Highlights from the group financial statements

Mannheim, 27.05.2004

Group sales and profits

Südzucker Group sales increased by EUR 191 million i. e. 4.4 % to EUR 4,575 million (EUR 4,384 million).

This growth is particularly attributable to the continuing success of the special products segment. The sharp rise in revenues, by 15.1 % to EUR 1,180 million (EUR 1,025 million) in this segment was supported by continuing strong growth in the functional food divisions and Freiberger. The change in financial year at Freiberger, from the calendar year to the Südzucker Group financial year ended 28 February, together with the first-time inclusion of newly-acquired investments in the fruit and pizza activities, further strengthened this growth.

Turnover in the sugar segment rose by EUR 36 million to EUR 3,395 million (EUR 3,359 million). Smaller EU export sales volumes at lower world market prices were offset by higher EU revenues. Sales in eastern Europe were affected by structural unevenness in eastern European markets in anticipation of EU membership on 1 May 2004. This situation could be more than offset by the first-time full consolidation of the Silesian SSC Group as from the second quarter of 2003/04.

The group's operating profit declined by 7.9 % to EUR 479 million (EUR 520 million). The increase in operating profit at the special products segment could not fully compensate for a decline in profitability in the sugar segment.

Operating profits in the sugar segment fell to EUR 335 million (EUR 397 million) in the poor sugar year of 2003/04. Lower world market prices, supplemented by the weakness of the US dollar, affected revenues from the large 2002 harvest. Sugar production in the 2003 campaign was sharply lower due to the long period of dry weather in the summer of 2003. Together with a continuing difficult situation in east European markets in anticipation of EU membership resulting in unsatisfactory sales levels, this led to a deterioration in operating profits in the sugar segment in 2003/04.

In the special products segment the clear growth trend continued, with an increase in operating profit of 16.9 % to EUR 144 million (EUR 123 million). This segment thus contributed 30.1 % to group operating profit. At 12.2 %, operating margin was again above that of the previous year and the special products segment»s return on capital employed (ROCE) increased again, to 17.2 % (16,0 %). Drivers of growth in the special products segment were the functional food divisions and Freiberger. Their performance more than compensated for a weaker starch division, which was particularly affected by higher raw materials costs due to the long dry period in the summer of 2003.

Restructuring expenses and exceptional items of EUR 33 million (EUR 33 million) included measures taken to improve the works structure in Belgium, with closure of the Genappe factory resolved in January 2004, as well as provisions made in 2003/04 for future structural optimisation of the eastern European sugar factories. The high take-up rate for the part-time early retirement scheme at Südzucker AG led to exceptionally high costs. This was due to expiry of the statutory part-time early retirement plan in December 2003. On the other hand, results were improved by a gain on disposal of the investment in Ebro-Puleva S.A., the Spanish food group, as well as income from participation in the rise in Fresenius AG»s share price, contractually agreed in connection with the sale of our investment in Fresenius in 2001/02.

The annual charge for amortisation of goodwill of EUR 73 million in 2002/03 falls away completely in 2003/04, as Südzucker early adopted the new IFRS 3 standard issued at the end of March 2004, as recommended by the International Accounting Standards Board (IASB). Hence, goodwill is no longer being amortised in the Südzucker Group as from the beginning of 2003/04, but is tested annually for possible impairment. This test was carried out for the first time in 2003/04 with the result that, in all cases, the fair value of goodwill was considerably higher than its carrying value, so there was no need for an impairment write-down.

Financial results deteriorated, mainly due to lower investment income, to a net expense of EUR 53 million (EUR 41 million). The main reason for this is that KWS investment income recognised at equity in 2002/03, was not included in 2003/04. Overall, earnings before income taxes of EUR 394 million (EUR 374 million) showed a further increase compared with the previous year. However, the group»s earnings after income taxes of EUR 307 million (EUR 315 million) were slightly lower than for the previous year, as special tax credits included in the previous year's results, particularly due to the tax reform in Belgium which entered into force in 2003, were not repeated in 2003/04.

After considering minority interests of EUR 53 million (EUR 56 million) the net earnings of the group after minority interests of EUR 255 million (EUR 259 million) and earnings per share of EUR 1.48 (EUR 1.52), down by 2.6 %, both showed a slight decline over the previous year.

Balance sheet

Südzucker Group's total assets at 29 February 2004 were EUR 6,038 million (EUR 5,826 million) and thus EUR 212 million higher than at the end of the previous year. This increase is particularly due to the first-time consolidation of companies in the past year. The increase of EUR 153 million in goodwill in 2003/04, from EUR 1,259 million to EUR 1,412 million, was due to the first-time consolidation of SSC and the acquisition by Saint Louis Sucre of a sugar quota of 67,000 tonnes in France. The increase in property, plant and equipment of EUR 58 million to EUR 1,665 million is both due to the new additions from first-time consolidation and capital expenditures on expanding capacity at Palatinit, ORAFTI and bioethanol. The decline of EUR 90 million in the carrying values of financial assets, from EUR 358 million to EUR 268 million, is particularly due to the balance of the sale of shares in Ebro Puleva and additions from acquisitions of investments in Steirerobst and Atys.

Working capital increased mainly due to the addition of newly-consolidated companies. The early retirement program is mainly responsible for the increase in other long-term provisions. Net financial liabilities rose by EUR 92 million to EUR 1,100 million (EUR 1,008 million), being 2.1 times (1.7 times) cash flow. Shareholders' equity increased by EUR 165 million to EUR 2,386 million and the ratio of shareholders' equity to total liabilities and shareholders' equity rose to 39.5 %, compared with 38.1 % at the end of the previous year. The gearing ratio thus amounts to 46.1 % (45.5 %).

Cash flow statement

Gross cash flow from operating activities amounted to EUR 522 million (EUR 580 million) in 2003/04. There was a sharp increase in capital expenditures for expanding the special products segment and in eastern European sugar investments. After a number of years delay, SSC Group, Wroclaw, was acquired in March 2003. AGRANA Group strengthened the special products segment by setting up a fruit division with Vallø Saft A/S, Køge, the Danish fruit-juice concentrate and fruit-juice producer, an investment in Steirerobst AG, Gleisdorf, and finally the phased acquisition of the French Atys Group. Freiberger Group extended its position in the pizza market by acquiring the British Stateside Food Group. Südzucker has begun constructing a bioethanol plant in Zeitz, which will start operations in early 2005 with an annual production of some 260,000 m³ of bioethanol and some 260,000 tonnes of protein-based feedstock. When including expansion of capacity for Isomalt and ORAFTI, total capital expenditure volumes were EUR 488 million and thus considerably exceeded the prior year's EUR 253 million.
This expansion in the group»s activities could be achieved while still maintaining sound financial ratios, with operating profits covering interest expense 6.6 times and with shareholders' equity, medium-term and long-term third-party liabilities representing 131.7 % of non-current assets.

Recommendation on appropriation of profits

The executive board and supervisory board will recommend a dividend of EUR 0.50 per share to the annual general meeting on 29 July 2004. With share capital of EUR 174.8 million entitled to dividends, the amount distributed will be EUR 87.4 million. The dividend will be paid on 30 July 2004.
Events after the balance sheet date

In March 2004 Südzucker acquired 14.2 % of the shares in Raffinerie Tirlemontoise S.A. from institutional investors and thus increased its share in Raffinerie Tirlemontoise S.A. and, indirectly, in its French subsidiary Saint Louis Sucre, to 99.6 %. Funding was provided by the successful placement of a EUR 250 million convertible bond with a 3 % coupon in December 2003. The acquisition will lead to a sustained increase in group net earnings after income taxes and to an improvement in cash flow of some EUR 19 million.

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