Further increasing operating income at Südzucker
In view of the opportunities in the sugar and sweeteners segment, the Südzucker Group decided to concentrate on its core business and successfully carried out this strategy in the first financial year of the new millennium. In implementing this strategy, within a single financial year Südzucker disposed of Schöller Holding and considerably strengthened its position as the EU's leading sugar producer by acquiring France's second largest sugar producer, Saint Louis Sucre S.A. (SLS). As a result, the Südzucker Group is now one of the world's largest sugar enterprises and has an extremely sound platform for a successful future in an increasingly global market.
Südzucker Group's sales for 2001/02 rose by Euro 112 million to Euro 4,776 million (Euro 4,664 million), despite the disposal of the Schöller Group. The operating profit increased by 18.8 %, or Euro 73 million, to Euro 465 million (Euro 392 million), mainly due to good progress in the sugar/sweeteners and ice cream/frozen food segments.
Net earnings for the year after tax rose by 34.3 % to Euro 281 million (Euro 209 million), so that concentration on our core business already had a noticeably positive effect in 2001/02.
Group 2001/02 2000/01
Sales
2001/02: Euro 4,776 m
2000/01: Euro 4,664 m
+ 2.4 %
Operating income
2001/02: Euro 465 m
2000/01: Euro 392 m
+ 18.8 %
Operating margin
2001/02: 9.7 %
2000/01: 8.4 %
+ 15.5 %
ROCE
2001/02: 13.2 %
2000/01: 12.7 %
+ 3.9 %
Net earnings for the year
2001/02: Euro 281 m
2000/01: Euro 209 m
+ 34.3 %
Earnings per share
2001/02: Euro 1.45
2000/01: Euro 1.301
+ 11.5 %
Employees
2001/02: 23,638
2000/01: 28,415
- 16.8 %
1 Adjusted.
The executive board and supervisory board will recommend an increase in the cash dividend to Euro 0.47 per share to the annual general meeting on August 22, 2002. Südzucker will thus pass on the improved results and advantages of the corporation tax reform to the shareholders. With this increase in the dividend to Euro 0.47 (Euro 0.34 per ordinary share and Euro 0.38 per preference share), the normal distribution increases by 38 % compared with the previous year's ordinary share dividend and by 24 % compared with the previous year's preference share dividend. The distribution amount will increase by 65 %, to Euro 82.2 million (Euro 49.9 million), as a result of the first-time dividend entitlement of shares issued for the capital increase in 2001. The dividend will be paid on August 23, 2002. A full dividend will be paid to holders of the new shares issued for the capital increase in September 2001.
The number of factories in the sugar group rose to 45 (41) in 2001/02 due to the acquisition of Saint Louis Sucre (SLS), with its 5 sugar factories and refineries. With Eastern Sugar and the Ropczyce and Wlostow works, which have not been included, there are a total of 53 sugar factories. The sugar beet harvest in the group of 25.0 million tonnes (22.3 million tonnes) was processed using a daily processing capacity for 342,000 tonnes (290,000 tonnes) in an average of 73 days (77 days). With the exception of Poland, the sugar beet harvest rose in all eastern European companies whereas, on the other hand, without the acquisition of SLS sugar beet processing would have declined in the EU companies.
Overall, sugar production increased in the group to 4.0 million tonnes (3.5 million tonnes) whereby this figures includes the refining of 278,500 tonnes (287,500 tonnes) of raw sugar. The Südzucker AG factories led the refinement league tables, with 17.39 %. Sugar content in the east European factories were between 14.99 % and 15.25 %.
Key figures sugar/sweeteners Segment
Sales
2001/02: Euro 3,396 m
2000/01: Euro 2,973 m
Operating profit
2001/02: Euro 403 m
2000/01: Euro 351 m
Operating margin
2001/02: 11.9 %
2000/01: 11.8 %
ROCE
2001/02: 15.8 %
2000/01: 17.5 %
Capital expenditures
2001/02: Euro 169 m
2000/01: Euro 133 m
Investments in financial assets
2001/02: Euro 1,671 m
2000/01: Euro 21 m
Average number of employees during year
2001/02: 12,679
2000/01: 12,841
Südzucker AG, Südzucker GmbH and Südzucker International operated 23 (23) sugar factories in their 2001/02 campaign, of which 14 (14) were located in Germany, 3 (5) in Poland (excluding Ropczyce and Wlostow) and 4 (4) in Moldavia. At the end of the campaign the sugar works in Delitzsch and Zeil were closed and their sugar beet processing has been taken over by neighbouring factories.
Raffinerie Tirlemontoise of Belgium was extremely successful in its operating activities, with 5 (5) sugar factories in the traditional sugar business, functional food products and a broad range of other food ingredients.
Saint Louis Sucre of France operates 5 sugar beet factories and one cane sugar refinery in France. Further business activities include the production of bio-ethanol in France and an investment in Eastern Sugar, which operates in eastern Europe.
The AGRANA Group operates in the sugar and starch segments in Austria and in the central and eastern European countries. Of its 13 (13) sugar factories, 3 (3) are located in Austria and a further 10 (10) in Romania, Slovakia, the Czech Republic and Hungary. With its potato and corn starch products, AGRANA could again improve its presence in the food and non-food markets.
The development in the special products division was also very succesful. Palatinit, with its sugar substitute Isomalt, is already the most important raw materials supplier for sugar-free hard caramels. As these products as well as sugar-free chewing gum pellets continue to be successful, production capacity is being stepped up.
In 2001 Orafti achieved its strongest growth for inulin and oligo-fructose, its functional food products, since it was founded. A number of encouraging product developments were initiated for leading global food companies wishing to give their products a healthy additive. This satisfactory market growth must be satisfied by a further expansion in capacity. Südzucker is currently reviewing the Bundaberg region in Australia for its possible suitability as a production location.
The Portion Pack Europe Group, now operating through eight companies in six European countries (Austria, Belgium, the Czech Republic, Germany, Poland and The Netherlands), specialises in providing portion pack articles for the catering industry and large volume consumers. As a full-range supplier, Portion Pack has a selection of products which, in addition to sugar products, also includes biscuits, sauces, sweeteners, coffee cream, jams, spices and bread.
The companies making up the Surafti division mainly supply food additives to food processors in the bakeries industry. The companies located in Great Britain and France produce fondant specialities, bakery additives and food decoration products.
The Südzucker Group’s starch activities are mainly operated by AGRANA. It was again possible in 2001/02 to sharply increase turnover and profits. Sales grew by 13 % to Euro 129.1 million (Euro 114.6 million) and net earnings for the year rose by 50 % to Euro 5.9 million (Euro 3.9 million). Total starch product sales volumes reached 208,000 tonnes (181,000 tonnes).
Following approval of the sale of Schöller Holding to Nestlé by the EU competition authorities at the end of February 2002, the purchase and sale contracts made in October 2001 could be implemented in the year ended February 28, 2002. Schöller Holding Group was de-consolidated effective September 30, 2001, as a result of which sales for the ice cream/frozen food segment declined to Euro 1,380 million (Euro 1,692 million). On the other hand, operating profit rose to Euro 62 million (Euro 41 million). The structural and rationalisation measures carried out had a positive effect on profits, and also the poorer winter months for the ice cream business were no longer included in the results.
Key figures for the ice cream/frozen food segment
Sales
2001/02: Euro 1,380 m
2000/01: Euro 1,692 m
Operating income
2001/02: Euro 62 m
2000/01: Euro 41 m
Operating margin
2001/02: 4.5 %
2000/01: 2.4 %
ROCE
2001/02: 6.9 %
2000/01: 2.9 %
Capital expenditures
2001/02: Euro 50 m
2000/01: Euro 82 m
Investments in financial assets
2001/02: Euro 16 m
Average number of employees during year
2001/02: 10,959
2000/01: 15,574
Freiberger Group, which remains in the Südzucker Group, is a European market leader for deep-frozen pizzas and baguettes. Freiberger was able to further strengthen its position in major foreign markets by continuing to penetrate neighbouring European countries. Retailers are offered a branded range based on specific customer needs and which is constantly adapted to reflect current market trends. The "Alberto" brand is being continuously boosted by the introduction of innovative products. One example is Alberto Microssa, a pizza which is specially suited for rapid microwave heating and offers maximum convenience with its patented packaging.
The main thrust of Südzucker Group’s research and development activities are new products or product varieties, optimisation of production processes and support for activities in sales. The breadth of work stretches from agricultural production to the production divisions of sugar, sugar substitutes, starch, inulin and their related products, through to application technology in the food and non-food areas. These tasks are being carried out by some 200 employees at four locations. The total budget for research and development was Euro 22.8 million in 2001/02 (Euro 21.0 million).
The future
Fiscal 2002/03 will be affected by the first-time full consolidation of the operating results of SLS, which will considerably exceed the loss in contribution from profits of the Schöller Group. Projects to achieve synergy advantages stemming from the enlarged sugar group will start yielding cost savings. On the other hand, due to lower sugar production in the 2001 campaign, export business will contribute less to profits. The eastern European sugar companies assume that they will be able to maintain their good previous year’s results. The dynamic growth of the special products division (Orafti, Palatinit, starch, Freiberger) will continue. Thus, Südzucker believes there will be a further considerable improvement in operating profits. With a decline in sales due to the falling away of Schöller revenues, Group operating margins will exceed 10 %.
As a result of fully including SLS for the first time and the lack of Schöller restructuring charges, net group earnings for the year will continue to increase steadily.