AGRANA Fruit Segment Becomes Leading Source of Revenues
For the first time in the group’s history, the Fruit segment represented the leading source of sales, with 48% of total revenues, exceeding both the Sugar and Starch segments, with 41% and 11% respectively.
21/05/07 The AGRANA group has forged ahead with its dynamic growth strategy during the 2006|07 financial year (March 1 to February 28) with further improvements in revenues and results. Revenues increased by 28% to € 1,915.8 million (prior year: € 1,499.6 million), while operating profit rose by 8% to € 107.0 million (after € 99.5 million in 2005|06). The increase in revenues was accounted for by a combination of strong organic growth in the Starch and Fruit segments, the adjustment of the financial year of the Fruit subsidiaries through the inclusion of two additional months to coincide with that of the parent company, and by consolidation effects.
For the first time in the group’s history, the Fruit segment represented the leading source of sales, with 48% of total revenues, exceeding both the Sugar and Starch segments, with 41% and 11% respectively. Fruit operations were also the top performer in terms of operating profit (with 42%) ahead of the Sugar (31%) and Starch segments (27%).
“The realignment of AGRANA from a Central European sugar and starch company to a growth-oriented global player with strong positions in three product segments – SUGAR, STARCH and FRUIT – has been achieved successfully within the course of just a few years,” said CEO Johann Marihart during the 2006|07 annual result press conference. “The positive development of results also demonstrates that AGRANA recognised the difficulties posed by the EU’s new sugar market regime in good time and that our policy of diversification has effectively countered these threats. Despite adverse circumstances in the sugar market, AGRANA has been able to boost operating profits to over € 100 million for the first time.”
As in the previous year, the Management Board and Supervisory Board will be recommending a dividend payment of € 1.95 per share at the Annual Shareholders’ Meeting on July 5, 2007.
In spite of the combined burdens of the EU sugar market reform and increases in energy and raw material costs the operating profit rose by 8% to € 107.0 million (prior year: € 99.5 million). The construction of the AGRANA bioethanol plant in Pischelsdorf, Austria, led to a balance of exceptional items of minus € 1.2 million which, in turn, resulted in an operating profit after exceptional items of € 105.8 million (prior year: € 75.0 million). Operating profits from the Fruit segment more than compensated for the drop in results reported by the Sugar and Starch segments. Due to a combination of higher interest-based expenses of € 7.0 million, largely associated with acquisitions in the Fruit segment, and the absence of the at-equity result of the former Atys group, the financial result fell by € 9.0 million to minus € 12.3 million (prior year: minus € 3.3 million). In the first quarter of 2005|06, the former Atys group was consolidated at equity as an associated company.
The result before tax climbed by 30% to € 93.5 million (prior year: € 71.7 million). After taxes at an average rate of 23.9% (prior year: 9.8%), the profit for the period before minority interests increased by 10% to € 71.1 million (prior year: € 64.7 million). Earnings per share consequently rose by nearly 10% to € 4.85 (from € 4.42).
“During the 2006|07 period we made the decision to forge ahead with our dynamic growth strategy and subsequently implemented a series of growth-oriented steps,” CFO Walter Grausam reported. “Throughout the group we boosted investments in property, plant and equipment by 73% to € 157.4 million. Investments in the Starch segment alone more than doubled to € 79.2 million,” he added. These outlays related primarily to the construction of the bioethanol plant in Pischelsdorf and the capacity expansion projects for bioethanol and isoglucose production at the Hungarian plant in which the company holds a stake. Grausam also mentioned the setting up of a joint venture for apple juice concentrate in China and the construction of a new fruit preparation facility in Brazil that recently came online as further milestones associated with the group’s growth strategy.
Revenues generated by the Sugar segment in the 2006|07 financial year rose by 4% to € 804.6 million (prior year: € 770.4 million). This segment is largely supported by higher sales volumes in Eastern Europe. Operating profits reached € 32.9 million (prior year: € 38.7 million before restructuring charges). A temporary reduction in quotas, the restrictive export policy pursued by the EU Commission, higher energy costs and the first-ever imposition of a restructuring levy were responsible for the decline in profits. AGRANA is actively countering these adverse impacts through a series of cost-cutting and efficiency measures.
The Starch segment increased revenues by 9% to € 253.4 million (prior year: € 232.5 million). Higher sales volumes of specialty starches as a result of the additional capacity available at the starch factory in Aschach, Austria, and healthy organic growth more than offset the impact of lower isoglucose prices due to the revised EU sugar market regime. Operating profits in this segment of € 28.5 million fell short of those in the prior period (€ 33.6 million) due to markedly higher corn prices and rises in energy costs.
In summer 2006, AGRANA began construction work on Austria’s first large-scale production plant for bioethanol, located in Lower Austria|Pischelsdorf. This facility will represent a considerable boost to the group’s diversification into the area of renewable energy sources. Following the investment of € 125 million, production is scheduled to start in autumn 2007. The aim is to produce up to 240,000m3 of bioethanol every year from domestic raw materials as the key to covering the majority of Austria’s requirements both today and in the longer term.
Revenues in the Fruit segment rose by 69% from € 541.2 million in 2005|06 to € 914.6 million. This major increase was due to the full consolidation of DSF and the former Atys group, in addition to the adjustment of the financial reporting periods of the various fruit subsidiaries to coincide with the financial year of the holding company. Operating profits rose by 68% to € 45.6 million (after € 27.2 million in the prior year) due to high organic growth and revised pricing.
The restructuring of the Fruit segment was completed in mid-2006, meaning that all of the subsidiaries in this segment are now globally marketed under the AGRANA brand. This reorganisation will allow AGRANA to better exploit the potentials and synergy effects in the areas of raw material purchasing, administration, research & development and product sales. The common branding is also promoting AGRANA’s ongoing internationalisation.
In the words of CFO Walter Grausam: “During the current financial year we will continue to pursue our growth strategy while simultaneously implementing further consolidation and optimisation measures in all our segments. Our clear focus is on growth with added value.” This will include further organic growth coupled with new acquisitions. The uncertainties associated with the future development of the European sugar market can only be partly removed by a revision of the sugar market regime.
Overall, AGRANA expects revenues in the 2007|08 financial year to be just under € 1.9 billion, or marginally below the level achieved in the 2006|07 period. This will be accounted for by the shorter reporting period for the fruit segment (12 instead of 14 months) and the lower volumes of sugar available for sale than in the previous year. Additional organic growth in the Starch and Fruit segments is not expected to fully offset these effects. In the 2008|09 financial year, however, AGRANA is confident of crossing the two-billion-euro revenue threshold.
