Südzucker cuts dividend and reports slow development in fiscal 2014/15
Südzucker AG Mannheim/Ochsenfurt, Mannheim generated consolidated group revenues of EUR 7,735 (previous year: 7,879) million in fiscal 2013/14 (1 March to 28 February 2014). Operating profit fell to EUR 658 (previous year: 972) million as projected, after the exceptionally strong previous year. As forecasted, earnings in the sugar, special products and CropEnergies segments were lower, while the fruit segment reported higher operating profit. Income from operations (EBIT) was down sharply at EUR 543 (previous year: 955) million. Included therein is the result from restructuring and special items of minus 115 million EUR, which consisted mainly of the amount for the fine associated with the German antitrust case and the income from the reimbursement of overpaid production levies during the 2001/02 to 2005/06 sugar marketing years.
Dividend of EUR 0.50 per share
The executive and supervisory boards will recommend to shareholders at the annual general meeting on 17 July 2014 that a resolution be passed approving distribution of a dividend of EUR 0.50 (previous year: 0.90) per share. Last year the dividend had been raised by EUR 0.20 per share on account of the exceptionally successful business performance. The reported earnings per share at the time were EUR 3.08. Earnings per share fell to EUR 1.38 in fiscal 2013/14. The recommended dividend takes into consideration achieved earnings and cash flow, as well as future expected corporate development. Based on the 204.2 (previous year: 204.2) million shares in circulation, the total dividend distribution will be EUR 102.1 (previous year: 183.8) million.
Sugar segment earnings and revenue retreat
The sugar segment's revenues declined to EUR 3,961 (previous year: 4,232) million. As projected, the result was sharply lower than the record 2012/13 result. It came in at EUR 436 (previous year: 708) million. Business performance was increasingly impacted by sharply lower sales revenues for quota sugar due to high EU inventories and decreasing world market prices, especially in the second half of the fiscal year. Higher raw material prices during the 2012 campaign and charges related to the shorter campaign due to the lower harvest yield in 2012 weighed on earnings in the first half of the fiscal year.
The total volume of sugar produced by the company's twenty-nine sugar factories and three refineries declined slightly to 4.7 (previous year: 4.9) million tonnes. The reduced cultivation area of 396,000 (previous year: 422,000) hectares yielded an average of 68.9 (previous year: 68.1) tonnes of beets per hectare. The campaign at the sugar factories was shorter, lasting 102 (previous year: 112) days.
Special products segment: high raw material costs weigh on earnings
The special products segment's revenue came in slightly higher than last year at EUR 1,882 (previous year: 1,862) million. The growth was driven by higher volumes, among other things thanks to the startup of the wheat starch facility in Pischelsdorf, Austria in June 2013. Toward the end of the fiscal year, the starch division began reporting sharply lower and ever declining sales revenues, particularly for bioethanol and sweeteners.
The drop in operating profit in the first half of the fiscal year due to higher raw material prices that could not be fully passed on to the market could not be completely offset in the second half of the year. As a result, operating profit was lower than last year as projected, coming in at EUR 122 (previous year: 132) million.
CropEnergies segment expands capacity substantially with Ensus integration
In July 2013, CropEnergies acquired British bioethanol producer Ensus Limited, based in Wilton, Great Britain. Ensus operates one of Europe's largest bioethanol plants in the northeast of England. It has an annual capacity of 400,000 cubic meters of bioethanol and 350,000 tonnes of protein-based animal feed. CropEnergies thus now has an annual production capacity of about 1.2 million cubic meters of bioethanol and over 1 million tonnes of food and animal feed, making it one of Europe's leading producers.
CropEnergies' revenues grew satisfactorily, reaching EUR 720 (previous year: 645) million. Higher sales revenues for food and animal feed, and especially higher ethanol volumes, more than offset the shortfall caused by increasingly declining sales revenues from ethanol in the second half of the fiscal year. Operating profit on the other hand came in at EUR 35 (previous year: 87) million, down sharply from the record result posted in 2012/13, as forecast. This drop was due to lower margins because of higher net raw material costs, as well as sharply lower ethanol sales revenues, especially in the last quarter. The costs of starting up the Ensus bioethanol plant and charges from the flooding in Zeitz in June 2013 also impacted operating profit.
Fruit segment reports revenues increase and significant increase in operating profit
The fruit segment's overall revenues rose to EUR 1,172 (previous year: 1,140) million in spite of lower sales revenues in the second half of the fiscal year. Operating profit was also up sharply, to EUR 65 (previous year: 45) million. The results were driven by higher volumes in the fruit juice concentrates division due to the first-time consolidation for the entire fiscal year of AUSTRIA JUICE GmbH, as well as strong volume growth in all key regions in the fruit preparations division.
Number of employees
In last fiscal 2013/14, the average number of employees rose by just under three percent to 18,459 (previous year: 17,940). About 110 former British bioethanol producer Ensus people were added to CropEnergies' payroll, raising the total to 430 employees. There were also slight increases in the sugar, special products and fruit segments.
Forecast for the current fiscal year 2014/15
Consolidated group revenues for fiscal 2014/2015 are expected to decline to about EUR 7.0 (2013/14: 7.5 after adjustment per IFRS 11*) billion. Südzucker expects sugar segment revenues to drop sharply, special products segment revenues to decline slightly, stable revenues in the fruit segment and a significant rise in the CropEnergies segment's revenues.
Expectations of an increasingly worsening economic environment in the European sugar and bioethanol markets as stated in the November 2013, December 2013 and February 2014 ad hoc announcements have been confirmed and the situation has in fact worsened. As indicated in the ad-hoc-release published 8 April 2014, Südzucker expects consolidated group operating profit to decline sharply, to about EUR 200 million (2013/14: 622 after adjustments according to IFRS 11*). The decline will be driven mainly by lower profits in the sugar and CropEnergies segments. Südzucker also expects moderately lower profits in the special products segment. The fruit segment's profits is expected to remain stable. Consolidated group operating profit for the first quarter of the current 2014/15 fiscal year will be significantly lower than last year at the same time.
*According to IFRS 11, joint venture companies that have to date been proportionally consolidated must be consolidated at equity starting in 2014/15. This change will be retroactive. The reported figures for 2013/14 were adjusted accordingly.