Interim Report 1st Half 2006/07

Dear Shareholders,

This interim report informs you about the development of business in the first six months of the current 2006/07 financial year (March to August 2006).

Reform of the European Sugar Market Regulation

As already reported, the European Council of Agricultural Ministers adopted the new single market regulation for sugar for the period to 2015 in February 2006. While the new market regulation leads to severe inroads as a result of the price reduction, it does give us a long-term perspective given that Südzucker is anchored in the most competitive regions in Europe. At the same time, the reform also presents new potential. As a competitive sugar producer Südzucker can purchase more-than-proportional new additional quotas and increase its sugar quota from 3.8 to 4.1 million tonnes; this will enable us to expand our market share in Europe significantly. Südzucker will also fully exploit the new possibility for the production of industrial sugar for bioethanol production and for chemical and pharmaceutical applications. Industrial sugar production represents a new business in the EU alongside the, to date, volatile C sugar business. All in all, we therefore anticipate a higher sustainable production volume than at present despite the loss of export possibilities as a result of the WTO panel decision.

By exploiting the potential presented by the new Sugar Market Regulation, with higher sales volumes within Europe, combined with the cost-cutting measures that have been initiated, Südzucker will be in a position to offset the negative impact of the price reduction by its own efforts in the medium term. Südzucker is making every effort to see that it emerges strengthened from the reform process.

The new market regulation came into force on 1 July 2006. As expected, only 1.5 million tonnes of EU quotas will be surrendered to the Restructuring Fund in the 2006/07 sugar industry year. Under the transitional arrangements of the new market regulation the European Commission had already cut the EU quota for the 2006/07 sugar industry year by 2.5 million tonnes before the sowing season, so correspondingly less sugar will be produced. After the high declassification in 2005/06 more or less restored the market balance, this will make for a further stabilisation of the market, which is reflected in better prices.

We expect further quotas to be sold to the Restructuring Fund in the 2007/08 sugar industry year. Eastern Sugar B.V., Deurne (Netherlands), is currently also in negotiations with employees and beet growers at all production locations in the Czech Republic, Slovakia and Hungary with a view to selling quotas totalling 281,000 tonnes to the Restructuring Fund. Our French subsidiary Saint Louis Sucre S.A. was unable to increase its 49.5 % stake in Eastern Sugar for antitrust reasons.

The World Trade Organisation (WTO) negotiations were broken off for the time being in July. Since the parties» respective positions were so far apart, not only in the agricultural sector, a fairly prolonged break of 2 - 3 years is expected before negotiations are resumed. So long as the negotiation round is in process, the currently valid obligatory limits for import duties, internal support and export refunds remain in force.

Bioethanol

Südzucker has merged the bioethanol activities of Südzucker Bioethanol GmbH, Zeitz, as well as Biowanze S.A., Brussels (Belgium), and Bioenergy Loon-Plage S.A.S., Paris (France), into CropEnergies AG, Mannheim. On 28 September 2006 CropEnergies AG placed 25 million new shares issued from a capital increase in an initial public offering. Priced at EUR 8.00 per share, CropEnergies realised gross proceeds of EUR 200 million, which provides a solid financial basis for further expansion in Europe. The shares began trading on the Official Market (Prime Standard) of the Frankfurt Stock Exchange on 29 September 2006.

Roughly 78 % of the shares in the public offering (excluding the preferential allotment for Südzucker shareholders) were placed in Germany with institutional investors and approximately 22 % with private investors. About 3.0 million shares were issued to Südzucker shareholders by preferential allotment. After the IPO Südzucker is still the majority shareholder of CropEnergies AG with an interest of 70.6 %.

The CropEnergies Group operates a bioethanol plant in Zeitz in the German State of Sachsen-Anhalt which can process 700,000 tonnes of grain per year and currently has an annual output capacity of 260,000 m³ of bioethanol. The bioethanol produced by CropEnergies is sold to the mineral oil and petrochemical industry under the umbrella brand name «CropEnergies».

The biofuel markets will see strong growth in the coming years due to EU regulations which promote regenerative energy sources. The CropEnergies Group has launched an extensive investment programme which, with an expansion of present capacities to over 750,000 m³ by 2008/09, will enable it to capitalise on this market growth. This includes the enlargement of the present plant in Zeitz in two stages to an annual capacity of 360,000 m³. In addition, the Group has started work on the planning and construction of a new plant in Wanze (Belgium) for the production of bioethanol from wheat and sugar beet juice with an annual capacity of up to 300,000 m³.

On 7 September 2006 AGRANA laid the foundation stone for the new bioethanol plant in Pischelsdorf (Austria) with a capacity of up to 240,000 m³ of bioethanol. It is due to come on stream in October 2007. Its total capital cost will be in the region of EUR 125 million. Aside from a direct supply agreement with the Austrian OMV Group, the bioethanol produced will be marketed under a distribution agreement with the CropEnergies Group.

The full takeover of the French Ryssen Group was completed at the beginning of the second quarter, so the group has been consolidated as from 1 June 2006. The Ryssen Group operates a modern facility for the rectification and drying of raw ethanol with a future annual capacity of 100,000 m³ in an ideal logistical location near the port of Dunkirk (France).

Revenues

Group revenues rose by EUR 258.4 million, or 9.7 %, to EUR 2,919.7 (2,661.3)* million in the first half of the 2006/07 financial year.

Revenues in the Sugar segment were level with a year earlier at EUR 1,844.0 million, with the decrease as a result of declining world market exports being offset by gratifying growth in quota sugar sales in the East European EU markets.

Revenues in the Special Products segment were up by 16.1 %, or EUR 96.3 million, to EUR 694.0 (597.7) million. This was attributable above all to the growth in revenues at Südzucker Bioethanol GmbH in Zeitz and the integration of the Ryssen Group. The functional food, Freiberger and starch businesses also achieved higher revenues.

The Fruit segment posted revenues of EUR 381.7 (217.0) million in the first half of the 2006 calendar year (1st January to 30 June). The increase of EUR 164.7 million versus the first half of 2005 is due in the main to the fact that in the year-earlier period the Atys Group was only included for three months (1 April to 30 June) and DSF Deutsch-Schweizerische Früchteverarbeitung GmbH, Constance, was not yet consolidated.

Earnings

Group operating profit rose to EUR 250.3 (243.0) million in the first six months of the 2006/07 financial year in a continued difficult operating environment; the operating margin came to 8.6 %.

Operating profit in the Sugar segment in the first half was just short of the year-earlier level at EUR 178.2 (186.4) million. Earnings performance was affected by the fact that the market situation in Western Europe only began to recover late on in the first half year. The positive market development in Eastern Europe already witnessed in the first quarter continued in the second quarter. The earnings contribution from world market exports contracted in the second quarter due to the now declining export volumes.

Operating profit in the Special Products segment was increased by EUR 7.7 million to EUR 54.9 (47.2) million. This growth was driven by the good earnings development in the bioethanol business, where there has been a pronounced earnings swing after the start-up losses in the year-earlier period. As expected, operating profit in the functional food business was well below the year-earlier level. The decline is due in part to the poor development of business in inulinfructose produced from chicory. With the reform of the Sugar Market Regulation Südzucker has decided to discontinue these business activities and to sell the quota to the Restructuring Fund. At the same time, the strong growth in sales volumes in the core functional food product lines was not able to offset the cost increases and the burdens from production capacities in Chile not yet operating at full capacity.

Operating profit in the Fruit segment was up by EUR 7.8 million to EUR 17.2 (9.4) million. Compared with the year-earlier period, the former Atys Group and DSF were consolidated for the first time for the full six months.

Group income from operations, amounting to EUR 240.8 (237.3) million, consists of operating profit of EUR 250.3 (243.0) million and net restructuring costs and special items of EUR -9.5 ( 5.7) million. The restructuring costs and special items relate in the Sugar segment to the closure of the Lubna plant in Poland. In the Special Products segment start-up costs were incurred in connection with the commissioning of the ORAFTI production plant in Chile.

Group net earnings in the first six months rose to EUR 156.5 million from EUR 151.8 million a year earlier.

Outlook

For the full year 2006/07 we expect double-digit rates of growth in revenues in the Special Products and Fruit segments, so Group revenues should be up by about 5 % from EUR 5.3 billion to EUR 5.6 billion despite slightly lower revenues in the Sugar segment.

In the Sugar segment revenues will decline by about EUR 200 million to EUR 3.4 billion as a result of the high declassification in 2005 and the temporary quota reduction in the 2006 campaign and because C sugar exports will fall away as from the second half of the 2006/07 financial year. Revenues in the Special Products segment are set to rise by about good EUR 150 million to EUR 1.3 billion on the back of strong growth in sales of bioethanol. In the Fruit segment we expect revenues to be up by about EUR 350 million to EUR 0.9 billion as a result of the Atys Group now being consolidated for the full year, the first-time consolidation of DSF, Constance, and the switch in the fruit companies» financial year from the calendar year to the Südzucker Group»s financial year.

We expect an improvement in Group operating profit. We thereby assume that in the first year of the new market regulation the operating result in the Sugar segment will be at least level with the previous year»s result - despite the burdens from the intervention price reductions and the first-time impact of the restructuring levy, and on the basis of the currently resolved temporary quota reduction for the 2006/07 sugar industry year. Market prices have recovered to some extent from the poorer level in the previous year. In view of the further stabilised market balance this development is expected to continue. The result in the Sugar segment will also benefit from the cost-cutting measures initiated and earnings contributions from the sale of the large C sugar harvest in 2006 at rising world market prices. In the Special Products segment the positive result in the bioethanol business will improve further on a full year basis. In the functional food business the gratifying development of sales in the core product lines will not be able to compensate for the burdens from production in Chile not yet running at full capacity and the effect of the earnings contributions from inulinfructose falling away following the sale of the quota. All in all, operating profit in this segment will therefore be lower than last year. The Fruit segment will see significant earnings growth as a result of the improved earnings quality on a full year basis, the consolidation of the Atys Group now for the full year and the change of financial year.

Restructuring costs and special items make provision for the closure of the Lubna sugar factory in Poland. In the functional food business the production of inulinfructose from chicory at the Oreye location will be discontinued as planned, strengthening the focus on the continued fast-growing Isomalt, Oligofructose and Inulin core product lines. In this connection we are also reviewing measures to counter the loss of the earnings contributions from fructose mixtures, the general cost increases and the circumstances arising from the first chicory campaign in Chile. Earnings burdens can be offset by the earnings effects from the sale of the inulin quota to the Restructuring Fund and the CropEnergies AG initial public offering.

All in all, judged from today»s vantage point, we expect a significant improvement in the net restructuring costs and special items position which in the previous year was still negative to the tune of EUR 53 million. Together with the growth in operating profit, this will result in a significant rise in income from operations.

Events after the interim reporting period

CropEnergies AG successfully completed its initial public offering and was admitted to official trading with a listing in the Prime Standard segment of the Frankfurt Stock Exchange on 29 September 2006. The company thereby increased its subscribed capital by EUR 25.0 million from EUR 60.0 million to EUR 85.0 million and realised gross proceeds of EUR 200.0 million. Following the capital increase Südzucker AG holds 70.6 % of the share capital; the other shares are held by institutional and private investors.

Together with Ricaeli, a Brazilian frozen foods company that will hold a stake of up to 25 % AGRANA Fruit has set up AGRANA Fruit Brasil Ltda., which will be constructing a new factory for fruit preparations in Cabreuva in the state of Sao Paulo at a capital cost of EUR 5 million.

Eastern Sugar B.V., Deurne (Netherlands), has begun talks with employees and beet growers at all locations in the Czech Republic, Slovakia and Hungary with a view to selling quotas totalling 281,000 tonnes to the Restructuring Fund.

Yours faithfully,
SÜDZUCKER AKTIENGESELLSCHAFT
Mannheim/Ochsenfurt
The Executive Board