Südzucker more optimistic about outlook for 2007/08 financial year
During the first half of the 2007/08 financial year, the Südzucker Group's revenues declined to 2.8 (2.9) billion EUR and operating profit fell to 120 (250) million EUR. The downturn was in line with forecasts and was attributable exclusively to the sugar segment. The special product and fruit segments generated higher revenues and operating profits. Group consolidated net earnings were lower because of the developments in the sugar segment. They came in at 78.7 (156.5) million EUR, and earnings per share were 0.20 (0.62) EUR.
Market regulations impact sugar segment
Revenues in the sugar segment fell to 1.7 (1.9) billion EUR in the first half of the 2007/08 financial year, but business performance was stable during the second quarter. The lower revenues compared to the prior year were mainly driven by the fact that, as of the current financial year, we are no longer permitted to export C-sugar to the world market. The significant deterioration in the sugar segment's operating profit, which fell to 31.6 (179.2) million EUR, is primarily due to the temporary restructuring levies being charged, and our continued forecast of a market withdrawal totaling at least 20% for the 2007/08 sugar marketing year. These factors are over and above the ongoing effects of the new sugar market regulations. Cost-cutting programs were implemented to mitigate the profit deterioration.
Rising commodity prices not yet affecting special product segment
The special products segment was able to boost revenues by 55.3 billion EUR, closing at 708.2 (652.9) million EUR, and improve operating profit by 15.2 million EUR to 70.1 (53.9) million EUR. All divisions, especially the bioethanol and starch divisions, contributed to this performance. Thanks to existing contracts, the - in some cases substantial - increases in raw material costs in almost all divisions have not yet had a significant negative impact on operating profits.
The bioethanol division enjoys a competitive advantage because using grains offers natural hedging resulting from the byproduct ProtiGrain and because it is free to vary the raw material mix consisting of grain and sugary juices according to market conditions. In addition, the location's in-house energy concept has proven to be advantageous, particularly in view of the rising energy prices.
Fruit segments grows in line with expectations
The fruit segment's revenues were higher by 53.4 million EUR, coming in at 435.1 (381.7) million EUR. Both the fruit-juice concentrates and fruit preparations division contributed to the improvement. Operating profit rose to 18.7 (17.2) million EUR.
Forecast for financial year total raised
The total consolidated revenue forecast for the 2007/08 financial year has now been adjusted. It is currently expect to decline from the 5.8 billion EUR achieved a year prior to 5.2 to 5.4 billion EUR. The majority of this decline, up to 500 million EUR, will be generated by the sugar segment. However, the special products and fruit segments are expected to contribute higher results than a year ago during the same period. The group's consolidated operating profit forecast for the total financial year is being raised from the previous 120 to 160 million EUR to at least 210 (419) million EUR. The revised forecast is based on the intended quota surrender in the amount of at least the preventive market withdrawal (corresponds on average to 13% of the company's sugar quota). The percentage of the quota surrendered is offset by an equal percentage exemption from the restructuring levy. This plan for the total year is now based on a slightly positive operating profit in the sugar segment and the continued expectation of a higher operating profit than last year in the special products and fruit segments, in spite of higher agricultural commodity prices.
Numbers in brackets refer to the corresponding prior year's period.