) and ACP countries (African, Caribbean and Pacific countries) require a flexible approach by market participants. Return of quotas to the restructuring fund With effect to January 31, 2008 Nordzucker will surrender 13.5 per cent of its quotas in Germany and in Poland respectively, about one third of its quota in Hungary and ten per cent of its quota in Slovakia to the EU restructuring fund and will receive compensation in return. Dr. Hendrik Einfeld (born in 1945) Member of the Management Board of Nordzucker AG since 2007 Responsible for: agriculture, risk management, raw material procurement, growth in Europe Even in the production-efficient core states of Europe, an inappropriate incentive scheme in the reform of the sugar market is forcing companies which are active in sugar production to reduce their quotas. Our goal remains to see the politically motivated reduction in production volume as an opportunity to optimise capacity utilisation, logistics and cultivation structures. For this reason and in order to optimise production capacity in the whole Group, the plants in Güstrow (Germany) and Szolnok (Hungary) will be closed after the 2007 campaign. No further market withdrawals Despite sugar surpluses still existing in the EU, the Commission stated in October 2007 that it had no intentions for further market withdrawals. This has put markets in some regions under renewed pressure. However, our European focus allows us to meet market distortion in individual regions appropriately. Günter Jakobiak (born in 1951) Member of the Management Board of Nordzucker AG since 1998 Responsible for: human resources, supply chain (buying, production, logistics) Beet and sugar yields at record level The 2007/08 campaign takes a special place in Nordzucker s company history due to its long processing period. With over 120 days, Germany had the longest campaign compared with other countries. Processing periods in the international plants lasted between 70 and 120 days. Most German factories ended beet processing in the first week of January, and one will continue until the end of January. Nordzucker nine-month report 2007/08 4

5 The processing months were marked by extremely high precipitation levels. This presented particular challenges for everyone involved in beet harvesting, beet transport and beet processing, all of which were successfully solved. Sugar yields reached record levels in Poland and Germany with an average of eleven tonnes per hectare. In the more southerly cultivation regions, Slovakia, Hungary and Serbia, the pronounced summer drought and extremely high temperatures led to below-average yields. Certifications passed successfully in 2007 During the year our plants have again been able to meet the standards of the certification bodies. Audits at all locations have shown that international norms and standards are met. As these also took the form of so-called compliance audits, Nordzucker was able to demonstrate and receive certification for compliance with all legal requirements. For the first time, the German plants received certification in line with the new international norm DIN EN ISO This consumer protection norm means that management focuses on production safety. It applies to both food safety and animal feed safety. We were therefore able to meet the requirements of our largest customers and comply with worldwide developments in certification. MEF ceases molasses processing in Frellstedt MEF Melasse-Extraktion Frellstedt is ceasing molasses processing in Frellstedt in We made this decision in conjunction with the other shareholder, the Dr. Wolfgang Boettger Group of Berlin. The termination of molasses processing was expected at MEF: it is no longer possible to have a cost-effective production of liquid sugar from molasses despite all previous efforts to reduce costs. This is a result of the rise in the price of molasses due to lower availability and to the reduction in sugar prices caused by the market reform. Hübner Group stabilised Restructuring of the Hübner Group will continue. The first evidence of success can already be seen and is based mainly on the incremental assumption of on-site operational responsibility since the spring of 2006 and the introduction of a comprehensive optimisation programme at all levels. The Hübner Group expects a balanced result for Nordzucker nine-month report 2007/08 5

6 Nordzucker locations Poland Germany Czech Republic 9 Slovakia Hungary 11 Sugar plants D 1 Clauen CLA 2 Nordstemmen NST 3 Uelzen UEL 4 Klein Wanzleben WZL 5 Schladen SLA 6 Güstrow * GÜS PL 7 Opalenica OPA 8 Chelmza CHE SK 9 Trecianska Tepla TRE HU 10 Szerencs SZE 11 Szolnok * SZO SCG 12 Bač BAC 13 Vrbas VRB 14 Pećinci PEC 15 Kovačica KOV 16 Liquid sugar plant Nordstemmen FNS 17 Liquid sugar plant Groß Munzel FGM Serbia Sugar plants not consolidated minority stakes CZ 18 Dobrovice DOB 19 Ceske Mezirici CES Company headquarter Braunschweig Other locations D 20 Frellstedt (MEF) FRE D 21 Ehrenkirchen (Hübner-Medopharm) EHR HU 22 Hatvan HAT * closed after the campaign 2007 Nordzucker nine-month report 2007/08 6

7 Focus on the future The EU sugar market has been subject to change in the last few months which has had a massive impact on companies in the sugar industry, on beet farmers and on shareholders. Stringent cuts such as the WTO ban on exports and the necessary surrender of production quotas has hit everyone. And the period of change is not over yet. Consolidation of the sugar industry in Europe is in full swing. The final cut with no compensation in 2010 is just one of the measures that the European Commission is threatening to impose. In such turbulent times, it is our duty to develop our company together with our employees in a responsible manner. The foundation of Eurosugar, the consistent introduction of modifications to plant structures, continual development of internal management and organisational structures, and the move into the production of bioethanol are the initial and important steps we have taken for the future. Yours sincerely, Nordzucker AG Management Board Hans-Gerd Birlenberg Dr. Henrik Einfeld Günter Jakobiak Nordzucker nine-month report 2007/08 7

8 Management Report Financial and earnings situation The interim financial statements for the Nordzucker Group as of November 30, 2007 have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted and published by the International Accounting Standards Board (IASB). The requirements of IFRS have been met in full and give a true and fair view of the financial and earnings situation of Nordzucker AG, including its subsidiaries, associated companies and joint ventures. As they have different reporting dates, all consolidated companies have been included in Nordzucker s consolidated financial statements as of September 30, The accounting methods applied in preparing the consolidated financial statements as of February 28, 2007 have been maintained without amendment. Further information is available in the notes to the Annual Report 2006/07. Sugar production is a seasonal business. The production phase from the middle of September to January takes place partly in the third quarter and partly in the fourth quarter of the company s financial year. This should be taken into account when interpreting the results from the first nine months of the financial year. Revenues and earnings As expected, the high temporary market withdrawal and the discontinuation of C-sugar exports had a negative effect on revenues. Markets in Central and Eastern European countries continue to be burdened by surplus production volumes and resulting market pressure. In Hungary and Slovakia in particular, revenues were significantly below those achieved in the first nine months of the previous year. Nevertheless, the Nordzucker Group generated revenues of EUR 917.4m in the first nine months of the financial year 2007/08, which was slightly above the amount for the same period in the previous year (EUR 908.6m). Market regime related reductions in revenues were compensated by the now fully consolidated revenue contribution from the investment in Serbia and by positive price developments for by-products. Revenues in the third quarter rose in comparison with the same period in the previous year by about 7.3 per cent to EUR 342.3m. Expenses were higher than in the previous year due to restructuring measures. Especially redundancy packages and impairment losses for the Güstrow plant had to be taken into account. Expenses for the plant in Hungary will not be applicable until the fourth quarter due to varying financial reporting periods. The cost of materials and services rose by about EUR 39.5m to EUR 554.7m. This was due mainly to an increased restructuring levy of EUR per tonne of sugar for 2007/08 in comparison to EUR in the previous year. Eliminating the personnel expenses of the Serbian investment and the extraordinary personnel costs arising from the closure of the plant in Güstrow, personnel expenses are about the same as in the previous financial year. The strong rise in Consolidated revenues in EUR m months 2006/ months 2007/08 Consolidated revenues 9 months 2007/08 by country in per cent Serbia 6 % Others 1 % Rest of the EU 14 % Germany 64 % Poland 6 % Hungary 6 % Slovakia 3 % Nordzucker nine-month report 2007/08 8

9 Management Report impairment results from extraordinary write-downs due to the closure of the Güstrow plant. The restructuring levy of EUR per tonne for 2007/08 (in comparison to EUR in the previous year) and a production levy of EUR 6 per tonne on the quota withdrawn by the European Commission have been accrued and recognised as other operating expenses. Other operating expenses are therefore around EUR 99.7m (EUR 105.1m). The operating result (EBIT) for the Nordzucker Group amounted to EUR 51.9m (EUR 120.7m) for the first nine months of the financial year 2007/08. Increased cost of materials and services, one-off costs for the plant closure and the the restructuring levy depressed revenues and are responsible for the significant decrease of about 57 per cent over the financial year 2006/07. Improved financial earnings and a tax credit in the amount of EUR 8.1m arising from the reform of corporation tax (tax liability EUR 46.6m) relieve consolidated net income for the period. The net income amounts to EUR 51.1m thereby considerably less below the result in the previous year (EUR 63.8m) compared to the operating result. The accumulated charges lead to a third quarter result of EUR 7.3m (EUR 16.0m). Balance sheet and cash flow Operating cash flow as defined by DVFA amounted to EUR 187.7m, slightly up on the level of the previous comparable period (EUR 170.5m), due mainly to the increase in write-downs. Taking into account the changes to liabilities and receivables, the operating cash flow amounts to EUR 201.6m (EUR 302.3m). Capital expenditure on property, plant and equipment of EUR 96.9m was far in excess of the amount for the previous comparable period (EUR 34.4m) and includes investment in the fuel 21 GmbH & Co. KG bioethanol plant under construction in Klein Wanzleben. Overall cash flow from investment activities amounted to EUR 118.1m (EUR 76.0m). Allowing for dividend payments, the amount of cash and cash equivalents at the end of the quarter ending on November 30, 2007 was EUR 138.1m (EUR 157.0m). As of November 30, 2007 the consolidated balance sheet total for the Nordzucker Group was EUR 1,683.8m (EUR 1,578.7m) and was therefore roughly the same as in the previous year. In particular, the investment in the fuel 21 GmbH & Co. KG bioethanol plant under construction in Klein Wanzleben increased capital expenditure on property, plant and equipment by about EUR 42.9m. The purchase of additional sugar quotas in Poland and Slovakia is reflected in growth of intangible assets to EUR 102.4m. Consolidated shareholders equity has increased from EUR 616.3m to EUR 698.4m. This increase is due mainly to higher retained earnings. The equity ratio for the Group rose to 41.5 per cent and exceeded the high level attained in the previous comparable financial period (39.0 per cent). In total, non-current and current financial liabilities rose by about EUR 54.2m. Cash and cash equivalents decreased by about EUR 18.9m. This results in higher year-on-year net debt of EUR 80.1m (EUR 7.1m). EBIT consolidated in EUR m months 2006/ months 2007/08 Consolidated net income in EUR m 64 9 months 2006/ months 2007/08 Balance sheet structure as of November 30, 2007 consolidated figures in EUR m 1,684 1,684 51% 28% 21% Assets Long-term assets 42% 23% 35% Liabilities Shareholders equity Inventories Other short-term assets Long-term liabilities Short-term liabilities Nordzucker nine-month report 2007/08 9

10 Management Report Supplementary report Free market access for ACP countries On December 20, 2007, the EU foreign ministers decided to open the sugar market to all ACP countries. The development initiative Everything But Arms, which proposes tax-free imports from the least developed countries from October 1, 2009, is to be extended by an interim arrangement from October 1, 2008 for 40 LDC countries which are also ACP countries. Export opportunities for these countries will be extended considerably. The other 37 ACP countries may also export unlimited amounts of sugar free of tax into the EU from October 1, Definitive thresholds in the amount of 1.38m tonnes for 2009/2010 and 1.45m and 1.6m tonnes for the following years are designated. At the same time, total import volumes of 3.5m tonnes may not be exceeded. Upon breach of this threshold, prohibitive tariffs will be introduced against the 37 ACP countries which do not belong to the least developed countries. The least developed countries will still be able to enjoy taxfree imports. Commencement of production at fuel 21 At the end of December 2007, production commenced at the fuel 21 GmbH & Co. KG bioethanol plant in Klein Wanzleben. After a construction period of 14 months, production is beginning in the fermentation division. Bioethanol output will be increased continually. Our goal is to produce some 130,000 cubic metres of bioethanol from sugar beet annually in the future, using raw and thick juice. Nordzucker nine-month report 2007/08 10

11 Management Report Outlook In line with revenue development as presented in these nine-month financial statements, we are also expecting similar revenues to last year at the end of this financial year 2007/08. However, the low operating result from the third quarter does not provide a clear indication for the annual financial statements. Due to the deadline for quota abandonment being set at January 31, 2008 and the decision to close the plant in Güstrow in the third quarter 2007, expenses for plant restructuring had to be taken into account in full in the third quarter results, while the benefits are being expected in the fourth quarter. The resulting considerable positive effect on the earnings for the financial year 2007/08 will probably be realised in the fourth quarter. This includes expenses for the restructuring levy, and also the compensation payments from the EU for surrendering quotas. The operating result for the full year will be below last year s figure, but to a lesser extent than in the first nine months of the year. It should nevertheless be borne in mind that these additional earnings are primarily the result of oneoff, non-recurring factors. The sugar industry in the EU is still undergoing a period of transformation. The reformed sugar regime is resulting in significant cuts. We view ourselves as well prepared for the future due to our European focus and our consequential and timely implementation of steps to optimise production structures. Nordzucker nine-month report 2007/08 11

12 Consolidated nine-month financial statements Consolidated nine-month financial statements Consolidated income statement for the period from March 1 November 30, 2007, Nordzucker AG, Braunschweig 1/9/ /11/2007 1/9/ /11/2006 1/3/ /11/2007 1/3/ /11/2006 Change 1. Revenues 342, , , ,600 8,807 less sugar regime levies , , , ,600 8, Changes in finished goods and work in progress 244, ,314-75,845-86,912 11, Own work capitalised 384 2,293 1,593 6,598-5, Other operating income 10,838 8,110 25,869 22,329 3, , , , ,615 18, Cost of materials and services 476, , , ,233 39, Personnel expenses 41,873 32,175 90,722 79,391 11, Depreciation, amortisation of intangible assets, property, plant and equipment and impairment losses 49,723 13,766 72,271 30,226 42, Appreciation on intangible assets, property, plant and equipment and impairment losses Other operating expenses 27,406 44,210 99, ,160-5, Operating result (EBIT) 2,907 27,621 51, ,694-68, Net interest a) Interest income 1,524 1,480 4,066 3, b) Interest expenses 3,464 4,952 12,818 14,946-2,128-1,940-3,472-8,752-11,859 3, Net income/loss from investments a) Net income/loss from associated companies at equity b) Other net income/loss from investments 5 1, ,698-1, , ,698-1, Other net financial income/expense Net financial income/expense -2,370-1,090-8,877-10,299 1, Income tax expense -6,799 10,517-8,056 46,635-54, Group net profit 7,336 16,014 51,051 63,760-12, Minority interests 3,432 1,579 11,122 1,664 9, Net income after minority interests 3,904 14,435 39,929 62,096-22,167 Nordzucker nine-month report 2007/08 12

13 Consolidated nine-month financial statements Consolidated cash flow statement for the period from March 1 November 30, 2007, Nordzucker AG, Braunschweig 1/3/ /11/2007 in EUR m 1/3/ /11/2006 in EUR m Group net profit Net depreciation, amortisation and impairment losses on long-term assets Net amortisation and impairment losses on financial assets Changes in long-term provisions Other non-cash income/expenses Changes in finished goods and work in progress Cash flow Changes in short-term provisions Proceeds on dispoal of long-term assets Changes in inventories, trade receivables and other assets not attributable to investing or financing activities Changes in accounts payable and other liabilities not attributable to investing or financing activities Cash flow from operating activities Proceeds on disposal of long-term assets Payments for investments in long-term assets Proceeds on disposal of intangible assets Payments for investments in intangible assets Proceeds on disposal of financial assets Payments for investments in financial assets Cash flow for investing activities Proceeds from changes in equity Dividend payments Proceeds/repayments of loans Cash flow from financing activities Changes in cash and cash equivalents Cash and cash equivalents at the beginning of the period Effect of foreign exchange rate changes Cash and cash equivalents at the end of the period Nordzucker nine-month report 2007/08 13

14 Consolidated nine-month financial statements Consolidated balance sheet as of November 30, 2007, Nordzucker AG, Braunschweig Assets 30/11/ /11/2006 Change Long-term assets Fixed assets Intangible assets 102,446 58,627 43,819 Property, plant and equipment 684, ,847 42,896 Investment property 6,113 6,118-5 Financial assets Shares in associated companies at equity 1,484 40,305-38,821 Other financial assets 24,483 27,748-3,265 25,967 68,053-42,086 Accounts receivable and other assets Financial assets Other assets 1, ,993 1, Deferred taxes 30,690 26,590 4, , ,337 49,615 Short-term assets Inventories Raw materials, consumables and supplies 43,587 39,598 3,989 Work in progress 30,787 6,961 23,826 Finished goods and merchandise 403, ,688 24, , ,247 52,196 Accounts receivable and other assets Trade receivables from external companies 81, ,690-38,904 Receivables from related parties and companies 57,576 8,167 49,409 Receivables from income tax 3,654 3, Financial assets 9,032 7,852 1,180 Other short-term assets 63,656 54,328 9, , ,088 21,616 Assets scheduled for sale Cash and cash equivalents 138, ,992-18, , ,412 55,409 1,683,773 1,578, ,024 Nordzucker nine-month report 2007/08 14

15 Consolidated nine-month financial statements Consolidated balance sheet as of November 30, 2007, Nordzucker AG, Braunschweig Shareholders equity and liabilities 30/11/ /11/2006 Change Shareholders' equity Subscribed capital 123, ,651 0 Capital reserves 127, ,035 0 Retained earnings 357, ,676 59,929 Accumulated other equity 25,700 10,720 14,980 Minority interests 64,438 57,170 7, , ,252 82,177 Long-term provisions and liabilities Provisions for pensions and similar obligations 100,140 98,429 1,711 Other provisions 23,882 20,248 3,634 Financial liabilities 178, ,481 52,022 Other liabilities 25,726 13,802 11,924 Deferred taxes 66,775 84,150-17, , ,110 51,916 Short-term provisions and liabilities Provisions for pensions and similar obligations 5,019 5, Other provisions 22,949 52,864-29,915 Financial liabilities 39,725 37,589 2,136 Income tax liabilities 3,157 18,823-15,666 Trade payables 176, ,105-71,672 Liabilities due to related parties and companies 3,404 1,746 1,658 Other financial liabilities 308, ,109 87,118 Other liabilities 31,404 33,733-2, , ,387-29,069 1,683,773 1,578, ,024 Nordzucker nine-month report 2007/08 15

16 Consolidated nine-month financial statements Consolidated statement of changes in shareholders equity Consolidated nine-month report as of November 30, 2007, Nordzucker AG, Braunschweig Subscribed Capital Retained Accumulated Minority capital reserves earnings other equity interests Total equity As of 28/2/ , , ,040 14,508 4, ,719 Group net profit , ,664 63,760 Dividend payment , ,558 Capital increase Currency effects , ,082 Fair value adjustment Others ,021 51,119 As of 30/11/ , , ,676 10,720 57, ,252 As of 28/2/ , , ,921 23,042 68, ,013 Group net profit , ,122 51,051 Dividend payment , ,594-53,779 Capital increase Currency effects , ,201 Fair value adjustment Others ,546 15,486 As of 30/11/ , , ,605 25,700 64, ,429 Shareholders structure Nordzucker AG EUR 123.7m share capital Nordzucker Holding Aktiengesellschaft: %, EUR 94.3m Union-Zucker Südhannover GmbH: %, EUR 13.4m Nordharzer Zucker AG: 7.83 %, EUR 9.7m Direct shareholders: 5.12 %, EUR 6.3m Nordzucker nine-month report 2007/08 16

17 Financial calendar Annual general meetings July 1, 2008, am July 9, 2008, am July 10, 2008, am July 11, 2008, am Union Zucker Südhannover GmbH, Berghölzchen Hildesheim Nordharzer Zucker AG, Stadthalle Braunschweig Nordzucker Holding AG, Stadthalle Braunschweig Nordzucker AG, Stadthalle Braunschweig Publications January 15, 2008 Nine-month report 2007/08 May 27, 2008 Annual Report 2007/08 Online publications The following publications can be downloaded from Annual Report Interim Reports Declaration of Compliance Sustainability Report Nordzucker nine-month report 2007/08 17

18 Nordzucker AG Küchenstrasse 9 D Braunschweig Telephone: +49 (0) Fax: +49 (0) info@nordzucker.de Shares register Wilhelm Just Telephone: +49 (0) aktien@nordzucker.de Investor Relations Bianca Deppe-Leickel Telephone: +49 (0) ir@nordzucker.de Public Relations Tanja Schneider-Diehl Telephone: +49 (0) pr@nordzucker.de This Nordzucker interim report is also published in English and German on our website at