Press

The AGRANA Group’s revenues during the first half of the current 2005|06 financial year (1 March through 31 August 2005) were 53.1 per cent up on the same period of 2004|05 at € 723.5 million (1st Half 2004|05: € 472.4 million).

The increase in revenues was largely due to an advance in sugar sales by volume and the addition of the world’s leader in fruit preparations – the Atys Group – to the scope of consolidation as of the second quarter of 2005|06.  First-half profit from operating activities advanced by 19.5 per cent to € 47.8 million (1st Half 2004|05: € 40.0 million).

In the words of Johann Marihart, Chairman of the AGRANA Group’s Managing Board, commenting on the group’s semi-annual figures during AGRANA’s half-year press conference, “The takeover of a majority stake in the Atys Group in the second quarter of 2005|06 and bringing forward the acquisition of the group’s remaining stock by a year, namely to the end of 2005, represent major strategic milestones in the development of our Fruit Division, securing our group’s dynamic growth in revenues and profits and reducing its dependence on profits in the Sugar Division.”

First-half profit after tax grew from € 33.5 million to € 34.6 million, but consolidated profit for the period net of minority interests fell from € 31.7 million to € 30.1 million as a result of the increase in minority interests attributable to the Atys Group.  Per-share earnings came to € 2.12 (1st Half 2004|05: € 2.23, adjusted in conformity with IAS 33.64).

 

^{*  Prior-year figure adjusted in accordance with IAS 33.64.}

Sales revenues broke down by segment as follows:

 

Results during the Second Quarter of 2005|06
Because of an advance in sugar sales by volume and the Atys Group’s addition to the scope of consolidation, second-quarter revenues were 80.9 per cent up on the year at € 441.3 million (2nd Quarter 2004|05: € 244.0 million).

Second-quarter profit from operating activities came to € 29.4 million, which was 42.0 per cent higher than the previous year’s figure of € 20.7 million.  Although the Sugar Division’s second-quarter profit from operating activities grew, aggregate first-half profit still declined by 15 per cent.  First-half profit from operating activities in the Specialities Segment nearly doubled, increasing by 90 per cent.

During the second quarter of 2005, AGRANA increased its stake in the Atys Group to 62.5 per cent.  In addition, the date for the acquisition of the remainder of the Atys Group’s stock was brought forward to year-end 2005.  The original agreement was for an acquisition in four stages to be completed by the end of 2006.

CFO Walter Grausam explained the decision as follows:  “This will allow the Atys Group’s integration into the AGRANA Group a year sooner than originally planned, which will in turn enable us to implement our plans for restructuring within AGRANA’s newly created Fruit Division earlier, benefiting our profits in the medium term.

The Fruit Division will be generating further growth within the AGRANA Group by opening up new growth markets, enlarging existing production capacities and carrying out further acquisitions.  The takeover of the rest of the Atys Group at the end of 2005 will substantially decrease minority interests, increasing earnings per share.”

The Sugar Segment
Sugar Division revenues rose sharply during the first half of 2005|06, growing by 24.3 per cent to € 404.3 million (1st Half 2004|05: € 325.3 million).  That was the result of higher sugar exports and the group’s first deliveries within the scope of the EU intervention system.  However, lower domestic prices, cuts in export refunds and increases in EU levies and freight costs dented operating profit from sugar operations during the first half of 2005|06 to € 22.8 million, as against € 26.8 million in the first half of the previous year.

The EU commission published its Legal Proposal for reform of the EU sugar CMO on 22 June 2005.  It recommends creating a restructuring fund to encourage the voluntary cessation of quota sugar production in exchange for an exit payment, a cut of 42.6 per cent in the minimum beet price and a 39 per cent cut in the sugar reference price.  The EU hopes to reach a political agreement on reform before the WTO Ministerial Conference in Hong Kong in December 2005.

On 22 September 2005, the EU Commission decided to carry out a flexible quota cut (declassification) of 1.8 million tonnes of quota sugar (A and B sugar).  That is 10.4 per cent of the total sugar quota of 17.4 million tonnes.  Declassified sugar volumes must be exported at world sugar prices as C sugar, taking pressure off the domestic EU market.

As Johann Marihart pointed out, “The reform of the EU sugar market regime is presenting AGRANA with major challenges and will necessitate further rationalization.”  However, AGRANA is located in Europe’s climatically favoured higher-yield beet growing areas where sugar extraction should remain possible in the long term despite the new regime.  In addition, the CMO reform will also create opportunities, for instance through growth in the isoglucose industry and the use of concentrated sugar beet juice to make bioethanol.  “Whatever happens, sugar will continue to be a core segment at AGRANA even after the implementation of the new CMO, albeit no longer as AGRANA’s principal area of activity once the necessary strategic reorientation has taken place.”

Total sugar sales by volume in Austria during the first half of 2005|06 were 35 per cent up on the same period of the previous year at 267,000 tonnes.  The increase was primarily due to a rise in sugar exports.  Domestic sugar sales fell by 15 per cent to 145,000 tonnes.  This year’s harvest in Austria is expected to come to 3.2 million tonnes (last year: 2.8 million tonnes).  Sugar production should total about 465,000 tonnes (last year: 450,000 tonnes).  The EU has set Austria’s sugar production quota at 340,799 tonnes (last year: 387,326 tonnes).

The beet harvests in Hungary, the Czech Republic and Slovakia are also expected to be very good, totalling about 2.4 million tonnes and yielding an estimated 349,400 tonnes of sugar (or 125 per cent of those countries’ quotas).  In Romania, it will probably be possible to extract 12,800 tonnes of sugar from the forecast national sugar beet harvest of 101,000 tonnes, and 192,500 tonnes of sugar is likely to be refined from imported raw sugar.  Consequently, AGRANA will, for the first time, be producing over a million tonnes of sugar, consisting of the sugar from about 5.7 million tonnes of beet (last year: 5.1 million tonnes) and 192,000 tonnes of sugar made from imported raw sugar.

The Specialities Segment (Starch and Fruit)
The first-time consolidation of the Atys Group had a major impact on the Specialities Segment during the second quarter of 2005|06.  First-half revenues in this segment rose from € 147.1 million to € 319.2 million, and profit from operating activities grew by 90 per cent to € 25.0 million.

The Starch Division
The plentiful supply of raw materials led to a small fall in starch prices, but the Starch Division more than made up for it by increasing quantities and improving the product mix, continuing its positive development.

The Gmünd potato starch factory began starch potato processing on 22 August 2005.  The factory expects to produce roughly 49,000 metric tons of potato starch from 245,000 tonnes of starch potatoes this financial year (last year: 204,000 tonnes).  The Aschach maize starch factory’s processing throughput increased by 10 per cent to 150,000 tonnes during the first half of 2005|06, already reflecting the increase in the factory’s capacity.

The International Starch Division’s revenues and sales by volume both increased during the first half of this financial year, namely by 7 per cent and 13 per cent, respectively.

Bioethanol
AGRANA Bioethanol GmbH was set up in July 2005, and planning of Austria’s first bioethanol facility is underway.  Local conditions (raw material usage, energy costs) and the required yield prompted AGRANA to opt for production technology that will allow the manufacture of bioethanol from a variety of agricultural raw materials (wheat, wet maize and concentrated beet sugar juice).  Production will begin in September 2007 and will total 200,000 cubic metres a year.
Bioethanol production in Hungary and sales to the Hungarian petrochemical industry have begun as planned.  Hungrana will deliver a total of 63,200 cubic metres of bioethanol to the industry by the year 2007.

The Fruit Division
Sales of fruit preparations during the first half of 2005 were 9.4 per cent up on the year.  The increase was due in part to higher sales by volume in traditional markets such as France and rapid rates of growth in countries like Argentina and Mexico.  AGRANA’s new plants in Serpuchov (Russia) and Tennessee (USA) have begun production as planned.

The Atys Group’s revenues during the first half from 1 January through 30 June 2005 were 9 per cent up on the year.  The Atys fruit preparations facility in Tennessee (USA) was completed.  Together with the Atys Group’s existing production facilities in Ohio, Texas and Florida, the new plant will allow Atys to continue to grow with its customers in the dynamically developing North American market.  The US is the group’s most important market alongside Europe, accounting for roughly 30 per cent of its fruit preparations sales.

Sales of fruit juice concentrates have been centralized under the umbrella of AGRANA Fruit Juice GmbH in Bingen (Germany) since the beginning of May 2005.  This is to ensure that the members of the Group present one consistent face to the customer and is also making it possible to exploit synergies between the Group’s various subsidiaries.  Fruit juice concentrate sales by volume during the first half of 2005 were 11 per cent up on the year.

Whereas Vallø Saft’s first-half sales were static on the year, the Wink Group reported an appreciable rise in revenues during the first half of 2005.

Steirerobst AG’s revenues during the first six months of 2005 (1 January through 30 June) were 5 per cent up on the same period of last year.  The increase was the result of higher revenues from sales of both fruit preparations and fruit juice concentrates.

After several months of trial production, the Steirerobst fruit preparations plant in Serpuchov, south of Moscow (Russia), was officially opened on 23 September 2005.  In the concentrates segment, Steirerobst was able to complete the amalgamation of all its Hungarian production facilities at one location in Hajdúsámson (Eastern Hungary) in time for the apple campaign.

An Extraordinary General Meeting of the company’s shareholders held on 23 August 2005 decided to carry out a stock split at Steirerobst AG during which existing shareholding ratios were not preserved.  The elimination of the free float went hand-in-hand with the removal of the Steirerobst shares from the Vienna stock exchange list on 5 October.  This step was undertaken to facilitate Steirerobst’s rapid integration and the continuing expansion of AGRANA’s Fruit Division.

Outlook
CFO Walter Grausam summed up the group’s outlook as follows:  “The addition of the Atys Group to the scope of consolidation in the second quarter of the 2005|06 financial year generated a growth surge that will boost full-year revenues to an estimated € 1,430 million. 
As we expected, it looks as if the Specialities Segment will continue to develop dynamically to account for over 50 per cent of AGRANA’s total revenues in the period up to year-end.”
In view of the rise in campaign energy costs and the cut in sales by volume of quota sugar, profits in the Sugar Division are expected to weaken during the second half of 2005|06.  Declassification should firm up the market price of sugar.

The rise in profits in the Specialities Segment (starch and fruit) is likely to continue, and the segment’s contribution to aggregate full-year profits should more than double versus last year.