Pressure on Prices in Sugar and Fruit Hits Agrana Revenues

09 Oct 2014 --- In the first half of the 2014|15 financial year, AGRANA, the global sugar, starch and fruit products manufacturer, registered a significant revenue reduction of 17.9% to EUR1,285.2 million. Operating profit (EBIT) was EUR87.0 million, a decrease of 16.5% from the first six months of 2013|14. "While the Starch segment was able to raise its EBIT, the Sugar and Fruit segments as expected lost ground as a result of lower revenue," explains AGRANA Chief Executive Officer Johann Marihart. Non-recurring expenses of EUR4.6 million for streamlining the location structure of fruit preparations production sites in Austria weighed on profitability in the Fruit segment.

On a positive note, AGRANA was able to cut energy costs Group-wide by approximately 8% compared to the year-earlier reporting period, despite higher processing volumes. In view of the difficult market environment, AGRANA will continue to put strong emphasis on structural optimisation and rigorous cost management.

Net financial items in the first half of 2014|15 amounted to a net finance expense of EUR7.1 million (H1 2013|14: net expense of EUR15.2 million); this significant year-on-year improvement resulted primarily from currency translation gains. After an income tax expense of EUR18.9 million, corresponding to a tax rate of 23.7% (H1 2013|14: 22.3%), profit for the period was EUR60.9 million (H1 2013|14: EUR69.2 million). Earnings per share attributable to AGRANA shareholders came to EUR4.08 (H1 2013|14: EUR4.59).

Net debt at 31 August 2014 was EUR287.4 million, down significantly – by EUR99.4 million – from the 2013|14 year-end level. Total assets eased slightly compared with 28 February 2014, to EUR2.3 billion, and the equity ratio rose from 49.9% to 52.1%. The debt-to-equity gearing ratio of 24.1% at the interim balance sheet date was thus substantially improved from 28 February 2014, when it had stood at 32.4%.

Sugar segment revenue in the first half of 2014|15 declined by a significant 34.0% year-on-year to EUR378.1 million. As expected, EBIT too, at EUR28.1 million, was down from the year-ago value, by 26.3%. The reasons were a continued reduction in sales prices and, to a lesser extent, a decrease in quantities sold into the sugar-using industry and to resellers. Revenues from by-products rose slightly.

The Starch segment's revenue in the first half of 2014|15 was EUR351.2 million, 3.8% less than in the same period one year earlier. The decline resulted mainly from lower selling prices, which were only partly offset by higher quantities sold. At EUR25.2 million, EBIT was up 11.0% year-on-year and profitability (the EBIT margin) expanded by one percentage point to 7.2%. Both in starch and bioethanol, lower selling prices were more than made up for by reduced raw material prices.

Fruit segment revenue in the first half of 2014|15 eased by 11.4% year-on-year to EUR555.9 million. On the fruit preparations side, sales volume was held at the year-earlier level. However, foreign currency effects from the stronger euro led to a revenue decline of just under 5%. The revenue reduction of about 25% in the fruit juice concentrate business resulted from lower sales quantities and selling prices. Segment EBIT in the first half (including the exceptional items expense of EUR4.6 million) was EUR33.7 million, or 22.4% less than one year earlier.

For the 2014|15 financial year as a whole, AGRANA expects a significant decrease in Group revenue (2013|14: EUR2,841.7 million), driven by much lower average prices. For operating profit (EBIT), the Group is projecting a significant reduction (2013|14: EUR167.0 million) as a result of the price declines that are manifesting notably for sugar and ethanol. Investment for the year, at approximately EUR96 million, will be in line with depreciation.