Südzucker shines with special products

Mannheim, 27.05.2004

With its core activities of sugar and special products, the Südzucker Group has a balanced and stable platform for long-term growth and value added. In 2003/04, and despite the unfavourable economic situation, we recorded revenue growth of 4 % to EUR 4.6 billion (EUR 4.4 billion) and an operating profit of EUR 479 million (EUR 520 million). Viewed geographically, turnover from Germany contributed 32 % to group sales. A dynamically growing special products segment contributed most to this increase, with a 15 % rise in sales and 17 % higher operating profits. Developments in the sugar segment were affected by the special situation in eastern Europe, with pending entry to the EU, low world sugar market reve-nues and lower sugar production caused by poor weather conditions. The sugar segment maintained sales at the high levels recorded in 2002/03, whereas operating profits fell by 16 %. At EUR 307 million (EUR 315 million) group net earnings for the year remained close to that of the previous year, with earn-ings per share at EUR 1.48 (EUR 1.52). Despite capital expenditures growing to EUR 488 million (EUR 253 million), our sound balance sheet ratios could be maintained. The ratio of shareholders' equity to total liabilities and shareholders' equity rose to 39.5 % (38.1 %) and, at 131.7 % (124.6 %) shareholders' eq-uity and medium- and long-term third-party liabilities more than covered non-current assets.

Our shareholders also profit from the stability of our core businesses, even in difficult economic times. This is reflected in Südzucker's share price and the recommended dividend of EUR 0.50 per share.

Developments in the group's sugar segment were affected by poor weather, causing a decline in produc-tion of some 6 % to 4.4 million tonnes (4.7 million tonnes) of sugar and an increase in the volume of sugar sold by some 6 % to 4.7 million tonnes (4.5 million tonnes). The higher sales were solely due to greater quantities sold to the processing industry, as exports declined due to lower quantities available. Internal group logistics optimisation has led to satisfactory growth, although the development of sales volumes varied at companies located in individual EU countries. The strong rise in sales volumes in east-ern Europe by almost 50 % is due to the full consolidation of Slaska Spolka Cukrowa (SSC), the Silesian sugar group.

Südzucker succeeds in Poland

As part of the European Union's eastward expansion Poland, the country with the third-highest sugar production following France and Germany, has entered the common market. This underlines the impor-tance of our success in completing the acquisition by Saint Louis Sucre of SSC, the Silesian sugar group, in 2003 and combining our existing sugar activities in Poland. We have thus now achieved our strategic objective of having a market share of some 25 % in Poland.

Double-digit growth for special products

Our special products activities continued their dynamic growth. The increase of 17 % in operating profit is above all due to the continuing expansion of our functional food activities. The planned new construc-tion of a factory in Chile to produce inulin and expansion of capacity at the Offstein/Pfalz works for pro-duction of Isomalt form the foundation for further growth in the future. With the acquisition of Atys, the French fruit additives company, we have extended our already good position in the EU with Vallø Saft and Steirerobst to becoming number 1 on the world market. The purchase was made subject to agree-ment by the antitrust authorities. In the meantime approvals from many countries have already been received, although in Germany the acquisition was forbidden by the federal antitrust authorities at the first stage in the approval process. However, we are confident that we will receive clearance for the ac-quisition from the courts.

New bioethanol business

With our entry into the bioethanol business and the related production of high-value feedstock, we are using our core competencies in major technological processing of agricultural raw materials and market-ing in the business-to-business sector. At the same time, this new activity also meets the sustainability postulate anchored in our corporate strategy to a particularly high degree. In view of the finite availabil-ity of fossil fuels and the need to reduce CO2 emissions, generating energy from sustainable raw materi-als is an activity which will also contribute to giving agriculture a further perspective for the future. The numbers are clear and the plant to be built by Südzucker in Zeitz will alone save the environment 520,000 tonnes of CO2, based on the results of a study by Munich Technical University in 2003.

Research triggers growth

Our activities in research and development provide the group with an important basis for cost savings and additions to our existing product range through innovation, as well as for expansion of our corporate activities into new activities based on agricultural raw materials. Tests on cost savings by using a new extraction process in the sugar business have progressed well and the process has been secured by filing patents. The research work in the "functional carbohydrates" area has been extremely successful and is leading to new application opportunities, providing tailored products for our customers. The magnificent success in expanding our world-wide market position in the Palatinit and ORAFTI divisions relies particu-larly on product innovation. The starch division also profits from new products and applications.

Sustainability as a success factor

A strategic concept which has the trust of consumers and investors is needed to maintain the attraction of a basic food which was launched on the market over 200 years ago. We anticipated consumers» cur-rent and future needs for their food products early, and have established a system which enables us to offer a foodstuff that meets key demands with respect to the environment, product safety and ethics throughout the process, from planting through harvesting and marketing. When we already became con-cerned about questions on planting and environmental fertilisation more than 20 years ago, it was nec-essary to convince many sceptics who considered these matters were not relevant to a company. The wide public, and partly political, debate on the topic of sustainment in recent years has confirmed the correctness of our concept. Origination documentation recently introduced by the south-German sugar industry following a test phase underlines the intention of Südzucker and its beet farmers to play a lead-ing role in environmental and consumer protection. Traditionally, this has been carried out under our own initiative, without pressure or regulation from the public or politicians. As part of our quality man-agement system, we have established the conditions in our sugar factories needed to offer our customers the highest quality standards for our sugar products and feedstock.

Südzucker again expects increased profit in 2004/05

As demonstrated by our new activities in the bioethanol and fruit additives divisions, the concentration on core competencies introduced at Südzucker some years ago has led to additional growth, which causes us to look to the future with optimism. It is particularly in these new divisions that many tasks and challenges will be encountered. We assume that, in meeting our objective of gaining market and cost leadership, we will be able to achieve a satisfactory value-added contribution despite increased competitive pressures. 2003/04 was an important step on the road to sustained profitability for the group.

Ten new states joined the EU on 1 May 2004. Südzucker is more strongly represented in these countries than in the previous EU-15. The expansion in membership will thus further extend Südzucker Group's leading position in Europe and is already contributed to the sustained improvement in operating results in the sugar segment in 2004/05. Together with the continuing strongly-growing special products seg-ment, Südzucker Group»s operating profit will increase sharply and thus continue the previous years' pattern of growth.

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