AGRANA achieves growth in Starch and Fruit – Contraction in Sugar in first quarter after exceptional prior-year periodAd-Hoc Date: 12.07.2007
In the first quarter of the current 2007|08 financial year (the three months ended May 31, 2007), sales revenue at AGRANA, the sugar, starch and fruit group, decreased by 5% to EUR 449.0 million (Q1 2006|07:EUR 472.0 million).
“While the Starch and Fruit segments grew substantially both in revenue and earnings, the Sugar segment, as expected, saw a revenue decline in the first quarter of 2007|08. This contraction resulted both from an unusually strong year-earlier quarter that included the very high C sugar exports still possible at the time, and from the adverse effects of the reform of the EU sugar regime that are now coming into play,” said AGRANA Chief Executive Officer Johann Marihart in commenting on the results for the first quarter of 2007|08.
AGRANA – IFRS results Three months ended May 31
First quarter 2007|08
First quarter 2006|07
Operating profit mEUR
Profit before tax mEUR
Profit for the period mEUR
Earnings per share mEUR
Investment: purchases of property, plant and equipment and intangible assets mEUR
Revenue by segment was as follows:
AGRANA Group revenue
Operating profit was EUR 28.2 million compared to EUR 35.1 million in the first quarter of 2006|07. Operating profit after exceptional items was EUR 27.6 million, reflecting a one-time expense of EUR 0.5 million for the construction of the Austrian bioethanol plant. Net financial items improved to a negative EUR 3.2 million from a year-earlier deficit of EUR 5.9 million, thanks largely to currency translation gains from the appreciation of Eastern European currencies. After income taxes of EUR 6.2 million calculated at a tax rate of approximately 25%, profit for the period before minority interests was EUR 18.2 million (Q1 2006|07: EUR 20.5 million). Earnings per share in the first quarter of 2007|08 were EUR 1.26, compared to EUR 1.35 one year earlier.
In the first quarter of 2007|08, AGRANA undertook capital expenditure of EUR 45.1 million, more than double the amount invested during the prior year’s first quarter. Of the total investment, the Sugar segment accounted for EUR 6.3 million (Q1 2006|07: EUR 3.4 million), the Starch segment for EUR 32.0 million (Q1 2006|07: EUR 12.2 million) and the Fruit segment for EUR 6.7 million (Q1 2006|07: EUR 6.1 million). The investment in expansion concerned mainly the construction of new production plants in the Sugar and Starch (bioethanol) segments and capacity enlargement at existing facilities.
In the first three months of 2007|08, the Sugar segment earned revenue of EUR 171.0 (Q1 2006|07: EUR 243.0 million), a decrease caused primarily by the ending of C sugar exports owing to the WTO panel decision. As well, in the comparative prior-year quarter, significant volumes had been sold through the EU’s intervention mechanism. These two non-recurring effects had contributed greatly to the high revenue in the year-ago quarter. The revenue reduction, the additional detrimental effects of the EU sugar market reform – notably the restructuring levy – and the restrictive EU export policy had an impact on operating profit as well, which, at EUR 7.8 million, was down significantly from the figure of EUR 22.6 million reached in the first quarter of 2006|07. (In AGRANA’s reporting, the term “operating profit” when not otherwise qualified represents operating profit before exceptional items.)
In April 2007, after receiving antitrust approvals, AGRANA together with Bulgarian sugar company Zaharni Zavodi AD launched a packaging and distribution joint venture that began operation near the end of the financial first quarter. The construction of the raw sugar refinery in Brcko in Bosnia-Herzegovina is progressing on schedule and the facility is to come on stream at the end of 2007.
First-quarter revenue in the Starch segment was EUR 77.5 million, or 30% higher than the year-earlier level of EUR 59.6 million. Starch sales in the segment grew by 20% to 187,800 tonnes.
The Starch segment’s operating profit rose to EUR 12.2 million (Q1 2006|07: € 7.3 million). The dominant reasons were the strong volume growth and the upgrading of the product mix in favour of higher-value-added starches with an attractive profit contribution.
Thanks to continuing good weather conditions in the first quarter of 2007|08, the construction and installation activities at the bioethanol plant in Pischelsdorf, Austria, advanced swiftly. Based on the present stage of completion, the facility’s commissioning at the beginning of October 2007 is thus assured. The raw material supply required for the start-up phase is already secured.
In the first three months of 2007|08 the Fruit segment achieved revenue growth of 19% compared to the first quarter of last year, to EUR 216.8 million (Q1 2006|07: EUR 182.9 million). Its operating profit increased by 60% from EUR 5.1 million to EUR 8.2 million. The year-earlier figure did not yet include Chinese joint venture Xianyang Andre Juice Co., Ltd., which formed part of the basis of consolidation for the quarter under review.
Fruit preparations business
The increase in raw material prices was partly reflected in higher sale prices, which, combined with the strong volume gains from organic growth, translated into a significant increase in revenue. At the same time, operating profit was also boosted. After just seven months of construction, the work begun in September 2006 to build the fruit preparations plant in Brazil’s Cabreúva near Sao Paulo was completed with the official opening in May 2007.
Fruit juice concentrates business
Sales revenue from fruit juice concentrates also rose from the prior-year quarter, particularly for apple juice concentrate and fruit puree. Sales of fruit juice concentrates from red fruits too (strawberry, currant, cherry, raspberry, etc.) showed a good trend and contributed to the higher revenue thanks to the improved price situation.
In Poland and Hungary, after two waves of spring frosts, the coming apple crop should be dramatically smaller than last year. This will create a shortage in the European market for sour apple juice concentrate, with a resulting steep increase in costs and prices.
For the 2007|08 financial year, AGRANA expects the Group’s revenue to come in slightly below last year’s level. One reason is the absence of last year’s two additional months of revenue in the Fruit segment (a difference of EUR 134 million) that had resulted from the changeover of the Fruit activities’ year-end from a calendar-year basis to the AGRANA financial year-end. Other causes are temporary quota cuts for sugar production and the elimination of C sugar exports. The vigorous organic growth in the Starch and Fruit segments will not be able to fully offset these effects. AGRANA is striving to deliver an operating profit in line with last year’s good result.
To sustain the growth trajectory, AGRANA plans capital expenditure of more than EUR 200 million for the current 2007|08 financial year (prior year: EUR157 million). “In the Sugar segment, this investment is to serve the further expansion of our strong market position in Central and Southeastern Europe, particularly the Balkans. In the Starch segment, we will bring our bioethanol plant in Pischelsdorf on stream in autumn 2007. Likewise, the increase in corn processing capacity at Hungrana (our corn starch and isoglucose factory in Hungary) will be a positive driver of our revenue trend. In the Fruit activities, we intend to make further strides in our international expansion,” announced CEO Johann Marihart.