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1 sugar has a Future annual report 2013/2014

2 key Figures nordzucker in europe northern europe 1,509 Average number of employees for the year 5 Sugar factories 2 Sugar refineries central europe 1,247 Average number of employees for the year 5 Sugar factories 2 Liquid sugar factories 1 Bioethanol plant eastern europe 523 Average number of employees for the year 3 Sugar factories 1 Sugar refinery Beet cultivation and campaign 2009/ / / / /2014 Beet farmers 16,292 16,091 15,379 14,981 14,761 Beet cultivation area ha 287, , , , ,000 Beet processing t/day 143, , , , ,236 Sugar production millions of tonnes

3 Nordzucker ANNual Report 2013/2014 Revenues in EUR m 2,500 2,250 2,000 1,750 1,500 1,250 1, ,443 2,361 2,018 1,806 1, / / / / /2014 net income in EUR m * / / / / /2014 * adopted Dividend per share EUR / / / / /2014

4 Key Figures Nordzucker Key Figures at a glance Yield Ratio 2009/ / / / /2014 Total operating profitability 1 % Return on revenues 2 % Return on equity 3 % Redemtion period 4 years Cash flow from operating activities per share EUR Earnings (Group) per share 5 EUR Dividend per share 6 EUR Total dividend EUR m EBITDA/Total revenues 2 Net income/revenues 3 Net income/equity 4 Net debt/ebitda 5 Total income/number of shares 6 Total dividend/number of shares Key Financial Figures 2009/ / / / /2014 Revenues EUR m 1,806 1,815 2,018 2,443 2,361 of which abroad % EBITDA EUR m EBIT EUR m Net income EUR m Cash flow for/from operating activities EUR m Investment in property, plant and equipment and intangible assets EUR m Balence Sheet ratio at the End of the Financial Year 2009/ / / / /2014 Balence sheet total EUR m 2,456 1,982 2,262 2,403 2,337 Equity EUR m ,291 1,386 Equity ratio % Dept capital EUR m 1,712 1,163 1,263 1, Financial liabililties EUR m Cash and cash equivalents EUR m Net dept 1 EUR m Cash and cash equivalents Financial liabililties

5 ANNuAl report 2013/ sugar has a Future We are shaping our future with foresight and working with great dedication to become more efficient and to streamline our processes. We give our all for our customers, out of conviction. as a powerful economic factor in our regions, we assume responsibility for the environment and for employment. together with our beet farmers, we aim to sustainably strengthen the position of sugar beet. We attach great importance to a transparent supply chain from the field to the customer, and to the highest quality products. as a strong european sugar company, we are looking to the future with confidence, because sugar has a future!

6 2 Nordzucker ANNual Report 2013/2014 : Sugar has a future Content 1 Nordzucker At a glance Key figures 4 Sugar has a Future 5 Letter from the Executive Board 10 Strategy 16 Optimised beet cultivation 20 Sugar beet is the future 26 Investitions 30 Production 36 Health and nutrition 40 Quality management 44 Sales 48 Group management report 50 Nordzucker at a glance 54 Economic environment and market developments 57 Earnings, net assets and financial position 62 Employees 62 Opportunities and risks 68 Supplementary report 68 Forecast

7 sugar has a future : Nordzucker ANNuAl report 2013/ How much sugar is needed when and where? Nordzucker is thinking in terms of the market. 70 consolidated Financial statements 72 consolidated income statement 72 consolidated statement of comprehensive income 73 consolidated cash flow statement 74 consolidated balance sheet 76 consolidated statement of changes in shareholders equity 77 Notes to the consolidated financial statements 123 Audit opinion 124 Further information 126 corporate Governance report 127 Statement of compliance with german corporate governance code 128 report by the Supervisory Board 132 Glossary 137 Financial calendar

8 4 Nordzucker ANNual Report 2013/2014 : Executive Board Dr Michael Noth, Dr Lars Gorissen, Hartwig Fuchs (Chief Executive Officer), Axel Aumüller and Mats Liljestam (left to right)

9 Letter from the Executive Board : Nordzucker ANNual Report 2013/ Dear shareholders After two excellent financial years with very good earnings, we were again able to close the year 2013/2014 at a level that we can be very pleased with. Nevertheless, over the course of 2013 we experienced some steep price falls for quota and non-quota sugar, which are reflected in both revenues and earnings. Higher sales were able to make up for much of this pricing effect, however. To give you the main figures in brief: we reported revenues of EUR 2,360.9 million in total, which was EUR 81.9 million lower than in the previous year. Consolidated net income for the period came to EUR million, compared with the adjusted EUR million in the previous year. Part of our strategy and preparation for the era without sugar quotas post-2017 are extensive investments in our plants to boost market and customer focus, improve their efficiency and protect the environment. In the reporting year, they included investments of EUR 78.7 million in property, plant and equipment over EUR 4 million more than in the previous year. Highlights of this capital expenditure were the first construction phase for the evaporation dryer in Örtofta and the second phase in Nakskov, an 80,000-tonne sugar silo in Uelzen, as well as the completion of the juice purification plant in Clauen and the wastewater treatment plant in Opalenica. Projects to increase energy efficiency and create additional silo capacities will remain the focus of investment in the years ahead. We are planning to increase our investment volume again substantially. Beet farming in our European regions has a future. The previous year s net debt of EUR 59.4 million has now been paid off in full. As of the reporting date, cash and cash equivalents exceeded financial liabilities by EUR 52.4 million. Equity went up to EUR 1,385.8 million. As total assets remained roughly the same, the equity ratio went up from 53.7 per cent in the previous year to 59.3 per cent.

10 6 Nordzucker ANNual Report 2013/2014 : Letter from the Executive Board Together with the Supervisory Board, we intend to put forward a proposal at the Annual General Meeting this year to distribute a dividend of EUR 1.30 per share of share capital. This corresponds to a total dividend distribution of EUR 62.8 million. In the outstanding previous year, we distributed EUR 1.80 per share, adding up to a total of EUR 86.9 million. In a long-term comparison, the dividend is still high, however, and allows our shareholders to participate in the company s strong earnings in the financial year 2013/2014. At the same time, a considerable portion of earnings has been retained to finance future profitable growth within the company. We want to become one European company and, together with our motivated and highly qualified team, are preparing for the post-2017 era. 2013/2014 was a successful year. Our wide-ranging programmes to increase efficiency are having an effect, and this year again made a substantial contribution to earnings. We were able to complete our Profitability plus efficiency programme a year earlier than planned, because we have already reached the target set for 2014/2015. Now, with an eye on 2017, the aim is to set new targets, as improvement is a continuous process. We can be proud of a smooth campaign, a good beet yield although weather conditions were not optimal everywhere and a team that is driving forward the company s continued development in all areas. This annual report is not only intended to provide you with a review of the past year, but above all to show you how Nordzucker staff in specific areas work each and every day to give their best for our customers and our company. They take care of customer requests, ensure compliance with our high quality standards, implement investment projects, improve workflows in our plants and work with our beet farmers to increase their yields. They are a strong team, who have been preparing for the new era for a long time. In particular, we want to highlight the fact that this team works together across national borders, that its members learn from one another and make use of knowledge from other plants. We want to become a European company and prepare ourselves for the time when the quota system expires. It is a time that will bring challenges, but also opportunities. Our thanks go to all our staff for their dedication and their willingness to confront the new challenges.

11 Letter from the Executive Board : Nordzucker ANNual Report 2013/ At the end of September 2017, the sugar market regime will cease to exist in its present form. The market will change and the global market, with its price fluctuations, will exert a much greater influence on the EU sugar market than before. From other markets we know that the phase following deregulation, in which a new market equilibrium is established, is demanding. Production volumes will go up, there will be greater competition with isoglucose and the market will consolidate as a result. In recent years, we have done everything to prepare ourselves well for this situation. We are a strong company built on sound foundations, in terms of both our performance figures and our technical equipment. And we have a strong team with motivated and highly qualified employees. We are convinced that we will also emerge from this downturn all the stronger, especially as we offer our customers reliability and service, as well as a product that is sustainable and regional. Sustainability and social responsibility are our key themes, and we will continue to develop these in the future. But strength also requires efficiency and foresight. It means thinking from a market perspective. We have to grow, but here in Europe we operate within narrow confines: sugar consumption will not go up and competition law will not really make consolidation in Europe any easier. So for us, the logical consequence can only be to look further afield to growth regions like Africa and Asia, where the market is set to grow, driven by economic expansion and an increasing population. At the same time, our message is clear: beet farming in our European regions has prospects, and we are confident that you, our shareholders, will stay with us in future and keep Nordzucker strong. Nordzucker AG The Executive Board Hartwig Fuchs Axel Aumüller Dr Lars Gorissen Mats Liljestam Dr Michael Noth

12 8 Nordzucker ANNuAl report 2013/2014 : sugar has a future sugar has a Future 8 Future ISSUES

13 Sugar has a future : Nordzucker ANNual Report 2013/ Strategy THE NEW WORLD OF SUGAR Page 10 4 Optimised beet cultivation 20 TONNES OF SUGAR PER HECTARE DON T JUST FALL FROM THE SKY Page16 5 Sugar beet is the future SUGAR BEET IS A WINNER FOR US Page 20 6 Investments Sustainability and profitability hand in hand Page 26 7 Production Master of a complex production machine Page 30 8 Health and nutrition Sugar in the media Page 36 Quality management How values become standards Page 40 Sales Customer orientation and a willingness to talk Page 44

14 10 Nordzucker ANNuAl report 2013/2014 : sugar has a future the new World o F sugar In 2017 the sugar market regime will expire after more than 45 years. focussed on the future The SMR will expire in But what s next? We are looking to the future with confidence.

15 Sugar has a future : Nordzucker ANNual Report 2013/ Strategy Hartwig Fuchs: strengthening NORDZUCKER BY LOOKING TO THE FUTURE For decades, the sugar market regime, or SMR, has been the cornerstone of the European Union s sugar market. At the end of September 2017, the SMR in its current form will expire. There will then no longer be a quota regulation restricting quantities, no compulsory minimum beet prices nor export restrictions. How will Nordzucker meet these changing market conditions? What will the future market look like? And, above all, what will be the opportunities and challenges for Nordzucker? We asked Hartwig Fuchs, CEO of Nordzucker AG, for his thoughts. There will be a number of changes in the European sugar market in the coming years. The competition will grow stronger, and the influence of the global market, with its greatly fluctuating sugar prices, will also increase. This scenario translates into the following three developments: Firstly, there will be regions where beet cultivation will not be as profitable in comparison to that of other crops, e.g. wheat, oil seed and maize; secondly, smaller producers will increasingly experience difficulties in investing in their competitiveness. Both trends will mean a decline in sugar production in these areas. Thirdly, it will also result in production increases particularly in regions where, in Europe, beet cultivation and sugar production is especially competitive. Our competitors will optimise the capacity of their facilities, thereby creating a surplus of sugar on the European market. In addition, the volumes of isoglucose produced will increase in Europe after Because when the quota for sugar expires, so, too, will the quota for isoglucose. Since isoglucose could be used as a substitute for sugar in a number of products, it will be in competition with sugar for some customers after 2017 and further increase the impending market surplus. At the same time, sugar consumption in Europe is stagnating. The increased production and the availability of isoglucose will affect prices. And we must be prepared for that. As one of the large producers in Europe, however, we are in a strong position, and we will use this to our advantage. It will, however, become very difficult for smaller companies, and we will see a new wave of consolidation. A STRONG COMPANY MUST GROW The pressure of competition is growing, so, too, the pricing pressure and, at the same time, our employees expect higher wages and salaries, shareholders an attractive dividend, and beet suppliers an appropriate price for their beet. Only through growth can we meet all of these challenges and increase company value. For more than 175 years, Nordzucker s success story has been closely linked to its growth, first in Northern Germany and later in Europe. There have always been voices urging caution, and never to spend money. And many people were of the same opinion concerning the acquisition of Nordic Sugar. But without risk, we will not be able to grow, and if our predecessors had not taken well-calculated risks, Nordzucker would probably not exist at all. To emphasise once again, the market in Europe is not expected to Facts and figures on the sugar market regime > 1968: The sugar market regime comes into force > Legal basis: Directive no. 1009/67/EEC > Content: Quota regulation and minimum beet price > Most recent fundamental reform: > Sugar market regime expires: 30/9/2017 > 85 %: Current proportion of sugar that the EU supplies for itself

16 12 Nordzucker ANNual Report 2013/2014 : Sugar has a future Sugar consumption in Asia 2012/ million tonnes 16 million tonnes Sugar consumption in Africa 2012/2013 At least 6 8 prozent cent economic growth for the year Source: OECD grow. At the same time, existing sugar consumption will be partly substituted by isoglucose, and growth through takeovers is a difficult enterprise given competition law. The harsh reality is that we will have to extend our sphere of business beyond Europe s borders and generate part of our revenues from outside Europe in future. That is the logical next step. Africa, Asia and the Middle East are the growth regions of the future for sugar. With strong population growth, six to eight per cent economic growth per year has been forecast for many countries in these regions. And economic development also always means a higher standard of living, which is reflected first and foremost in eating habits and this means higher sugar consumption. We need to look ahead here and, while maintaining a sense of the realities, a healthy dose of responsibility courage is required, as the conditions in these countries are very different to those in Europe. Together with our Supervisory Board, we have made a clear decision to closely review growth options outside of Europe, including on the African continent. This is an important and appropriate step for our future. FOCUS ON REGIONAL MARKETING 16.9 million tonnes Average annual quantity of sugar production in the EU We will, however, not be going into other areas to produce sugar for our European market. Our focus has always been on regional marketing and the local production of sugar. We produce locally, near to the consumer. We intend to operate sustainably, monitor the process chain and serve a local market. We will invest with good judgement and observe international corporate social responsibility standards as a matter of course, which means ensuring that our projects are socially anchored in the local community. All our plants, including those in Europe, are in rural areas where we are an important economic factor for communities, for agriculture, for our employees and for supplier farms. This is an important asset for us. Taken further, this principle also applies to future activities in Africa or Asia. If we produce sugar from cane in Africa or India in the future, for example, we provide added value for that country, in order to meet demand locally, build infrastructure there and take on staff. It is about opening up future sugar markets that have growth potential, and about supplying the customers there with locally produced sugar. Our activities outside of Europe will definitely not be in competition with beet at home. And yes, of course we want to make money and reinvest these gains, or pass them on to our shareholders.

17 Sugar has a future : Nordzucker ANNual Report 2013/ EVEN IF WE SHOULD PRODUCE sugar FROM CANE IN africa IN THE FUTURE, OUR STRATEGY continues TO FOCUS ON PRODUCING locally AND MARKETING regionally. Hartwig Fuchs is clearly committed to beet and to the region ISOGLUCOSE IS NOT AN ALTERNATIVE FOR US At present At present, we do not see isoglucose as an alternative to locally produced sugar from beet. As the quota for isoglucose will also be expiring, the volume of isoglucose produced in Europe will rise after In my view, however, isoglucose has several disadvantages compared with beet sugar, which prevent us from moving into this area. Firstly, isoglucose is ideally based on maize maize that would be grown in Hungary, Serbia, Romania or Bulgaria. This would mean higher freight costs either for the raw material or the product not to mention that the regional approach would be missing from the product. This is a principle which we will continue to stand by in the future. Of course, wheat can also be used to produce isoglucose, but I see here a moral problem: can there really be a justification for taking food grain for isoglucose production when it could be raw material for the mills and bakeries of Egypt, Syria, Iraq, or the poorer countries of Africa experiencing chronic malnutrition? On a personal level, too, I just don t like the taste of isoglucose. Nordzucker, therefore, currently has no plans to move into this area. In my view, this is absolutely no alternative to sugar in terms of taste, usability and sustainable production.

18 14 Nordzucker ANNuAl report 2013/2014 : sugar has a future Streamlined processes and refined logistics make Nordzucker ready for the future. We need to think in terms of the market to remain competitive in the future, we need to change the way we think within the company. nordzucker will become a company that is oriented towards the market and the customer. to this end, we will turn the process chain on its head and think more in terms of the customer in future. For more than 175 years, our thinking has centred on beet cultivation and production, i.e. how much beet we have, how much plant capacity are we using, and how much sugar can we produce from this? today, the question is how much sugar can we sell for a given price, how much of it can we produce ourselves and how much land do we need for this amount of beet? The customers will expect Nordzucker to be more flexible in meeting their demands, and not just in terms of quantities and prices. We need to offer our customers an additional benefit: reliability, transparency and special service. We are also doing more work on improving efficiency and productivity. our opportunity lies in being faster, more efficient and more productive that our competitors. sustainability and customer loyalty go hand in hand of course, the expertise that we have continuously developed and promoted over the years also plays a role, such as our comprehensive certification and the practically seamless documentation of our production processes, for example. Particularly at a time when consumers

19 Sugar has a future : Nordzucker ANNual Report 2013/ regional production IS traditionally A CORE EXPERTISE at NORDZUCKER. expect transparency from the field to the chocolate bar, this is an opportunity for Nordzucker to make the most of its talents. Our customers and the consumers expect evidence for the manufacturing conditions, from sowing to finished, locally produced sugar. This is something that we can certainly provide. Producing sugar locally from beet has undoubted advantages in terms of shorter transport routes and therefore a lower environmental impact. Sustainability, with its environmental and social aspects, is a significant focus of our work. Since 1990, for example, we have significantly reduced our energy consumption and CO 2 emissions, and will continue to do so. The, by international comparison, extremely high security, social and environ mental standards in the EU are, in my view, a real competitive advantage. We are pioneers in sustainability in the industry and so we should be! Our customers quite rightly expect it of us. READY FOR THE FUTURE We are a European team and our strength lies in our diversity. Together, we have already prepared our company very well, and we will not ease off in our efforts to achieve greater profitability and further growth. Nordzucker will be systematically aligning itself with the market in the coming years. We are thinking in terms of the customer and are creating a new, flexible and efficient structure. At the same time, we will be putting out our feelers towards the markets outside of the EU, and expanding our core business in promising locations. 18 sites Nordzucker employees work in production facilities and refineries in seven European countries hand in hand.

20 16 Nordzucker ANNual Report 2013/2014 : Sugar has a future 20 TONNES OF sugar PER HECTARE DON T Just FALL FROM THE SKY Cord-Heinrich Köster

21 sugar has a future : Nordzucker ANNuAl report 2013/ optimised Beet cultivation creativity reveals hidden resources one of our most important company goals is strengthening yields in beet cultivation. But where is the potential? How can it be exploited? What has been the experience of our cultivation advisers? What trials have been carried out with our farmers and what were the results? To get answers to these questions first-hand, we visited two farmers in Lower Saxony, both committed beet cultivators participating in trials, along with cultivation advisers Axel schönecker and tobias minth. Wunstorf in calenberg land, near lake steinhude We are on the way to Wunstorf, a town in the region of Hanover. cord-heinrich köster s farm lies on the edge of calenberg land, part of the fertile calenberg lössbörde region. he farms 220 hectares on the deep humic luvisol soils typical of the area. he sows 32 hectares of this land with sugar beet. he also works for other farms as a contractor and drills beet for colleagues, and he has been participating in early sowing trials for around seven years now. The field must be mature. I don t work to fixed dates. cord-heinrich köster has a clear idea of early sowing. he knows the limits of what his fields can yield, as do his colleagues, he believes, whose knowledge like his own has grown over the last ten to fifteen years. cord Köster has been growing his sugar beet for fifteen years entirely by mulch seeding. he does this simply because the ground surface, which in his region is characterised by a scarcity in water, then holds the moisture better. on the question of how much to work the land, he believes less is more. He is pleased to tell us about an extreme case he witnessed some years ago. one farmer first applied slurry to his fields and then went over it with a grubber and plough. the neighbouring farmer brought out his old grubber and ran it once over the field. that s all he did. said cord Köster, with raised eyebrows. the one who worked his fields so intensively had half of it washed away in a storm. to my surprise, the neighbour s beet thrived. that made me think. cord Köster s farm has been participating in nordzucker s cultivation advisory early sowing trials for about seven years. he is assisted by the nordstemmen plant. similar trials are being carried out and evaluated at all nordzucker sites, be they in germany, poland or sweden.

22 18 Nordzucker ANNual Report 2013/2014 : Sugar has a future What s the benefit of early sowing? We have evaluated our early sowing trials. They showed that the difference between early sowing and later sowing dates was 1.5 tonnes sugar yield per hectare. Interpolating this, it can be assumed that for every week that sowing is brought forward, there is an additional yield of one tonne of sugar. There is a natural limit, however: it is not possible to bring it forward right into February. Our findings relate to March. Tobias Minth, Nordzucker cultivation adviser (left) talks to Cord-Heinrich Köster DOMÄNE BAHRDORF, IN HELMSTEDT DISTRICT, RIGHT ON THE BORDER WITH SAXONY-ANHALT Without a catch crop, we couldn t sow so early. Andreas Bertram And on to Bahrdorf, near Helmstedt. Here, we meet Andreas Bertram, the manager of Domäne Bahrdorf. The farm has 360 hectares of cultivated land, of which 60 hectares are used for beet cultivation, 80 hectares for rapeseed, and the rest for wheat. The soils have between 23 and 55 ground points i.e. sandy to sandy-loamy. We have always drilled early, Andreas Bertram tells us. Usually in March, as soon as the topsoil is dry. He, too, is convinced of the benefits of early sowing for the yield, but maintains that this is only possible on his farm thanks to a winter catch crop. That s particularly important, he emphasises. It leads to better soil conditions, erosion protection, better root penetration and organic fertilisation, especially on sloping ground. Without the catch crop, we wouldn t be able to sow so early. It s no wonder, then, that at 17 per cent, sugar beet is currently a key part of Andreas Bertram s operational planning.

23 Sugar has a future : Nordzucker ANNual Report 2013/ TRIAL FARMS HELP EVERYONE PROGRESS Axel Schönecker, manager of the Klein Wanzleben beet office, and his team assist Andreas Bertram s farm. He underlines the fact that in his experience, sowing early by an average of ten days significantly increases beet yield: By sowing early, the beet yield went up by eight per cent. The result was welcomed by both our project and our farmers. Today, early sowing has already become standard practice. But it is important to continue trials, because a single trial is not enough. Only as a whole can we get valuable findings of use to every farmer. One future topic for beet cultivation is the equal-space narrow-row method. Compared with conventional sowing, this method ensures that the intervals between the seeds both in their rows and between the rows are equal. In other words, in the case of the equal-space narrow-row method as the same suggests adjacent plants are separated by an almost equal distance of between 30 cm and 33 cm. All plants are therefore exposed to the same amount of water, nutrients, and, above all, light. If a 45 row is drilled, the individual plants are separated from their neighbours in the next row by 45 cm, but only separated by around 21 cm from their neighbours in the same row. The results using the equal-space narrow-row method are promising, but the harvesting technology currently available is not intended for rows of this width. There is a requirement for technical development here. 21 cm cm 45 cm 30 cm Conventional sowing Equal-space narrow-row method The findings of the research project are obvious: according to ARGE Nord, in ten trials at five sites over two years, the sugar yield increased by an average of five per cent. According to current understanding, the increase in yield is solely the result of the higher beet yield, i.e. the sugar content is not affected by the equal-space narrow-row method. The plants are obviously making better use of the surrounding space than with the normal row intervals. The ground and the sunlight are thereby also used better. Gero Schlinker, Managing Director of ARGE Nord, is therefore convinced of the future potential offered by the equal-space narrow-row method: We can see tangible yield potential with this method. How great this potential is and how it can be exploited, remains the subject of more research over the coming years. Comparability of the two systems to be examined is the decisive criterion in our trials on the equal-space narrow-row method. We are setting out with the same varieties at all trial sites. The drilling machines, sowing and harvest times are also the same, and this allows comparability across the regions. The results using the equal-space narrow-row method are promising, but the harvesting technology currently available is not intended for rows of this width. There is a requirement for technical development here. SIGNIFICANTLY GREATER YIELD WITH MORE INTENSIVE CONSULTATION In order to achieve 20 tonnes of sugar per hectare among 20 per cent of the highest-performing beet farmers by 2020, regional expertise teams in every country where Nordzucker processes beet are defining the steps, large and small, which are required to reach the target of 20 tonnes. Taken together, the many different, often small steps eventually lead to success. On the one hand, our cultivation advisers are carrying out their own trials or see numerous different trials, and on the other, they see many on-farm trials in the course of their daily consultation. They therefore have a very wide view of the cultivation in its natural environment, which they consolidate to a certain extent. And they bring this knowledge back to the land, i.e. to the other farmers. This is a very important step on the way to 20 tonnes of sugar per hectare. Our aim is to drive innovation forward, says Dr Andreas Windt, Manager Cultivation Advice. FACTS ON THE initiative Start: 2011 Aim: 20 per cent of beet farmers should be able to harvest 20 tonnes of sugar per hectare by 2020 Core areas: Plant strains, cultivation methods, harvesting, storage and cultivation structure Knowledge exchange: Regional expertise teams in seven growing countries

24 20 Nordzucker ANNuAl report 2013/2014 : sugar has a future Fredrik Larsson in sweden In the Southern Swedish province of Scania, sugar beet feels right at home. Joachim Vogel (r.) and Johannes Vogel (l.) in germany In the Mittelweser district, sugar beet contributes to the financial success of family businesses with a long heritage. Daniel Frauenschuh in slovakia Sugar beet grows well in the climatic conditions of Eastern Europe, too.

25 Sugar has a future : Nordzucker ANNual Report 2013/ Sugar beet is the future SUGAR BEET IS A WINNER FOR US THREE BEET FARMERS TALK ABOUT THEIR EXPERIENCE We talked to three farmers from three Nordzucker countries Germany, Sweden and Slovakia to find out how important sugar beet is for their businesses and how they see its future also thinking of the post-quota era beginning in We talked to Daniel Frauenschuh, from Austria. Since 2008, he has been the estate manager responsible for a large agricultural business of 3,500 hectares in Slovakia. Fredrik Larsson is a fourth-generation farmer operating a business of 735 hectares near Skegrie in the South-East of Scania, Sweden, along with a partner and two employees. And finally Joachim Vogel, who, together with his wife, runs a 140-hectare farm in the Mittelweser district that has been in his family for 500 years, as well as a 100-hectare business in Lage, in the Lippe district. BEET FARMING UNDER DIFFERENT CONDITIONS When you look at these three agricultural businesses, it quickly becomes clear how different they are. Daniel Frauenschuh and his 90 employees at six sites in Slovakia farm around 2,000 hectares of arable land as well as 1,500 hectares of grassland and pasture, which are used for intensive livestock and dairy farming. The agribusiness plants 500 hectares with wheat, 200 hectares with winter brewing barley, 100 hectares with summer barley, 115 hectares with beet, 310 hectares with maize and 275 hectares with rapeseed, as well as clover and lucerne. His land is spread across 14 districts. The business used to be a state-owned enterprise, but today it is clearly structured and highly efficient: it makes a profit and acts as a model for Slovakian agriculture. Somewhat smaller, but with largely contiguous fields, BryLa jordbruks AB is typical for an agricultural business in Southern Sweden. Fredrik Larsson and his partner cultivate 92 hectares of beet, 103 hectares of rapeseed, 270 hectares of wheat and 160 hectares of brewing barley, as well as peas and the pasture grasses meadow grass and fescue, alongside the fallow land that is required. The Vogel family farm is also typical for the region around the Weser marshes. The family has been growing beet for 60 years, currently on 15 of its 140 hectares of arable land. They also cultivate hybrid rapeseed and seed potatoes, as well potatoes for crisps, asparagus, winter wheat, rye and triticale.

26 22 Nordzucker ANNuAl report 2013/2014 : sugar has a future The Vogel family has been growing beet for 60 years Beet has a high priority on our farm. What all three farmers have in common is the conviction that beet cultivation fulfils an important function on their farms. Frauenschuh emphasises: For me, sugar beet is a) a useful crop for crop rotation, b) an excellent cash crop and c) a very important source of animal feed, thanks to the cossettes we get back from the plant. in addition, beet is a stabilising factor for our financial results. compared with wheat, whose price fluctuates enormously, it provides us with much more predictable earnings. despite the vast differences in size between the farms, Joachim vogel sees things similarly: the beet has a high priority on our farm, partly for reasons of crop rotation, but also for the profit margin and distribution of labour. and in sweden? there, too, the farmer s position is unequivocal: We generate around 20 per cent of our revenues with sugar beet, explains Fredrik Larsson, although it only accounts for 15 per cent of our total land. So that is obviously cost-effective! So it seems that conditions are excellent for the sugar beet s future career. All three farms are planning a moderate expansion of their beet-growing areas. Post-2017, we d like to expand our land under cultivation to 20 hectares. that would fit well with our crop rotation, but of course it also depends on the beet staying competitive, underlines Joachim vogel. Fredrik larsson, however, emphasises the importance of crop rotation: the sugar beet will remain an

27 Sugar has a future : Nordzucker ANNual Report 2013/ important arable crop. It s a good plant for breaking the infection chain in crop rotation and it helps to distribute the work evenly over the course of the year. For him, too, the economics are paramount, Beet cultivation has to make financial sense for me as a farmer and for the sugar industry. If it s not profitable, it won t get planted, and if it s not planted, there s no industry, so if everyone involved does the right thing at all levels, we can create a win-win situation. Daniel Frauenschuh and Fredrik Larsson have invested in new technology, and thereby in the future of the sugar beet. AND SUGAR BEET IS SOMEHOW AN INTERESTING SORT OF CROP. On this point they all agree that the services and opportunities offered by the Nordzucker cultivation advisers play an important role. Asked about their experience of the cultivation advisers responsible for their regions, we only get positive answers. None of them would want to do without the experts advice. It starts with recommendations on how to effectively combat recurrent rapeseed on the field when rotating from rapeseed to beet, and includes tips for neutralising salt damage due to heavy rainfall immediately after fertilisation with potash, as well as special advice tailored to the climatic conditions for beet in Slovakia. The expertise and exchange of information with the cultivation advisers is appreciated everywhere. So Fredrik Larsson is not the only one keen to share in the latest findings from the project, for instance. Not without self-criticism, he points out that the more closely you look at the cultivation methods, the more you see that the way we ve always done things may not always be the best. So it s worth paying attention and learning from the trials carried out. And his colleague from Slovakia hits the nail on the head when he declares, The idea is for us to get better! That is why we are happy to draw on the findings from the cultivation trials. Characteristic of the good farmers is the fact that they get suggestions from other sources available to them, too, in addition to the farmers meetings, field days and training courses organised by the Nordzucker cultivation advisers. Frauenschuh regards the results of the agricultural trials as extremely helpful for his work. If the experience and results of the experiments are positive, then he is one of the first to apply the new knowledge, because this is the only way to achieve the sometimes ambitious goals that farmers like Fredrik Larsson have set themselves. Our aim is for our farming to be in the top 20 per cent in Sweden in the years ahead. We have good conditions, so we just have to continue the trend of making continuous improvements, keep on eye on the research, make use of new findings and have the confidence to be the best. 20 t onnes OF SUGAR PER HECTARE BY 2020 IS THE TARGET FOR 20 PER CENT OF FARMERS

28 24 Nordzucker ANNual Report 2013/2014 : Sugar has a future THE MARKET SETS THE PRICE AND QUALITY WINS OUT. Under these circumstances, it may come as no surprise that the farmers are not at all worried by the expiry of the quota in 2017 and its financial effects. Quota, quota, quota is the worst thing you can do to a market. So for us, it s good that it s coming to an end. The market sets the price. And quality wins out. We need professionals who support us, and we have to work professionally ourselves. Hand in hand. I m not worried about the end of the quota! Given the size of his business, Daniel Frauenschuh is an advocate of the free market. Some of the farmers are more critical, however. But for Fredrik Larsson, too, the opportunities predominate: I don t believe that the abolition of quotas is only negative. It provides great opportunities, because we can grow and produce more. Our consistently high sugar quality and punctual deliveries make us competitive. The industry and the farmers depend on one another. A profitable industry in conjunction with profitable farming keeps things moving forwards. In neither Slovakia, Sweden nor Germany do they see a danger to their own beet farming or to sugar production in Europe. Quite the opposite! The last few years have shown that beet is sustainable in Germany, says Johannes Vogel. Confidence in the collective expertise of the sugar industry and farmers is so strong that real opportunities for the future are expected. GPS Precision farming with GPS and GIS is the technology of the future positioning TO THE CENTIMETRE IS WorthWHILE.

29 Sugar has a future : NORDZUCKER ANNUAL REPORT 2013/ I VALUE THE SUGGESTIONS MADE BY MY CULTIVATION ADVISER. IT PAYS OFF. ADVANCES IN BEET CULTIVATION ARE ALREADY MUCH MORE DYNAMIC THAN FOR OTHER CROPS. So the cost-effectiveness of the sugar beet is the be-all and end-all for the era after That s something everyone agrees on. And when we ask about what they are doing to increase their yields, we are deluged by the responses: Firstly, we work very closely with the cultivation adviser at our sugar plant. Secondly, we have bought new technology. Then in Germany, we use special catch crop mixtures, explains Frauenschuh, and before we sow the beet we scatter a thousand kilos of lime. We take soil samples to determine the fertiliser. All of these are steps that optimise conditions for the beet. We are not a farm that scrimps and saves. We invest. For their part, the Vogels think that advances in beet cultivation are already much more dynamic than for other crops, and they are sure that plenty more will be possible in future. Apart from that, we are now trying to complete the seedbed in one pass. That cuts costs, because we use less fuel, for example, and at the same time it keeps the moisture in the ground, which we need for germination. And, finally, in Sweden they are betting heavily on the possibilities offered by modern technology: We have invested in cutting-edge machinery, we use GPS and other technologies and have bought a modern, six-row beet harvester. Our strategy is to use specialised drivers for our machines, in order to exploit their full potential. As diverse and individual as the location and size of the farms are also their steps to boost yields. But everyone we asked had the will to ensure that sugar beet remains competitive with other arable crops in the future.

30 26 Nordzucker ANNuAl report 2013/2014 : sugar has a future The end of one campaign means looking ahead to the next... Now it s time to invest sustainability and ProFITABILITy hand in hand

31 Sugar has a future : Nordzucker ANNual Report 2013/ Investments Smart investments get plants fit for the future The future is approaching with great strides. And Nordzucker is responding to the new challenges with a comprehensive range of measures. We also have the end of the quota system in view as pertains the plans for investments in order to continue making our plants ready for the future with intelligent investments. Investments that serve to ensure the long-term sustain ability and profitability of our production sites. But what areas do they focus on? Where are we making investments and why? We would like to answer these questions by taking our plant in Örtofta in Sweden as an example. We spoke with two of the project managers, Jerker Magnusson and Niklas Hanner. IN SUGAR PRODUCTION, THE TIME FRAME FOR IMPLEMENTING INVESTMENT PROJECTS IS TIGHT. Sugar production is a seasonal business: during beet processing the campaign sugar is produced around the clock, seven days a week. Due to this special timing, all investments in which new systems are installed or old ones are replaces need to be completed by the beginning of the next campaign. What are the long and short-term priorities for investments in the Örtofta plant? From the project managers in charge, we learn that all investments in Örtofta contribute to reducing costs and thereby increasing profitability, and, at the same time, to signi ficantly lowering energy consumption. This includes a new evaporation dryer (ED for short) in which beet pulp is dried using the thermal energy from steam, so that it can be processed to the animal feed dried pulp pellets. We have combined the investment in the ED with a new continuous crystallisation machine in the boiling station. Together, the two systems reduce the total energy consumption of our plant. This is because the ED uses less energy than the old system and it creates steam, which we can use in the evaporation plant to concentrate clarified juice, Jerker Magnusson continues. So both investments will result in substantial energy savings at the plant. In addition, two evaporators will increase the capacity of the heating areas by about a quarter. One of them is new and is being delivered by a Polish supplier, while the other, already part of the inventory, was modernised. Finally, a new molasses tank completes the series of projects in Örtofta and will double storage capacities there to 28,000 tonnes. THE NEW molasses TANK WILL DOUBLE THE storage CAPACITIES FOR MOLASSES IN ÖRTOFTA. 28,000 tonnes

32 28 Nordzucker ANNual Report 2013/2014 : Sugar has a future PLANNING, TIMING AND COORDINATION ALL HAVE TO BE PERFECT Preliminary work for the evaporation dryer and the crystallisation machine, like laying the foundations, was begun after the 2012/2013 campaign. Despite this, keeping all the investment projects exactly on budget and on schedule is a fine art. This requires a well-devised project plan. The plan for the evaporation dryer was drawn up about eighteen months ago and the capital expenditure itself has been planned for as long as six years. The idea of adding a continuous crystallisation machine to supplement the investment in a evaporation dryer and make full use of its capabilities was born in the Energy Focus Group and included in the investment plan three years ago. Just as important as precise planning is excellent cooperation across all departments, plants and countries. And of course the involvement and dedication of all of our colleagues. Everyone in the plant is working towards a common goal when it comes to the implementation of large investments. Only in that way will we reach our targets in time, says Niklas Hanner. Investments on this scale have a major influence on the whole plant, of course. Around fifty employees at Örtofta are involved in the investment projects to varying degrees. But that is not all. Last summer, we had about forty employees from external companies in the plant, who laid the foundations for the evaporation dryer and the crystallisation machine, for example. This summer, we will certainly employ 150 workers from about twenty different external companies, Jerker Magnusson explains. We have coordination meetings each week and are able to represent the other if there are bottle-necks, Niklas Hanner emphasises. REDUCING ENERGY COSTS IS A PRIMARY OBJECTIVE All of the energy produced in the Örtofta plant can be used multiple times. This will reduce the annual power consumption of the sugar plant by about 150,000 MWh. This represents around 30 per cent of its power requirement during the campaign, and is equivalent to the energy consumed by around 7,500 family houses. Additionally, the CO 2 emissions will be decreased by about 32,000 tonnes per year. These investments represent a great step towards sustainable production, Jerker Magnusson sums up, not without pride. And of course they were preceded by intensive knowledge transfer between the sites both in the preparatory phase and while the project was being executed. Nearly all our machine operators have had a look at the evaporation dryers in Nakskov and Uelzen, and the future operators of the continuous crystallisation machine were in Klein Wanzleben and Nordstemmen, recounts Niklas Hanner. He continues, Seeing how the technology works in full operation is an important experience. It changes people s attitudes and helps to remove any fear of the new technology. 30 Per Cent THE NEW Facilities WILL REDUCE ENERGY CONSUMPTION AT THE ÖRTOFTA PLANT BY 150,000 MWH. THIS CORRESPONDS to 30 PER CENT OF THE PLANT S energy NEEDS DURING THE CAMPAIGN.

33 Sugar has a future : Nordzucker ANNual Report 2013/ The project managers have got a lot to smile about. With the timely completion of all renovation and expansion measures, they are moving the Örtofta plant further forward: roll on the next campaign! THE EFFICIENCY PROGRAMME PROFITABILITY PLUS AND THE FUTURE All the investment projects carried out in Örtofta contribute to the profitability and increase in efficiency. They ensure a profitable use of resources and increase the cost-effectiveness of the plant. And in a way they are a never-ending story, just like the whole Profitability plus efficiency programme. After all, every efficiency gain at one point in the production process opens up further potential elsewhere. Following the latest investments in Örtofta, the project managers have already discovered the next important starting points. For instance, increasing the efficiency of logistics capacities will soon be on the agenda, i.e. the areas of packaging, silo, storage and unloading. After all, current capacities are based on very different scale of production to that now in place at Örtofta. One thing just leads to another, Jerker Magnusson says, smiling. He and his colleagues already know where the next work in progress will be: The filter station is reaching the limits of its capacity. The plant has outgrown it and can no longer keep up, both in terms of its quality and capacity. Something has to be done. Just like with the presses for the extracted beet pulp and the automation system. We have to focus on the future. We have always been good at saving energy and Nordzucker was always a leader in terms of efficiency gains in this area. Jerker Magnusson and Niklas Hanner see their plant as a tightly meshed, highly integrated system of production components, with scope for efficiency gains. With their sharp eyes for future opportunities, they are living and breathing exactly what the Profitability plus programme stands for: the drive for greater efficiency and sustainability as a continuous, never-ending process.

34 30 Nordzucker ANNuAl report 2013/2014 : sugar has a future master of a complex production machine Lothar Steinmann Patrick Drengemann

35 sugar has a future : Nordzucker ANNuAl report 2013/ production how the profile of a master craftsman evolves sugar has been produced in nordzucker s plants for 175 years. our plants are important employers in their regions. How has the work changed in recent years? At the plant in uelzen, we spoke with two master craftsmen who can look back on very different careers. one of them, in his late 40s, will soon celebrate his 25 th anniversary with the company and is continuing a family tradition that goes back for generations. the other, a young father in his early 30s, has been a master craftsman in uelzen for just two years. We accompanied both of them during a working day outside of the campaign to get an idea of what it means to be a master craftsman at nordzucker today. Lothar Steinmann is celebrating his 25 th anniversary with the company this year. He completed his apprenticeship in the Northeim sugar plant and qualified as a master craftsman at the age of 22. He has been foreman at the Uelzen plant s sugar house for 15 years and during his shift is responsible for the entire production process in particular for crystallisation and loading the silo. he is a master craftsman in the family tradition my grandfather and great grandfather both worked in the sugar plant. i d say we re not far short of a hundred years altogether, says lothar steinman with a grin. his smile gets broader as he tells us that his son is starting an apprenticeship as an industrial electronics engineer at the uelzen plant. a proud family tradition, in other words. We ask him about his very first memories of the sugar plant. he laughs. my first memory of the sugar plant is actually my grandmother. i must have been four or five years old. she brought my grandfather s lunch to the plant everyday, in a tin box, like people used to do back then. LoTHAr STeINmANN HAS BeeN WorKing as a Foreman in uelzen For 15 years

36 32 Nordzucker ANNual Report 2013/2014 : Sugar has a future Lothar Steinmann among his team EFFICIENT TEAM WORK RATHER THAN STRICT HIERARCHIES The work has changed a lot over the years. Lothar Steinmann reminisces, Thirty years ago the master craftsman was more of a taskmaster. Nowadays, I don t tell people which screw to turn any more. I lead a team of individuals who think for themselves. He had his first job as a master craftsman in the crushing and extraction section. There were two of us foremen and we normally had a hundred workers. Another fifty were employed for the campaign. Just for that section. In those days, there was a foremen for one section in one shift. But things are very different today. We work a four-shift system. I have 16 employees in my team. During the campaign, we add another five or six. Everyone pulls in the same direction. The importance of teamwork becomes clear right at the start of our visit. Every day at 8.20 a.m. there is a meeting of all the foremen, engineers and the plant director. They all report on what needs to be done in their area, so that the cooperation between them all can be optimised. Steinmann relies on the opinion of his staff, too; they re much closer to the practical side of the work. We go with him to a meeting, where he meets three of his staff to discuss a technical drawing for the construction of a new raw sugar mixer. Overall, the work has become more compressed, Steinmann says later. Things that a plant manager used to do twenty years ago are now sometimes carried out by an engineer. And a lot of what an engineer used to do is now down to us foremen. He pauses to sum up, More responsibility, organising our own group work today a master craftsman is a functional manager who has to have an overview of everything. Nowadays, everyone associates themselves with what comes out at the end of the day. We talk about entire processes. It certainly is very satisfying! An annual average of around 250 staff work at the plant in Uelzen. RESPONSIBILITY AND PROFESSIONAL TRAINING Lothar Steinmann lists what has to be done in his section: There are four shifts to be filled: four plant operators, four foreman s assistants, four centrifuge operators, four double-refined cookers and four silo loaders. Plus one reserve in case anyone gets ill. Everyone here takes an interest in the others work; that broadens their horizons and makes them into all-rounders. That s the only way we can organise and control the entire production process properly with what is just a handful of people, compared with the old days. Today, there are plenty of

37 Sugar has a future : Nordzucker ANNual Report 2013/ opportunities for professional development, you just have to use them. Alongside managing a team, planning and carrying out repairs are also his responsibility. Every few weeks, a budget meeting is held to talk about the expenses that have been incurred. In addition, he is also a safety officer and is involved in a Group-wide working group. Asked about how IT and have changed his job, Steinmann replies, During the campaign, I can work at night just like in the daytime. If I need a quote I can just send a request in the middle of the night and get the answer back the next day. And in future, who knows? Steinmann thinks for a moment. What could a shift system for a foreman look like in future? Does every shift still have to have a foreman? Are the workers not now able to operate their station themselves; is it not enough to have experienced employees as coordinators? We are discussing that at the moment. So there s a lot of change happening. THE END OF ONE CAMPAIGN MEANS LOOKING AHEAD TO THE NEXT In the old days, when we switched from the campaign to the repair season, we could say, Time to kick back and take a breather. But it s not like that anymore. The campaign puts an enormous strain on our machinery. Even while the campaign is under way, we are focused on identifying the parts with potential for wear and tear. When major repairs are required, we have to get three quotations for the work, which is not so easy with our highly specialised equipment. Then there is the paperwork to be done for damages covered by insurance, if a machine breaks, for instance, or for investment projects, of course. During the campaign itself, Lothar Steinmann also has an eye out for potential improvements. I always say, finishing the campaign with no ideas for improvements would be a shame. In our crystallisation section in particular, it s great fun to keep tweaking the machinery, so that the process always runs a tick better. thirty YEARS AGO THE MASTER CRAFTSMAN WAS MORE OF A TASK- MASTER. [...] TODAY, I LEAD A TEAM OF individuals WHO THINK FOR THEMSELVES.

38 34 Nordzucker ANNual Report 2013/2014 : Sugar has a future Patrick Drengemann with colleagues in the workshop Patrick Drengemann is in his early 30s and, for two years, has been a master electrician at the plant in Uelzen, where he completed his apprenticeship. Alongside his work as an electrician and shift leader, he passed the exams to become a certified electrician and is now responsible for the entire energy supply area. Working WITH ENERGY We operate our own power plant here, with two turbines and a total capacity of roughly 26 mega watts, and we produce all our own process heat. Patrick Drengemann is visibly proud of the independent energy supply at the plant in Uelzen. Twenty-seven transformers supply power to every station here in the plant. So it s a great responsibility to ensure that everything runs as it should. Particularly when the campaign is under way, absolutely nothing is allowed to go wrong. THE DAILY ROUTINE OF A YOUNG MASTER CRAFTSMAN My working day generally begins in the office. I check my s, what are the latest messages? Has the Purchasing department sent me anything or are there any letters or forms for me to sign off on? On Mondays, we coordinate our work in the team, talk about new developments, health and safety issues, etc. After a session of paperwork, I take a walk through the workshop to talk to the colleagues there. If we have ongoing projects, like new investment projects for example, then the next stop is the building sites. When external contractors are involved, I discuss the progress of the work with them. I m getting the hang of it now after two years. I was a shift leader before, so I m used to taking responsibility. That also showed me how well people can work together, what good teamwork really is. PATrick DreNGemANN has been a master electrician at the Uelzen plant for 2 years

39 Sugar has a future : Nordzucker ANNual Report 2013/ THE TASKS OF THE FUTURE Although he has only been a master electrician for two years, Drengemann can look back on a good ten years of professional experience. How does he think his profession will change in future? There will be more automation, that s for sure. We will integrate even more functions into the control system. Our youngsters already have a lot of knowledge and are much more aware of the topic than we were at their age. They contribute a lot of new ideas. He thinks for a moment. And of course, there is the whole subject of greater efficiency not least since the energy reform became a priority. We are always on the lookout for where we can save a few kilowatts of power. In future, it will be possible to do even more. EDUCATION AND PROFESSIONAL TRAINING In Patrick Drengemann s field of electrical engineering, in-house training also plays an important role: Nordzucker offers plenty of training programmes, of course on the sugar process as a whole, but also on very specific aspects, especially for our younger colleagues. Such as on the control system for example, when we get a new system update. But also on field systems, measurement and microwave technology. Here in the plant, you can never have enough knowledge. So we run training courses all year long, also by colleagues for colleagues. If a larger group is involved, then someone who knows about the subject just gives a presentation to the others. Here, everyone has to know about everything really. The employees commitment can be seen in the fact that in the electronics department, there are four technicians and four master craftsman s qualifications. Here, everyone has to know about everything really. THE FOREMAN OF TODAY How has the profile of a foreman in sugar production evolved? They have become real team players. They are managers with a considerably bigger area of responsibility and greater freedom to make decisions than their fathers and grandfathers. There is no doubt that being a foreman at Nordzucker is more appealing than ever before!

40 36 Nordzucker ANNuAl report 2013/2014 : sugar has a future Worried about sugar? It s part of life and belongs in a balanced diet. What s important is getting the balance right million hits when you google sugar. sugar in the media

41 Sugar has a future : Nordzucker ANNual Report 2013/ Health and nutrition HOW SUGAR IS BECOMING A HOT TOPIC ON TV AND IN PRINT Publishers and TV stations have been making drastic cuts to editorial staff numbers and research budgets for several years now. In these times of cost pressure and rationalisation, it should come as no surprise that they then sometimes fail to do justice to complex issues requiring in-depth research such as sugar. We set out to gain an overview of current reporting, how nuanced it is, the way in which it handles scientific facts, and its not inconsiderable impact on the general public s knowledge of sugar and nutrition. SUGAR IN THE TABLOIDS, ON BREAKFAST TV AND IN NEWS MAGAZINES Entering Zucker (sugar) into the search engine Google gives you 8,260,000 hits. If you combine the search terms Zucker (sugar) and Genuss (treats), you get 2,570,000 results. So far, so good. However, if you search for Zucker (sugar) along with the word Gift (poison), the search engine comes up with no less than 1,340,000 hits. Searching for Zucker (sugar) plus Drogen (drugs) gives you 141,000 results. The hits include headlines in well-known media outlets. It is a simple test which is easy for anyone to understand, but it leaves you in no doubt as to how sugar is publicly perceived throughout the media. Is it possible to put all this down to the age-old media aphorism that bad news is good news? Unfortunately, it s not that simple. On one hand, it seems that sugar is being used to draw viewers and readers from headlines on the breakfast TV show Morgenmagazin like Sugar, the dangerous mass drug to best-selling books such as Hans-Ulrich Grimm s Health risks guaranteed how the sugar mafia is making us ill. On the other hand, sugar production and consumption is such a complex issue that most media coverage fails to examine it from all the relevant angles and perhaps this is inevitable. The media reality shows that more information is needed about sugar. It is often misunderstood, but nevertheless vital for life.

42 38 Nordzucker ANNual Report 2013/2014 : Sugar has a future Sugar as an evolutionary driver = sugar consumption The ability to taste sweetness and use it as a way to find high-energy food something which other species ignored gave our ancestors a crucial advantage in the battle for superiority. Even the high-profile World Health Organization (WHO) seems to be taking a one-sided approach in its current guidance when it recommends that people limit their sugar intake to drastic new levels. That is because this draft is based on the scientifically unproven view that obesity and tooth decay are down to one thing alone: sugar. Firstly, improving oral hygiene has led to a significant improvement in dental health, especially among children and young people. Tooth decay is therefore becoming less common. Secondly, unilateral bans are rarely constructive education is far more valuable. That is something which there is a marked lack of with relation to sugar. As our everyday lives become more and more hectic, we are increasingly eating processed food rather than preparing meals ourselves. In the process of this shift, we have lost a great deal of knowledge, including an appreciation of sugar as a natural part of a balanced diet something our parents and grandparents knew. We need to start by tackling this problem. However, the complexity of this issue always seems to fail in a media landscape which likes easy answers and embraces a culture of he who shouts loudest gets heard. A good example of this is an article in a popular tabloid newspaper which looked into the sugar content of 55 foods in July 2012 and published a number of surprising results. Like many other articles, this one pointed out that there was nothing wrong with sugar itself and that it plays a natural role in the body as an important energy source. This important scientific fact was more or less an aside which was quickly followed by much more powerful catchphrases like sweet

43 sugar has a future : Nordzucker ANNuAl report 2013/ poison and sugar as a drug in the battle for the reader s attention. these phrases are almost always taken from the same handful of sources. First among them is a series of studies by the us endocrinologist and paediatrician robert lustig from the university of california in san Francisco. But even this hard-line critic of sugar admits that what matters most is how much sugar people eat. mentioned in passing, this fact is true of pretty much everything we eat and drink, which is probably why it is often overlooked in the emotionally charged media debate. a fondness of sweet things is in our nature our fondness of sweet treats also has another dimension which is often overlooked in media coverage. it also enabled the human race to succeed in its evolutionary ascent. our earliest ancestors instinctively knew how to use the sweet energy in carbohydrates and other food groups to their advantage. they also understood that sweetness is a clear indication that a fruit or berry is not poisonous. in our modern world where people no longer spend all day engaged in energy-intensive hunting, it is important for us to pay close attention to eating a balanced diet and getting enough exercise. With sugar now readily available as a source of fast-release energy for our brains, muscles and organs, we must use our powers of judgement to control our age-old impulses. Average sugar consumption per capita in Germany has remained unchanged for about 40 years proof that we are successfully doing just this. Nordzucker is involved in various projects, which aim to improve knowledge about food production, a balanced diet and healthy living, primarily among children and young people, because one thing above all is clear: a substance alone cannot be made responsible for obesity and diet-related diseases. 35 kilogrammes Every german consumes an average of 35 kilogrammes of sugar per year.

44 40 Nordzucker ANNual Report 2013/2014 : Sugar has a future How values become standards Quality management is teamwork. QM measures are regularly coordinated across countries and sites.

45 sugar has a future : Nordzucker ANNuAl report 2013/ quality management intelligent guidelines For consistent QuALITy a company like nordzucker lives from the satisfaction of its customers with the quality of its products. in order to ensure that our sugar is of consistently high quality, we need dependable, high-performance quality management, and, of course, clear guidelines on how the planning, management and monitoring of the quality of our products and processes are to be carried out. But how does it all work in practice? How do our values become standards? To find out, we went to see Birgit kerner, quality manager at the plant in Nordstemmen. Then we visited two of her colleagues in poland and sweden to see if and how their work differed. it s not about the standards, it s about the people We meet in a conference room in Braunschweig, where Birgit kerner has just had a meeting on a different topic. she is a very calm, restrained woman, who speaks with a quiet but very emphatic voice and underlines what she says with brief, precise gestures. Birgit kerner explains that, generally, there are various different quality management officers. the plant manager determines who is responsible for which area. accordingly, there is an environmental officer, one for health and safety, an energy management officer, one for quality management according to iso standards and one for food safety, among others. this is a standardised structure which applies in all plants. in nordstemmen, the responsibilities are split between two people, the production engineer André Pollex, responsible for environment, health and safety, and Birgit kerner, who is in charge of product safety and quality management. For both of them, the role involves work in addition to their normal everyday activities. quality, 24 hours a day, seven days a Week We ask Birgit kerner how the laboratory is staffed. She explains that, during the campaign, there is a lab technician responsible for the inspection of outgoing goods and four employees working a four-shift system, who can be reached 24 hours a day, seven days a week. All the intermediate steps in the production process are sampled and, of course, samples are taken before the sugar finally goes into the silo. These shift samples are taken by the production staff during their eighthour shift and tested for various parameters: is it basic grade or refined (white sugar 1 or 2)? and does the quality match the internal requirements? at nordzucker, these thresholds are below those required for the corresponding specification. the requirements of the customers, for example, are defined in the specifications, which must be complied with when preparing deliveries. these include guidelines on the grain size, as well as quality parameters such as the moisture content and the colour in solution, along with the colour type, which is used to classify granulated sugar according to colour by means of reflection measurement. if all the results fall within the threshold limits specified, the sugar is sent to the silo and is then approved. of course, deliveries to customers are tested once again before they leave the plant. And they are tested thoroughly, too, with one extract and one reference sample from every container supplied, i.e. for each truckload, each 25 kg or 50 kg sack, each 1 kg bag or each 1,000 kg big bag.

46 42 Nordzucker ANNual Report 2013/2014 : Sugar has a future Audit process for customer deliveries: 1 Does the grain size correspond to the guidelines? 2 THE SLIGHTEST INACCURACIES MAKE A BIG DIFFERENCe. In answer to our question of how much tolerance the customer specifications allow, Birgit Kerner explains that it very much depends on the products that the customer wants to manufacture with our sugar. For example, we have a customer who wants to package vanilla sugar. If ten grammes have to be filled into the little packet and the grain is too fine and it s therefore too dusty, then the flap won t close. But if it s too coarse, then the packet gets too thick, so when a large quantity of the packets is put in a box, it won t shut. When we have such very precise specifications, we examine an extra sample in the laboratory and only approve the formula for that one day! With other customers, the tolerances are not quite so strict. We can see that all this cannot be managed without very detailed guidelines. Birgit Kerner agrees, That s why there are detailed process descriptions on carrying out our outgoing goods inspection, working in the service centre, complying with regulations, and so on. All that is laid down in our management handbook, which is filed in a public directory as a central document so that everyone can download the forms, specifications, organisational charts, process descriptions and instructions. AND IF SOMETHING DOES GO AWRY? We understand that professional quality management isn t possible without comprehensive documentation. But what if something really does go wrong? Are the colour values correct? If something really goes wrong we have to take action! In Nordstemmen, for example, we had a complaint from a big customer. So of course, we fixed the source of the problem straight away and also checked all the other Nordzucker plants to see if the same mistake could happen there. She pauses briefly and then makes a sweeping gesture, One other consequence was that since then, a central directive has stipulated that the same procedures apply at all sites on how often, where and how testing is to take place. That s a product safety topic that concerns the whole Group. ON AN EQUAL QUALITY FOOTING ACROSS EUROPE 3 Does the quality match the specifications? After the long talk with Birgit Kerner, we were curious about how quality management is lived and breathed at our other sites. So we made an appointment with Hanna Woźniak from Nordzucker Polska who, together with the plant s own officers, is responsible for QM at the two Polish plants, in Opalenica and Chełmża. With a refreshingly direct manner, she tells us what she particularly wants to see. Practical relevance! is her motto. Don t produce unnecessary paperwork and bureaucracy. QM is a ongoing process you have to live and breathe it. Too much bureaucracy is counterproductive. Good, practically relevant QM is mainly about prevention! And it obviously works very well. Not for nothing do our customers in Poland include major international food groups such as Mondelez, Coca Cola and PepsiCo. The last two have Nordzucker Polska s quality standards and certifications audited once a year by a British company, including inspections of the quality assurance processes and their end-to-end documentation. When you think that the customers QM departments generally have ten employees or more, the performance of Hanna and her few colleagues cannot be praised enough.

47 Sugar has a future : Nordzucker ANNual Report 2013/ Our values responsibility, dedication, courage and appreciation remind us of how we want to act. Lina Nelander OUR VALUES ARE THE BACKBONE OF EVERYTHING Lina Nelander, project manager for quality management at Nordic Sugar in Sweden, is one of three employees in the local QM department. Her office is in Arlöv, but she is also responsible for the two Swedish plants, in Arlöv and Örtofta. We meet her between two other appointments and shortly before the annual, Group-wide QM meeting, where she meets in person all the colleagues from quality management with whom she usually only exchanges phone calls and s the rest of the year. For Lina Nelander, the four corporate values of responsibility, dedication, courage and appreciation are an important tool for reinforcing quality awareness at all levels of the company and for ensuring that they stay on the agenda, because they remind us of how we want to act. Dedication is her favourite value, she says with a smile. We believe her without further ado. Anyone who, like her, attends six Reference Group meetings for product safety a year to coordinate decisions for harmonising the QM processes in the Group, on top of four to six QM project meetings a year, simply has to be putting their heart and soul into the business. Lina Nelander appreciates one aspect of her job above all others, as she freely admits in conclusion: What I really love about my work is the opportunity to go all over the plant, to see everything that goes on, to get involved in things myself and, at the same time, to talk to lots of different colleagues and to work with them so that we grow together as one big, unified company. That is really great. And to us it really does seem to be the unifying element that all the quality managers we spoken to have in common. THE SPECIAL QUALITIES OF QUALITY MANAGERS Not everyone is cut out to be a quality manager. You have to be consistent, send clear messages and, above all, be persistent. You can t be afraid to say so clearly when something goes wrong. You need a talent for putting things the right way. And, of course, you have to live and breathe quality. And that s where our corporate values come into play again. But above all, of course and we are especially grateful to all our interview partners for this insight above all, you have to have an idea of quality from the outset! ISO As an international management system for food safety, international norm ISO is intended to minimise the flood of individual standards.

48 44 Nordzucker ANNuAl report 2013/2014 : sugar has a future customer orientation ANd A WILLINGness to talk Erik Bertelsen Dr Volker Diehl Ingo Saß

49 Sugar has a future : Nordzucker ANNual Report 2013/ Sales Why good customer relations are vital for us Our business is characterised by a high proportion of customers from the food industry and a smaller share from the retail sector. What connects us with them? How do we treat them? And what should a customer relationship look like today to ensure that both sides benefit from it? As no one can judge this better than the sales team, we asked our sales managers for an interview. They replied from firsthand experience: Dr Volker Diehl, Erik Bertelsen and Ingo Saß. Nordzucker: How would you describe our customers in Central, Northern and Eastern Europe? Are there differences between them? Dr Volker Diehl: I wouldn t distinguish between customers from North, South, East or West. We market a product. The overall package has to fit and to be at a consistent level. That is also what the purchasing managers at our key accounts say. And it is certainly one of our strengths not only in Eastern Europe that we sell a total package. The proportion of industrial and retail customers varies, however: in Eastern Europe the ratio is around 60:40. As far as our customers in the food processing industry are concerned, we are seeing an increase in multinational customers in Eastern Europe who also produce here. Especially in Poland. That offers growth potential for us. Providing a good product at a competitive price is still not something everyone can do! The retail sector in Eastern Europe is still dominated by ordinary sugar, category 2. In Germany, for example, we mainly sell household caster sugar via food retailers. Ingo Saß: In Germany, industrial users account for around 80 to 85 per cent; the rest goes to retail and therefore to consumer households. Our sugar is basically a high-quality product and our assortment is broad and deep. We supply three different market segments: multinational purchasers like Coca Cola and Ferrero, local food producers and then the entire retail market, of course. Overall, we have a saturated market with very stable prices, but it has been flat for years. Erik Bertelsen: Our sugar is a very high-quality product everywhere, around which we have assembled a whole range of services. That is our strength. As far as Northern Europe and Ireland go, we see a split between industrial and retail consumption in line with the German market i.e. about 80 per cent for industrial customers, whereas in the Baltic states around per cent. The different countries make very different logistical demands of us. Denmark, for instance, is a small country with no great distances. In Sweden or Norway, on the other hand, we have very long transport routes, which entail a variety of different logistical demands. And of course, there are certain differences in customer behaviour. In the Baltic countries and Finland they traditionally pick large quantities of wild berries that they preserve or turn into jam. Both these methods need large amounts of sugar. So demand for preserving sugar is very high. In Sweden, the bakers and industrial bakeries traditionally sweeten the bread with syrup. We have adapted to this and developed a broad range. We provide our industrial customers with tailor-made solutions and whet our customers appetites for our products with interesting recipes. Nordzucker: How important is quality for our customers from the food processing industry? Saß: Quality and product safety have a high priority. Our customers invest a lot of money in their brands. That means we, in turn, have to offer the highest possible quality and product safety. Diehl: Absolutely. Stable quality over the year is the key. It just has to work. Our customers want just-in-time deliveries, consistent quality according to their individual specifications and, of course, cost efficiency. Bertelsen: Quality is very important not only the consistently high quality of our products, but also the quality of what we add in terms of customer care and services. At the end of the day, it is also about inspiring our customers and ensuring that when it comes to sweetening they call us, acknowledge our expertise in refining existing products and developing new ones, and, above all, that they buy our products.

50 46 Nordzucker ANNual Report 2013/2014 : Sugar has a future Nordzucker: How important are sustainability and traceability for our customers? Diehl: More and more important. At first glance, we are only suppliers of a commodity, but what we also sell is a package of services. Advice, joint process evaluations, sustainability, transparency, traceability we have to deliver all that, too. Saß: Above all, you mustn t forget that the major global brands in the food industry, in particular, are always in the public eye. They have to demonstrate transparency and traceability. With palm oil or cocoa, that is certainly more difficult than with a commodity like our sugar. But even if our raw material is in the lowest risk category for the top brands, we still have to make our processes transparent and traceable for our customers. Bertelsen: The importance of sustainability has grown significantly, partly as a result of globalisation, and also due to a great deal of exposure in the media. Both industrial customers and those in the retail industry are attaching more and more importance to these issues. Many companies, for example, have great ambitions in the area of sustainability, and they use these actively both to expand their strong brands and for their corporate profile. Ultimately, however, it s the consumer who determines what is required of food producers and the retail trade. We must maintain an intensive dialogue with all parties affected, in order to continuously refine our systems and processes and thereby respond to changing demands. Diehl: Yes, because ultimately the question is: what qualifies me as a preferred supplier and not my competitor? All of our key accounts have made public commitments to purchase their raw materials transparently by That means we have to communicate to our beet farmers that end-to-end documentation of the entire sugar production chain is in their interest as well. We are one of the first in the industry to do so, which means we can differentiate ourselves further from the competition. Nordzucker: What are the services that set us apart? Bertelsen: I think the dialogue with the customer is the key to everything. It corresponds to our role as an important player in the market. No one knows for sure how things will develop after We can envisage scenarios of course, but above all we have to engage in a dialogue with customers and bring our knowledge and expertise to the table. More than ever, we need to think in terms of the market, because it s about supplying the customer with the right quality of sugar at the right time. We need to align the entire process chain to requirements. Diehl: Right. And we have to adapt to customers processes, which are now so lean that it s practically a just-in-time business. There are plants that process 80,000 tonnes of sugar a year with only minimal storage capacities. We have to calibrate our logistics so precisely that it all works smoothly. Our expertise in transporting sugar of different grain sizes with pumps, pipes, etc. is also useful for our customers. We know how to store sugar optimally. In this area, too, we can provide support to our customers as is also the case with application technology. At a time when big companies are thinking about alternatives and reducing calories, we have our work flat out as well: we have expertise in sweetness, we can estimate how sweeteners will react with one another and what effect that will have on the final product. Think of stevia. Saß: Correct. Compliance with different quality standards such as IFS, halal, accompanying documentation and certificates, customised labelling, all that is important. And of course we also have to adapt to our customers various specifications in terms of logistics. You could say that we are a mobile warehouse for our customers. Cooperation, dialogue, a proactive response to our customers concerns: that is the right path. At Nordzucker, we have set off well along this path, but we have to pursue it and develop it. IN THE NORTHERN AND central EUROPE REGIONS, BUSINESS WITH CUSTomerS in THE Food INDUSTRY accounts For AROUND IN 80 there Per Cent eastern EUROPE, the Figure IS AROUND 60 PER CENT. MORE sugar IS CONSUMED AT HOME.

51 Sugar has a future : Nordzucker ANNual Report 2013/ With precisely tuned logistics, we support our customers in optimising their production processes. Nordzucker: How are we preparing for sales in the post period? Diehl: By bringing the topics discussed here into the public arena. We have to listen to our customers. And we have to take seriously what they tell us. We are the ones who gather the information from the market and pass it on to customers, integrate it into their processes. Sales certainly has an important function there. Saß: We are in the process of developing scenarios and marketing strategies for the period after There are a number of working groups. We are thinking about new business models and are trying to prepare ourselves as well as possible across the whole company. Above all, we believe in a free market, and we are doing everything to position ourselves strongly among the competition. Bertelsen: We have to align ourselves even more closely with our customers: what are their concerns with regard to 2017 and what can our contribution be to that, which package can we put together for them? Nordzucker: What about the customers; are they already thinking about what happens after 2017? Diehl: Yes, you can be sure they are already working on strategies. Big purchasers are generally trying to reduce the number of their suppliers, too, to concentrate on a few main suppliers, maybe just two or three. So they are looking very carefully at how things develop. What are the supplier s long-term prospects, can I work with them for an extended period? It s about dependability and predictability. Saß: As Nordzucker AG, we certainly have a strong hand in a market that is set to consolidate. Also and especially after We are a strong number 2. We are a player that will still have a key role in the market in ten years time. Bertelsen: There will be a lot of new opportunities for everyone involved. But what we also have to do is to look at the situation from the customer perspective. To engage in an open dialogue with customers. We are the experts. We have our scenarios. But there are so many variables at stake that at the moment, neither ourselves nor our customers can provide a reliable forecast of how things will develop post But along with price, dependability, safety and sustainability will remain the criteria by which our customers evaluate and select their suppliers, even after And those are areas where we are right at the head of the pack.

52 48 NORDZUCKER ANNUAL REPORT 2013/2014 : Management report FACTS and FIGURES on the course of the Financial YeaR 2013/2014

53 Management report : Nordzucker ANNUAL REPORT 2013/ Group management report 48 Group management report 50 Nordzucker at a glance 54 Economic environment and market developments 57 Earnings, net assets and financial position 62 Employees 62 Opportunities and risks 68 Supplementary report 68 Forecast

54 50 Nordzucker ANNUAL REPORT 2013/2014 : Management report Group management report of NOrdzucker ag Nordzucker at a glance Business activities Nordzucker is the second largest sugar producer in the European Union, with a market share of more than 15 per cent, as measured by its share of the EU sugar quota. In the past financial year, the company produced 2.5 million tonnes of sugar from sugar beet and refined 200,000 tonnes of sugar from raw cane sugar at 13 sites in seven European countries. On average over the year the Group had 3,279 employees. Our customers include the confectionery industry as well as producers of dairy and bakery products, jams, ice cream and drinks. Nordzucker sells some 80 per cent of its sugar to manufacturers of food and beverages. The remaining 20 per cent is supplied to consumers via the retail industry. Nordzucker sells these retail sugar products in many different varieties, primarily under the brand names SweetFamily in Germany and Eastern Europe and Dansukker in Northern Europe. The portfolio includes other products of the sugar-making process, especially dried pulp pellets and pressed pulp as animal feed and molasses for the yeast and alcohol industries. Sustainability, environmental protection and product safety have a particularly high priority at Nordzucker. Nordzucker AG Region central europe (CE) Region Northern europe (NE) Region Eastern europe (ee) Nordzucker AG Braunschweig / Germany 100 % Nordic Sugar A/S Copenhagen / Denmark 100 % Považský Cukor a.s. Trenčianska Teplá / Slovakia % Norddeutsche Flüssigzucker GmbH & Co. KG Braunschweig / Germany 70 % Nordic Sugar AB Malmö / Sweden Suomen Sokeri OY Kantvik / Finland 100 % 80 % Nordzucker Polska S.A. Opalenica / Poland Tereos TTD, a.s. Dobrovice / Czech Republic % % Sucros OY Säkylä / Finland 80 % AB Nordic Sugar Kèdainiai Kèdainiai / Lithuania % Nordzucker Ireland Ltd. Dublin / Ireland 100 %

55 Management report : Nordzucker ANNUAL REPORT 2013/ Locations in europe Group Headquarters D 1 Braunschweig Regional Head Office DK 2 Nordic Sugar, Copenhagen 29 Sugar Plants and refineries D 3 Clauen 4 Nordstemmen 5 Uelzen northern europe 6 Klein Wanzleben 7 Schladen DK 8 Nakskov 9 Nykøbing 13 S 10 Arlöv 11 Örtofta FIN 12 Porkkala 13 Säkylä LT 14 Kèdainiai 26 PL 15 Chełmża 16 Opalenica SK 17 Trenčianska Teplá D 18 Liquid sugar plant Groß Munzel 19 Liquid sugar plant Nordstemmen sugar plants non-consolidated Minority stake CZ 20 Dobrovice central europe Ceské Meziříčí other locations D 22 Bioethanol plant, Klein Wanzleben S 23 Köpingebro (Fibrex) Eastern europe DK 24 NP Sweet, Copenhagen B 25 Office Brussels sales offices LV 26 Riga LT 27 Vilnius EE 28 Tallinn IS 29 Reykjavik 32 NO 30 Oslo IE 31 Dublin GR 32 Athens

56 52 Nordzucker ANNUAL REPORT 2013/2014 : Management report Group structure The Nordzucker Group is divided into the three regions of Central, Northern and Eastern Europe. Central Europe In the Central Europe region, Nordzucker AG operates five sugar plants in Germany. The plants are in Lower Saxony and Saxony- Anhalt, and produce around one million tonnes of quota sugar every year. Sugar from the Central European region is mainly sold on the German market. Markets outside the EU account for around five per cent of sales. Other products of the sugar-making process are also sold, such as animal feed and molasses. In addition, Nordzucker produces and markets bioethanol from intermediate products of the sugar-making process (raw juice, thick juice) and molasses at its plant in Klein Wanzleben. Nordzucker AG holds a majority stake in Norddeutsche Flüssigzucker GmbH & Co. KG (NFZ), which operates two liquid sugar plants, in Nordstemmen and Groß Munzel. An average of 1,247 employees worked in the Central Europe region in the financial year 2013/2014. Its business accounted for around 44 per cent of Group revenues. Northern Europe In the Northern Europe region, Copenhagen-based Nordic Sugar produces sugar in five plants and two refineries in Denmark, Sweden, Finland and Lithuania. The company markets a broad range of sugar products, above all in the Nordic countries, the Baltic states and Ireland. Nordic Sugar is the market leader in Northern Europe and its 1,509 employees contributed around 40 per cent to Nordzucker s consolidated revenues in 2013/2014. NP Sweet is also based in Copenhagen. The joint venture between Nordzucker and PureCircle develops and distributes products based on the sweetener stevia (steviol glycosides) in collaboration with its customers. Eastern Europe The Eastern Europe region includes two sugar plants in Poland, one of which is also used as a sugar refinery, and one in Slovakia. Furthermore, Nordzucker has a 35 per cent stake in Tereos TTD a.s., a sugar producer in the Czech Republic. The Eastern Europe sales area also includes a number of other Eastern European states. Nordzucker had an average of 523 employees in the Eastern Europe region in 2013/2014. It accounted for around 16 per cent of consolidated revenues. Strategy Since the company was founded in 1997, Nordzucker has focused on growth in its core sugar market. Consolidation of the North German sugar industry was followed by several acquisitions in Eastern Europe. Nordzucker pursued its growth strategy with the purchase of Nordic Sugar in 2009 and is now the second largest sugar producer in Europe. After restructuring its investment portfolio in 2010 and 2011, the Group is initially concentrating on its core business: the production and distribution of sugar. The Nordzucker Group benefits from its strong market position in the EU. Further reinforcing this position remains its overriding corporate objective. In addition, the company reviews growth opportunities outside Europe. The focus is on attractive growth regions such as Africa and Asia, because demand for sugar is growing rapidly there in contrast to the EU. These reviews are aimed at preparing the company to move into the production of cane sugar and to build a regional sugar marketing organisation in order to develop an additional high-potential business area. The objective is to sign cooperation agreements with local, national or international partners. A final decision on an actual commitment and the associated issues, such as the construction of production facilities, for example, had not been made at the time the consolidated financial statements and Group management report were prepared, however. Projects outside Europe not only bring considerable growth opportunities, but also new challenges. The Executive Board is therefore reviewing these opportunities with particular care. In response to growing demand for natural sweeteners, Nordzucker also sells products containing stevia, a plant-based sweetener, in addition to sugar.

57 Management report : Nordzucker ANNUAL REPORT 2013/ Sustainable business determines all the workflows throughout the company. Long-term success can only be secured by running a sustainable business and by including environmental protection, energy efficiency and social aspects in business decisions. Product safety and occupational health and safety also have a high priority within the company. Nordzucker sets itself ambitious targets in all areas of sustainability, which result in continuous improvements. It is particularly important to include the entire process chain, from the beet to the customer, in the sustainability assessment. Nordzucker s aim is to offer high-quality products and first-class service at a reasonable price. Only by providing consistently high quality can Nordzucker retain the loyalty of its customers as competition grows even more intense. Nordzucker therefore sets great store by customer orientation, individual solutions, great flexibility and dependability of supplies. Its broad product range, which includes a wide assortment of speciality products, also adds value for customers. Continuous efficiency improvements along the entire value chain are driven by wide-ranging projects throughout the Group. Efforts are particularly focused on steps to achieve lasting increases in the yields from beet farming. The aim of the project is for 20 per cent of beet farmers to achieve a yield of 20 tonnes of sugar per hectare by 2020, because it is vital to make sugar beet even more competitive in comparison with other crops, so as to safeguard beet cultivation in our regions for the long term. The project includes activities in the areas of research, cultivation advice and communications. The five-year efficiency improvement programme Profitability plus has been under way since 2009/2010 and has also delivered cost reductions in all areas of the company. The savings target of EUR 67 million was achieved in the financial year 2013/2014, a year earlier than planned. Major investments in the production process made a key contribution, especially those aimed at saving energy. Significant improvements were also made in the purchasing of energy and technical services. Another focus of our work in recent years has been the harmonisation and optimisation of business processes and the integration of the IT environment for the whole Group, which all contribute substantially to lasting improvements in the company s competitiveness. All the efficiency programmes are aimed at preparing the company for the changes to the market and competitive situation that will take place after Sustainability, a focus on customers and markets, and efficiency gains strengthen the company s market position and enable additional growth in the core business. Nordzucker s goal is not just to develop its excellent position within Europe, but to open up new growth areas outside Europe at the same time. Both are necessary to ensure long-term profitability and further growth. Company management The company is managed by an Executive Board made up of several members. It reports to the Supervisory Board, which has 21 members, of which 14 represent the shareholders and seven the employees. The internal management of the company is carried out by means of financial indicators. The following targets have been set: a return on sales of five per cent, total operating profitability of 15 per cent, a return on equity of ten per cent and an equity ratio of 30 per cent. Shareholder structure of Nordzucker AG Following the merger between Nordharzer Zucker Aktiengesellschaft and Nordzucker Holding Aktiengesellschaft as of 1 April 2013, Nordzucker Holding Aktiengesellschaft holds 84.1 per cent of the shares in Nordzucker AG. A further 10.8 per cent is held by Union-Zucker Südhannover Gesellschaft mit beschränkter Haftung. 5.1 per cent of the capital is held by other shareholders. The Nordzucker AG share is not traded on the stock exchange. Shareholders are, to a large extent, also active beet suppliers of Nordzucker AG. Shareholder structure of Nordzucker AG EUR 123.7m share capital 84.1 % Nordzucker Holding AG 10.8 % Union-Zucker Südhannover GmbH 5.1 % Other shareholders

58 54 Nordzucker ANNUAL REPORT 2013/2014 : Management report World market prices for sugar, jan 04 jul 04 jan 05 jul 05 jan 06 jul 06 jan 07 Jul 07 jan 08 Jul 08 jan 09 JUL 09 jan 10 JUL 10 jan 11 jul 11 jan 12 JUL 12 jan 13 JUL 13 jan 14 White sugar EUR/t FOB White sugar USD/t FOB Source: LIFFE white sugar trading London, London No 5, as of April 2014 Economic environment and market developments Macroeconomic situation The European debt and financial crisis continued to hold the EU and the eurozone firmly in its grip in Economic output (gross domestic product) was unchanged year on year in the EU as a whole, while the eurozone reported a slight decline of 0.3 per cent. Germany achieved economic growth of 0.4 per cent in Economic performance in France and other member states in the south of the EU again deteriorated. Sector developments World sugar market Rising global stocks for the third year in a row caused further sharp falls in world market prices for sugar in the financial year 2013/2014. As in recent years, prices were subject to great volatility. At the beginning of the financial year in March 2013, the average sugar price on the London Futures Exchange (White sugar No. 5, free-on-board, earliest delivery) was USD 527 per tonne. It fell successively in subsequent months to reach a new low of USD 427 per tonne in January 2014.

59 Management report : Nordzucker ANNUAL REPORT 2013/ The sugar market in the EU In the past, the EU sugar market was largely decoupled from the global market by the European sugar market regime. As a result, it was characterised by very stable volumes and prices, with its surpluses being exported to the world market. All this changed with the reform of the sugar market regime in The quotas for producing sugar for human consumption in the EU were reduced to around 80 to 85 per cent of market demand. Since then, it has been necessary to import sugar from ACP and LDC countries. The non-quota sugar produced in the EU in excess of the quotas is sold to customers outside the food industry in the EU or can be exported to non-eu markets up to a total volume of 1.37 million tonnes. If the import volumes provided for by preferential agreements are not sufficient, the European Commission can respond to these market developments within the framework of the sugar market regime to guarantee a stable supply of sugar. To cover demand for sugar from the food industry, it can both approve non-quota sugar for human consumption and enable additional imports at reduced import duties. The European Commission takes these decisions on the basis of supply balances for each sugar marketing year, which in the EU runs from 1 October to 30 September of the following year. This means the financial year for Nordzucker AG straddles two sugar marketing years. In the sugar marketing year 2012/2013, a good 3.5 million tonnes of sugar came into the EU under preferential agreements. The European Commission also allowed 1.2 million tonnes of sugar to be brought to the EU market from additional imports and allowances of non-quota sugar. Corresponding steps have been announced for the current marketing year 2013/2014, but not yet adopted. In the financial year to date (until 28 February 2014), a total of nearly 1.6 million tonnes of sugar has been imported under preferential agreements. Market for animal feed and molasses Supplies of animal feed were low in the past financial year. Although the two previous years harvests had been good, there were hardly any stocks and the 2013/2014 harvest could not repeat the particularly strong performance of the last two years. Prices for pellets and pressed pulp went up as a result, although prices for grain were down. Supplies of molasses were also limited in the reporting year. As in the previous year, the beet quality was good and so a lower quantity of molasses was produced. Nordzucker increasingly sells molasses to the fermentation industry instead of as animal feed. Here, too, prices trended upwards. Market for sweeteners The market for stevia and products sweetened with stevia has grown steadily since stevia (steviol glycosides) was approved by the EU for food and beverages in Numerous products are now on the market and many others are still in the develop ment phase. These activities will successively boost market volumes, which are still low. Market for bioethanol The political circumstances for the future use of biofuels in Europe are still unclear and consumer demand remains subdued. E10 has a market share of 15 per cent in Germany and has remained flat at this low level. At the same time, the good harvests mean that bioethanol can currently be produced cheaply from grain or maize. Imports from the USA, some of which have circumvented the anti-dumping duties, have expanded supplies. In the reporting year, the price of ethanol in Rotterdam fell as a result by 24 per cent to EUR 478 per tonne most recently. Market developments in the sugar business Market developments: Central Europe region The Central Europe region mainly supplies customers in Germany. The long winter and rainy spring depressed sales and revenues for the German manufacturers of beverages, ice cream and grill sauces. Nordzucker AG s revenues from quota sugar were also below expectations in these areas as a result. The decline was more than offset by higher sales in other sectors, however, so that total sales of quota sugar went up year on year by around 24,000 tonnes. The European Commission s steps to increase supply, higher stock levels in the EU and lower prices for imports meant that prices for quota sugar in Germany came under increasing pressure from October Sales of non-quota sugar came to 98,000 tonnes in the reporting year, and were thereby well above the previous year.

60 56 Nordzucker ANNUAL REPORT 2013/2014 : Management report Market developments: Northern Europe region The Northern Europe region consists essentially of Sweden, Finland, Denmark, Norway, Ireland and the Baltic states. Sugar from internal production is supplemented by world market imports of raw cane sugar for refining. Nordic Sugar maintained its strong position in the Northern Europe region and was even able to extend it in some markets, selling around 800,000 tonnes of quota sugar to industrial and retail customers. As in Germany, the prices in Northern Europe came under pressure at the beginning of the new sugar marketing year. High yields in 2012/2013 again enabled Nordic Sugar to sell additional volumes of non-quota sugar in the reporting year, supplying customers from the chemical industry and markets outside the EU. Volumes declined slightly, however, from 320,000 to 280,000 tonnes. Market developments: Eastern Europe region The Eastern Europe region supplies customers in Poland and Slovakia from its own local production. Nordzucker also has a strong market position in a number of other countries in South-Eastern Europe. On all markets, Nordzucker mainly supplies large international customers as well as a multitude of national and regional customers. In order to meet demand in excess of the quota in Poland and Slovakia, the Eastern Europe region refines raw sugar at the plant in Chełmża, Poland. In addition, sugar from other regions of the Nordzucker Group is imported. As in the previous year, Nordzucker sold about 507,000 tonnes of quota sugar in Eastern Europe. As in the two other regions, sales prices for quota and nonquota sugar declined over the course of the year. This price trend had a particularly rapid impact in Eastern Europe, because some customers here traditionally buy sugar on shortterm contracts. The previous year s high level of non-quota sugar sales could not be repeated. Total sales fell by around 34,000 tonnes. Beet cultivation and campaign Late beet sowing in most cases and changeable weather conditions during the growing period caused some challenges for the sugar beet. Favourable weather in the autumn and good processing conditions during the campaign nonetheless allowed for very good yields, which were only slightly below those of the previous year. The average beet yield for the Group was 63.0 tonnes per hectare (previous year: 65.2 tonnes). The sugar content came to 18.0 per cent (previous year: 17.9 per cent), which represented an average sugar yield of 11.3 tonnes per hectare (previous year: 11.7 tonnes). Land under cultivation fell year on year by nine per cent to 241,000 hectares in 2013/2014 as a result of targeted activities. Across the Group during the 2013/2014 campaign, Nordzucker produced 2.5 million tonnes of sugar from beet (previous year: 2.8 million tonnes). The campaign lasted for 106 days (previous year: 125 days). Beet processing in the Nordzucker plants mostly went smoothly thanks to targeted investments and forward-looking maintenance. Excellent cooperation between beet deliveries, production and sugar logistics also ensured that the campaign went off smoothly all round. Sugar production Nordzucker group in millions of tonnes average sugar yield Nordzucker tonnes per hectare / / / / / / / / / /2014

61 Management report : Nordzucker ANNUAL REPORT 2013/ group campaign results Beet yield t/ha Sugar content % Sugar yield t/ha Campaign length d 2013/ / Earnings and financial position and net assets Earnings position After a record year in 2012/2013 with exceptionally high yields, profitability in the reporting year 2013/2014 was much lower, but still good. Earnings declined sharply over the course of the year, however. In addition to much lower prices for quota and non-quota sugar, the result was depressed by high production costs. Total operating profitability is calculated by dividing EBITDA (operating result before depreciation, amortisation and impairment) by revenues. This year, the figure was 20.0 per cent (previous year: 24.3 per cent), which was above the target of 15 per cent. The return on sales, calculated as net income (after minority interests) divided by annual revenue, came to 8.5 per cent in the reporting year compared with 14.7 per cent in the previous year. This was again well above the target of five per cent. The return on sales includes an impairment loss of EUR 89.0 million on the goodwill of Nordic Sugar, which has therefore been written off in full. In recent years, Nordic Sugar has contributed to the Group s performance with excellent earnings. Declining prices on Scandinavian markets and the end of the sugar market regime in 2017 have considerably lowered expectations for the future, however. Nordic Sugar is still expected to generate positive earnings in future, but at a much lower level, and this change in the market outlook required an impairment charge to be recognised on the goodwill. Adjusted for this impairment, the return on sales came to 12.3 per cent. Revenues came to EUR 2,360.9 million, a slight decline of EUR 81.9 million on the previous year s figure of EUR 2,442.8 million. Revenues of EUR 1,746.9 million were generated with quota sugar. Quota-sugar revenues were therefore just EUR 4.0 million down on the previous year s figure of EUR 1,750.9 million. Steep falls in prices at times were almost fully offset by higher sales volumes. consolidated revenues in EUR m 3,000 2,500 2,443 2,361 2,000 1,500 1, ,806 1,815 2, / / / / /2014

62 58 Nordzucker ANNUAL REPORT 2013/2014 : Management report It was not possible to repeat the high sales volumes of non-quota sugar in the previous year. Together with the equally sharp fall in prices, this caused revenues to go down by EUR 50.8 million to EUR million (previous year: EUR million). Revenues of EUR million from the sale of bioethanol were down on the previous year (EUR million), largely due to lower prices. Revenues from by-products include revenues from the sale of molasses and animal feed (dried pulp pellets and pressed pulp), which fell by EUR 11.1 million to Eur million. The reason for the decline was mainly lower sales volumes, especially for dried pulp pellets, while prices were stable or slightly higher. Other revenues fell from EUR million to EUR million. Lower seed revenues due to a change in sales processes were the main reason for the fall. At the end of the reporting year, the production costs amounted to EUR 1,707.3 million (previous year: EUR 1,663.3 million). This rise of EUR 44.0 million was due to the higher sales volumes for quota sugar, on the one hand, and the increases in purchasing volumes for sugar on the other. Sales costs rose by EUR 9.5 million, largely due to higher transport costs in connection with the higher sales volumes of quota sugar. Administrative expenses went down from EUR 91.0 million to EUR 85.1 million in the reporting year. Lower rents for administrative buildings and lower personnel expenses contributed to this reduction. Production costs, sales costs and administrative expenses include EUR million in personnel expenses (previous year: EUR million) and EUR 81.3 million in depreciation of property, plant and equipment (previous year: EUR 86.8 million). Other income came to EUR 46.8 million and was therefore well above last year s figure of EUR 28.7 million. The increase is due primarily to the capitalisation in the reporting year of claims for the repayment of production levies for previous years. The Nordzucker Group recognised other operating income of EUR 17.3 million for this item. Other expenses came to EUR million at the end of the reporting year and were therefore well above the previous year s figure of EUR 44.8 million. In the reporting year, it became necessary to write off the goodwill of EUR 89.0 million resulting from the acquisition of Nordic Sugar. This impairment charge was recognised in other expenses. This item also includes a fine of EUR 8.5 million resulting from an investigation by the German competition authorities, which has since been closed, and an equalisation payment of EUR 7.5 million in connection with claims for the repayment of production levies. In total, the Nordzucker Group reported an operating result (EBIT) of EUR million, as against EUR million in the previous year. The operating result before depreciation, amortisation and impairment (EBITDA) came to EUR million (previous year: EUR million). Financial income rose significantly by EUR 5.2 million to EUR 19.7 million, partly due to interest income of EUR 4.8 million in connection with forecast repayments of production levies from previous years. In addition, the Nordzucker Group received much higher dividends from its Czech investment Tereos TTD a.s., because a second dividend was paid due to the change in the financial year. Financial expenses are largely made up of interest and similar expenses. A further improvement in the financing structure meant that financing costs decreased. consolidated EBIT in EURm consolidated EBITda in EUR m * / / / / / / / / / /2014 * adopted

63 Management report : Nordzucker ANNUAL REPORT 2013/ consolidated net income in EUR m Breakdown of the assets and liabilities making up the 2013/2014 balance sheet total in EUR m * adopted 369* / / / / /2014 2,500 2,250 2,000 1,750 1,500 1,250 1, ,337 2, % 59 % 43 % 13 % 16 % 28 % Assets Equity & liabilities The increase in the tax ratio to 31.1 per cent (previous year: 25.3 per cent) stems mainly from the impairment loss on goodwill, which is not tax deductible. In total, Nordzucker reported net income before minority interests of EUR million, as against EUR million in the previous year. After deduction of minority interests, this resulted in consolidated net income of EUR million, compared with EUR million in the previous year. Net assets position Total assets for the Nordzucker Group amounted to EUR 2,336.7 million at the end of the reporting year, a decline of EUR 66.6 million on the previous year s figure of EUR 2,403.3 million. Intangible assets of EUR 67.1 million fell by EUR 98.2 million from the previous year s figure of EUR million. Alongside depreciation and amortisation of EUR 11.2 million, this was mainly due to the complete write-off of the goodwill from the acquisition of Nordic Sugar amounting to EUR 89.0 million. In the reporting year, the Nordzucker Group invested EUR 78.7 million in property, plant and equipment. Capital expenditure was offset by current depreciation and amortisation of EUR 70.0 million and impairment losses of EUR 3.3 million. Total property, plant and equipment went down from EUR million to EUR million. Non-current assets Inventories Other current assets Inventories declined by EUR 15.7 million to EUR 1,012.1 million. This was due to a fall of EUR 33.7 million in stocks of quota and non-quota sugar. A warehouse fire in Sweden shortly before the reporting date destroyed a substantial quantity of quota sugar. Raw materials, consumables and supplies went up by EUR 14.8 million thanks to higher stocks of raw sugar at year-end. Current receivables and other assets were EUR 24.1 million higher, at EUR million compared with EUR million in the previous year. Lower revenues meant that trade receivables from third parties and related parties fell by EUR 29.4 million compared with the previous year s figure. Current income tax receivables rose by EUR 11.0 million. Equity Non-current liabilities Current liabilities Financial and other assets were up by EUR 42.5 million overall. The increase was due partly to the recognition of insurance claims following a warehouse fire in Sweden. The EU is also to reimburse the Nordzucker Group for production levies paid in previous years, for which EUR 43.3 million was recognised. This was offset by a decline of EUR 18.8 million in other taxes. Financial investments of EUR 26.4 million were roughly the same as in the previous year, whereas deferred tax assets fell from EUR 17.9 million to EUR 1.6 million.

64 60 Nordzucker ANNUAL REPORT 2013/2014 : Management report consolidated Net debt in EUR m / / / / /2014 The previous year s net debt of EUR 59.4 million (financial liabilities less cash and cash equivalents) was paid back in full. Altogether, cash and cash equivalents exceeded financial liabilities by EUR 52.4 million at the end of the period. Equity went up to EUR 1,385.8 million compared with EUR 1,291.3 million in the previous year. Consolidated net income for the period increased equity by EUR million. Dividend payments of EUR 96.4 million to shareholders of Nordzucker AG and minority shareholders had the opposite effect. As total assets remained roughly the same, the equity ratio went up from 53.7 per cent in the previous year to 59.3 per cent. This figure was again well above the Group target of 30 per cent. Non-current provisions and liabilities fell to EUR million (previous year: EUR million). The total includes noncurrent provisions of EUR million (previous year: EUR million), of which EUR million (previous year: EUR million) are for pension obligations. The decline of EUR 42.8 million in pension provisions stemmed from transferring some of the pension obligations to a pension fund, accompanied by a one-off payment. This step was taken in order to use the Nordzucker Group s good liquidity to reduce its biometric risks. Non-current liabilities consist mostly of deferred tax liabilities, which fell from EUR million to EUR million in the reporting year. Current provisions and liabilities declined sharply from EUR million to EUR million. Current financial liabilities were repaid almost in full thanks to the good liquidity. At the same time, current income tax liabilities were paid in the course of the year. Trade payables fell year on year from EUR million to EUR million, mainly due to much reduced beet deliveries from farmers. Other liabilities went up from EUR 37.6 million to EUR 97.1 million. This increase is mainly related to the receivable for the reimbursement of production levies for previous years. Nordzucker is obliged to pass on a certain percentage of the expected reimbursement to the beet farmers; the corresponding amount of EUR 28.7 million was recognised under other liabilities. Financial position Cash flow from operating activities of EUR million was lower than in the previous year (EUR million). The decline stemmed primarily from lower earnings of EUR million, compared with EUR million in the previous year, from the funding and transfer of pension obligations to a pension fund and from higher tax payments. An improvement in working capital had a positive effect, however. Cash flow from investing activities of EUR 75.1 million was roughly on par with the previous year (EUR 72.2 million) and corresponded to the investment budget for the reporting year. Cash flow from financing activities improved from EUR million to Eur million. Nordzucker again consistently reduced its net debt in the reporting year, repaying EUR 66.7 million in total. Dividend payments of EUR 96.5 million were also made to shareholders. As of 28 February 2014, cash and cash equivalents amounted to EUR 58.3 million (previous year: EUR 11.3 million). Cash flow from operating activities in EUR m / / / / /2014

65 Management report : Nordzucker ANNUAL REPORT 2013/ Investments Capital expenditure in property, plant and equipment and intangible assets in EUR m / / / / / Responsibilities and objectives of financial management The main responsibilities of Nordzucker s financial management are to manage and control flows of funds for the entire Group on the basis of clearly defined criteria. The most important objective is to maintain liquidity. This is followed by the optimisation of net interest expense and the management of commodities, interest rate and foreign exchange risks. The financial management function is also responsible for developing and executing financing strategies. It also maintains close contact with banks. As of the reporting date, the Nordzucker Group could draw on a total of EUR million in unused credit lines. Financing and covenants Nordzucker invested EUR 78.7 million in property, plant and equipment and intangible assets (previous year: EUR 74.1 million). Key investments were the first construction phase for the evaporation dryer in Örtofta, the second phase for the evaporation dryer in Nakskov, the construction of an 80,000-tonne sugar silo in Uelzen and the completion of the juice purification plant in Clauen and the wastewater treatment plant in Opalenica. As in the previous years, capital expenditure was focused on increasing efficiency, above all by saving energy, on compliance with regulatory requirements and on replacing existing assets. Creating additional silo capacities will remain an investment focus in the years ahead. There were investment commitments of EUR 28.9 million as of the reporting date. Nordzucker AG signed a five-year syndicated loan agreement with its main banks in 2011, which secured the financing of the Group. This loan was renegotiated in the last quarter of the 2013/2014 financial year. In March 2014, Nordzucker then signed a new contract with the banks. This loan gives the company much greater latitude for entrepreneurial activities than the previous arrangement. It initially runs for a period of five years. Both the previous loan and the new agreement include financial covenants. These consist of obligations to maintain certain financial ratios over the entire term of the loan. The covenants are an essential component of the loan agreement. Banks use them as a tool to identify and avoid risks at an early stage by drawing conclusions from the figures about the company s financial position. They have been defined for the Group as a whole. Compliance with the covenants of the syndicated loan agreement is monitored internally on a regular basis and reported to the banks at defined intervals during the reporting year. In the reporting year, all the financial criteria were met on all test dates. On the basis of the planning currently available for the Group, the Executive Board of Nordzucker AG assumes that the agreed limits will also be adhered to in future.

66 62 Nordzucker ANNUAL REPORT 2013/2014 : Management report Dividend Opportunities and risks Total dividends, Nordzucker AG in EUR m / / / / /2014 A proposal will be put forward at the Annual General Meeting of Nordzucker AG to distribute a dividend of Eur 1.30 per share of share capital for the reporting year. This corresponds to a total dividend distribution of EUR 62.8 million. A total of EUR 86.9 million (EUR 1.80 per share) was paid out in the previous year. In a long-term comparison, this represents a substantial dividend and enables the shareholders to participate in the company s good result for the 2013/2014 financial year. At the same time, a substantial proportion of net income is retained in the company to finance future profitable growth. Employees The Nordzucker Group had an average of 3,279 employees in the reporting year, slightly below the figure for the previous year (3,290 employees). Of the total, 1,247 were employed in Central Europe, 523 in Eastern Europe and 1,509 in Northern Europe. Average number of employees in the Nordzucker Group for the year by region 4,500 4,346 4,000 3,500 3,000 3,508 3,280 3,290 3,279 1,694 1,588 1,521 1,504 1,509 2,500 2, , ,350 1,357 1,211 1,242 1, / / / / / Risk management Behaving entrepreneurially means seizing opportunities and accepting that they entail risks. To identify these risks at an early stage, to evaluate them and manage them consistently, Nordzucker has introduced an integrated system of risk identification and management for the entire Group. This ensures that risks which could jeopardise the company s business are identified and evaluated at regular intervals. Individual steps to avert, limit or transfer exposure to risks are defined for every risk that is identified. The risk management function discusses at regular intervals the progress made in implementing the defined steps with the managers responsible. Regular risk management reports are made to the Executive Board and Supervisory Board. All operating and strategic decision-making always takes risk aspects into account. Scenario planning is used to examine the effects different market situations would have on the company s business, for example. Descriptions of opportunities and risks highlight alternative developments and identify areas where action needs to be taken. Over the course of the year, the Group reporting and controlling system provides all the decision-makers responsible with continuous information on the actual business performance. Some of the risks are passed on to third parties, such as insurance companies. The scope and amount of insurance coverage is reviewed regularly and adjusted as necessary. Internal auditing Internal auditing examines and evaluates the business processes, organisational structure, risk management and internal control system (ICS) to ensure they are carried out correctly, are effective and offer value for money. The results of every audit are recorded in an audit report and the implemen tation of the agreed activities is monitored systematically and regularly. As well as audits carried out on the basis of annual riskoriented audit planning, the internal audit department also carries out ad hoc checks. The internal audit department also offers advice, such as on drawing up internal guidelines, optimising business processes or improving the Group s internal control system. It answers directly to the Chief Executive Officer and reports regularly to the Executive Board and to the Supervisory Board s Audit and Finance Committee. This reporting comprises the status of internal audits, the key findings of the audits and the implementation status of the agreed activities. Northern Europe Eastern Europe Central Europe

67 Management report : Nordzucker ANNUAL REPORT 2013/ Political and legal risks Sugar market regime In June 2013, the member states of the EU, the European Parliament and the European Commission decided to extend the sugar market regime in its current form until the end of the sugar marketing year 2016/2017 on 30 September Up to this point, the sugar market regime remains the operating framework for the EU sugar industry. At the same time, the European Council, Parliament and Commission voted to let the sugar market regime in its current form expire thereafter. The quotas for sugar and isoglucose as well as the minimum price for sugar beet will therefore be abolished at the beginning of the sugar marketing year 2017/2018. The end of the quota system also means the end of the WTO export limit, presently set at 1.37 million tonnes. Finland is still allowed to pay its beet farmers a national subsidy of EUR 350 per hectare. The abolition of quotas for sugar and isoglucose will have a considerable impact on the EU sugar market. It is to be expected that, without a quota system, the production of isoglucose in the EU will increase, resulting in sugar being crowded out. The European Commission and other market observers anticipate that between two and three million tonnes of iso glucose could be marketed in the EU in future, compared with around 700,000 tonnes today. Some sugar producers have also already announced their intention to expand production. Increased supplies of sugar will heighten competition even further. In order to prepare for the changing environment as well as possible, Nordzucker is working continuously to improve its competitiveness. One important area is to increase the efficiency of sugar beet cultivation compared with alternative crops. Nordzucker is pooling all of its activities to boost farmers productivity in the project. The Profitability plus efficiency programme was completed success fully in 2013/2014, and other steps are to follow. In future, the activities will continue to focus on increasing energy efficiency. All areas of the company and all functions are preparing intensively for the end of the sugar market regime in WTO negotiations The Doha round of WTO negotiations resulted in the first resolutions at the conference of ministers held in December 2013 in Bali. These resolutions have no effect on the EU sugar sector, however. They mainly relate to the administration of tariff quotas and stockpiling in developing countries. It was also agreed to abolish all export subsidies for agricultural products in the foreseeable future. This also plays no role for the EU, because export subsidies have already been phased out. By contrast, there was no discussion and no decision in Bali on a possible reduction of import duties in the agricultural sector. The intention is nonetheless to try and establish a timetable for discussing this matter in the course of No resolutions are generally expected before 2016, however. Reducing protection against imports without taking the special interests of the sugar industry into account would make competition in the EU even more intense than is already the case following the abolition of the sugar market regime. Import duties protect the European sugar industry from imports from big sugar-exporting countries in excess of those volumes that enter the European market at reduced rates or duty-free via preferential agreements with least developed countries (LDC) or bilateral trade agreements. Without these safeguards, the imports to the EU would only be determined by global market prices. This global market price is often affected by sales of surplus produce and state programmes, making it a price influenced by state aid. At the same time, reducing import duties would make prices in the EU even more volatile. Nordzucker and its European competitors are campaigning for these external safeguards to be maintained in their current form. In parallel, the company is also using the measures described in the section above to prepare for the possibility that import duties are reduced even further. EU free trade agreements Free trade agreements continue to become more and more important for the European Union. In 2013, the free trade agreements with Columbia, Peru and Central American states came into force. These allow the countries to export around 250,000 tonnes of sugar per year to the EU free of customs duties. Agreements have also been signed with Ukraine, Singapore, Armenia, Georgia and Moldova, but these have not yet come into effect. Additional regulations for existing trade agreements are also under discussion, with, for example, the Mediterranean countries or the Republic of South Africa.

68 64 Nordzucker ANNUAL REPORT 2013/2014 : Management report Negotiations are taking place with 20 other states. This group includes sugar exporters such as Brazil, together with the other MERCOSUR states, the USA, Canada, India, Malaysia, Thailand and Vietnam as well as the Gulf states. The most important for the EU sugar market are the negotiations with the MERCOSUR states of the South American economic area, which are still not advancing. As one of the largest sugar exporters, Brazil, in particular, is pressing for an import quota for sugar and ethanol. Additional costs of CO 2 certificates As a company that emits carbon dioxide (CO 2 ) from generating its own electricity and heat, Nordzucker requires corresponding certificates for its emissions. The company is allotted some of its certificates free of charge. The third phase of the CO 2 emissions trading scheme that has been in place in the EU since 2005 began in All companies subject to emissions trading have to buy all the certificates needed for power generation at auction. Nordzucker receives certificates for heat generation based on natural gas, less a cross-sector discount, free of charge until 2015, as the European Commission has listed the entire industry as being at risk of carbon leakage. For the industries on this list, the assumption is that the additional costs of CO 2 certificates could result in production being outsourced to non-eu countries. Rising prices for CO 2 certificates could increase the already high costs of environmental protection even further, since as the drying facilities and other equipment not previously taken into account are also subject to emissions trading as of To a certain extent, a further price increase is politically motivated, although the sugar industry has already had considerable success in reducing its CO 2 emissions. The carbon leakage list is to be reviewed in 2015, and Nordzucker currently anticipates that the sugar industry will stay on the list. Nordzucker is also working hard to cut its CO 2 emissions even further by means of investments to reduce its energy consumption. This is an important step to increase the sustainability of our business. Legal risks In February 2014, the German competition authority concluded its investigation into alleged breaches of competition law and the ongoing antitrust proceedings against Nordzucker and other sugar producers. Nordzucker AG accepted a fine of EUR 8.5 million. The risk of third-party claims for damages cannot be ruled out. However, Nordzucker AG is currently assuming that any such claims would only have a very slight chance of success. The companies in the Nordzucker Group are also subject to various statutory regulations, which can give rise to liability risks. They include, in particular, the sugar market regime in connection with the relevant provisions of customs and licensing law as well as food and animal feed law. Further risks can also arise from tax regulations in the various countries in which the Nordzucker Group operates. Market risks Sugar Since the reform of the sugar market regime in 2006, fluctuations in the world market price have had a considerable impact on markets in the EU. To cover its supply, the EU is dependent on imports from ACP and LDC countries and world markets. World market prices fell sharply again over the course of the past financial year. With world market prices being lower, there was a greater incentive for ACP countries and LDCs to export their sugar to the EU, and imports therefore picked up. This will ensure that market prices in the EU remain under pressure in future, which could diminish Nordzucker s profitability considerably. The steps to boost competitiveness described in the section on the sugar market regime are preparing Nordzucker to meet these challenges, too. As a foodstuff, sugar has repeatedly been presented in the media as unhealthy or even harmful. Individual scientists believe that the rising number of certain diseases can be linked to higher sugar consumption. In its twelfth Nutrition Report published in December 2012, the German Nutrition Society (DGE) found that annual sugar sales in Germany have been constant for years. It is therefore the change towards a less active lifestyle that leads to excess weight and obesity. Public and media debates may affect consumers eating habits and thus influence demand for sugar.

69 Management report : Nordzucker ANNUAL REPORT 2013/ The German Sugar Trade Association (WVZ) has launched an information campaign (Forum Zucker; to present the relationship between sugar and health objectively, in order to provide a counterweight to the negative media reporting and the negative public perception. Nordzucker AG expressly supports these efforts, but at the same time also campaigns for more public information about exercise and healthy eating. Securing raw materials For farmers, sugar beet competes with other arable crops. The decision whether to plant sugar beet or other crops depends to a large extent on relative price levels for different crops and on the yield that can be obtained regionally. Attractive conditions for growing other crops also increase the cost pressure for purchases of sugar beet. As competition becomes more intense, particularly after the sugar market regime expires, it is therefore all the more important that high levels of productivity enable farmers to supply beet at prices that are competitive and attractive for them the same time. The most important long-term element of securing raw materials is the yield improvement programme. Nordzucker has set itself the Group-wide target of achieving a sugar yield of 20 tonnes per hectare with 20 per cent of farmers in This programme is very important for safeguarding the relative attractiveness of sugar beet cultivation compared with other arable crops, especially given the volatility of agricultural markets. To reach this target Nordzucker is working closely with farmers, agricultural associations and other companies in the value chain. Nordzucker signs supply contracts with the beet farmers well in advance in order to secure volumes in the short and medium term. The company buys some of its industrial beet on oneyear contracts and some on multi-year contracts. All contracts offer attractive terms compared with alternative crops. For the existing multi-year industrial beet contracts the company has agreed on a number of different pricing models. In Germany, farmers can choose between fixed beet prices and a variable price for industrial beet that is indexed to prices for wheat and rapeseed. Similar options for contracts are available in all the Group s regions, indexing the beet prices to those for wheat or sugar, for example, or to local company performance. These mechanisms ensure that the beet prices paid in each instance are competitive. Energy prices The current liquidity of supplies and stable prices on energy markets enabled Nordzucker to reduce the cost of purchasing energy compared with the previous year. New sources of energy in the USA and their sustainable extraction resulted in a healthy market supply. Despite this, the unresolved problems in the Middle East require attention and could have an adverse effect on these developments. Investments made to date in energy efficiency and the steps taken for energy management certification under DIN ISO and EMAS are beginning to have an effect and also contribute to reducing expenses. Variable purchasing contracts for energy also reduce the risk of price developments. Dependence on individual suppliers The reduction of sugar production capacities in the course of the sugar market reform in 2006 led to a process of concentration among suppliers. This has often resulted in a monopoly among providers of equipment made especially for the sugar industry, with correspondingly high prices. In some cases, this problem is exacerbated by the fact that Nordzucker deliberately standardises technologies and concentrates its purchases on individual suppliers. The limited number of suppliers entails the risk of increased dependence, if a supplier should become insolvent for example, and of price increases. To counter this trend, a global sourcing programme has been launched to identify potential alternative suppliers. A marketing campaign also aims to attract new engineering companies to sugar technology. Nordzucker has been able to largely avoid price increases for the purchase of components by means of long-term framework agreements. The company will also achieve additional savings with its Profitability plus programme, by qualifying European competitors for selected products and by standardising aspects of maintenance and packaging.

70 66 Nordzucker ANNUAL REPORT 2013/2014 : Management report Operating risks Longer campaigns The length of the campaign has been increased gradually in the plants to raise productivity. A campaign now lasts for an average of more than 120 days in some areas. This means that the production phase generally continues into January. Longer campaigns entail two risks. One is that the onset of winter weather can severely hamper beet harvesting, logistics and processing. The other is that longer campaigns make production downtime more likely. Nordzucker has therefore taken wide-ranging precautions both in the field and in the plant to minimise these risks. They include covering beet clamps with a sheet of fleece to protect the beet from frost. New production processes help us to deal better with extreme changes in weather conditions and beet which has begun to thaw or decompose. One example is the optimisation of juice purification, which is vital for processing even frost-damaged beet. Longer campaigns increase the risk of production downtime. In some regions the beet flows can be diverted to alternative sites, but this also leads to longer campaigns at those plants and much greater logistical expense. Risk-oriented maintenance has been introduced to reduce the risk of production downtime. All the essential machinery in a plant is examined closely and repaired or replaced as necessary in the phase between two campaigns. Nordzucker has also taken out production downtime insurance to reduce its exposure further. Environment Environmental impacts cannot be avoided altogether when sugar is produced. They include airborne emissions (odours, noise), waste disposal and wastewater treatment. Risks arise from the potential for exceeding limits, complaints from neighbours or new statutory regulations. Nordzucker gives high priority to limiting detrimental environmental effects as far as possible. Investments to avoid noise and odours are an important part of capital expenditure every year. In recent years, for example, one key focus has been on improving wastewater treatment in order to minimise unpleasant odours. All Nordzucker plants are audited regularly in accordance with applicable national and international legislation and standards to verify the results of these activities. This includes certification in line with the DIN EN ISO environmental management system and the EU Environmental Audit regulation (EC) 1221/2009 (EMAS III). Nordzucker not only submits to the statutory inspections, but also carries out additional voluntary audits. An active dialogue with local residents is a matter of course for Nordzucker. Direct contact with neighbours enables plant managers to improve their understanding of how residents are affected and to explain processes at the plant. Product safety As a food producer, Nordzucker is responsible for the quality and safety of its products. The company works consistently to keep improving its already very high safety standards by means of continuous improvements to production processes, targeted investments and strict internal guidelines. Regular inspections and product safety certifications are carried out to identify risks at an early stage. All sites comply with DIN EN ISO 9001 and the DIN EN ISO product safety standards in conjunction with PAS 220 (FSSC 22000). As a result of different local requirements, some sites are also certified under the following standards and norms: occupational health and safety management system OHSAS 18001, energy management system DIN EN ISO 50001, German biofuels sustainability by-law (Biokraft-NachV the transposition of Directive 2009/28/EC to promote the use of energy from renewable sources), IFS standards (International Food Standard for food retailing) and the GMP B2 standard for quality control in raw materials for animal feed. Organic and fair trade products are grown and inspected in line with the applicable legislation and standards.

71 Management report : Nordzucker ANNUAL REPORT 2013/ IT risks The comprehensive use of IT systems gives rise to risks regarding unauthorised access to sensitive company data and the unavailability of these systems as a result of operating incidents or disasters. Nordzucker addresses the risk of unauthorised access to company data by using virus scanners and firewalls. IT security is also increased by granting defined and restricted access to systems and information, and by backing up data. Proven, market-based technologies are used throughout the company on the basis of defined standards. Nordzucker hedges against the risks that would ensue in the event of operating incidents or disasters by means of redundant IT infrastructures. Financial risks Financial risks relate to unrecoverable receivables, currency, raw materials and interest rate risks and liquidity risk. Risk exposure may also arise from the investment strategy and the availability of loan finance. Default on receivables Receivables from customers or other parties may become unrecoverable. This risk rises at times of economic crisis or when extreme swings in the price of raw materials put pressure on customers. To address these risks, Nordzucker establishes a customer s credit standing before signing a contract and generally takes out trade insurance. The sales team maintains close contact with the customer and defaults are limited by active receivables management. Currency, raw materials and interest rate risks The increasing volatility of interest rates and exchange rates and fluctuations in the price of raw materials give rise to operating risks, which are pooled by the Group treasury department. To limit these risks, they are analysed thoroughly before contracts are signed. Standard financial instruments available from banks and exchanges are used if Nordzucker has to assume risks. Financial derivatives such as forward contracts, swaps and futures are used to hedge the Group s open risk positions. This exposes the Nordzucker Group to a normal measure of counterparty risk, in the sense that a partner to a contract may not perform their obligations. To minimise this counterparty risk, financial derivatives are only transacted with first-class international financial institutions, whose economic performance is monitored regularly, partly by analysing the financial ratings issued by international rating agencies. Dependence on individual institutions is also limited by spreading transactions over various counterparties. All the financial derivatives used serve solely to hedge operating sales and purchase transactions and to hedge exchange rates for financial transactions. The margins required for exchange-traded derivatives are also held exclusively on separate margin accounts with first-class international financial institutions. As of 28 February 2014, the Nordzucker Group had exchange rate derivatives with a notional net volume of EUR 90.8 million. At the end of the financial year, derivative transactions with a notional net volume of EUR 18.2 million were open to hedge against price movements for raw materials, and derivatives with a notional net volume of EUR 2.2 million were open to hedge the price of CO 2 certificates. These existing hedges generally run for less than one year (excluding hedges of CO 2 certificates) and match the maturity profile of the hedged transactions. Liquidity risk The seasonality of the Group s business means that its capital requirements vary widely over the course of a financial year. The quality of the harvest and developments in market prices also have a considerable effect on the company s funding requirements. If the company cannot draw on sufficient liquidity either if there is a default on its investments or if borrowing is not available its continued existence could be at risk. Short and medium-term liquidity forecasts for the subsidiaries and the entire Group are therefore regularly drawn up on the basis of a standardised process. Financing strategies are then prepared and implemented on the basis of these forecasts.

72 68 Nordzucker ANNUAL REPORT 2013/2014 : Management report Availability of credit No negative effects on the Nordzucker Group s access to liquidity have been felt to date, despite the ongoing economic crisis in the EU and the evolving situation on lending markets due to the increasing regulation of banks. One important reason for this is the Group s good credit rating. The Group s main source of financing is the syndicated loan originally maturing on 17 June 2016, which the company obtained from 14 banks in In March 2014, this loan was replaced by a new syndicated loan with a smaller group of banks on improved terms. This loan has a minimum term of five years, and thereby extends well beyond the end of the sugar market regime. All the syndicate banks have very good credit ratings and are very dependable. In the opinion of the company management, this medium-term syndicated loan to finance its operating business, together with its available liquidity, covers the company s capital needs. From a current perspective, its cash reserves and unused lines of credit enable Nordzucker to meet its payment obligations at all times. Based on current assessments, sufficient funds are also available to ensure the financing of solid growth. On the basis of existing corporate planning for the Group, the company assumes that the terms of the loan agreement will be met in subsequent years as well. The guarantees needed for current operations can also be provided at any time as needed by means of the syndicated loan and bilateral lines of credit. The Group is not directly dependent on individual lenders. Investment policy Errors in investment strategy can result in the loss of financial assets. Nordzucker has a conservative investment policy. The Group s free liquidity is only invested in money-market products with first-class European financial institutions. Investment amounts are limited to ensure that the deposits are covered by the applicable deposit insurance mechanisms. Supplementary report There have been no events of particular significance since the end of the financial year. Forecast The financial year 2013/2014 was closed with a satisfying result. In line with the previous year s forecast, earnings fell sharply, however, particularly in the last two quarters of the reporting year. Revenues and earnings declined sharply, as world market prices were low and stock levels in the EU high. As in previous years, the steps taken to increase efficiency made a significant contribution to earnings. They were not able to make up for the fall in prices by a long way, however. Pressure on prices will persist in the financial year ahead. Stocks of quota and non-quota sugar in the EU remain high, and world market prices are still very low in a long-term comparison, even though they have recovered slightly recently. The months ahead will show whether a further recovery materialises. Following the EU decision to let the current sugar market regime expire on 30 September 2017, all sugar companies have already begun intensive preparations for the new commercial environment. The battle for market share has intensified as a result. As in previous years, Nordzucker is working consistently to keep improving its competitiveness. In 2014/2015, the focus will be on realigning organisational structures and processes, which will be of great help to the company in pursuing its continued development in the years ahead. Despite these steps, revenues and earnings will fall again sharply in the 2014/2015 financial year. In terms of the company s key performance indicators, total operating profitability is not expected to achieve the target of 15 per cent. The return on sales (target: five per cent) will be met, and the equity ratio (target: 30 per cent) will again be exceeded by a large margin. Potential default risks are also addressed by spreading the investment across various counterparties.

73 Management report : Nordzucker ANNUAL REPORT 2013/ Nordzucker is also examining growth opportunities outside Europe. These projects will not have any significant effect on revenues and income in 2014/2015, but may result in considerable additional capital expenditure. At the same time, Nord zucker will again increase its investment in its European core business. Its very solid financing arrangements will enable the company to cope well with these additional tasks. The current assumption is that these factors will not only define the financial year 2014/2015, but also the year thereafter. As the markets are so volatile, all medium-forecasts are subject to considerable uncertainty, however. Braunschweig, Germany, 25 April 2014 The Executive Board Hartwig Fuchs Axel Aumüller Dr Lars Gorissen Mats Liljestam Dr Michael Noth

74 70 NORDZUCKER ANNUAL REPORT 2013/2014 : Consolidated financial statements consolidated net income 2013/ ,726 IN Eur thousands

75 Consolidated financial statements : NORDZUCKER ANNUAL REPORT 2013/ Consolidated financial statements 72 Consolidated income statement 72 Consolidated statement of comprehensive income 73 Consolidated cash flow statement 74 Consolidated balance sheet 76 Consolidated statement of changes in shareholders equity 77 Notes to the consolidated financial statements 77 General remarks 92 Notes to the consolidated income statement 98 Notes to the consolidated balance sheet 100 Consolidated assets schedule for the financial year 2013/ Consolidated assets schedule for the previous year (2012/2013) 107 Notes to the consolidated cash flow statement 108 Other disclosures 121 List of investments 123 audit opinion

76 72 NORDZUCKER ANNUAL REPORT 2013/2014 : Consolidated financial statements Consolidated income statement* Nordzucker AG, Braunschweig, Germany, for the period from 1 March 2013 to 28 February 2014 in EUR thousands Further details in Note 1/3/ /2/2014 1/3/ /2/2013 Revenues 8 2,360,913 2,442,840 Production costs 9 1,707,342 1,663,287 Gross profit 653, ,553 Sales costs , ,158 Administrative expenses** 11 85,101 91,033 Other income 12 46,811 28,704 Other expenses ,751 44,796 Operating result (EBIT) 298, ,270 Financial income** 14 19,675 5,211 Financial expenses** 15 14,959 17,343 Result from companies accounted for using the equity method Earnings before taxes 303, ,316 Income taxes** 17 94, ,642 Consolidated net income 208, ,674 of which attributable to non-controlling interests 7,395 9,294 of which attributable to shareholders of the parent company 201, ,380 * The income statement has been prepared using the cost of sales method instead of the nature of expense method. For more information, please refer to Note 7.1. ** Amounts from the comparative period have been adjusted as a result of the retrospective application of IAS 19 (2011). Consolidated Statement of comprehensive income in EUR thousands 1/3/ /2/2014 1/3/ /2/2013 Consolidated net income 208, ,674 Remeasurements of defined benefit plans* 1,895 33,296 Deferred taxes on items of other comprehensive income not reclassified to the income statement* 522 9,651 Other comprehensive income from items not reclassified to the income statement 1,373 23,645 Exchange differences on translating foreign operations 13,063 6,568 Net result of cash flow hedges 3, Deferred taxes on items of other comprehensive income reclassified to the income statement 2, Other comprehensive income from items reclassified to the income statement 13,955 7,219 Consolidated comprehensive income after taxes 193, ,248 of which attributable to non-controlling interests* 7,365 9,123 of which attributable to shareholders of the parent company 186, ,125 * Amounts from the comparative period have been adjusted as a result of the retrospective application of IAS 19 (2011).

77 Consolidated financial statements : NORDZUCKER ANNUAL REPORT 2013/ Consolidated cash flow statement Nordzucker AG, Braunschweig, Germany, for the period from 1 March 2013 to 28 February 2014 in EUR thousands 1/3/ /2/2014 1/3/ /2/2013 Earnings before taxes 303, ,316 Interest and similar income 5, Interest and similar expenses 14,052 27,088 Depreciation, amortisation and impairment/reversals of impairment of non-current assets 173,452 87,562 Amortisation and impairment/reversals of impairment of non-current financial investments 4 0 Changes in non-current provisions* 46,946 47,685 Other non-cash expenses/income* 12,320 47,418 Net income/loss from associated companies Changes in current provisions 10,718 5,610 Proceeds on disposal of non-current assets 939 1,657 Changes in inventories, trade receivables and other assets not attributable to investing or financing activities 2, ,132 Changes in trade payables and other liabilities not attributable to investing or financing activities 1,890 16,967 Interest received in the financial year 5, Interest paid in the financial year 7,341 7,677 Taxes paid in the financial year 153, ,291 Cash flow from operating activities 284, ,255 Proceeds on disposal of property, plant and equipment 3,494 1,950 Payments for investments in property, plant and equipment 75,668 69,370 Proceeds on disposal of intangible assets Payments for investments in intangible assets 2,936 4,809 Proceeds on disposal of financial assets 10 0 Payments for investments in financial assets Cash flow for/from investing activities 75,080 72,213 Payments to shareholders (dividends) 96,453 51,251 Proceeds from borrowing 110,003 41,733 Loan repayments 176, ,648 Cash flow from financing activities 163, ,166 Changes in cash and cash equivalents 46,586 3,876 Cash and cash equivalents at the beginning of the period 11,297 7,406 Effect of foreign exchange rate changes Cash and cash equivalents at the end of the period 58,339 11,297 * Amounts from the comparative period have been adjusted as a result of the retrospective application of IAS 19 (2011).

78 74 NORDZUCKER ANNUAL REPORT 2013/2014 : Consolidated financial statements Consolidated balance sheet as of 28 February 2014, Nordzucker AG, Braunschweig, Germany Assets in EUR thousands Non-current assets Fixed assets Further details in Note 28/2/ /2/2013 1/3/2012 Intangible assets 21 67, , ,066 Property, plant and equipment , , ,059 Investment property 24 4,515 5,676 6,785 Financial investments 25 Shares in companies accounted for using the equity method ,538 3,068 3,593 Other financial investments ,818 23,536 20,428 Receivables and other assets 26,356 26,604 24, ,811 1,050,667 1,065,931 Financial assets Other assets , ,376 Deferred taxes* 17 1,629 17,928 15, ,449 1,068,604 1,083,178 Current assets Inventories 26 Raw materials, consumables and supplies 61,770 46,885 44,451 Work in progress 53,707 50,491 43,373 Finished goods and merchandise 896, , ,414 1,012,126 1,027, ,238 Receivables and other assets Trade receivables , , ,423 Receivables from related parties , Current income tax receivables 17 12,504 1,470 5,084 Financial assets 29 33,442 12,597 13,185 Other assets 30 84,070 62,376 61, , , ,896 Cash and cash equivalents 58,339 11,297 7,406 Current assets 31 1,387,740 1,332,191 1,180,540 Assets held for sale 1,532 2,497 1,867 1,389,272 1,334,688 1,182,407 2,336,721 2,403,292 2,265,585 * Amounts from the comparative period have been adjusted as a result of the retrospective application of IAS 19 (2011).

79 Consolidated financial statements : NORDZUCKER ANNUAL REPORT 2013/ Equity and liabilities in EUR thousands Shareholders equity 26 Further details in Note 28/2/ /2/2013 1/3/2012 Subscribed capital , , ,651 Capital reserves , , ,035 Retained earnings* ,077, , ,844 Other comprehensive income* ,528 23,828 40,083 Equity attributable to shareholders of the parent company 1,336,223 1,239, ,613 Non-controlling interests* 49,595 51,596 43,147 1,385,818 1,291, ,760 Non-current provisions and liabilities Provisions for pensions and similar obligations* , , ,593 Other provisions* 34 27,610 31,752 22,008 Financial liabilities 35 5,836 4,575 88,473 Liabilities towards related parties 37 5,500 5,500 5,500 Other financial liabilities ,181 Other liabilities 39 10,788 12,555 20,985 Deferred taxes , , , , , ,657 Current provisions and liabilities Provisions for pensions and similar obligations 33 11,432 5,283 5,281 Other provisions 34 78,368 73,683 68,059 Financial liabilities , ,852 Current income tax liabilities 17 8,410 62,882 60,000 Trade payables , , ,122 Liabilities towards related parties 37 35,537 16,245 11,498 Other financial liabilities 38 9,859 6,383 15,900 Other liabilities 39 97,050 37,567 50, , , ,168 2,336,721 2,403,292 2,265,585 * Amounts from the comparative period have been adjusted as a result of the retrospective application of IAS 19 (2011).

80 76 NORDZUCKER ANNUAL REPORT 2013/2014 : Consolidated financial statements Consolidated statement of changes in shareholders equity Nordzucker AG, Braunschweig, Germany in EUR thousands Subscribed capital Capital reserves Retained earnings Other comprehensive income Equity attributable to shareholders of the parent company Noncontrolling interests Total equity As of 1/3/ , , ,603 51, ,971 43, ,231 Adjustment due to retrospective application of IAS 19 (2011) 2,241 11,599 9, ,471 Adjusted as of 1/3/ , , ,844 40, ,613 43, ,760 Net income* 359, ,380 9, ,674 Other comprehensive income* 16,255 16, ,426 Consolidated comprehensive income 359,380 16, ,125 9, ,248 Dividend payment 48,301 48,301 2,949 51,250 Other 1,765 1,765 2, Adjusted as of 28/2/ , , ,158 23,828 1,239,672 51,596 1,291,268 Net income 201, ,331 7, ,726 Other comprehensive income 15,298 15, ,328 Consolidated comprehensive income 201,331 15, ,033 7, ,398 Dividend payment 86,942 86,942 9,511 96,453 Other 2, , ,395 As of 28/2/ , ,035 1,077,009 8,528 1,336,223 49,595 1,385,818 * amounts under retained earnings or other comprehensive income have been adjusted as a result of the retrospective application of IAS 19 (2011).

81 Notes : Nordzucker ANNUAL REPORT 2013/ Notes to the consolidated financial statements General remarks 1. Accounting principles The consolidated financial statements as of 28 February 2014 for Nordzucker AG (Küchenstrasse 9, Braunschweig, Germany) have been prepared in accordance with Sec. 315a HGB (German Commercial Code) in accordance with the International Financial Reporting Standards (IFRS) adopted and published by the International Accounting Standards Board (IASB) or the IFRS Interpretations Committee (IFRS IC) as applicable in the European Union (EU-IFRS) and with supplementary provisions of German commercial law. The financial statements comply fully with EU-IFRS and give a true and fair view of the net assets, financial and earnings position of Nordzucker AG and its consolidated subsidiaries, associated companies and joint ventures (hereinafter known as Nordzucker Group or Group ). As the parent company of the Group, Nordzucker AG is entered in the commercial register at Braunschweig Local Court (HRB 2936). The consolidated financial statements of Nordzucker AG, audited by Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Stuttgart, and issued with an unqualified opinion, are published in the German Federal Gazette. The annual report can be viewed on the Nordzucker AG website ( The reporting currency is the Euro, with amounts reported in thousands of Euros (in EUR thousands). The consolidated financial statements of Nordzucker AG will be released by the Board of Management via passing it to the Supervisory Board on 22 May consolidation and acquisitions 2.1. Principles of consolidation Subsidiaries In addition to Nordzucker AG as the parent company, the Nordzucker consolidated financial statements also include the domestic and foreign subsidiaries in which Nordzucker AG has direct or indirect control of financial and operating policy. Subsidiaries are fully consolidated from the acquisition date, i.e. the date on which the Group obtains control. Consolidation ends once the parent company no longer exercises control. The financial statements of the subsidiaries are prepared for the same reporting period as the financial statements for the parent company using uniform accounting methods. Intra-group transactions between companies in the Group are eliminated in full. Associated companies and joint ventures Associated companies and joint ventures are accounted for in the consolidated financial statements using the equity method. Associated companies are defined as companies in which the Nordzucker Group has a significant influence over financial and operating policy. Joint ventures are companies which are jointly controlled in cooperation with other companies. In applying the equity method, the IFRS financial statements of these companies are used. Losses from associated companies which exceed the carrying amount or other noncurrent receivables from financing these companies are not recognised unless there is an obligation to provide further capital.

82 78 Nordzucker ANNUAL REPORT 2013/2014 : Notes 2.2. Acquisitions No acquisitions were made in the reporting period or comparative period Significant subsidiaries and joint ventures The significant subsidiaries of the Nordzucker Group are listed in the table below: For the accounting principles relating to acquisitions, please see Note Significant subsidiaries 2.3. Group of consolidated companies The consolidated companies in the Nordzucker Group are as follows: Group stake Central Europe region NORDZUCKER GmbH & Co. KG, Braunschweig, Germany 100 % Norddeutsche Flüssigzucker GmbH & Co. KG, Braunschweig, Germany 70 % Group of consolidated companies 28/2/ /2/2013 Fully consolidated subsidiaries Domestic 3 4 Foreign Companies accounted for using the equity method Domestic 2 2 Foreign 2 2 Northern Europe region Nordic Sugar A/S, Copenhagen, Denmark 100 % Nordic Sugar AB, Malmö, Sweden 100 % Suomen Sokeri Oy, Kantvik, Finland 80 % Sucros Oy, Säkylä, Finland 80 % AB Nordic Sugar Kèdainiai, Kèdainiai, Lithuania 70.6 % Nordzucker Ireland Limited, Dublin, Ireland 100 % Eastern Europe region Považský cukor a.s., Trenčianska Teplá, Slovakia % Nordzucker Polska S.A., Opalenica, Poland % In the reporting period, the Group of consolidated companies was reduced by six subsidiaries. In Germany, fuel 21 GmbH & Co. KG was merged with Nordzucker AG. Outside of Germany, Nordzucker Eastern Europe GmbH (Vienna, Austria) and SugarPartners Holdings Limited (Dublin, Ireland) were liquidated and therefore deconsolidated. In addition, Nordic Sugar UAB (Vilnius, Lithuania), SIA Nordic Sugar (Riga, Latvia) and Ingolf Wesenberg & Co. AS (Oslo, Norway) were also deconsolidated due to lack of significance. The carrying amounts for these three companies are listed in the item Other financial investments. The list of shareholdings can be found in the Nordzucker AG annual report and is published in the German Federal Gazette. All the companies included in the consolidated financial statements have 28 February 2014 as their reporting date. The following trading companies structured as limited partnerships (GmbH & Co. KG) > NORDZUCKER GmbH & Co. KG, Braunschweig, Germany > Norddeutsche Flüssigzucker GmbH & Co. KG, Braunschweig, Germany are exempt from the obligation to prepare annual financial statements in accordance with the regulations applicable to companies with limited liability pursuant to Sec. 264b German Commercial Code (HGB). Significant joint ventures of the Nordzucker Group that are accounted for under the equity method are listed below: Significant joint ventures Group stake Central Europe region MEF Melasse-Extraktion Frellstedt GmbH, Frellstedt 50 % Northern Europe region NP Sweet A/S, Copenhagen, Denmark 50 %

83 Notes : Nordzucker ANNUAL REPORT 2013/ conversion of financial statements in foreign currencies Assets and liabilities of subsidiaries whose functional currency is not the Euro are converted at the exchange rate applicable on the balance sheet date. The functional currency is the currency of the primary economic environment in which the subsidiary operates. Items in the income statement are converted at the weighted average rate for the relevant reporting period. Equity components of subsidiaries are converted at the historical rate for the date first recognised. The currency differences resulting from conversions are included in other comprehensive income (i.e. in the statement of comprehensive income and not in the income statement). The rates for the conversion of key financial statements in foreign currencies into Euros have changed as follows: Exchange Rates of Foreign Currencies 3. explanation of accounting policies 3.1. General principles The valuation of the items in the consolidated financial statements is primarily at amortised cost. Derivative financial instruments and actuarial reserves for pension obligations in the form of plan assets, in particular, are recognised at fair value. Individual line items of the income statement and the balance sheet have been aggregated to improve readability. These items are listed in the notes. The income statement has been prepared using the cost of sales method. As such, the revenues recognised in the reporting period are compared with the costs incurred to achieve these revenues, categorised by the functional areas of production, sales and administration. In the balance sheet, assets and liabilities are categorised as non-current (with maturities of more than one year) or current. for EUR 1.00 Average rate Spot rate 2013/ / /2/ /2/2013 Polish Zloty (PLN) Hungarian Forint (HUF) Danish Crown (DKK) Swedish Crown (SEK) Lithuanian Litas (LTL) Recognition of income and expense Revenues are recognised in accordance with IAS 18 when the goods or services are delivered if the amount of revenue can be estimated reliably and the flow of economic benefit is probable. Revenues are reduced by sales discounts. Operating expenses are recognised when the service is used or as of the date they arise. Interest is recognised as an expense or as income in the period in which it arises. Interest expense arising in connection with the purchase or production of certain assets is only capitalised if they are qualifying assets in accordance with IAS 23. Dividends are recognised in profit or loss when the legal entitlement is vested.

84 80 Nordzucker ANNUAL REPORT 2013/2014 : Notes 3.3. Intangible assets including goodwill This item primarily refers to acquired intangible assets, internally generated intangible assets and goodwill. Acquired intangible assets (purchased rights and licences) are valued initially at cost (purchase price, directly attributable costs). Assets related to acquisitions (see also Note 3.6), such as contractual customer relationships, trademark rights and no-competition clauses, are recognised as acquired intangible assets, provided that the criteria of IFRS 3 and IAS 38 are fulfilled, and valued initially at fair value. Internally generated intangible assets (such as internally generated software) are recognised provided that they fulfil the capitalisation criteria of IAS 38 (in particular with regard to demonstration of technical feasibility, of the intention and ability to use the asset, as well as of its reliable valuation). Production costs include the costs directly attributable to the development phase, as well as borrowing costs insofar as they can be capitalised under IAS 23. Research costs are recognised as an expense. Acquired and internally generated intangible assets with finite lives are subject to scheduled amortisation after initial recognition. This is done on a straight-line basis under the assumption of the following useful lives: Intangible assets Useful life in years Production quotas acquired against payment 10 ERP licences 20 Other software 3 15 Goodwill arises in conjunction with an acquisition (see also Note 3.16) if the total consideration transferred to the seller (purchase price and any future contingent considerations) exceeds the net amount of the identifiable assets acquired and the liabilities assumed. The positive difference is capitalised under IFRS 3. Acquired and internally generated intangible assets with indefinite useful lives, as well as goodwill, are not subject to scheduled amortisation, but must be tested for impairment at least once a year in accordance with IAS 36 (see also Note 3.6). The impairment test for goodwill takes place at the level of the cash-generating unit to which the item was attributed upon initial recognition. Goodwill is assigned to the cash-generating unit that stands to benefit from the synergies of the business combination. According to IAS 36, a cash-generating unit is the smallest identifiable group of assets with cash inflow that is largely independent of cash inflow from other assets. Within the Nordzucker Group, the lowest possible level is deemed the one within the entity at which goodwill is monitored for internal management purposes. An impairment loss is recognised on goodwill when the recoverable amount attributed to the cashgenerating unit for this item is less than the carrying amount of this cash-generating unit; goodwill must then be written down by the amount of this difference. The basis for calculating the recoverable amount is the value in use of the cash-generating unit. The cash-generating unit determines a present value model taking into account cash flows that are based on internal targets. Reversals of the impairment or increases in the carrying amount of goodwill cannot be carried out later. Gains or losses resulting from the disposal or impairment of intangible assets are recorded on the income statement under Other income or Other expenses. Useful lives are reviewed regularly to ensure they are appropriate. If necessary they are adjusted accordingly. If there is reason for an impairment on intangible assets with finite useful lives in accordance with IAS 36 and the recoverable amount is less than the amortised cost, impairment losses are recognised on these items (see also Note 3.6). If the reasons for the impairment losses are no longer valid, the relevant reversals of impairments are to be made.

85 Notes : Nordzucker ANNUAL REPORT 2013/ Property, plant and equipment In accordance with IAS 16, property, plant and equipment is initially recognised at cost and subsequently depreciated on a straight-line basis over their expected useful lives. Costs include the purchase price, all directly attributable costs, estimated costs for future decommissioning and restoration obligations, as well as borrowing costs insofar as they can be capitalised under IAS 23. The following useful lives are assumed for depreciation: Property, plant and equipment Useful life in years Buildings Technical plant and machinery 4 60 Railway tracks 70 Vehicles 4 15 Trailers and rolling stock 25 Other operating and office equipment 3 25 not ownership will be transferred to the lessee, the scheduled depreciation takes place either over the term of the leasing arrangement or the useful life whichever is shorter. If this is not the case, the leased item must be depreciated over its useful life. Gains or losses resulting from the disposal or impairment of items of property, plant and equipment are recorded on the income statement under Other income or Other expenses Investment property Property intended to be let to third parties is initially recognised at cost under IAS 40. For subsequent measurement, the Nordzucker Group consistently exercises the option of measuring investment property at cost, minus scheduled and unscheduled depreciation. Depreciation takes place on a straight-line basis over the useful life of 20 to 60 years. If there is reason for an impairment in accordance with IAS 36 and the recoverable amount is less than amortised cost, an impairment is recognised (see also Note 3.6), which is reversed if the reason for the impairment no longer exists in subsequent periods. Useful lives are reviewed regularly to ensure they are appropriate. If necessary they are adjusted accordingly. Depreciation starts from the time at which the asset in question becomes ready for use. Production-related technical plant and machinery only used during the campaign are depreciated for the full year. If there is reason for an impairment in accordance with IAS 36 and the recoverable amount is less than the amortised cost, impairment losses are recognised on these items (see also Note 3.6). If the reasons for the impairment losses are no longer valid, the relevant reversals of impairments are to be made. If the major opportunities and risks associated with ownership of rented or leased items of property, plant and equipment are borne by the tenant or lessee, then the items are to be recognised as an asset under IAS 17 on the lessee s balance sheet. The asset is initially valued at the present value of the minimum lease payments, or at fair value for the leased item whichever is lower. In exchange, a liability is to be recognised at an appropriate amount for the finance lease. The leased item is reduced by scheduled depreciation or impairment. If it is not sufficiently clear at the start of the lease whether or 3.6. Impairment of intangible assets (including good will), property, plant and equipment as well as investment property Under IAS 36, impairment losses are calculated by comparing the carrying amount with the recoverable amount. This impairment test is applied at the level of individual assets, provided that it is possible to estimate the recoverable amount for the individual asset. If this is not the case, the impairment test must be applied at the level of the cash-generating unit. The cashgenerating unit is the smallest possible group of assets that generate largely independent cash inflows. On each reporting date, a review is conducted to assess whether any indications for the impairment of assets exist. If such an indication exists, the recoverable amount of the asset or cash-generating unit must be determined and compared with the carrying amount. Impairment testing is carried out once a year for goodwill, other intangible assets with indefinite useful lives and for intangible assets not yet available for use regardless of whether or not indications for impairment exist.

86 82 Nordzucker ANNUAL REPORT 2013/2014 : Notes The recoverable amount of an asset or cash-generating unit equates to the higher of fair value less costs of disposal and value in use. For cash-generating units, the recoverable amount is generally calculated using the discounted cash flow method, taking into account cash flows based on internal targets. The cash flows are discounted at a rate which reflects current market assessments of the time value of money and the specific risks of the cash-generating unit. An impairment is applied if the recoverable amount of the asset or cash-generating unit is lower than the corresponding carrying amount. For cash-generating units, any goodwill must first be reduced or eliminated. If the carrying amount is insufficient, other assets belonging to the cash-generating unit must be reduced proportionally. With the exception of goodwill, a review must be conducted on each end of the reporting period to assess whether there are any reasons for whether a previously recognised impairment no longer exists or has been reduced. If this is the case, the carrying amount of the asset or cash-generating unit must be increased to its recoverable amount. As such, assets may not be attributed in excess of the amortised carrying amount as would have been determined in the absence of any prior impairment Investment subsidies Government grants representing grants for assets under IAS 20 (i.e. being investment subsidies) are only recorded if there is sufficient reason to believe that a company within the Nordzucker Group is likely to fulfil the associated conditions and the grant will be received. Subsidies are not subtracted from the corresponding asset but are considered as deferred income under Other liabilities. The deferred income is subsequently released to profit or loss (i.e. via the income statement) over the useful life or depreciation period of the corresponding item of property, plant and equipment Financial instruments Financial instruments are defined in IAS 32; the relevant accounting and disclosure principles can be found in IAS 39 and IFRS 7. The term financial instruments covers both financial assets and financial liabilities. Financial assets include cash and cash equivalents, contractual rights to receive cash or other financial assets such as trade receivables, derivative financial instruments with positive fair value and equity instruments of another company. Financial liabilities include contractual obligations to deliver cash and cash equivalents or other financial assets. These include, for example, borrowings, current loans, trade payables and derivative financial instruments with negative fair value. Only financial assets are included under Other financial investments, Financial assets, Trade receivables, Receivables from related parties and Cash and cash equi valents. The items Financial liabilities, Trade payables, Liabilities towards related parties and Other financial liabilities only comprise financial liabilities. For the initial recognition, financial instruments must be assigned to measurement categories as listed in IAS 39. The subsequent valuation of the items is determined by the measurement category. There are four measurement categories for financial assets ( Financial assets at fair value through profit or loss, Held-to-maturity investments, Loans and receivables, Available-for-sale financial assets ). Financial liabilities may be assigned to two measurement categories ( Financial liabilities at fair value through profit or loss, Financial liabilities measured at amortised cost ). In the reporting period and comparative period, no financial assets were assigned to the measurement category Held-to-maturity investments. In addition, there were no reclassifications from one measurement category to another. Financial assets and liabilities must be recognised as soon as a company becomes a party to the contractual provisions of the financial instrument. Within the Nordzucker Group, regular purchases and sales are recognised on the settlement date (the day on which the asset is supplied to or by the company). Initial recognition is at fair value. The principles of IFRS 13 are applied to determine fair value. For items not measured at fair value through profit or loss, transaction costs must be taken into account in the initial carrying amount.

87 Notes : Nordzucker ANNUAL REPORT 2013/ The Nordzucker Group has not used the voluntary option of designating financial assets or financial liabilities upon initial recognition as at fair value through profit or loss (fair value option). After initial recognition, financial instruments in the category Financial assets/liabilities at fair value through profit or loss are to be recognised at fair value. This includes derivative financial instruments that are not part of an effective hedging relationship as set out in IAS 39 (see also Note 3.14). Changes in value are recognised through profit or loss (i.e. in the income statement). The subsequent measurement of items in the measurement category Available-for-sale financial assets is also at fair value. However, having considered for the effects of tax, changes in fair value are recognised without effect on profit or loss in other comprehensive income (i.e. in the statement of comprehensive income and not in the income statement). If fair value for items in the measurement category Available-forsale financial assets cannot be reliably determined, the items are to be valued at cost. For derivative financial instruments that are part of an effective hedging relationship as set out in IAS 39 (see also Note 3.14), no measurement category is assigned. The instruments are also recognised at fair value. However, value changes are recognised also in other comprehensive income (i.e. in the statement of comprehensive income) depending on the type of hedging relationship. Following initial recognition at amortised cost, financial assets in the measurement category Loans and receivables and financial liabilities in the measurement category Financial liabilities measured at amortised cost are measured using the effective interest method. Within the Nordzucker Group, the financial assets included under the item Cash and cash equivalents are assigned to the measurement category Loans and receivables. This includes bank balances, cash in hand and current balances with banks which have an initial remaining term of up to three months. Amortised cost is frequently the same as the nominal value. On each end of the reporting period, it must be identified whether an impairment of a financial asset or a group of assets exists according to IAS 39. There must be objective indications of a loss event (e.g. severe financial difficulties of the issuer or debtor, breach of contract, concessions made to debtors for economic or legal reasons in connection with the debtor s financial difficulties, an increased probability of insolvency, a significant or prolonged decline in the fair value below its cost), and this must have a reliably estemated effect on expected future cash flows. For financial assets in the measurement categories Held-to-maturity investments and Loans and receivables, any impairment amount is calculated by comparing the carrying amount with the present value of the expected future cash flows (discounted using the effective interest rate). For items in the measurement category Available-for-sale financial assets, a comparison must be made between acquisition cost and fair value Assets held for sale Under IFRS 5, items classed as Assets held for sale include non-current assets and disposal groups classified as held for sale. This classification applies if the relevant carrying amount will be recovered principally through a sales transaction rather than through continuing use. In addition, the items must be available for immediate sale in its present condition and the sale must be deemed highly probable, and expected to occur within one year. Non-current assets are not subject to depreciation, provided that they are categorised as held for sale or belong to a disposal group categorised as held for sale. Non-current assets or disposal groups that are classified as held for sale must be measured immediately after being classified as such, as well as before subsequent ends of reporting periods, at either the carrying amount or fair value less costs to sell, whichever is lower. If a non-current asset is no longer classified as held for sale or no longer belongs to a disposal group classified as held for sale, and if it is again presented as a non-current item and is at the time of the decision not to sell, it is measured either at the recoverable amount or if this is lower at the carrying amount prior to classification, adjusted for all depreciation or revaluations that would have been recorded in the absence of classification.

88 84 Nordzucker ANNUAL REPORT 2013/2014 : Notes Inventories Under IAS 2, inventories are measured at the lower of cost and net realisable value. The cost of inventories include all costs of acquisition and production, as well as any costs incurred in transferring inventories to their current location and in their current condition. Costs are determined using weighted averages. Costs include all direct costs attributable to producing the asset as well as indirect costs attributable to production. Borrowing costs are not included in costs as the Group s products are not qualifying assets under IAS 23. The net realisable value is the estimated selling price in the ordinary course of business less estimated costs to completion and estimated costs to sell. The net realisable value of work in progress is inferred from the net realisable value of finished goods and services less the outstanding costs of completion. Semi-finished goods from production processes are measured using their respective full cost approach. Indirect costs are allocated according to production volume and the amount of production work carried out in-house. If the recognised amounts for finished products and goods are higher than fair value as of the end of the reporting period, the inventories are written down to net realisable value. Sugar stocks from internal production presented under finished products are recognised at cost, unless they are recognised at lower net realisable value in view of sales opportunities. Costs include production costs, indirect costs attributable to the production department and straight-line depreciation for wear and tear. The production costs of quota sugar also include the plant portion of the production levy of EUR 6.00 per tonne. An impairment loss for inventories to the net realisable value is reversed if the reasons for recognising the loss no longer exist Provisions for pensions Under IAS 19, provisions must be made for pension commitments in the form of defined benefit plans where the company primarily bears the actuarial risk (that the benefits will result in higher costs than expected) and the investment risk (that the assets invested will not be sufficient to provide the benefits expected). Provisions are presented as a net liability, i.e. the capital accrued to finance the pension payments (actuarial reserves) is offset against the defined benefit obligation (reflecting the future pension payments to the employee) if the actuarial reserves shows the defining characteristics of plan assets. The valuation of the defined benefit obligation is made using actuarial methods (projected unit credit method). This method assumes that each period of service gives rise to an additional unit of benefit entitlement; as such, the defined benefit obligation increases successively until the employee retires. Future payouts are subject to a discount rate, which is calculated on each end of the reporting period based on market returns on high-quality corporate bonds. The method takes into account both actuarial and demographic assumptions (such as expected mortality, fluctuations, early retirement, for example), as well as financial assumptions (such as discount rates and future salary trends, for example). Cost components with a bearing on pension provisions include service cost, net interest (interest expense, interest income), actuarial gains or losses, return on plan assets. In the income statement, the service cost (i.e. the increase in the present value of a defined benefit obligation arising from a service provided during the reporting period) is recorded in the items Production costs, Distribution costs and Administrative expenses, while the net interest is recorded under Financial expenses. Net interest is calculated by multiplying the net liability with the discount rate of the defined benefit obligation. Actuarial gains or losses andreturn on plan assets are recognised without effect on profit or loss in other comprehensive income (i.e. in the statement of comprehensive income and not in the income statement). Actuarial gains and losses are defined as changes in the present value of the defined benefit obligation as a result of experience adjustments (effects of variations in past actuarial assumptions and actual developments) and effects of changes in actuarial assumptions. Return on plan assets is the variation between the actual rate for the plan asset and the interest based on the discount rate for the defined benefit obligation.

89 Notes : Nordzucker ANNUAL REPORT 2013/ Other provisions The item Other provisions includes personnel-related provisions for anniversaries, partial early retirement, early retirement and severance pay obligations, as well as obligations for profitsharing, bonuses and other gratuities. Under IAS 19, these are recognised depending on the characteristics of the obligation either according to the rules for short-term employee benefits, the rules for other (i.e. not considered as pension benefits) long-term employee benefits, or according to the rules for long-term employee benefits resulting from the termination of an employment relationship (termination benefits). The item Other provisions also includes recultivation obligations and other provisions (e.g. for onerous contracts or imminent losses). Under IAS 37, these kinds of provisions are recognised if a present (legal or factual) obligation has arisen as a result of a past event, which will probably result in an outflow of resources and if the extent of the provisions can be reliably estimated. The measurement is based on the best-possible estimate of the expenses required to fulfil the obligation before the end of the reporting period. Long-term provisions must be discounted with an interest rate commensurate to the risk. Other provisions take into account all recognisable legal and factual obligations of the Nordzucker Group towards third parties Deferred taxes Under IAS 12, deferred taxes are recognised for future tax assets and liabilities resulting from temporary differences between the value of assets and liabilities for tax purposes and their carrying amount in the IFRS financial statements, and for tax loss carry-forwards. Deferred taxes are measured on the basis of the fiscal legislation enacted at the end of each reporting period for the reporting periods in which the differences are expected to reverse or in which it is likely that tax loss carry-forwards will be used. Deferred tax assets for tax loss carry-forwards are only recognised if it is sufficiently likely that they will be realised in the near future. Deferred tax assets are only offset against deferred tax liabilities if specific conditions are fulfilled. The offsetting entry of deferred taxes is made within the income statement under the item Income taxes unless the tax results from a transaction or event that is recognised directly in equity during the same period or another period either under other comprehensive income (i.e. in the statement of comprehensive income) or in any other place derivative financial instruments and hedge accounting Due to the nature of its business, the Nordzucker Group is exposed to interest rate, exchange rate and other market risks. Derivative financial instruments are used as a means of managing these risks. Accounting of derivative financial instruments is governed by the principles set out in IAS 39. Derivative financial instruments are either accounted for separately or they are part of an effective hedging relationship ( hedge accounting ). Hedge accounting means addressing hedged items and hedging instruments that are documented as being linked from a financial point of view in such a way that the compensatory effects on the income statement resulting from changes in market prices occur in the same period. If a hedging relationship is designated, recognition of gains and losses from hedged items and hedging instruments is based on special hedge accounting rules. There is a hedge accounting option for every scenario. However, the application of hedge accounting rules is tied to certain conditions. For one thing, the hedging relationship must be documented. In addition, the hedge must be effective, i.e. the fair value or cash flow changes of hedged items and hedging instruments must be offset within a specific range.

90 86 Nordzucker ANNUAL REPORT 2013/2014 : Notes The value measure for the initial and subsequent recognition of derivative financial instruments is fair value. The fair value of certain derivatives may be both positive or negative; depending on that they are either financial assets or financial liabilities. Fair value must be determined in accordance with the principles set out in IFRS 13. If no market prices for active markets are available, fair value is determined using the present value or option pricing models, whose significant input factors (e.g. market prices, interest rates) are derived from price quotations or other directly or indirectly observable input factors. Stand-alone derivative financial instruments, i.e. those that are not part of an effective hedging relationship according to IAS 39, are always assigned to the measurement categories Financial assets/liabilities at fair value through profit or loss. Value changes are recognised in the income statement under either Financial income or Financial expenses. For derivative financial instruments in an effective hedging relationship no measurement category is assigned. They are also recognised at fair value, although their recognition depends on the type of hedge (fair-value hedge, cash flow hedge) or on the characteristics of the hedge as either with an effect on profit or loss (i.e. in the income statement) or with no effect on profit or loss under other comprehensive income (i.e. in the statement of comprehensive income). Within the Nordzucker Group, interest rate derivatives are always integrated into hedging relationships as cash flow hedges. Stand-alone derivatives are also used to hedge currency and market risks Transactions and items in foreign currencies Under IAS 21, a foreign currency transaction is a transaction that is denominated or requires settlement in a foreign currency. A foreign currency is defined as any currency other than the functional currency of the company. Foreign currency transactions are business transactions for the acquisition or sale of goods or services in a foreign currency, borrowing activity or leases in a foreign currency, or acquisitions or sales of assets or debt in a foreign currency by any other means. Foreign currency items are balance sheet items that are received or borrowed in foreign currency (and which were related with foreign currency transactions before initial recognition). Foreign currency transactions or foreign currency items are translated into the functional currency initially at the spot exchange rate valid on the day of the transaction. Subsequent recognition of foreign currency items depends on whether they are monetary or non-monetary items. Monetary items in a foreign currency are to be translated into the functional currency by each end of the reporting period using the closing rate (i.e. the spot exchange rate at the end of the reporting period); exchange differences must generally be recognised through profit or loss (i.e. in the income statement). Non-monetary items provided that they are recognised at cost are to be translated into the functional currency using the exchange rate on the day of their initial recognition. Non-monetary items recognised at fair value must be translated using the exchange rate that was valid on the day of their recognition (i.e. generally using the closing rate). Exchange differences from non-monetary items should be treated like all other gains or losses, i.e. they are either recognised with an effect on profit or loss or with no effect on profit or loss under other comprehensive income (i.e. in the statement of comprehensive income).

91 Notes : Nordzucker ANNUAL REPORT 2013/ Acquisitions Business combinations are presented using the purchase method in accordance with IFRS 3. The acquisition costs of a business combination are defined as the total consideration paid, measured at fair value as of the acquisition date and the non-controlling interests in the acquired entity. For every business combination the acquirer measures the non-controlling interests in the acquired entity either at fair value or at their pro rata share of the identified net assets of the acquired entity. Costs incurred in the course of the business combination are recognised as expenses in profit or loss. If the Group acquires an entity it determines the appropriate classification and designation of the financial assets and liabilities assumed in accordance with the terms of the contract, economic circumstances and the conditions at the acquisition date. This also includes separating embedded derivative financial instruments from their host contract. For business combinations in stages, the fair value of the equity interest held by the purchaser in the acquired entity is measured as of each acquisition date and the resulting gain or loss is recognised in the income statement. The agreed contingent consideration is recognised at fair value as of the acquisition date. Subsequent changes in the fair value of a contingent consideration that constitutes an asset or a liability are generally recognised either in the income statement or in other comprehensive income in accordance with IAS 39. Contingent consideration that is classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Goodwill is initially recognised at cost, which is defined as the excess of total consideration transferred and the amount of any non-controlling interest over the identifiable assets acquired and the liabilities assumed. If this consideration is below the fair value of the net assets of the company, the difference is recognised in the income statement. 4. discretionary decisions and estimation uncertainty The presentation of the net assets, financial and earnings position, as well as the accounting policies, are influenced by estimations and assumptions. Estimated values and actual amounts may vary sometimes significantly. In particular, key estimates and assumptions have been made in defining uniform periods of depreciation and amortisation for the Group, the amount of impairments on receivables, as well as determining the actuarial assumptions for measuring pension provisions. At the same time, it is also highly necessary to make estimates and assumptions to account for provisions or disclose contingent liabilities particularly with regard to related or potential legal disputes or other pending claims. Estimates, for example, must be made regarding the likelihood of a pending case being ruled in the claimant s favour, and regarding any payment obligations arising as arecognition the ruling. There is also estimation uncertainty in the recognition of provisions for onerous contracts or imminent losses with regard to whether a loss is likely, and whether it is possible to estimate this loss reliably. For deferred tax assets, the main estimates relate to the taxable profits that will be generated in future. Other significant estimations are made with regard to the issue of whether there are reasons for an impairment of assets or a cash-generating unit, as well as in the implementation of the impairment testing in accordance with IAS 36 with regard to determining the cash flows in the forecast period and the selection of a suitable capitalisation rate. We refer to the corresponding notes to the consolidated balance sheet for the carrying amounts of balance sheet items affected by significant estimates. After initial recognition, goodwill is not subject to scheduled amortisation, but is tested at least once a year for impairment under IAS 36 (see also Notes 3.3 and 3.6).

92 88 Nordzucker ANNUAL REPORT 2013/2014 : Notes 5. accounting standards to be applied for the first time The Nordzucker Group applied the following pronouncements or amendments to existing pronouncements of the IASB or IFRS IC for the first time during the reporting period: > amendment to IAS 1 Presentation of Financial Statements; > amendment to IAS 19 Employee Benefits; > IFRS 13 Fair Value Measurement; > amendment to IFRS 7 (designation of the amendment: Disclosures Offsetting Financial Assets and Financial Liabilities); > Improvements to International Financial Reporting Standards (published 2012); > Amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards (designation of the amendment: Government Loans); > IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine. The amendment to IAS 1 contains new guidelines for the structure of the statement of comprehensive income. The items listed under other comprehensive income on the statement of comprehensive income must now be divided into two groups, depending on whether or not they will be reclassified to the income statement in the future. The amended of IAS 19 has resulted in significant changes to the accounting policies used by the Nordzucker Group. Note 7 goes into more detail regarding the changes to the regulations and the effects associated with them. IFRS 13 contains general and overarching regulations with regard to the definition and determination of fair value, as well as to the associated disclosures. The guidelines apply to almost every standard, with accounting for Inventories (IAS 2), Leases (IAS 17) and Share-based Payment (IFRS 2) the only exceptions. IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The amendment to IFRS 7 extends the disclosure obligations for financial instruments to include disclosures in connection with offsetting financial assets and financial liabilities. The IASB makes amendments to various IFRSs via its overarching Improvements to International Financial Reporting Standards. A total of five standards were amended with the 2012 publication. The amendments to IAS 16 are likely to be the only ones relevant to the Nordzucker Group. These amendments clarify the fact that spare parts, stand-by equipment and servicing equipment may qualify as items of property, plant and equipment if they fulfil the relevant definition. The amendment to IFRS 1 is not relevant to the Nordzucker Group because IFRS 1 concerns the first-time application of IFRS. IFRIC 20 is also of no consequence for the Nordzucker Group because its interpretation refers to accounting issues facing mining companies. With the exception of the amendments to IAS 19, none of the above amendments have any major impact on the net assets, financial and earnings position or the cash flows of the Nordzucker Group. 6. accounting standards not applied No IFRSs were voluntarily applied ahead of time in the consolidated financial statements of Nordzucker AG as of 28 February The pronouncements will be taken into account for the first time when their application becomes mandatory. The application of IFRS requires the European Union (EU) to first grant approval (endorsement process), which in some cases is still outstanding. In addition, the Nordzucker Group has not yet applied IFRS 8 Operating Segments or IAS 33 Earnings per Share; their application is only mandatory for capital market related companies. The amendments listed below are not likely to have any major impact on the presentation of the net assets, financial and earnings position or the cash flows of the Nordzucker Group.

93 Notes : Nordzucker ANNUAL REPORT 2013/ mandatory first-time application in the 2014/2015 reporting period The following pronouncements are to be applied for the first time in the Nordzucker consolidated financial statements as of 28 February 2015: > Amendment to IAS 27 Consolidated and Separate Financial Statements (in future: Separate Financial Statements); > Amendment to IAS 28 Investments in Associates (in future: Investments in Associates and Joint Ventures); > IFRS 10 Consolidated Financial Statements; > IFRS 11 Joint Arrangements; > IFRS 12 Disclosure of Interests in Other Entities; > Amendments to IFRS 10, IFRS 11 and IFRS 12 (designation of the amendments: Consolidated Financial Statements, Joint Agreements and Disclosure of Interests in Other Entities: Transition Guidance, as well as Investment Entities); > Amendment to IAS 32 (designation of the amendment: Presentation Offsetting Financial Assets and Financial Liabilities); > Amendment to IAS 36 Impairment of Assets (designation of the amendment: Recoverable Amount Disclosure for Non- Financial Assets); > Amendment to IAS 39 Financial Instruments: Recognition and Measurement (designation of the amendment: Novation of Derivatives and Continuation of Hedge Accounting); > IFRIC 21 Levies (not yet endorsed by the EU). The amendments to IAS 27 and IAS 28, as well as IFRSs 10 to 12, have brought about changes in the guidelines for consolidated accounting: > Following the adoption of IFRS 10 and IFRS 12, the scope of IAS 27 is limited to accounting for subsidiaries, joint ventures and associated companies in separate financial statements. In addition, the scope of IAS 28 has been extended to cover the application of the equity method to joint ventures as well as to associated companies. > IFRS 10 replaces the previous regulations on consolidated accounting in IAS 27 and SIC-12. The standard defines a uniform concept of control, which is applied to all companies including special purpose entities. > IFRS 11 replaces IAS 31 and SIC-13. IFRS 11 abolishes the previous option of accounting for joint ventures using the proportional consolidation method, i.e. joint ventures now have to be accounted for using the equity method. > IFRS 12 contains uniform rules for disclosures in the area of consolidated accounting and consolidates the disclosures on subsidiaries that were previously governed by IAS 27, the disclosures on joint ventures and associated companies previously defined in IAS 31 and IAS 28 respectively and those for structured entities. The amendment to IAS 32 includes clarifications on offsetting financial instruments, although it retains the existing basic rules. The amendment to IAS 36 requires the provision of disclosures regarding the recoverable amount for assets or cash-generating units for which impairments were made or reversed during the reporting period. The amendment to IAS 39 allows, under certain conditions, for the continuation of hedge accounting with derivatives which are transferred to a central clearing house. IFRIC 21 determines that a company active in a particular market must recognise a liability for the levies for the relevant authorities in the market if the business activity causing the levy takes place. For levies dependent on a certain minimum volume being reached, for example, the interpretation clarifies that the liability can only be recognised as such once this minimum volume has been reached.

94 90 Nordzucker ANNUAL REPORT 2013/2014 : Notes 6.2. mandatory first-time application in the 2015/2016 reporting period or later These standards or amendments are to be applied to the Nord zucker consolidated financial statements for the first time as of 29 February 2016 or for later reporting periods: > Amendment to IAS 19 Employee Benefits (designation of the amendment: Employee Contributions; not yet endorsed by the EU); > Improvements to International Financial Reporting Standards ( Cycle; published in 2013; not yet endorsed by the EU); > Improvements to International Financial Reporting Standards ( Cycle; published in 2013; not yet endorsed by the EU); > IFRS 9 Financial Instruments (published 2009, 2010) and subsequent amendments to IFRS 9 and IFRS 7 (designation of the amendments: Mandatory Effective Date and Transition Disclosures Amendments to IFRS 9 and IFRS 7; published in 2011) and to IFRS 9, IFRS 7 and IAS 39 (designation of the amendments: IFRS 9 Financial Instruments Hedge Accounting and Amendments to IFRS 9, IFRS 7 and IAS 39; published in 2013); not yet endorsed by the EU. > IFRS 14 Regulatory Deferral Accounts (not yet endorsed by the EU). The amendment to IAS 19 governs the recognition of contributions made by employees or third parties to pension plans to reduce the service cost insofar as the reduction reflects the service rendered during the reporting period. The IASB makes amendments to various IFRSs via its overarching Improvements to International Financial Reporting Standards. The cycle amended a total of seven standards; the cycle amended four. 7. changes in the Reporting Structure and Changes of Accounting Policies 7.1. presentation of the income statement according to the cost of sales method In the 2013/2014 Nordzucker consolidated financial statements, the income statement has been prepared using the cost of sales method for both the reporting period and the comparative period. In previous annual reporting periods, the income statement was prepared using the nature of expense method. The transition is a result of the fact that the cost of sales method has become the more common method on both a national and international level. It is also used predominantly in the industry. As such, switching over to the cost of sales method will facilitate the comparison of the Nordzucker consolidated financial statements Changes resulting from IAS 19 Within the Nordzucker Group, an amended version of IAS 19 (published in 2011) was applied for the first time in the 2013/2014 reporting period. The first-time application is made retrospectively, i.e. it must be accounted for as if the new guidelines had always been used. As a result, amounts from the comparative period must be adjusted. For significant retrospective adjustments, IAS 1 additionally requires the preparation of an additional (third) balance sheet at the beginning of the comparative period. Adjustments for earlier periods that are not shown in the financial statements are offset against the value on the opening balance sheet for each equity component affected in the earliest period presented. IFRS 9 is to replace the existing regulations in IAS 39 regarding accounting for financial instruments. The standard is being developed by the IASB in a series of stages and will then be published. EU adoption of the standard will only begin once the IASB has completed all the stages. IFRS 9 contains new regulations on categorisation and measuring financial assets as well as on accounting for hedging relationships. The existing guidelines on the categorisation and measurement of financial liabilities will largely be retained. IFRS 14 will make it possible to continue using previously applied accounting guidelines to account for regulatory deferred income items from price regulations during the transition to the new IFRS.

95 Notes : Nordzucker ANNUAL REPORT 2013/ For the Nordzucker Group, the following amendments to the regulations in IAS 19 have an effect on the presentation of the net assets, financial and earnings position: > In terms of pension provisions, the abolition of the corridor method will lead to the immediate recognition of actuarial gains and losses, as well as of past service costs. This results in the fact that at the end of each reporting period the full amount of the net liability (defined benefit obligation less plan assets) is presented. > In conjunction with pension provisions, the expected return on plan assets or on reimbursements no longer has to be recognised as interest income in the income statement. Instead, interest income for the reporting period must be calculated on the basis of the discount rate at which the defined benefit obligation was determined at the end of the previous reporting period. The difference between the actual return on plan assets or on reimbursements for the reporting period and the interest income calculated based on the discount rate represents a gain or loss as a result of the remeasurement of the plan asset or reimbursement. This gain or loss must be recognised outside of profit or loss under other comprehensive income (i.e. in the statement of comprehensive income). > For other provisions, there are changes with regard to the value of obligations from partial early retirement agreements. On the basis of previous regulations, the top-up amounts were treated in the same way as benefits arising from the termination of an employment relationship (termination benefits), i.e. they were recorded as liabilities in their full amount at the time the benefits were approved. With the revision of IAS 19, the definition of termination benefits has been changed; it now no longer includes any payments in exchange for future work. This also affects the top-up amounts, which are now no longer accountable as termination benefits, but are recognised proportionally over the vesting period as a provision according the rules of other long-term employee benefits. As a consequence, partial early retirement obligations were previously overstated on the basis of the revised IAS 19. The following table shows the effects of the changes in accounting methods for pension and partial early retirement obligations on the balance sheet and result: 28/2/ /2/2013 1/3/2012 in EUR thousands cumulative Retained earnings 10,657 8,416 2,241 of which adjustments within the income statement Administrative expenses 434 Financial income 1,446 Financial expenses 13,834 Income taxes 3,538 Other comprehensive income (including non-controlling interests, including deferred taxes) 35,357 23,645 11,712 Provisions for pensions and similar obligations (non-current) 35,590 20,724 14,866 Other provisions (non-current) ,407 Deferred tax assets 10,101 6,113 3,988 If the Nordzucker Group were to continue applying the old version of IAS 19, the net expenses recorded in the income statement for pension provisions in the reporting period would exceed those calculated under the new version of IAS 19 by EUR 231 thousand. Under the hypothetical application of the old version of IAS 19, the pension provisions shown in the balance sheet would have been EUR 32,149 thousand lower as of the reporting date than on the basis of the new version of IAS 19; as a result, the equity shown in the balance sheet, adjusted for deferred taxes, would have been correspondingly higher.

96 92 Nordzucker ANNUAL REPORT 2013/2014 : Notes Notes to the consolidated income statement 8. Revenues Revenues are made up as follows: 10. Sales costs Sales costs are made up as follows: Revenues in EUR thousands Products 1/3/ /2/2014 1/3/ /2/2013 Sugar 1,957,099 2,011,955 Bioethanol 109, ,054 By-products 188, ,239 Other 106, ,592 Regions 2,360,913 2,442,840 Central Europe 1,029,718 1,059,303 Northern Europe 933, ,949 Eastern Europe 397, ,588 2,360,913 2,442,840 Sales costs in EUR thousands 1/3/ /2/2014 1/3/ /2/2013 Freight 84,667 79,002 Sales commission 2,212 1,983 Advertising 10,569 13,302 Rentals, land leasing and outside warehousing costs 30,037 27,490 Personnel expenses 12,881 14,297 Depreciation, amortisation and impairment 9,033 5,990 Other costs of sales 26,257 24,094 Total 175, ,158 Other revenues primarily include sales of merchandise. 11. Administrative expenses Administrative expenses are made up as follows: 9. Production costs Production costs are made up of the following: Production costs in EUR thousands 1/3/ /2/2014 1/3/ /2/2013 Cost of materials and services 1,466,139 1,419,433 Personnel expenses 136, ,091 Depreciation, amortisation and impairment 72,628 72,529 Other expenses 32,416 34,234 Total 1,707,342 1,663,287 Administrative expenses in EUR thousands 1/3/ /2/2014 1/3/ /2/2013 Personnel expenses* 43,267 46,394 Rentals and land leasing 2,854 4,150 Consultancy fees 14,425 14,105 Fees and levies 4,707 4,796 Phone/communications 1,564 1,808 Travel costs 2,559 3,151 Depreciation, amortisation and impairment 2,200 2,420 Other administrative expenses 13,525 14,209 Total 85,101 91,033 * amounts from the comparative period have been adjusted as a result of the retrospective application of IAS 19 (2011).

97 Notes : Nordzucker ANNUAL REPORT 2013/ Other income Other income is made up as follows: 13. Other expenses Other expenses are made up as follows: Other income in EUR thousands 1/3/ /2/2014 1/3/ /2/2013 Proceeds from disposal of non-current assets 2, Reversals of impairments on receivables Income from the reversal of provisions 8,707 7,714 Insurance and other compensation for damages 5,666 5,249 Income from the reversal of investment subsidies, grants and other receivables Rental and leasing income 900 1,248 Foreign exchange gains 1,526 2,893 Reversals of impairment of intangible assets as well as property, plant and equipment Reimbursement of production levy 17,290 0 Miscellaneous operating income 8,743 9,946 Total 46,811 28,704 Other expenses in EUR thousands 1/3/ /2/2014 1/3/ /2/2013 Losses from disposal of non-current assets 1,938 2,518 Impairments on receivables Expenses from loss events 13,617 12,458 Other impairments 89, Foreign exchange losses 1,753 2,657 Research and development 2,833 6,508 Other operating expenses 30,917 19,298 Total 140,751 44, Financial income Financial income is made up as follows: Financial income Foreign currency gains and the foreign currency losses disclosed under other expenses are mainly due to the movement of the relevant national currencies against the Euro. in EUR thousands 1/3/ /2/2014 1/3/ /2/2013 Interest income on bank balances Other interest and similar income* 5, Income from other investments 13,734 4,712 Other financial income Total 19,675 5,211 * amounts from the comparative period have been adjusted as a result of the retrospective application of IAS 19 (2011). Income from other investments refers to dividends. Note 42 contains further information on the net gains or net losses of financial instruments.

98 94 Nordzucker ANNUAL REPORT 2013/2014 : Notes 15. Financial expenses Financial expenses are made up as follows: Financial expenses in EUR thousands 1/3/ /2/2014 1/3/ /2/2013 Interest expense from bank balances 2,605 5,234 Interest expense on provisions 6,711 6,039 Other interest and similar expenses* 4,737 1,980 Other financial expenses 906 4,090 Total 14,959 17,343 * amounts from the comparative period have been adjusted as a result of the retrospective application of IAS 19 (2011). Interest expense from bank balances comprises both interest on lines of credit drawn as well as commitment fees. Additional information on the net gains or net losses of financial instruments can be found in Note Income taxes Income taxes include taxes on income paid or owed in the individual countries and deferred taxes. Income taxes consist of trade tax, corporation tax, solidarity surcharge and the equivalent foreign income taxes. Income tax expense is made up by origin as follows: Income taxes in EUR thousands 1/3/ /2/2014 1/3/ /2/2013 Current taxes Current domestic taxes 41,584 69,107 Current foreign taxes 53,219 67,400 94, ,507 Deferred taxes Deferred domestic taxes* 4, Deferred foreign taxes 4,748 12, ,865 Income taxes 94, ,642 * amounts from the comparative period have been adjusted as a result of the retrospective application of IAS 19 (2011). 16. result from companies accounted for using the equity method The result from companies accounted for using the equity method improved by EUR 339 thousand compared with the previous reporting period. Companies accounted for under the equity method are shown in the balance sheet under the item Financial investments (see Note 25.1). The current income taxes affecting previous years had a positive effect on the net income to the amount of Eur 2,563 thousand. The expected income tax expense which would have been payable if the tax rate for the parent company Nordzucker AG of per cent (previous year: per cent) were applied to the consolidated net income under IFRS before taxes and non-controlling interests can be reconciled with the income taxes in the income statement as follows: Tax expense in EUR thousands 1/3/ /2/2014 1/3/ /2/2013 IFRS net profit before income taxes 303, ,316 Group tax rate in % Expected tax expense* 87, ,062 Tax rate variances 19,291 23,724 Taxes for prior years 1,652 4,909 Tax-free income 4,477 2,169 Non-deductible operating expenses for tax purposes 31,919 1,285 Other effects 19 1,279 Tax expense 94, ,642 * amounts from the comparative period have been adjusted as a result of the retrospective application of IAS 19 (2011).

99 Notes : Nordzucker ANNUAL REPORT 2013/ The corporation tax rate for stock corporations based in Germany is 15 per cent plus 5.5 per cent solidarity surcharge on the corporation tax liability. Companies based in Germany are also liable for trade tax at a rate determined by multipliers set by the local council. The effects of differences between foreign tax rates and the Group tax rate for Nordzucker AG (29.00 per cent) are shown in the reconciliation statement under tax rate differences between Germany and abroad. As a result of tax rate changes abroad, there was deferred income of EUR 5,028 thousand for the current financial year. Deferred tax assets and liabilities result primarily from temporary valuation differences between the IFRS financial statements and the financial statements of the individual Group companies for local tax purposes for the following items: Deferred taxes 28/2/ /2/2013 in EUR thousands Deferred tax assets Deferred tax liabilities Deferred tax assets Deferred tax liabilities Intangible assets 38 8, ,202 Property, plant and equipment 1, ,962 2, ,278 Financial investments Inventories 2,387 8,860 3,179 9,574 Other assets 395 1, ,991 Pension provisions* 14, ,993 0 Other provisions* 9, ,987 2,098 Other liabilities 1,163 9, ,134 Deferred taxes on temporary differences 30, ,982 35, ,081 Deferred tax assets on tax loss carry-forwards 0 0 2,706 0 Gross amount 30, ,982 37, ,081 Netting 28,647 28,647 19,843 19,843 Balance sheet amount 1, ,335 17, ,238 * amounts for deferred tax assets from the comparative period have been adjusted as a result of the retrospective application of IAS 19 (2011). The changes in deferred taxes as of the reporting date as shown in the consolidated balance sheet were recorded within profit or loss at EUR 422 thousand (i.e. in the income statement) and outside of profit or loss at EUR 3,182 thousand (i.e. in the statement of comprehensive income). Deferred tax assets and liabilities are offset for each company or taxable entity. To the extent that deferred taxes relate to private partnerships, offsetting only takes place at the level of Nordzucker AG for corporation tax purposes. Deferred trade taxes are offset at the level of the individual private partnerships.

100 96 Nordzucker ANNUAL REPORT 2013/2014 : Notes The following table shows the changes in deferred tax assets and deferred tax liabilities as shown both within and outside of profit or loss: Deferred taxes 1/3/ /2/2014 1/3/ /2/2013 in EUR thousands Deferred tax assets Deferred tax liabilities Deferred tax assets Deferred tax liabilities Intangible assets 405 2, ,865 Property, plant and equipment 627 7,316 5,933 11,715 Financial investments Inventories Other assets , Pension provisions* 4, Other provisions* 587 2,331 2, Other liabilities 596 2,276 4,555 9,675 Deferred taxes on temporary differences 4,789 11,099 10,192 22,067 Deferred tax assets on tax loss carry-forwards 2, Total 7,495 11,099 10,202 22,067 * amounts for deferred tax assets from the comparative period have been adjusted as a result of the retrospective application of IAS 19 (2011). With regard to the surplus of deferred tax assets over deferred tax liabilities at the level of individual companies in the balance sheet, the value of the deferred tax assets is considered to be sufficiently certain, based on the current earnings situation and/or business planning. In the financial year, no deferred tax assets were recognised for foreign tax loss carry-forwards of EUR 3,976 thousand (previous year: EUR 4,594 thousand) as no positive taxable income is expected in the near future. Furthermore, no deferred tax assets were recognised for domestic tax loss carry-forwards of EUR 298 thousand (previous year: EUR 297 thousand) as no positive taxable income is expected in the near future. No deferred tax assets were recognised for temporary differences on investments by subsidiaries of EUR 165,145 thousand (previous year: EUR 364,353 thousand) because the Nordzucker Group is able to control the timing of the reversal and the temporary differences will not be reversed in the foreseeable future.

101 Notes : Nordzucker ANNUAL REPORT 2013/ Cost of materials and services The cost of materials and services is made up as follows: In the reporting period and the comparative period, the average number of employees in the Nordzucker Group was as follows: Cost of materials and services in EUR thousands 1/3/ /2/2014 1/3/ /2/2013 Cost of raw materials, consumables and supplies and of purchased merchandise 1,376,712 1,517,620 Cost of purchased services 111, ,348 Total 1,488,021 1,621,968 Average number of employees 1/3/ /2/2014 1/3/ /2/2013 Central Europe 1,247 1,242 Northern Europe (including Ireland) 1,509 1,504 Eastern Europe Total 3,279 3, PersoNNel expenses Personnel expenses are made up as follows: 20. depreciation, amortisation and impairment Depreciation, amortisation and impairment are made up as follows: Personnel expenses in EUR thousands 1/3/ /2/2014 1/3/ /2/2013 Wages and salaries 158, ,641 Social security contributions and other social expenses 28,895 24,927 Expenses for defined benefit plans 3,422 2,281 Expenses for defined contribution plans 6,045 6,604 Total 196, ,453 Depreciation, amortisation and impairment in EUR thousands 1/3/ /2/2014 1/3/ /2/2013 Depreciation or amortisation of intangible assets, property, plant and equipment, and investment property 81,263 86,767 Impairment of intangible assets, property, plant and equipment, and investment property 92, Total 173,720 87,562 Expenses for defined benefit and defined contribution plans relate to Group expenses for defined benefit and defined contribution pension plans and similar obligations. The expenses for defined benefit plans affect service costs. They do not contain the net interest expenses of defined benefit obligations associated with pension expenses. These are shown in the income statement under Financial expenses. Impairment losses in the reporting period primarily resulted from the impairment of goodwill from the acquisition of the Nordic Sugar Group to the amount of EUR 89,007 thousand.

102 98 Nordzucker ANNUAL REPORT 2013/2014 : Notes Notes to the consolidated balance sheet 21. Intangible assets Changes in the individual items of intangible assets are shown in the statement of changes in non-current assets. At the end of the reporting period, there were no intangible assets with indefinite useful lives. In the reporting period, research and development expenses of EUR 2,833 thousand (previous year: EUR 6,508 thousand) were recorded in the income statement. These expenses are attributed in full to the item Other expenses. In the reporting period, intangible assets purchased for EUR 2,558 thousand (previous year: EUR 3,972 thousand) were still in use, although they had already been fully amortised. 22. Property, plant and equipment We refer to the statement of changes in non-current assets for the Nordzucker Group for changes in property, plant and equipment. Assets recognised within a finance lease under IAS 17 primarily include a storage reservoir in Stöcken and a silo in Saxkøbing. The leased items are categorised as technical plant and machinery and have a net carrying amount of EUR 1,864 thousand (previous year: EUR 607 thousand) as of the end of the reporting period. 23. impairment test for intangible assets and items of property, plant and equipment Impairment tests for intangible assets and items of property, plant and equipment are mainly performed on the basis of the values in use for cash-generating units. The cash-generating units have been determined according to the business activities of the Nordzucker Group and taking regional aspects into account. An impairment test was carried out for the goodwill of the Nordic Sugar Group recognised in the consolidated balance sheet. The recoverable amount is based on the value in use. The cash flows for this cash-generating unit were calculated for the next five years based on financial forecasts. The pre-tax interest rate used to discount the cash flows for this cashgenerating unit was around 8.48 per cent (previous year: 8.96 per cent). A growth rate of 0 per cent (previous year: 0 per cent) was assumed for the long-term earnings component of the discounted cash flow calculation. Price falls and the end of the sugar market regime in 2017 have considerably lowered expectations for the future of the Nordic Sugar Group. As such, the financial years after 2017 are expected to see significantly lower earnings than previously projected. This change in market outlook required an impairment of this goodwill to the amount of EUR 89,007 thousand. During the reporting period, items of property, plant and equipment with acquisition and/or production costs of EUR 118,322 thousand (previous year: EUR 118,371 thousand) were in use although they had already been fully depreciated. In the 2013/2014 reporting period, the Nordzucker Group received compensation of EUR 2,246 thousand (previous year: EUR 1,824 thousand) for the loss or impairment of items of property, plant and equipment from third parties, e.g. insurance companies. As of the end of the reporting and the comparative period, items of property, plant and equipment in the amount of EUR 5,400 thousand were pledged as collateral for liabilities.

103 Notes : Nordzucker ANNUAL REPORT 2013/ Investment property Investment property in the Nordzucker Group mainly consists of flats and land not required for operating purposes. In the reporting period, rental income of EUR 125 thousand (previous year: EUR 133 thousand) was generated, offset by expenses of EUR 217 thousand (previous year: EUR 171 thousand). There were also expenses of EUR 8 thousand (previous year: EUR 9 thousand) for which there was no corresponding rental income. The fair value of the property is EUR 7,466 thousand as of the reporting date (previous year: EUR 9,502 thousand). Fair value was determined on the basis of internal estimates using comparable properties. No subsequent acquisition costs were capitalised in the reporting period or in the comparative period. 25. Financial investments There were no significant changes in the Nordzucker Group s financial investments in the reporting period. In applying the equity method, losses from an associated company that exceed the carrying amount of the investment or other non-current receivables relating to the financing of the associated company are not recognised as there is no requirement to invest further equity. In the reporting period, the Nordzucker Group did not receive any dividends for companies accounted for using the equity method Other financial investments Financial assets in the measurement category Available-forsale financial assets as shown in other financial investments are recognised at the end of the reporting period at fair value or at cost (see Note 3.8). The shares in Tereos TTD a.s. are disclosed here, despite a stake of per cent, because the company s Articles of Association do not permit the Group to have significant influence over its operating and financial policy. The Nordzucker Group received dividends of Eur 13,703 thousand in the reporting period (previous year: EUR 4,713 thousand) companies accounted for using the equity method In the reporting period, associated companies accounted for using the equity method reported a total result for the period of EUR 965 thousand (previous year: EUR 8 thousand), revenues of EUR 2,051 thousand (previous year: EUR 1,976 thousand), assets of EUR 18,434 thousand (previous year: EUR 17,820 thousand) and liabilities of EUR 13,087 thousand (previous year: EUR 12,546 thousand) in their financial statements. The share of profit/loss from associated companies attributable to the Nordzucker Group in the reporting period was EUR 483 thousand (previous year: EUR 821 thousand). A loss was reported during the comparative period because an impairment loss of EUR 825 thousand was recognised for one joint venture in addition to its current earnings contribution.

104 100 Nordzucker ANNUAL REPORT 2013/2014 : Notes Consolidated statement of changes in non-current assets 2013/2014 Nordzucker AG, Braunschweig, Germany in EUR thousands Intangible assets As of 1/3/2013 Cost or fair value Currency effects Additions Reclassifications Disposals As of 28/2/2014 Goodwill 89, ,028 Rights, patents and licences 53, ,708 Internally generated intangible assets 5, ,185 2,981 Other intangible assets 101,510 1,209 1, , ,397 Advance payments made , ,492 Property, plant and equipment 250,243 1,117 2, , ,606 Land and buildings 448,138 1,943 3, ,399 Technical plant and machinery 1,602,457 6,693 61,244 11,904 12,214 1,656,698 Other plant, operating and office equipment 47, , ,475 46,247 Advance payments made and plant under construction 12, ,664 11, ,999 2,110,420 8,792 75, ,194 2,161,343 Investment property 10, ,417 2,371,618 10,561 78, ,411 2,418,366 Consolidated statement of changes in non-current assets 2012/2013 Nordzucker AG, Braunschweig, Germany in EUR thousands Intangible assets As of 1/3/2012* Cost or fair value Currency effects Additions Reclassifications Disposals As of 28/2/2013 Goodwill 89, ,038 Rights, patents and licences 49, , ,599 Internally generated intangible assets 5, ,167 Other intangible assets 102, , ,510 Advance payments made Property, plant and equipment 246, , , ,243 Land and buildings 448,619 1,042 3,668 2,451 2, ,138 Technical plant and machinery 1,547,605 5,066 35,499 25,340 11,053 1,602,457 Other plant, operating and office equipment 47, ,669 1,573 4,673 47,506 Advance payments made and plant under construction 12, ,462 27, ,319 2,056,513 6,162 69,298 3,038 18,515 2,110,420 Investment property 12, , ,955 2,315,572 6,829 74,059 4,138 20,704 2,371,618 * In the course of a Group-wide system change, the amounts in the columns have each been corrected by EUR 21,387,000 in total. This had no effect on the net carrying amounts of the corresponding assets as of the end of the reporting period 28/2/2013.

105 Notes : Nordzucker ANNUAL REPORT 2013/ Accumulated depreciation, amortisation and impairment Carrying amounts As of 1/3/2013 Currency effects Depreciation, amortisation Impairment Reversals of impairment Reclassifications Disposals As of 28/2/2014 As of 28/2/2014 As of 28/2/ , , ,012 41, , ,800 8,908 12,348 4, ,184 2, , , ,860 44,048 56,349 62, , , ,218 89, , ,538 67, , , , , , , ,703 2,682 59,030 2, ,730 1,029, , ,754 37, , ,263 37,257 8,990 9, ,852 12,172 1,257,370 2,975 70,010 3, ,103 1,313, , ,050 5, ,902 4,515 5,676 1,347,555 3,522 81,263 92, ,574 1,498, ,455 1,024,063 Accumulated depreciation, amortisation and impairment Carrying amounts As of 1/3/2012* Currency effects Depreciation, amortisation Impairment Reclassifications Disposals As of 28/2/2013 As of 28/2/2013 As of 28/2/ ,012 89,251 35, , ,251 12,348 14,411 4, , , , ,110 38,870 62,640 69, , , ,110 84, , , , , ,455 1, , , , ,675 1,764 57, ,904 9, , , ,650 38, , ,428 37,932 9,574 9, ,172 12,260 1,195,454 1,695 72, ,667 15,881 1,257, , ,059 5, ,279 5,676 6,785 1,273,663 1,892 86, ,433 17,995 1,347,555 1,024,063 1,041,910

106 102 Nordzucker ANNUAL REPORT 2013/2014 : Notes 26. Inventories Unfinished goods mainly consist of the thick juice required to produce bioethanol. Inventories of EUR 39,972 thousand (previous year: EUR 3,025 thousand) are carried at net realisable value. Write-downs on inventories as recorded in the income statement under the item Production costs amounted to EUR 24,680 thousand (previous year: EUR 2,949 thousand). In the reporting period, these are mainly related to write-downs on fire-damaged inventories. 29. Financial assets Financial assets are made up as follows: Financial assets in EUR thousands 28/2/ /2/2013 Claims for damages 21,615 3,260 Positive fair value of derivative financial instruments 3,692 5,033 Other financial assets 8,135 4,303 Balance sheet amount 33,442 12, Trade receivables Trade receivables are made up as follows: Information on the default risks and age structure are provided in Note Trade receivables in EUR thousands 28/2/ /2/2013 Gross trade receivables 188, ,483 Write-downs on trade receivables 1,916 2,059 Balance sheet amount 186, , Other assets Other assets are made up as follows: Other assets in EUR thousands 28/2/ /2/2013 Information on the default risks and the age structure of trade receivables is given in Note Expenses for impairments on trade receivables in the reporting period amounted to EUR 588 thousand (previous year: EUR 562 thousand). Receivables from other taxes 31,323 50,092 Miscellaneous other assets 52,756 12,293 Balance sheet amount 84,079 62, Receivables from related parties Receivables from related parties are made up as follows: Receivables from related parties 31. assets held for sale Assets classified as held for sale in accordance with IFRS 5 consist of land and buildings with a carrying amount of EUR 1,532 thousand (previous year: EUR 2,497 thousand). in EUR thousands 28/2/ /2/2013 Receivables from associated companies and joint ventures Receivables from other related parties 35 4,132 Balance sheet amount 977 4,264 Information on the default risks and age structure can be found in Note 43.2.

107 Notes : Nordzucker ANNUAL REPORT 2013/ Shareholders equity Changes in Group shareholders equity are shown in the statement of changes in shareholders equity. Capital management at the Nordzucker Group is founded on a strong equity base and a sustainable dividend policy in order to secure current operations on the one hand and to enable a reasonable dividend yield for the shareholders on the other. As of 28 February 2014, the equity ratio came to 59 per cent (previous year: 54 per cent). The Executive Board will put a proposal at the Annual General Meeting to distribute a dividend of EUR 1.30 per share (previous year: EUR 1.80 per share). Nordzucker AG s Articles of Association do not require any particular amount of equity. The Executive Board manages the Group with the aim of generating a profit. It does this by means of capital market related targets for the company which are measured in terms of specific financial indicators. The main financial indicators for the Group are total operating profitability, return on sales, equity ratio and return on equity, for which targets have been set Retained earnings Retained earnings are made up of the net income earned in prior financial years and the current period by the companies included in the consolidated financial statements. Goodwill arising on acquisitions made by the Group before 1 March 2004 has been offset against reserves. In the IFRS opening balance sheet the balancing item from the conversion of financial statements prepared in foreign currencies was offset against retained earnings. Retained earnings include statutory reserves of 10 per cent of subscribed capital, amounting to EUR 12,365 thousand which, in line with statutory regulations (Sec. 150 AktG [German Stock Corporation Act]), are not available for distribution to shareholders Other comprehensive income Other comprehensive income is made up as follows: Subscribed capital As of 28 February 2014, subscribed capital (ordinary share capital) remained unchanged at EUR 123,651, and was divided into 48,301,300 registered common shares. The ordinary share capital is fully paid in and, as in the previous year, has a nominal share of subscribed capital of EUR 2.56 per share. At the end of the reporting period, Nordzucker Holding ag, Braun schweig, Germany, had provided evidence that it held more than 50 per cent of the shares, with per cent Capital reserves The capital reserves have been formed from share premiums paid in the course of capital increases by Nordzucker AG. Other comprehensive income in EUR thousands 28/2/ /2/2013 Remeasurements of defined benefit plans 36,438 35,073 Exchange differences on translating foreign operations 45,450 58,004 Net result of cash flow hedges Balance sheet amount 8,528 23, Non-controlling interests Non-controlling interests exist primarily in the following companies: Non-controlling interests in EUR thousands 28/2/ /2/2013 Sucros Oy 30,565 29,844 AB Nordic Sugar Kèdainiai 14,220 16,929 Norddeutsche Flüssigzucker GmbH & Co. KG 2,741 2,174 Považský cukor a.s. 1,735 2,272 Cukrownia Melno S.A. i.l Other companies Balance sheet amount 49,595 51,596

108 104 Nordzucker ANNUAL REPORT 2013/2014 : Notes 33. Pension obligations Provisions for pension obligations are made for accrued and current benefits of both currently active and former members of staff of Nordzucker Group and of their surviving dependants. Benefit obligations are structured in line with the legal, fiscal and economic conditions in each country. The Group offers both defined contribution and defined benefit plans. Pension commitments are based on collective agreements and in a few cases on individual agreements with fixed benefit amounts. The defined benefit plans have commitments both covered by provisions and funded by plan assets. As such, reinsurance was pledged to the beneficiaries for some of the benefit plans in Furthermore, the Nordzucker Group concluded an additional pension commitment with a pension fund for some of the benefit plans in As such, 80 per cent of pension obligations can now be funded in full in exchange for a single premium. In 2012, the Nordzucker Group concluded a benefit plan for all new employees that distributes the biometric risks between the employee and the employer. The benefit plan involves changing to a capital commitment with market-based interest. In the reporting period, the expenses for defined contribution plans amounted to EUR 6,045 thousand (previous year: EUR 6,604 thousand). Provisions for pension benefits are determined in accordance with IAS 19 on the basis of actuarial assumptions. In the reporting and comparative period, the following weighted financial assumptions were applied: Financial assumptions regarding pension obligations 2013/2014 reporting period 2012/2013 comparative period Domestic Foreign Domestic Foreign Discount rate 3.40 % 3.50 % 3.45 % 3.50 % Salary increase 2.50 % 2.75 % 2.50 % 2.75 % Pension increase 1.50 % 1.75 % 1.50 % 1.75 % For domestic companies in the Nordzucker Group the assumptions for life expectancy are taken from the actuarial tables 2005 G by Dr Klaus Heubeck. The following table shows the percentage effect that a change in assumptions would have on the defined benefit obligations at the reporting date, provided the other assumptions remained unchanged: Sensitivity analysis 2013/2014 reporting period Domestic Foreign Discount rate % 6.79 % 6.35 % 0.5 % 7.67 % 6.56 % Salary increase % 0.53 % 1.75 % 0.5 % 0.51 % 1.68 % Pension increase % 4.52 % 6.52 % 0.5 % 4.16 % 5.97 %

109 Notes : Nordzucker ANNUAL REPORT 2013/ Provisions for pensions and similar obligations disclosed in the balance sheet changed as follows: Change in pension provisions Defined benefit obligation Plan asset Net liability in EUR thousands Domestic Foreign Total Domestic Foreign Total Total As of 1/3/ ,659 34, ,313 36, , ,008 Adjustment due to retrospective application of IAS 19 (2011) 14, , ,866 Adjusted as of 1/3/ ,525 34, ,179 36, , ,874 Service cost 2, ,281 / / / 2,281 Interest expense/interest income 7,435 1,487 8,922 1, ,724 7,198 Other value changes 262 2,412 2, ,674 Total recognised on the income statement 9,699 4,178 13,877 1, ,724 12,153 Return on plan assets / / / Actuarial gains/losses 30,329 2,699 33,028 / / / 33,028 Total remeasurements (not recorded in the income statement) 30,329 2,699 33, ,237 Payments made for reinsurance , ,524 1,524 Reimbursements from reinsurance , ,039 5,039 Pension payments made 8,948 2,014 10, ,962 Adjusted as of 28/2/ ,605 39, ,122 34, , ,817 Service cost 3, ,422 / / / 3,422 Interest expense/interest income 6,472 1,237 7,709 1, ,184 6,525 Other value changes 0 1,485 1, ,485 Total recognised on the income statement 9, ,646 1, ,184 8,462 Return on plan assets / / / Actuarial gains/losses 2, ,434 / / / 2,434 Total remeasurements (not recorded in the income statement) 2, , ,997 Payments made for reinsurance , ,647 39,647 Reimbursements from reinsurance , ,557 3,557 Pension payments made 8,961 2,063 11, ,024 As of 28/2/ ,259 37, ,178 72, , ,162 For the 2014/2015 reporting period, contributions to plan assets are expected to amount to EUR 102 thousand (previous year: EUR 102 thousand).

110 106 Nordzucker ANNUAL REPORT 2013/2014 : Notes 34. Other provisions Other provisions are made up as follows: Other provisions in EUR thousands As of 28/2/2013 Exchange-rate effects Additions/ reclassifications Usage Reversal As of 28/2/2014 Staff-related provisions 33, ,349 26,300 2,463 28,715 Litigation risks and risk provisions 33, ,074 24, ,176 Miscellaneous other provisions 38, ,943 18,239 6,302 43, , ,366 68,672 9, ,978 Staff-related provisions mainly consist of provisions for profitsharing, bonuses and other gratuities, holiday and overtime accounts, partial early retirement, early retirement and severance pay obligations. The latter provision covers the Group s forecast obligations under existing collective early retirement agreements as part of a redundancy settlement in connection with changes to the sugar market regime that will come into effect in subsequent years. This item also includes obligations under other individual agreements. Provisions for litigation risks and risk provisions were mainly recognised for risks from various ongoing legal disputes and miscellaneous legal risks. Miscellaneous other provisions relate partly to recultivation obligations. The provision made for this includes the forecast expenses for the demolition of buildings and recultivation of land used for operations as well as demolition obligations at former production sites. Miscellaneous other provisions were also made for bonuses and commissions, onerous contracts, outstanding invoices and other anticipated expenses. 35. Financial liabilities Financial liabilities are made up as follows: Financial liabilities in EUR thousands 28/2/ /2/2013 Liabilities to banks 5,404 70,050 Liabilities from finance leases Balance sheet amount 5,939 70,684 On 17 June 2011, a syndicated loan was taken out for a period of five years to secure the Nordzucker Group s access to liquidity. The syndicated loan is available to fund short-term operating business and includes a revolving credit for EUR 465,000 thousand of which EUR 465,000 thousand (previous year: EUR 395,892 thousand) had not been used in the reporting period. Interest on the revolving credit partly depends on certain financial indicators, such as the equity ratio and EBITDA in relation to debt and interest expense. Further bilateral credit lines were also available as of the reporting date, of which EUR 35,000 thousand (previous year: EUR 47,727 thousand) had not been used. In the reporting period and comparative period, the Nordzucker Group did not pledge any financial assets as collateral for financial liabilities.

111 Notes : Nordzucker ANNUAL REPORT 2013/ Trade payables Trade payables are made up as follows: 39. Other liabilities Other liabilities are made up as follows: Trade payables in EUR thousands 28/2/ /2/2013 Liabilities towards sugar beet suppliers 294, ,530 Other trade payables 105,266 71,895 Balance sheet amount 399, ,425 Other liabilities in EUR thousands 28/2/ /2/2013 Outstanding social security contributions 18,828 23,279 Investment grants, subsidies and other support payments 10,862 11,584 Deferrals 9,664 3,852 Advance payments received for orders Liabilities towards related parties Liabilities towards related parties are made up as follows: Miscellaneous other liabilities 68,246 11,312 Balance sheet amount 107,838 50,122 Liabilities towards related parties in EUR thousands 28/2/ /2/2013 Liabilities towards associated companies and joint ventures 6,518 5,500 Liabilities towards other related parties 34,519 16,246 Balance sheet amount 41,037 21,746 Liabilities from investment grants, subsidies and other support payments derive from public subsidies in connection with the purchase or production of subsidised property, plant and equipment. They are reversed through the income statement over the useful life of the subsidised assets. Miscellaneous other liabilities primarily comprise liabilities from production levies. 38. Other financial liabilities Other financial liabilities are made up as follows: Notes to the consolidated cash flow statement Other financial liabilities in EUR thousands 28/2/ /2/2013 Negative fair value of derivative financial instruments 6,669 2,615 Miscellaneous financial liabilities 3,210 4,061 Balance sheet amount 9,879 6, components of cash and cash equivalents Cash and cash equivalents in the cash flow statement comprise all cash and cash equivalents in the balance sheet (i.e. cash in hand, cheques and bank balances), provided that they are available for use within three months. Cash is not subject to any restrictions on availability. 41. other disclosures regarding the cash flow statement No significant non-cash transactions took place for financing and investing purposes in the reporting period and the comparative period. Within the cash flow from operating activities, dividends of EUR 13,703 thousand (previous year: EUR 4,712 thousand) received in the reporting period were accounted for.

112 108 Nordzucker ANNUAL REPORT 2013/2014 : Notes Other disclosures 42. other disclosures on financial instruments The following table lists the carrying amounts for financial assets and financial liabilities by measurement category for the reporting period: Carrying amounts of financial instruments by measurement category LaR 1 AfS 2 FLFVPL 3 FLAC 4 category FAFVPL/ No in EUR thousands Carrying amount 28/2/2014 Amortised cost Cost Fair value Fair value Amortised cost Fair value Non-current assets Other financial investments 23, , / 0 Current assets Trade receivables 186, , / / / Receivables from related parties / / / Financial assets 33,442 21, ,165 / 8,662 Cash and cash equivalents 58,339 58,339 / 0 0 / / Non-current liabilities Financial liabilities 5,836 / / / 0 5,836 0 Liabilities towards related parties 5,500 / / / 0 5,500 0 Other financial liabilities 20 / / / Current liabilities Financial liabilities 103 / / / Trade payables 399,325 / / / 0 399,325 0 Liabilities towards related parties 35,537 / / / 0 35,537 0 Other financial liabilities 9,859 / / / 4,897 3,189 1,773 Total assets 302, ,221 23, ,165 / 8,662 Total liabilities 456,180 / / / 4, ,510 1,773 1 Measurement category Loans and receivables. 2 Measurement category Available-for-sale financial assets. 3 Measurement category Financial assets at fair value through profit or loss or Financial liabilities at fair value through profit or loss. 4 Measurement category Financial liabilities measured at amortised cost.

113 Notes : Nordzucker ANNUAL REPORT 2013/ The following table shows the carrying amounts of financial assets and financial liabilities by measurement category for the comparative period: Carrying amounts of financial instruments by measurement category LaR 1 AfS 2 FLFVPL 3 FLAC 4 category FAFVPL/ No in EUR thousands Carrying amount 28/2/2013 Amortised cost Cost Fair value Fair value Amortised cost Fair value Non-current assets Other financial investments 23, , / 0 Current assets Trade receivables 212, , / / / Receivables from related parties 4,263 4, / / / Financial assets 12,597 7, ,038 / 2,995 Cash and cash equivalents 11,297 11,297 / 0 0 / / Non-current liabilities Financial liabilities 4,575 / / / 0 4,575 0 Liabilities towards related parties 5,500 / / / 0 5,500 0 Other financial liabilities 294 / / / Current liabilities Financial liabilities 66,108 / / / 0 66,108 0 Trade payables 465,425 / / / 0 465,425 0 Liabilities towards related parties 16,245 / / / 0 16,245 0 Other financial liabilities 6,383 / / / 2,608 3,768 7 Total assets 264, ,613 23, ,038 / 2,995 Total liabilities 564,530 / / / 2, , Measurement category Loans and receivables. 2 Measurement category Available-for-sale financial assets. 3 Measurement category Financial assets at fair value through profit or loss or Financial liabilities at fair value through profit or loss. 4 Measurement category Financial liabilities measured at amortised cost. The measurement of financial assets and liabilities is made in accordance with the availability of relevant information on the basis of the three levels of the fair value hierarchy detailed in IFRS 7 and IFRS 13. For the first level, market prices for identical assets and liabilities can be observed directly on active markets. For the second level, the measurement is made on the basis of valuation models that are determined by parameters observed on the market. The use of valuation models that are not based on input factors that can be observed on the market is covered by the third level. All derivative financial assets and liabilities are classed under level 2. Accepted financial models are used to determine the fair value of derivative financial instruments; as such, only input factors that can be observed (e.g. interest rates, exchange rates) are taken into account. For derivative financial instruments, fair value corresponds to the amount that the Nordzucker Group would receive or have to pay for the transfer at the end of the reporting period.

114 110 Nordzucker ANNUAL REPORT 2013/2014 : Notes For cash and other current financial instruments, i.e. trade receivables, financial assets, derivative financial instruments, and other receivables and liabilities, the fair value and the carrying amount on each end of the reporting period are the same. The net gains or net losses by measurement category are as follows: Net gains or net losses from financial instruments in EUR thousands 1/3/ /2/2014 1/3/ /2/2013 Loans and receivables (LaR) Available-for-sale financial assets (AfS) 13,734 5,646 Financial assets/liabilities at fair value through profit or loss (FAFVPL/FLFVPL) 131 2,582 Financial liabilities measured at amortised cost (FLAC) 7,341 7,213 Total 6,565 3,960 Under financial asset/liabilities at fair value through profit or loss changes in the market value of derivative financial instruments are recognised. This is presented in the income statement under either Financial income or Financial expenses. Loans and receivables include impairments on receivables, interest from receivables and loans granted, as well as gains or losses from currency translation for receivables. Impairments on receivables and gains or losses resulting from currency translation for receivables are recognised in the income statement under Other income or Other expenses. Interest from receivables and loans granted is presented under Financial income. The available-for-sale financial assets include dividends, which are recognised in the income statement under Financial income or Financial expenses. Interest on loans received is recognised as financial liabilities measured at amortised cost. This is presented in the income statement under Financial expenses. Within the income statement, the item Financial income or Financial expenses includes interest income of EUR 974 thousand (previous year: EUR 411 thousand) and interest expense of EUR 7,341 thousand (previous year: EUR 7,174 thousand) from financial instruments not measured at fair value through profit or loss. In the reporting period and the comparative period, there was no unwinding (i.e. no interest income from impaired financial assets). 43. Risk management General remarks The Nordzucker Group has a comprehensive system in place throughout the company for the early identification and permanent monitoring of risk as well as for risk measurement and limitation. The integrated risk management system is used to identify risks and the appropriate steps fully and to include them in operational and strategic planning. Potential risks such as default and credit risks, commodity, liquidity, exchange rate and interest rate risks are assessed permanently as part of risk management, whereby appropriate steps are developed and implemented. Operating and strategic decision-making always takes risk aspects into account. The Group-wide reporting and controlling system ensures that all the responsible decision makers are continually informed. By the nature of its business, the Nordzucker Group is exposed to default and credit risks, commodity, liquidity and exchange rate risks as well as interest rate risks. These are controlled by means of suitable risk management processes. The Nordzucker Group uses derivative financial instruments to hedge against interest and exchange rate fluctuations and to hedge costs of raw materials. The use of these instruments is governed by Group guidelines and restricted to the hedging of existing transactions or those which are sufficiently likely to take place. The guidelines define the individuals responsible, the limits and reporting and stipulate a strict separation between trading and clearing. This transparent and functional manner of organising risk management processes applies to all types of risk.

115 Notes : Nordzucker ANNUAL REPORT 2013/ Default risk Credit or default risk is the risk that business partners do not meet their contractual payment obligations, causing the Nord zucker Group to suffer a loss as a result. As part of credit risk management, business partners are subject to a credit scoring in order to reduce default risk. Identifiable default risks are accounted for by impairments, whereby the risk of default on receivables is in part limited by trade credit insurance. The Nordzucker Group does not see itself as exposed to a significant default risk from any individual counterparty. As the customer structure for the Nordzucker Group is diverse, there is only a limited concentration of credit risk. There is therefore no special monitoring and management on the basis of specific risk categories to avoid a concentration of risk. The maximum default risk corresponds to the carrying amounts of the financial assets on the balance sheet at the end of the relevant reporting period. The following table shows total carrying amounts, the carrying amounts for financial assets which are neither overdue nor impaired and the age structure of financial assets which are not impaired but past due, for the financial assets: age structure of financial assets Not impaired at the end of the reporting period and past due as follows: in EUR thousands Total carrying amount Neither impaired nor past due at the end of the reporting period Less than 30 days Between 30 and 60 days Between 61 and 90 days Between 91 and 180 days More than 180 days As of 28/2/2014 Other financial investments 23,818 23, Financial assets (excluding derivative financial instruments), receivables from related parties 30,727 30, Trade receivables 186, ,354 10,231 2, ,083 2,019 Total 240, ,899 10,231 2, ,083 2,019 As of 28/2/2013 Financial investments 23,536 23, Financial assets (excluding derivative financial instruments), receivables from related parties 16,125 16, Trade receivables 212, ,083 15,143 1,535 1,316 1,271 2,076 Total 252, ,744 15,143 1,535 1,316 1,271 2,076 For the portion of the receivables portfolio which has neither been impaired nor is past due there is no indication as of the end of the reporting period that Nordzucker Group s debtors will not fulfil their payment obligations. Financial assets that are shown in the table above under Financial investments, Financial assets (excluding derivative financial instruments), receivables from related parties or Trade receivables have a gross carrying amount (i.e. carrying amount before impairments) of EUR 242,743 thousand (previous year: EUR 254,145 thousand). Impairments of EUR 588 thousand (pre vious year: EUR 2,059 thousand) were made in the reporting period. The Nordzucker Group did not use financial assets as collateral either in the reporting period or the comparative period.

116 112 Nordzucker ANNUAL REPORT 2013/2014 : Notes Liquidity risk Liquidity risk is the risk that the company cannot meet its payment obligations at the contractually agreed time. To ensure the Nordzucker Group s liquidity, the liquidity needs are monitored and planned centrally. Sufficient cash is held to be able to meet all obligations when they are due. Current lines of credit, which can be drawn down as needed, provide additional liquidity. The following table shows contractually agreed (undiscounted) interest and capital repayments also categorised by remaining term for the non-derivative financial liabilities and for derivative financial instruments: Payments from financial instruments by remaining term Remaining term of Remaining term of Remaining term of in EUR thousands Carrying amount Gross inflow/outflow up to one year 1 5 years more than five years As of 28/2/2014 Financial liabilities 5,939 6, ,724 Trade payables 399, , , Other financial liabilities, liabilities towards related parties 44,247 44,998 39,498 5,500 0 Derivative financial liabilities 6,669 6,669 6, Derivative financial assets 3,692 3,692 3, Total 452, , ,543 6,296 5,724 As of 28/2/2013 Financial liabilities 70,684 71,359 65, ,075 Trade payables 465, , , Other financial liabilities, liabilities towards related parties 25,806 26,250 20,750 5,500 0 Derivative financial liabilities 5,033 5,033 5, Derivative financial assets 2,615 2,615 2, Total 564, , ,433 5,500 6,075 The term to maturity analysis includes all instruments held for which payments have been contractually agreed as of the end of the reporting period.. Forecast payments on expected future liabilities are not included. Floating-rate interest payments on financial instruments are determined using the last interest rates set before the balance sheet date. Financial liabilities repayable at any time are categorised in accordance with remaining term according to their estimated repayment dates.

117 Notes : Nordzucker ANNUAL REPORT 2013/ Market risks Market risks arise from potential changes in risk factors, which lead to fluctuations in market values or alterations in future cash flows. The relevant risk factors for the Nordzucker Group are exchange rate and interest rate fluctuations, as well as changes in the price of commodities. a. Exchange rate risk Due to its business operations in different countries which are not part of the Eurozone, the Nordzucker Group is exposed to an exchange rate risk. IFRS 7 requires the disclosure of a sensitivity analysis to illustrate the dimensions of exchange rate risks. The application of sensitivity analyses enables the calculation for this type of risk of the effects that a change of the given exchange rate at the end of the reporting period would have on net income for the period and on the equity of the Nordzucker Group. The effects are determined by applying a hypothetical change of 10 per cent in the exchange rates to the amount of the relevant items in foreign currencies (the net risk position in the foreign currency) at the end of the reporting period. It is assumed that the exposure at the end of the reporting period is representative of the whole reporting period. The net risk position is adjusted for planned transactions within the next twelve months and for existing hedging instruments (even if no hedging relationship in accordance with IAS 39 exists). Foreign currency positions in Danish Crowns and Lithuanian Litas are only exposed to an insignificant exchange rate risk as these states are part of the European Union s exchange rate mechanism. The exchange rate risk from foreign currency positions in US Dollars is also insignificant as the amounts are minor and are hedged directly. Furthermore, the Nordzucker Group hedges a large proportion of actual currency risks using the natural hedge approach and by using derivatives, so that the remaining net risk exposure is insignificant. b. Interest rate risk Due to its borrowing activities, the Nordzucker Group is exposed to interest rate risk. Financing is arranged in various currency areas, although the most frequent currency is the Euro. Interest rate risks from financing activities denominated in Hungarian Forints, Swedish Crowns, Lithuanian Litas, Polish Zloty or Danish Crowns are insignificant as the amounts involved are minor. As of the reporting date, Group companies hold a total of Eur 0 (previous year: Eur 65,200 thousand) in interestbearing or interest-rate-sensitive instruments. These were fully assigned to floating-rate instruments in the comparative period. In accordance with IFRS 7, interest rate risks are illustrated using sensitivity analyses. The sensitivity analysis determines the effect that a change in market interest rates at the end of the reporting period would have on net income for the period and on equity. In the reporting and in the comparative period, no cash flow hedges were used to hedge the interest rate risk of floatingrate instruments, since these funds are scheduled to be repaid shortly and no further loans are to be taken out at floating rates of interest thereafter. In view of the remaining duration of the derivatives, a hypothetical change in the relevant interest rates for floating-rate instruments of +/ 50 basis points would therefore not have a significant effect in relation to the Group s equity and net interest. c. Commodity risk As a result of its business activities, the Nordzucker Group is ex posed to various price risks for commodities. These primarily relate to world-market sugar and energy prices. d. Hedging activities The Nordzucker Group uses derivative financial instruments solely to hedge interest rate and exchange rate risks as well as price risks for raw materials. As a rule, the existing interest rate risk for floating-rate loans is reduced by means of interest rate derivatives. All interest rate derivatives are designated as cash flow hedges in hedging relationships under IAS 39. As of the end of the reporting period, the Nord zucker Group had not taken out any interest rate derivatives, since based on its financial planning it could not identify any exposure to interest rate risk as of this date.

118 114 Nordzucker ANNUAL REPORT 2013/2014 : Notes It is generally assumed that the hedged transactions will actually take place. If a hedging transaction is cancelled, the amounts accumulated in other comprehensive income during the term of the transaction are reversed when the hedged item is recognised in profit or loss or if it no longer takes place. In addition to the natural hedge approach for Poland and Sweden, the gross positions are hedged to reduce exchange rate risk. Exchange rate risks are also hedged by means of appropriate derivatives such as currency futures including for periods of less than a year. At the end of the reporting period, the Group holds derivative financial instruments aimed at hedging currency risks and price risks for sugar and energy (CO 2 ). Almost all of the derivative financial instruments mature within one year. A sensitivity analysis for the market values in the balance sheet would not produce a significant effect in relation to the Group s equity and net income. The effective portion of changes in the market value of derivative financial instruments integrated in cash flow hedges is recognised in other comprehensive income (i.e. in the statement of comprehensive income) with no effect on profit or loss. In the reporting period, EUR 3,552 thousand (previous year: EUR 930 thousand) was recognised in the statement of comprehensive income. The Group does not measure the derivatives itself. The fair value determination is carried out by the contracting banks using accepted financial methods and observable input factors (level 2 of the fair value hierarchy). 44. Related party transactions For the Nordzucker Group, related parties within the meaning of IAS 24 are individuals and companies which control the Group or exercise significant influence over it or are controlled or significantly influenced by the Group. The first category includes the active members of the Executive Board and Supervisory Board of Nordzucker AG and its majority shareholder Nordzucker Holding AG. In addition, the subsidiaries, parent company, associated companies and joint ventures of the Nordzucker Group are defined as related parties. Receivables from and liabilities towards related parties are based on arm s length transactions. The following commercial relationships existed with related parties in addition to those existing with fully consolidated subsidiaries: Related party transactions in EUR thousands 28/2/ /2/2013 Balance sheet Receivables from related parties 977 4,264 Liabilities towards related parties 41,037 21,746 Income statement Services provided to related parties Net financial result Receivables from related parties of EUR 917 thousand were owed almost exclusively by NP Sweet A/S, Copenhagen, and, in the comparative period, almost exclusively by Nordzucker Holding AG, Braunschweig, with EUR 4,105 thousand. In the reporting period, of the liabilities towards related parties, EUR 14,344 thousand was owed to Nordzucker Holding AG, Braunschweig, EUR 6,518 thousand to MEF Melasse- Extraktion Frellstedt GmbH, Frellstedt, EUR 3,378 thousand to SWEETGREDIENTS GmbH & Co. KG, Nordstemmen, and EUR 13,719 thousand to Union-Zucker Südhannover GmbH, Nordstemmen. In the comparative period, EUR 5,500 thousand was owed to MEF Melasse-Extraktion Frellstedt GmbH, Frell stedt, EUR 6,150 thousand to Union-Zucker Südhannover GmbH, Nordstemmen, EUR 3,542 thousand to Nordharzer Zucker AG, Schladen, and EUR 3,339 thousand to SWEETGREDIENTS GmbH & Co. KG, Nordstemmen.

119 Notes : Nordzucker ANNUAL REPORT 2013/ Nordzucker Holding AG, Union-Zucker Südhannover GmbH and Nordharzer Zucker AG are/were shareholders of Nordzucker AG; the liabilities relate to current accounts. The remaining liabilities relate to other related parties and result largely from loans and trade in goods and services. At the end of the reporting period, total future payment obligations from rental and lease contracts are made up as follows: The provision of services for related companies primarily concerns NP Sweet A/S, Copenhagen, and the net financial result is from associated companies and joint ventures. Rental and leasing agreements in EUR thousands Remaining term of up to one year Remaining term of 1 5 years Remaining term of more than five years Total 45. Contingent liabilities There were no contingent liabilities towards third parties outside the Group at the end of the reporting period. 46. Other financial obligations The Nordzucker Group s other financial obligations are made up as follows: Other financial obligations in EUR thousands 28/2/ /2/2013 Purchase commitments for property, plant and equipment 28,887 21,463 Obligations from finance leases 2, Obligations from operating leases 12,044 12,614 Total 43,911 34,892 Future payments for finance leases 279 1,511 1,556 3,346 Future payments for operating leases 5,703 6, ,044 At the end of the reporting period, future payments under finance leases are as follows: Finance leases in EUR thousands Remaining term of up to one year Remaining term of 1 5 years Remaining term of more than five years Total Repayment 254 1,412 1,314 2,980 Interest Payment 279 1,511 1,556 3, Auditors fees Companies in the Nordzucker Group purchased services for EUR 404 thousand (previous year: EUR 352 thousand) from Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Stuttgart, in connection with the statutory audit of financial statements for the Nordzucker Group and Nordzucker AG, as well as tax advisory services for EUR 76 thousand (previous year: Eur 136 thousand) and other services for EUR 269 thousand (previous year: EUR 412 thousand).

120 116 Nordzucker ANNUAL REPORT 2013/2014 : Notes 48. supervisory Board and Executive Board In the reporting period, the Supervisory Board was made up as follows: Shareholder representatives Hans-Christian Koehler farmer, Eppensen, Chairman Helmut Meyer, farmer, Betheln, Deputy Chairman Helmut Bleckwenn farmer, Garmissen Gerhard Borchert farmer, Brome Hans Jochen Bosse farmer, Ohrum Dr. Karl-Heinz Engel Managing Director of Hochwald Foods GmbH, Riol Michael Gerlif consultant, Cologne Dr. Clemens Große Frie CEO of AGRAVIS RAIFFEISEN AG, Telgte Dr. Harald Isermeyer farmer, Vordorf Dr. Hans-Theo Jachmann Managing Director of Syngenta Germany GmbH, Limeshain Jochen Johannes Juister farmer, Nordhastedt Rainer Knackstedt farmer, Dedeleben Matts Eskil Rosendahl consultant, Svartsjö, Sweden Andreas Scheffrahn farmer, Cramme Employee representatives Dieter Woischke electrician, Algermissen, Deputy Chairman Ulf Gabriel electrician, Banteln Gerd von Glowczewski metalworker, Schladen Olaf Joern mechatronics engineer, Uelzen Sigrun Krussmann laboratory technician, Seelze Marie Lohel energy electronics engineer, Magdeburg Marina Strootmann industrial clerk, Braunschweig, Chair of the Works Council, Nordzucker AG The members of the Executive Board in the reporting period were as follows: Hartwig Fuchs Hamburg, Chairman of the Management Board, Chief Executive Officer Axel Aumüller Braunschweig, Chief Operating Officer Dr. Lars Gorissen (from 1/3/2014) Braunschweig, Chief Agricultural Officer Mats Liljestam Höllviken, Sweden, Chief Marketing Officer Dr. Michael Noth Braunschweig, Chief Financial Officer Dr. Niels Pörksen (until 30/9/2013) Limburger Hof, Chief Agricultural Officer 49. Remuneration report In the following section the principles of remuneration for members of the Executive Board and Supervisory Board of Nordzucker AG are described and the amount of their remuneration disclosed, together with disclosures on shares held by members of the Executive Board and Supervisory Board.

121 Notes : Nordzucker ANNUAL REPORT 2013/ Remuneration of the Executive Board The structure and amount of Executive Board remuneration are determined and regularly reviewed by the full Supervisory Board following a proposal from the Human Resources Committee of the Supervisory Board. The criteria for determining the remuneration of individual Executive Board members are their responsibilities, personal performance, the economic situation, business success, future prospects, sustainable corporate development and also the extent to which the remuneration is generally accepted considering the sphere of comparison and remuneration structures applicable elsewhere in the company. The total remuneration of Executive Board members includes monetary payments, benefit commitments and other commitments such as the provision of a company car. The monetary remuneration components consist of a fixed annual salary, paid in twelve equal monthly instalments, as well as an earnings and performance-related payment. The variable bonus can be up to a maximum of 50 per cent of total compensation (total compensation is made up of fixed annual salary and the variable bonus). The structure of Executive Board remuneration is aligned with the company s sustainable development, as recommended by the German Corporate Governance Code (GCGC). In consequence, 45 per cent of variable remuneration is paid as a shortterm incentive (STI) linked to the achievement of targets for the given financial year. The remaining 55 per cent is paid as a long-term incentive (LTI), calculated on the basis of average performance against targets for the past three years. Benefit commitments made to Executive Board members in the event that their appointment to Executive Board ends prematurely are limited to the value of the remaining term of their contract. This results in the following remuneration for individual members of the Executive Board for the 2013/2014 reporting period: Remuneration of Executive Board members 2013/2014 EUR Cash payments Pensions Other* Total Salary Variable annual bonus Hartwig Fuchs 575, , ,000 16,162 1,301,918 Axel Aumüller 380, , ,000 22, ,007 Mats Liljestam 350, , ,000 26, ,653 Dr. Michael Noth 380, , ,000 17, ,123 Dr. Niels Pörksen 221, ,000 1,106,451 1,453,118 Total 1,906,667 1,613, ,000 1,188,200 5,351,819 * Non-cash benefit for tax purposes, e.g. for company car, etc. For the 2012/2013 comparative period, the members of the Executive Board were remunerated as follows: Remuneration of Executive Board members 2012/2013 EUR Cash payments Pensions Other* Total Salary Variable annual bonus Hartwig Fuchs 460, , ,000 15,996 1,091,816 Axel Aumüller 350, , ,000 27, ,146 Mats Liljestam 350, , ,000 26, ,121 Dr. Michael Noth 380, , ,000 16, ,033 Dr. Niels Pörksen 380, , ,000 14, ,594 Total 1,920,417 1,899, , ,792 4,564,710 * Non-cash benefit for tax purposes, e.g. for company car, etc.

122 118 Nordzucker ANNUAL REPORT 2013/2014 : Notes The members of the Executive Board are assured pension commitments in the form of defined benefit commitments and defined contribution commitments. Former Executive Board members received pension payments of EUR 771 thousand (previous year: EUR 752 thousand). Nord zucker AG recognised provisions of EUR 10,718 thousand (previous year: EUR 10,728 thousand) for pension commitments to former Executive Board members. In the reporting and comparative period, members of the Executive Board received neither loans nor advances from the company Remuneration of the Supervisory Board The remuneration of the Supervisory Board is based on the size of the company, the duties and responsibilities of the members of the Supervisory Board and the economic situation of the company. The remuneration includes a dividendrelated component and an attendance fee, in addition to a fixed payment. The Chairman and Deputy Chairman of the Supervisory Board receive additional remuneration. Additional remuneration is also paid to the Chairs of the committees as well as for participation in the committees (with the exception of the Nomination Committee). The remuneration of the Supervisory Board is defined in Sec. 14 of the Articles of Association of Nordzucker AG. In accordance with these rules, members of the Supervisory Board receive a fixed salary of EUR 18 thousand and a dividend-related payment of EUR 90 for every EUR 0.01 of dividend paid out per share on average over the past three years. Subject to approval at the Annual General Meeting, the dividend for the 2013/2014 reporting period will be EUR 1.30 per share (2012/2013 reporting period: EUR 1.80; 2011/2012 reporting period: EUR 1.00). The amount of variable remuneration is limited to the amount of fixed salary. The Chairman of the Supervisory Board receives two and a half times, the Deputy Chairmen and Committee Chairmen each receive 1.4 times, and committee members 1.2 times the total of fixed and variable remuneration. If a member of the Supervisory Board occupies more than one of these positions, the increased rate of remuneration only applies once. In addition, each Super visory Board member receives an attendance fee of EUR per meeting for attending the meetings of the Supervisory Board and its committees. A maximum of two meetings per day can be remunerated.

123 Notes : Nordzucker ANNUAL REPORT 2013/ Subject to the approval of the dividend proposal at the Annual General Meeting, the following payments will be made for the 2013/2014 reporting period: Remuneration of Supervisory Board members 2013/2014 EUR Fixed remuneration* Variable remuneration* Subtotal Factor Total compensation Attendance fee* Total Total previous year Hans-Christian Koehler 18,000,00 12,330,00 30,330, ,825,00 4,800,00 80,625,00 87,856,25 Andreas Scheffrahn 18,000,00 12,330,00 30,330, ,462,00 4,200,00 46,662,00 61,456,25 Dieter Woischke 18,000,00 12,330,00 30,330, ,462,00 3,600,00 46,062,00 59,056,25 Helmut Meyer 18,000,00 12,330,00 30,330, ,462,00 2,100,00 44,562,00 55,756,25 Dr. Harald Isermeyer 18,000,00 12,330,00 30,330, ,396,00 3,000,00 39,396,00 52,256,25 Jochen Johannes Juister 18,000,00 12,330,00 30,330, ,396,00 3,300,00 39,696,00 51,056,25 Marina Strootmann 18,000,00 12,330,00 30,330, ,396,00 3,300,00 39,696,00 50,756,25 Ulf Gabriel 18,000,00 12,330,00 30,330, ,396,00 3,300,00 39,696,00 50,456,25 Sigrun Krussmann 18,000,00 12,330,00 30,330, ,396,00 3,300,00 39,696,00 50,456,25 Matts Eskil Rosendahl 18,000,00 12,330,00 30,330, ,396,00 3,300,00 39,696,00 50,156,25 Michael Gerlif 18,000,00 12,330,00 30,330, ,396,00 4,200,00 40,596,00 49,856,25 Gerhard Borchert 18,000,00 12,330,00 30,330, ,330,00 2,100,00 32,430,00 49,556,25 Dr. Hans Theo Jachmann 18,000,00 12,330,00 30,330, ,330,00 1,800,00 32,130,00 48,956,25 Rainer Knackstedt 18,000,00 12,330,00 30,330, ,330,00 2,100,00 32,430,00 48,956,25 Hans Jochen Bosse 18,000,00 12,330,00 30,330, ,330,00 2,100,00 32,430,00 48,056,25 Gerd von Glowczewski 18,000,00 12,330,00 30,330, ,330,00 1,800,00 32,130,00 48,056,25 Dr. Clemens Große Frie 18,000,00 12,330,00 30,330, ,330,00 1,500,00 31,830,00 48,056,25 Dr. Karl-Heinz Engel 18,000,00 12,330,00 30,330, ,330,00 2,100,00 32,430,00 47,156,25 Helmut Bleckwenn 18,000,00 12,330,00 30,330, ,330,00 2,100,00 32,430,00 30,694,78 Olaf Joern 18,000,00 12,330,00 30,330, ,330,00 2,100,00 32,430,00 30,694,78 Marie Lohel 18,000,00 12,330,00 30,330, ,330,00 2,100,00 32,430,00 30,694,78 Hans-Heinrich Prüße 19,161,47 Wolfgang Wiesener 18,561,47 Rolf Huber-Frey 17,961,47 Total 378,000,00 258,930,00 636,930,00 761,283,00 58,200,00 819,483,00 1,105,681,25 * Does not include the Vat paid on behalf of Supervisory Board members for their work. Furthermore, the members of the Supervisory Board are reimbursed for all out-of-pocket expenses incurred in the exercise of their duties as well as for the Vat payable on their remuneration and on the reimbursed expenses. The total amount of these reimbursements, including Vat, was EUR 26 thousand (previous year: EUR 38 thousand). In the reporting and comparative period, members of the Supervisory Board received neither loans nor advances from the company.

124 120 Nordzucker ANNUAL REPORT 2013/2014 : Notes shares held by members of the Executive Board and Supervisory Board Members of the Executive Board hold no significant stocks of shares. As of 28 February 2014, members of the Supervisory Board and related parties held less than one per cent of the issued share capital of Nordzucker AG. The shares bear no relation to the remuneration of the Supervisory Board Miscellaneous 51. Events after the reporting period No significant events occurred after the reporting period. Braunschweig, Germany, 25 April 2014 Executive Board Board members of Nordzucker AG are indemnified by Nordzucker AG against third-party liability as allowed by law. For this purpose the company has taken out D & O insurance for members of the Boards of Nordzucker AG. The insurance policy is taken out or renewed annually and covers the personal liability of Board members for claims for damages arising in the course of their work. It includes an excess in accordance with Sec. 3.8 of the German Corporate Governance Code. Axel Aumüller Mats Liljestam Hartwig Fuchs dr. Lars Gorissen dr. Michael Noth 50. Dividend proposal The dividends that can be distributed to shareholders are defined in the German Stock Corporation Act (AktG) as the net balance sheet profit as determined under German commercial law and disclosed in the annual financial statements of Nordzucker AG. The annual financial statements for the 2013/2014 reporting period show a net distributable profit of Eur 86,361, The Executive Board proposes to use this net distributable profit to pay a dividend for the 2013/2014 reporting period (EUR 1.30 per share with dividend entitlement).

125 Notes : Nordzucker ANNUAL REPORT 2013/ List of investments Nordzucker AG, Braunschweig, as of 28 February 2014 Shareholding direct indirect Shortened form % % via subsidiaries Consolidated subsidiaries Norddeutsche Flüssigzucker GmbH & Co. KG (Braunschweig, Germany) NFZ KG 70 % NORDZUCKER Spezial GmbH (Braunschweig, Germany) NZ SPEZIAL 100 % NORDZUCKER GmbH & Co. KG (Braunschweig, Germany) NZ KG 100 % Nordzucker Polska S.A. (Opalenica, Poland) NZ Polska % Považský cukor a.s. (Trenčianska Teplá, Slovakia) Povazsky % Matra Cukor z.r.t. (Hatvan, Hungary) Matra % Nordic Sugar Holding A/S (Copenhagen, Denmark) NSH AS 100 % Nordic Sugar A/S (Copenhagen, Denmark) NS AS 100 % NSH AS Titoconcerto AB (Malmö, Sweden) Titoconcerto 100 % NSH AS Nordic Sugar AB (Malmö, Sweden) NS AB 100 % Titoconcerto Nordic Sugar Services AB (Malmö, Sweden) NSS AB 100 % NS AB AB Nordic Sugar Kèdainiai (Kèdainiai, Lithuania) NS Kèdainiai 70.6 % NS AS Nordic Sugar Oy (Kantvik, Finland) NS Oy 100 % NS AS Sucros Oy (Säkylä, Finland) Sucros Oy 80 % NS Oy Suomen Sokeri Oy (Kantvik, Finland) Suomen Oy 80 % Sucros Oy Nordzucker Ireland Limited (Dublin, Ireland) NZ Ireland 100 % Cukrownia Melno S.A. [in liquidation] (Opalenica, Poland) %

126 122 Nordzucker ANNUAL REPORT 2013/2014 : Notes Shareholding direct indirect Shortened form % % via subsidiaries Joint ventures accounted for using the equity method in accordance with Sec. 312 German Commercial Code (HGB) MEF Melasse-Extraktion Frellstedt GmbH (Frellstedt, Germany) MEF 50 % NZ KG Norddeutsche Zucker-Raffinerie Gesellschaft mit beschränkter Haftung (Frellstedt, Germany) NZR 50 % NZ KG NP Sweet A/S (Copenhagen, Denmark) NP Sweet 50 % NSH AS Eurosugar S.A.S. (Paris, France) ES 50 % Subsidiaries not consolidated in accordance with Sec. 296 paragraph 2 German Commercial Code (HGB) Bioethanolgesellschaft Klein Wanzleben mbh (Stadt Wanzleben-Börde, Germany) Bioethanol KW 100 % Norddeutsche Flüssigzucker Verwaltungs-GmbH (Braunschweig, Germany) NFZ GmbH 70 % NORDZUCKER Verwaltungs-GmbH (Braunschweig, Germany) NZ GmbH 100 % NZ KG SWEETGREDIENTS GmbH & Co. KG (Nordstemmen, Germany) SG KG 100 % NZ SPEZIAL SWEETGREDIENTS Verwaltungs GmbH (Nordstemmen, Germany) SG GmbH 100 % SG KG NZ Erste Vermögensverwaltungsgesellschaft mbh (Braunschweig, Germany) NZ 1. VVG 100 % NZ Zweite Vermögensverwaltungsgesellschaft mbh (Braunschweig, Germany) NZ 2. VVG 100 % Associated companies not consolidated in accordance with Sec. 311 paragraph 2 German Commercial Code (HGB) Nordzucker Bioerdgas Verwaltungs-GmbH (Braunschweig, Germany) NZ BEG GmbH 50 % Nordzucker Bioerdgas GmbH & Co. KG (Braunschweig, Germany) NZ BEG KG 50 % Other non-consolidated investments Tereos TTD, a.s. (Dobrovice, Czech Republic) TTD 35.38

127 Notes : Nordzucker ANNUAL REPORT 2013/ Audit Opinion We have audited the consolidated financial statements prepared by Nordzucker AG, Braunschweig, comprising the balance sheet, the income statement, statement of consolidated income, the notes to the consolidated financial statements, the cash flow statement and the statement of changes in shareholder s equity, together with the group management report for the fiscal year from 1 March 2013 to 28 February The preparation of the consolidated financial statements and the group management report in accordance with IFRS as adopted by the EU, and the additional requirements of German commercial law pursuant to Sec. 315a (1) HGB are the responsibility of the parent company s management. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit. We conducted our audit of the consolidated financial statements in accordance with Sec. 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations. In our opinion, based on the findings of our audit, the consolidated financial statements comply with IFRSs as adopted by the EU, the additional requirements of German commercial law pursuant to Sec. 315a (1) HGB and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group s position and suitably presents the opportunities and risks of future development. Hanover, 28 April 2014 Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft Hentschel dr. Janze Wirtschaftsprüfer Wirtschaftsprüfer [German Public Auditor] [German Public Auditor]

128 124 NORDZUCKER ANNUAL REPORT 2013/2014 : Further information equity Ratio 2013/2014: 59.3 per cent

129 Further information : Nordzucker ANNUAL REPORT 2013/ Further information 126 Corporate Governance Report 127 Statement of compliance with German Corp. Gov. Code 128 Report by the Supervisory Board 132 Glossary 137 Financial Calendar

130 126 Nordzucker ANNUAL REPORT 2013/2014 : Further information Corporate Governance Report for the financial year 2013/2014 Corporate governance covers the system of managing and monitoring a company, including its organisational structure, its corporate policies and guidelines as well as the internal and external mechanisms of control and monitoring. Nordzucker AG attaches great importance to well-structured, authentic corporate governance as it ensures that the management of the company is carried out in the spirit of long-term value creation. It fosters the confidence of shareholders, financial markets, business partners, staff and the general public in the management and monitoring of the Nordzucker Group. Corporate governance is the foundation for the decisionmaking and controlling processes at Nordzucker AG. The activities of Nordzucker AG are carried out in accordance with clearly defined guidelines. These guidelines ensure that the company s actions are systematically aligned with the interests and expectations of shareholders, customers, business partners and staff. For publicly traded companies the principles of good company management are laid down in the German Corporate Governance Code (hereafter known as the Code). The Code consists of recommendations and suggestions for good company management and also describes statutory obligations for publicly listed companies. Publicly traded companies must issue an annual statement on compliance with the Code s recommendations pursuant to Sec. 161 of the German Stock Corporation Act (AktG). This declaration relates to both past and future periods. The Code is intended for listed companies, but non-listed companies are also well advised to follow its recommendations. As Nordzucker AG is not listed on a stock exchange it is not legally obliged to issue a statement in accordance with Sec. 161 AktG. Nordzucker AG therefore studies the Code s recommendations closely on a voluntary basis and reports at regular intervals, generally annually, on the company s own corporate governance. This includes making a declaration on the recommendations of the Code, which reflects the contents of the statement of compliance required under Sec. 161 AktG. To the extent that the Code refers to statutory obligations of publicly quoted companies outside the scope of its recommendations, these are not applicable to Nordzucker AG. The company also assumes no voluntary obligation to adhere to them. The actions of all our staff are aimed at earning an appropriate and sustainable profit, continually generating growth and increasing our market share. Continuous improvement of all business processes by competent, well-managed staff earning performance-related pay secures the existence and the systematic long-term development of the company in an ever-changing competitive environment. Meeting high standards for food and animal feed quality and safety, conserving resources, continuously minimising and preventing environmental damage as well as safeguarding health and safety at work are an integral part of all Nordzucker s activities. Particular importance is attached to avoiding and preventing errors. The Executive Board of Nordzucker AG is responsible for determining company policy. It sets corporate strategy, plans and approves company budgets, decides on the allocation of resources and monitors company development. The Executive Board is also responsible for preparing the quarterly and annual financial statements for Nordzucker ag and the consolidated financial statements. The Supervisory Board of Nordzucker AG has 21 members. Two-thirds of the Supervisory Board members represent the shareholders and one-third represents the workforce. The Supervisory Board monitors the Executive Board and advises it on the management of the company. The Supervisory Board regularly discusses the course of business and company planning as well as corporate strategy and its implementation. It examines and approves the annual financial statements of Nordzucker AG and the consolidated financial statements for the Group, giving due regard to the auditors report and the results of the examination by the Audit Committee. Major Executive Board decisions are subject to its approval.

131 Further information : Nordzucker ANNUAL REPORT 2013/ In order to reflect recommendation of the German Corporate Governance Code, the Supervisory Board decided on 10 March 2011 to take the following elements relating to its composition into account: > at least three Supervisory Board seats for people with a particularly international background (e.g. from having worked abroad or holding foreign citizenship); > at least three Supervisory Board seats for people who hold no functions at customers, farmers associations or other business partners; and > at least two Supervisory Board seats for women. At present these targets have been met. In addition, the rules of procedure for the Supervisory Board envisage that an age limit of 65 years should apply to proposals for election to the Supervisory Board. Declaration by Nordzucker AG on the German Corporate Governance Code in line with Sec. 161 AktG (German Stock Corporation Act) The Executive Board and Supervisory Board of Nordzucker AG, Braunschweig, have examined the recommendations of the German Corporate Governance Code as amended on 13 May 2013 in detail. Although the German Corporate Governance Code is not binding for Nordzucker AG, which is not publicly listed, the company has complied and continues to comply with the recommendations it contains, with the following exceptions: 1. Beyond the requirements for companies that are not publicly listed, the Supervisory Board includes two members who are financial experts within the meaning of Sec. 100 paragraph 5 AktG. Neither of these financial experts chairs the Audit Committee, but both are members of it (Number 5.3.2). 2. Given the particular significance of agricultural expertise for the company, conflicts of interest to which Supervisory Board members may be subject are of secondary importance (Number 5.5.3). 3. Aas Nordzucker AG is included in the consolidated financial statements of Nordzucker Holding Aktiengesellschaft, the latter has a particular need for information (Number 6.1). To the extent that the Code refers to statutory obligations of publicly quoted companies outside the scope of its recommendations, these are not applicable to Nordzucker AG. The company also assumes no voluntary obligation to adhere to them. Otherwise, we refer to the comments in the Corporate Governance Report. Braunschweig, March 2014 Hartwig Fuchs Chief Executive Officer Hans-Christian Koehler chairman of the Supervisory Board

132 128 Nordzucker ANNUAL REPORT 2013/2014 : Further information Report by the Supervisory Board of Nordzucker AG for the financial year 2013/2014 Hans-Christian Koehler, Chairman of the Supervisory Board