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2 June 2015

Nordzucker AG: Unsatisfactory earnings position defines the financial year

Significant price distortions and high stockpiles increase competitive pressure – profitability in focus

Nordzucker AG ended their 2014/2015 financial year with unsatisfactory earnings. Global overproduction, high stockpiles within the EU, measures implemented by the European Commission that exaggerated the effect and an overall increase in the level of competition, led to a notable downturn in business performance. A positive result in the current financial year is highly unlikely due to persistently low prices. Nordzucker is therefore focusing on improving its profitability and believes it is well equipped for future trends with a very stable capital structure.

Nordzucker generated consolidated revenues of EUR 1,866 million in the 2014/2015 financial year (reporting date: 28 February), around 20 per cent lower than in the previous year (EUR 2,361 million). The operating result (EBIT) totalled EUR 26 million (previous year: EUR 299 million) and the consolidated net income was down considerably on the previous year at EUR 20 million (EUR 209 million), also falling well short of expectations.

“We knew that we would face an extremely challenging financial year with much lower income. Nevertheless, in the end the decline in our earnings was much more pronounced than we expected,” said Hartwig Fuchs, Chief Executive Officer of Nordzucker AG, explaining the earnings position during the annual press conference on the financial statements. The primary factors behind this development were high stockpiles coupled with low prices in the EU and global markets. “Politically motivated action by the European Commission in previous years have made the situation more acute in the EU market, exercising even greater pressure on prices.”

 

Despite the difficult financial year, it was possible to end the year with out any debts. Equity was at EUR 1.272 billion compared with EUR 1.386 billion in the previous year. As in the previous year, the equity ratio came to 59 per cent, well above the target level of 30 per cent.

“As a well positioned company in the European sugar market, we have a very solid financial structure, which has enabled us to keep sight of our growth strategy and to remain in a position to act,” the CEO emphasised.

A dividend of EUR 0.10 per share (previous year: EUR 1.30) will be proposed at the Annual General Meeting on 16 July 2015.

A focus on efficiency as well as the market and our customers
“We are currently channelling our efforts into work to further improve our efficiency,” said Mr Fuchs. Despite the difficult earnings situation, 2015/2016 will see investment levels for existing plants remain on par with the previous year. A new efficiency programme will steer the company on a clear course of cost cutting, profitability and customer orientation. “We aim to save EUR 50 million in the short term with this comprehensive programme. To this end, we are currently taking a very close look at all processes and all areas, from field planning to the customer.” This will also take into account aspects relating to sustainability and transparency along the entire production chain. After all: “A clear focus on the market and customers enables us to set a course for future success and growth,” Mr Fuchs explained.

Outlook
Nordzucker expects that it will be very difficult to achieve a positive result in this financial year. Generally speaking, changes in the sugar markets will only take effect at a gradual pace as they are linked to long-term cultivation planning. In view of the impending reduction in cultivation area, prices are expected to go up again in the medium term, but the degree of competition is likely to limit any such increase. As a result, Nordzucker’s core task remains to be profitable and market-oriented. “We must stay competitive even when prices are low. This is the only way we can take advantage of international growth possibilities and opportunities arising out of the consolidation of the European sugar market,” concluded Mr Fuchs.

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Background
The Nordzucker Group, based in Braunschweig, is Europe’s second-largest sugar producer. The Group also produces bioethanol and animal feed from sugar beet. 18 production and refinery facilities across Europe form the technical, logistical and geographic basis for continued success. The Group’s 3,300 employees strive towards providing excellent products and services.

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