2011-02_Akzente_english

Akzente News from Nordzucker | Issue 1 | February 2011

A scarce commodity

Campaign 2010/11

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Good market opportunities for industrial beet

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EU sugar 2011

Stevia – new approach to sweetening

Contents

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8 Profitability plus: new wells cut water costs at the Arlöv site.

The foundations are being laid in Brussels for the EU agricultural policy from 2013 onwards.

14 An all new situation in the EU – sugar is becoming scarce.

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NEWS UPDATE 4 “Beet is now governed by the market economy” An interview with Dr. Niels Porksen 6 SERIES “Profitability plus”– Nordic Sugar: Ideas exceed the target 8 The EU’s post-2013 agricultural policy 9 PRION enters crucial phase

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BEET 10 The 2010/2011 growing year – a year of extremes for beet 12 Snow and ice impeded the campaign 13 Financial report for the third quarter 2010/11 13 A new face at the Clauen plant: Markus Biering 13 Sale of Maribo Seed completed 13 Nordzucker sells Hübner

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MARKETS AND CLIENTS 14 Spotlight on the market 15 Mátra Cukor closes packaging facility 16 Stevia – new approach to sweetening 18 Sugar – the obvious Fairtrade product 19 Nordzucker stand wins prize at Polish industry trade show

Cover image: Laboratory manager Dr. Eugeniusz Rychter checks sugar quality at the Opalenica plant in Poland.

Imprint Published by: Nordzucker AG, Küchenstraße 9, 38100 Braunschweig, Germany, Telephon +49 (0)531 2411-314, Fax +49 (0)531 2411-378, akzente@nordzucker.de Editorial team (eds.): Helmut Bleckwenn, Susanne Dismer-Puls (sdp), Oliver Ditsch, Rolf Hoffmann, Tanja Schneider-Diehl (tsd), Marion Stumpe (ms), Dr. Ulf Wegener Layout and typesetting by: Sieler Kommunikation und Gestaltung GmbH, Frankfurt | Printed by: Druckerei Bammel, Braunschweig | Image credits: Fotolia, iStockPhoto, Nordic Sugar, Nordzucker

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Editorial

Dear Shareholders and Friends of Nordzucker, Welcome to the first international issue of our magazine Akzente. From now on, you will receive the publication three times a year. Our Akzente magazine is the best way to find out about news from Nordzucker and the latest trends and developments in our business. We have grown considerably in recent years, so it is only natural that we should give our communications a more international approach.

The 2010/2011 campaign finished a few days ago. Throughout the Group, it was hallmarked by a number of challenges and problems. From sowing time onwards, our farmers faced difficult weather conditions. First, it was too cold and damp, then it was too hot. At the Hartwig Fuchs, CEO Nordzucker AG

height of summer, it was far too wet again. Then – following a brief spell of glorious autumn weather – winter hit with plummeting temperatures

»Sugar is scarce and expensive both on the global market and in the EU this year. «

and snow. In spite of all this, beet has proved that it can deliver acceptable results even in difficult conditions. With a sugar content of around 17 per cent, it only just fell short of the five-year average. This is a pleasing outcome, as it shows that beet makes a major contribution towards our growers’ ­economic success.

Nordzucker’s operating result also developed pleasingly in the third quarter. Demonstrating a clear upwards trend, it confirms that our Ertragskraft plus (Profitability plus) programme is taking effect.

All our hard work to improve our Group structure is paying off. However, we are also profiting from the fact that sugar has become relatively scarce and expensive in the EU due to a lack of imports. This prompted a growing number of our clients to call off their contractually agreed volumes early. We expect high demand to keep generating strong sales of quota sugar in the fourth quarter. Meanwhile, we anticipate net income for the current financial year 2010/2011 as a whole to be well above earnings for the previous two years. However, the early call-offs can be expected to reduce demand in the next financial year. Business will cool off to some extent as a result.

As I have already mentioned, sugar is scarce and expensive both on the global market and in the EU this year. This price trend is also affecting the cereal and oil seed markets. That is good for farmers.

However, it also places us under pressure to ensure security of supply in Europe.

On a personal note, I look forward to meeting you at one of our winter get-togethers in February.

My colleagues and I will do our best to attend the vast majority of winter meetings in person. We want to maintain dialogue with you, as promised at the Annual General Meetings. This is a good opportunity to follow through on that promise.

I hope the first international edition of Akzente proves informative. We look forward to hearing your views.

Best regards,

Hartwig Fuchs

Akzente 01/11

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News Update

“ Beet is now governed by the market economy” Chief Agricultural Officer Dr. Niels Pörksen on development opportunities in beet cultivation Dr. Niels Pörksen, Chief Agricultural Officer, Nordzucker AG

Nordzucker is gearing up to expand beet cultivation. The plan is to use this sweet crop to produce biogas and supply an attractive industrial sugar market in the future, in addition to using it for sugar and bioethanol. These ambitious targets call for everyone involved to take a new approach to beet cultivation.

Tanja Schneider-Diehl spoke to Dr. Niels Pörksen about the prospects and the steps to be taken.

Dr. Pörksen, the recent campaign posed a number of challenges for our farmers and service providers.

Dr. Niels Pörksen: It did indeed. In some cases, ice and snow made lifting, maintaining clamps, loading, transporting and even processing the beet at our factories much more difficult. It was only thanks to real

dedication on the part of everyone involved that we were able to haul the beet to our plants and process it there. This was an outstanding team effort and I would like to thank everyone for their hard work.

Farmers can choose which crops to grow.

In your opinion, how willing are growers to expand beet production?

Dr. Pörksen: You could say that sugar beet is in the agricultural equivalent of the Champions League, and the farmers who grow it are too. Very few other arable crops have seen yields develop like beet has. Yields are still increasing by some two per cent a year and the trend looks set to continue. By contrast, yields are stagnating for many other crops. Beet is an ideal leafy crop for farmers during crop rotation, while quota beet provides a very competitive profit contribution over the course of many years. In addition, prices are stable and calculable, which is another advantage. Farmers can sign agreements lasting several years to minimise the risk of price

fluctuations. Beet growers also benefit from a huge amount of service. Very often, farmers' cooperatives organise the sowing, harvesting, clamp storage and transportation. Although economic considerations are making longer campaigns a necessity, Nordzucker assumes the risk of losses during uncertain weather conditions after 23 December as long as the beet is covered properly. There is a high degree of transparency as regards quality assessments at the plants. This means that each grower can see what effect their efforts have had on quality and yield. Farmers' decisions are based on economic factors, so the price for non-quota beet also has to be attractive. We have taken all this into account with the agreements on offer for 2011.

Beet will remain a very attractive option for farmers in the future.

Are there significant differences between the three Nordzucker regions?

Dr. Pörksen: The fundamental difference is that the beet growers in Northern

Nordzucker sees good market opportunities for industrial beet If you can remember when the industrial beet contracts began back at the 2010 farm show, you will not believe your eyes. Prices for bread wheat have soared by 75 per cent.

Rapeseed prices also seem to be bent on climbing. No one knows how much longer they will keep rising.

Farmers given opportunity for further ­optimisation Nordzucker is promising farmers a premium for its 2011 industrial beet agreements.

Growers who sign – or have already signed – five-year or short-term contracts will only have to pay half of their haulage contribution for 2011. Nordzucker can offer this because it has been able to tap new market opportunities for industrial beet at short notice. All our industrial beet growers will ben4

efit from the advantages. Nordzucker remains convinced that the market prospects are bright for industrial sugar. Although the original volume has already been contractually agreed, the company is therefore allowing farmers to sign industrial beet agreements until the sowing period commences.

These agreements can be for the 2011 growing season alone or for several years.

We hope to considerably increase the proportion of industrial beet, especially at highperforming farms, and utilise all the opportunities available for successful beet cultivation. All beet growers also have the opportunity to optimise the range of crops they grow. This can be done by adjusting their individual combination of quota beet, non-quota beet I with better remuneration and industrial beet. The regional beet offices

will be happy to answer any questions you may have.

Fixed prices dominate five-year contracts to date Nordzucker’s contracted volume currently runs to 725,000 tonnes for 2011. Of this, 600,000 tonnes are covered by five-year agreements held by some 2,200 farmers.

Despite the euphoria on the competitive markets, this proves that growers value the high, reliable income offered by sugar beet. Of the multi-year contracts signed to date, some 70 per cent are based on a fixed price while 30 per cent are variable. Beet growers chose the flexible price model for just over half of the contracted volume governed by short-term agreements. Volker Bückmann, Head of Beet Procurement, Central Europe

News Update

Growing beet will still be worth the effort in future. Dr. Niels Pörksen (right) is confident that beet will continue to hold its own amid ­competition from other crops.

Left: haulier Christian Reimann.

Centre: Wolfgang Könnecker, a farmer from Lahstedt.

Germany also hold shares in Nordzucker.

They have a twofold relationship with the company and its sugar factories. This makes them passionate about cultivating and processing sugar beet.

In Northern Europe and Eastern Europe, growers have a similar relationship with Nordzucker as they do with processing partners for other crops. Aside from this, we face the same set of circumstances.

Beet encounters competition from other arable crops everywhere.

Nordzucker's future strategy for raw ma­ terials has to reconcile the many different uses for beet. Is the supply of beet for sugar, bioethanol and biogas secure long term?

Dr. Pörksen: Beet is now governed by the market economy. If Nordzucker obtains high prices for sugar, the beet price will follow suit and remain competitive.

The same applies to beet for ethanol and biogas. If beet improves profits for biogas operators, this will have a knock-on effect for the price of beet. The supply of beet

will be secure if this price is attractive for growers. That is why we are offering a flexible price and paying very well for I1 beet too. A special offer for biogas plants was trialled in the German state of Schles­ wig-Holstein in 2010. Preparations for 2011 are currently under way based on this experience.

Nordzucker has already found answers to volatile markets with flexible agreements.

Do farmers accept the new range of ­options?

Dr. Pörksen: Definitely! The farmers I have spoken to explicitly commended this addi­tional option, although stable, calculable prices remain a very powerful argument. So far, variable pricing has been arranged for some 30 per cent of the volume contracted under multi-year agreements. It currently also accounts for around 50 per cent of short-term contracts.

What was the outcome of your most recent site meetings with farmers?

Industrial beet contracts by region in thousands of tonnes of beet Clauen Schladen Schleswig-Holstein Klein Wanzleben Nordstemmen Uelzen

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50

100

150

200

Dr. Pörksen: First of all, the discussions met with a very positive response. There was a very constructive mood at all the meetings. Many of the criticisms voiced towards us last year were reinforced, but they were weighted very differently in some cases. It is generally accepted that prices depend on market developments, as farmers are already familiar with this system for other crops (such as rapeseed, wheat or potatoes). However, farmers are worried about the perceived estrangement between Nordzucker and its growers. That is our team's cue to step up contact with our growers and work together to keep beet cultivation profitable so that growing beet is a pleasure for our farmers.

Looking ahead to 2020, how optimistic are you that there will be enough beet for all the different uses? What is Nordzucker doing to make sure there is enough to go round?

Dr. Pörksen: 2020 is now less than ten years away. But if we look back over the last ten years, there has been a huge increase in beet yields. That motivates us to work with all our active and interested partners throughout the beet chain in ­order to define a target that will considerably boost yields further for all of us. We are already achieving top sugar yields of 15 to 16 tonnes per hectare and average yields of around eleven tonnes. Breeding, minimising losses and further optimising growing techniques will help us to further enhance yields. This means that beet will remain highly competitive in the future.

Actively searching for additional uses for beet will also make it a permanent, indispensable crop for farmers to grow.

Interview conducted by Tanja Schneider-Diehl

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Total contracted volume for ethanol beet, 2010: 718,000 tonnes Total contracted volume for industrial beet, 2011: 723,000 tonnes As of: 12/1/2011

Akzente 01/11

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SERIES: Profitability plus

News Update

Nordic Sugar: Ideas exceed the target Region Northern Europe makes a good start to the Profitability plus programme

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Bertil Isaksson Programme Coordinator, Region Northern Europe

“One year in, Profitability plus is right on track. We’re confident we will meet our ­target.”

Major projects Silo in Nykøbing, Denmark A new 60,000-tonne silo at the sugar factory in Nykøbing offers the other Danish sugar plants significant logistical advantages as from the 2010 campaign. Nykøbing can now store an additional 60,000 tonnes of sugar on site, freeing up space in the other silos previously used by the plant. This has enabled the other facility in Nakskov to use now unutilised storage capacity. As a result, the plant no longer needs to pay for costly transportation, including shipping the sugar by ferry to an unused factory on the island of Funen. This investment of almost EUR 11 million generates total annual savings of more than EUR 2 million.

Packaging line in Kėdainiai, Lithuania Nordic Sugar used to have two sugar factories in Lithuania – Kėdainiai and Panevėžys. Several years ago, sugar production in Panevėžys ceased. However, the packaging unit was still used. In the final phase of a EUR 7.5 million

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EUR 30.4 million – these are the cost ­savings Region Northern Europe is ­expected to contribute to Nordzucker’s Group-wide Profitability plus programme.

This target must be achieved by 2014/­ 2015. It may seem like a lot, but the ­region’s programme ­coordinator, Bertil Isaksson, is confident that Nordic Sugar – making up Region Northern Europe – will not only meet the target but exceed it.

Bertil Isaksson describes the current state of play: “The initiative is developing as planned. We have received more than 400 ideas and suggestions. Now we are working to implementi the 227 proposals which are most readily realisable in both technical and financial terms.” The programme has now been running for a year. “According to our calculations, these projects will lead to cost savings

project to convert and increase ­capacity at the Kėdainiai plant by 50 per cent, a new packaging line went operational in 2010. This has obvious logistical advantages, as it combines production and packaging at the same site. However, as the new production line uses state-of-the-art automated technology, it is also much more efficient than the old manual system in Panevžys.

District heating for Örtofta, Sweden Thanks to an investment of almost EUR 2 ­million, the amount of district heating that can be supplied from the sugar factory in Örtofta has been significantly increased. The investment was split equally between Nordic Sugar and the local energy supplier. A new flue-gas condenser was installed in the feed drying plant. This means we can now supply more energy to some 4,500 Swedish district heating customers. At the same time, we have cut the factory’s CO2 emissions by 7,000 tonnes per annum. The sugar factory has been supplying surplus heat for use in the

­exceeding the Profitability plus budget by more than EUR 1 million. And we are still ­receiving more good suggestions, so we might do even better than that.”

Setting priorities “There are lots of promising projects which could strengthen our company in the next few years. But we mustn’t forget that lots of projects require substantial capital expenditure up front. In a Group like Nordzucker, there are so many investment proposals and requests that we could never fulfil them all. This means it’s very important to decide which projects are priorities,” explains Jesper Thomassen, Executive Vice President Technology & Operations at Nordic Sugar. Jesper Thomassen is also Chairman of the Nordzucker Investment Coordination Group, which checks proposals and

r­ egion’s district heating system since as early as 2006. Now, we can provide 68 kilowatthours during the campaign thanks to the new equipment.

The new flue-gas condenser for the feed drying plant at Nordic Sugar’s facility in Örtofta, Sweden. This enables the factory to feed twice as much surplus heat into the local district heating network.

News Update

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Jesper Thomassen Executive Vice President Technology & Operations Region Northern Europe

“There are lots of promising projects which could strengthen our company in the next few years.”

r­ equests, prioritises them and finally ­discusses them with Chief Production Officer Axel Aumüller.

The Group’s annual capital expenditure totals some EUR 50 million. Investments are made in three areas: 1) Compliance – investments made to conform to regulatory and customer-­ specific requirements 2) Reinvestment – investments in ongoing activities which safeguard the operating business 3) Profitability – investments with a longterm objective Jesper Thomassen explains: “The profitability pool accounts for a large proportion of total capital expenditure. This is because it is a forward-looking way for

Water abstraction at the sugar factory in Arlöv, Sweden Increased system security, reduced water consumption and lower overall costs – all without compromising on quality. These are the main advantages of a project which centres on sourcing process water privately at Arlöv sugar refinery. The factory previously used water from the local waterworks. However, when a 100 per cent price increase was announced, the company started looking for alternative solutions. The plant in Arlöv has held a licence to abstract 330,000 cubic metres of groundwater a year since 1964. This covers the majority of the water needed for production.

Three new wells have been bored at the site.

The groundwater complies with all the rel-

the company to add value. Of course the speed at which investments pay for themselves is also hugely important. Usually, the longest acceptable payback period for us is four years. We know from experience that investments in improving energy ­efficiency tend to have short payback ­periods. This is because energy prices have risen significantly in recent years.

The upwards trend is expected to continue too. As a result, energy efficiency has been a central focus area at Nordic Sugar for several years.”

Additional energy-saving projects Nordic Sugar’s programme plan for the 2011–2015 period comprises a number of energy efficiency initiatives. These include small-scale projects, such as relocating ­machinery from closed factories to other sites, as well as major investments. For ­instance, EUR 14.5 million has been earmarked to install a new steam dryer at the Swedish plant in Örtofta in 2013/2014.

evant quality requirements. In recent years, the Arlöv plant has used around 450,000 cubic metres of water per annum. The remaining 120,000 cubic metres was either sourced from the waterworks or compensated for by

reducing consumption. The team in Arlöv currently estimates that annual water consumption can be reduced by up to 80,000 cubic metres. For example, by reusing some of the water for cooling.

“This is a sizeable investment. However, the new pulp drying technology saves >>

Jimmi Johansson, Department Manager, at one of the new groundwater wells in Arlöv.

He was project manager for the new wells and the reuse of process water.

Akzente 01/11

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News Update

The EU’s post-2013 agricultural policy Over the past ten years, the EU’s Common Agricultural Policy (CAP) has experienced a number of far-reaching changes. As well as strengthening its market orientation, these changes focused on decoupling direct payments to farmers from production. The next stage of the reform is now imminent.

The sugar market regime may also become part of the discussions.

CAP and the system of direct payments will be at the forefront of the discussions about reforming the policy. How high the EU’s agriculture budget is will still depend on the EU’s total budget. For this reason, the EU member states’ finance ministers and heads of government will be largely responsible for deciding what funds are available for the CAP. These decisions will be made during negotiations concerning the EU’s whole ­financial framework for the 2014 – 2020 ­period. Negotiations will begin in 2011. The general expectation is that the current agriculture budget of some EUR 58 billion will remain largely unchanged.

Last year, the European Commission began presenting ideas and proposals for the post-2013 CAP. In 2011 and 2012, the Euro­pean Parliament, the Agriculture Council and the European Commission will discuss and decide on these proposals. The reform resolutions will then take effect in 2014. The future financing of the

The European Commission paved the way for the 2011 and 2012 debates surrounding the future of the CAP in November 2010 with its communication “The CAP towards 2020: Meeting the food, natural resources and territorial challenges of the future”. With the CAP’s post-2013 re­ alignment, the Commission hopes above all to ensure that direct payments to

>>

Post-2014/2015 sugar market regime At present, the discussions are not focusing on another reform of the existing ­market regimes. However, the Common Market Organisation for sugar is mentioned in the Commission Communication: “In the sugar and isoglucose sectors, the current regime is set to expire in 2014/2015.

Several options for the future, including a non-disruptive end of the quotas at a date to be defined, need to be examined to bring about increased efficiency and greater competitiveness for the sector.” It is therefore possible that the sugar market regime may also become part of the discussions during the negotiations concerning the post-2013 CAP. This possibility is supported by internal observations which are already being made by the European Commission.

CONTINUED FROM PAGES 6/7 “Nordic Sugar: Ideas exceed the target”

EUR 4 million a year thanks to lower ­energy costs. This makes it a good ­example of a prudent investment that will be recouped in less than four years and will then enable us to keep making significant savings in day-to-day operations,” says Bertil Isaksson. There are plans for a similar investment in Nord­ zucker’s Uelzen factory prior to the 2012 campaign.

Corporate culture stimulates diversity of ideas Jesper Thomassen is not surprised that

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farmers are distributed more fairly. Other major objectives include boosting competitiveness in both the agricultural sector and rural areas. The new CAP should also encourage sustainable farming practices.

Nordic Sugar was able to generate more than 400 ideas and suggestions in the first phase of Profitability plus: “Throughout our organisation, we have ­established a healthy culture of soliciting ideas and thoughts on how to further ­improve our company. We are used to thinking business, also in the production.

This means we were at an ideal starting point when the programme was launched.

Although more than 400 suggestions have already been submitted in phase one, they just keep coming. We’re well organised to

pick them up and push them through the pipeline.”

Bertil Isaksson adds: “If our current ­assumptions prove correct, we are committed to implement the 227 proposals which we have included in the capital ­expenditure plan for the next five years.

And if it emerges that one or two of the ideas can’t be put into practice after all, I’m sure there will be other viable suggestions. Whatever happens, we will create cost savings of EUR 30.4 million by Ulrik Larsen, journalist 2014/2015.”

News Update

Quota scenarios Above all, the Commission is discussing various scenarios for the future of quotas.

Is it necessary to extend the current system until 2020? What would happen if quotas were dissolved earlier than that?

Should it be possible to trade quotas within the EU? What would that mean for beet cultivation in the EU? The fact that quotas for milk will cease to exist in 2015 also suggests that the future of the sugar market regime will come under discussion. From a political perspective, sugar quotas would then no longer fit in the CAP system. The sugar market regime could come under further pressure should the WTO’s Doha round finally reach an agreement in 2011. In all probability, the EU would then have to allow additional preferential imports of sugar.

This would place pressure on the quota system yet again.

Coping with the 2006 reform What next? We at Nordzucker must closely follow the discussions about the post-2013 CAP. For this reason, we will regularly ­report on the progress of the negotiations in Akzente from now on. In ­addition, we need to contribute our interests – and those of the whole sugar industry – to the political debate and defend them. We will do this via our national associations and our European umbrella organisation, CEFS. Our prime objective must be to secure an

Our objectives in Brussels are to secure an extension of the existing quota system along with effective protection against imports.

­ xtension of the existing quota system e beyond 2014/2015 along with effective protection against imports. It is also important, however, for us to analyse the scenarios discussed by the European Commission independently and assess them for ourselves.

2011 will be an interesting and important year for all farmers, our shareholders and Nordzucker itself. Developments on the

international agricultural markets and the discussion about the future of the EU’s agricultural policy will play a key role in this. In this rapidly changing environment, both the challenges and the opportunities continue to grow.

Dr. Klaus Schumacher Group Vice President – Economics, Communications, Public Affairs

PRION enters crucial phase Sales and procurement should be harmonised by mid-2011 PRION, the Group-wide IT project for process integration, has entered its next phase. At this stage, the selected processes are planned in detail. By June 2011, the prototype for every stage of the core sales and procurement processes should be completely mapped in SAP. The necessary system environment is currently being set up.

Almost all departments and divisions are involved in this important project. The planning made it clear that we need to work hard to fulfil our aims as regards quality, time and resources.

Alongside this project, the integration of the Nordic Sugar sites is proceeding as planned. Five sites have been integrated

into the IT environment so far, and preparatory planning is under way for the remaining sites. We have not incurred any major migration-related problems to date.

Franz-Josef Elsing Senior Vice President Corporate IT / CIO

Akzente 01/11

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Review of the 2010/2011 campaign

Beet

There was plenty of snow in 2010 and it arrived ­several weeks earlier than in the previous year.

The 2010/2011 growing year and the campaign

A year of extremes for beet From the sowing phase right through to the beet processing, 2010/2011 was hallmarked by changeable weather with extremes at both ends of the scale. It all started with the seed being sown fairly late in all of our regions, followed by an extremely cool May. Growth was therefore restricted and it proved impossible to compensate for this later on. The beet rows closed in late as a result. Over the summer, very high temperatures and a lack of rain – especially in July – limited the plants’ mass growth and sugar formation. Considerable rain, ­particularly in October and November, then made the lifting period more difficult in all our regions. Last but not least, the end of November/beginning of December brought frost and snow which lingered until the end of the campaign.

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Northern Germany The campaign in Northern Germany was marked by low sugar content at the start of the campaign. Good growing conditions in September and early October prompted considerable growth in mass combined with rising sugar content. As a result, the sugar yield came in slightly below average at 10.1 tonnes per hectare. In total, 7.5 million tonnes of beet were produced. This was processed in 115 days. The harsh winter weather in the last third of the campaign seriously impacted the whole logistics chain. Snow and ice made for difficult transport and processing conditions, especially over the festive ­period, requiring great dedication on the part of both the logistics service providers and our staff at the sugar ­factories.

Nordic Sugar In Scandinavia and Lithuania, weather conditions were similar to those in Northern Germany, but with extraor­ dinary snowfall as early as November.

This had an impact on the harvesting, storage, transportation and processing of beet.

In Denmark, the sugar yield is expected to come in at 10.5 tonnes per hectare.

In Sweden, the last beet was processed in early January. A sugar yield of 8.9 tonnes per hectare was recorded here.

Both Lithuania and Finland concluded the campaign in 2010. They achieved ­average sugar yields of 7.6 and 6.3 tonnes per hectare respectively.

Beet

Sweden

2010

2009

52

60.4

Sugar content (%)

17.1

17.9

Sugar yield (t/ha)

8.9

10.8

Campaign length (d)

109

133

Beet yield (t/ha)

Finland

2010

2009

Beet yield (t/ha)

37.1

37.4

Sugar content (%)

16.9

17.1

Sugar yield (t/ha)

6.3

6.4

Campaign length (d)

73

77

Helsinki Stockholm Denmark

2010

2009

Beet yield (t/ha)

59.5

65.8

Lithuania

2010

2009

Sugar content (%)

17.6

19.2

Sugar yield (t/ha)

10.5

12.6

Beet yield (t/ha)

46.2

47.1

Campaign length (d)

124

118

Sugar content (%)

16.4

17.3

Sugar yield (t/ha)

7.6

8.1

Campaign length (d)

103

112

Poland

2010

2009

Beet yield (t/ha)

57.1

60.4

Sugar content (%)

16.9

17.4

Sugar yield (t/ha)

9.6

10.5

Campaign length (d)

83

88

2010

2009

61

59.8

Sugar content (%)

16.1

17.0

Sugar yield (t/ha)

9.8

10.2

106

102

MalmĂś

Copenhagen

Vilnius

Berlin

Poznan Warsaw

Braunschweig Germany

2010

2009

Beet yield (t/ha)

59.4

66.9

Sugar content (%)

17.1

18.1

Sugar yield (t/ha)

10.2

12.1

Campaign length (d)

115

128 Slovakia Beet yield (t/ha) Bratislava

Campaign length (d)

As of: 24/1/2011

Eastern Europe In Poland and Slovakia, the year’s weather was dominated by well above average levels of precipitation. This led to flooding as early as May. As the rain continued, numerous crops were virtually saturated with water up to harvest time. This made the beet harvest much more challenging, with the last beet only being lifted in adverse conditions in December. This beet in particular made processing at the sugar factories more difficult and put the whole value chain to the test.

Despite these conditions, above-average sugar yields of 9.6 and 9.8 tonnes per hectare were achieved in Poland and Slovakia.

Dr. Ulf Wegener Senior Manager Agricultural Sourcing Strategies

Clear the snow, then lift the crop.

Hopefully not to be repeated.

Akzente 01/11

11

Review of the 2010/2011 campaign

Beet

Snow and ice impeded the campaign in all three Nordzucker regions Northern Germany Dr. Michael Gauß Managing Director region Central Europe; responsible for the German plants

»

The weather had a huge impact on the r­ esults of this year’s campaign. Even back at the start of the campaign, there were signs that ­sugar content and yields per hectare were likely to be average. Everyone was surprised by the early arrival of winter and the persistently difficult conditions for lifting, maintaining clamps

and transportation. The factory staff and beet management teams made a massive contribution towards ensuring that the sugar production process kept going. Their extensive experience was crucial to ­mastering difficult situations. These included a fire in a drying drum at the Nordstemmen plant and processing problems in the cutting and extracting phases caused by the high proportion of stones and soil.

The plants were well prepared for the campaign. A range of improvement and cost-cutting measures – such as converting the boiler house in Klein Wanzleben from heavy heating oil to more affordable natural gas – helped us to make efficient use of energy and raw materials.

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Northern Europe Jesper Thomassen Senior Vice President Production, region Northern Europe; responsible for the plants in Denmark, Sweden, Finland and Lithuania

»

As a whole, the campaign at Nordic Sugar was gratifying. We experienced some machine damage, but nothing out of the ordinary – as in previous years. Winter arrived surprisingly early at the beginning of

December, bringing with it very low temperatures and lots of snow.

At that point, we had not yet lifted all the beet. We therefore faced the great challenge of harvesting as much beet as possible and ­hauling it to the factory. Workflows at the factories and the whole logistics chain were heavily affected by the weather. The plants in Nakskov, Nykøbing and Örtofta were particularly hard hit: daily beet processing here had to be scaled down due to the weather.

Throughout the campaign, the sugar quality was good. Overall, Nordic Sugar’s production will slightly exceed the sugar quota.

«

Eastern Europe Joachim Rüger Senior Vice President Production, region Eastern Europe; responsible for the plants in Poland and Slovakia

» We achieved a slightly above-average daily

processing volume in the Eastern Europe region during this campaign. Everything ran very smoothly at all three plants in the first two thirds of the campaign, apart from a few weather-related disruptions in the beet supply and

Farmers and Nordzucker staff worked hard to keep the sugar production process going.

12

processing. Results were well above average as a consequence.

However, heavy snowfall and very low temperatures in December then had a severe impact on the overall result. Nevertheless, we produced the planned quantities and qualities of both quota and non-quota sugar.

But however, the quantity of energy and supplies used climbed considerably at the end of the campaign. Thanks to the frost which lingered until the end of the campaign, the beet remained easy to process. The investments made in 2010 enabled us to stabilise processing capacity at all three plants. The same is true of the sugar quality attained. This was confirmed by all the audits that were conducted.

«

Continuous frost keeps the beet easy to process.

Beet

Financial report for the third quarter

Nordzucker benefits from strong demand In the first nine months of the financial year 2010/2011 Nordzucker reported consolidated revenues of EUR 1,360.9 million, compared with EUR 1,380.6 million in the same period last year. Revenues were lost due to the sale of the investment in Serbia in March 2010 and the reduction in sales prices for quota sugar following the final phase of the sugar market reform. How­ ever, this was nearly offset by higher revenues from sales of non-quota sugar and as a result of strong demand for quota sugar.

At the same time, expenses fell in many areas of the company. The sale of the Serbian investment and savings from the Profitability plus efficiency programme, ­together with lower costs for sugar purchases from non-EU countries, resulted in a reduction in both the cost of materials and services and personnel expenses as well as depreciation, amortisation and impairment. All in all, the Group posted an operating result (EBIT) of EUR 134.3 million in the first nine months of the

2010/2011 financial year, compared with EUR 54.9 million in the same period a year ago.

­ arnings for the upcoming financial year e 2011/2012 are likely to be less pleasing.

The gratifying trend in operating earnings, lower stocks thanks to strong sugar sales and the sale of the investments in Serbia and of the seed business Maribo Seed all had a positive impact on net assets and the financial position. Net debt fell considerably as a result. This was accompanied by a substantial reduction in the interest expense. Overall, consolidated net income for the period climbed sharply to EUR 64.4 million as against EUR 9.3 million for the same period a year ago.

We expect strong sales of quota sugar to continue in the fourth quarter. Meanwhile, we anticipate net income for the current financial year 2010/2011 as a whole to be well above earnings for 2008/2009. How­ ever, lower quantities of sugar twinned with higher manufacturing costs in the 2010/2011 campaign will mean that

A new face at the Clauen plant:

Markus Biering The beet management team at the Clauen plant has a new manager. Since 1 October 2010, Markus Biering (32) has been the new man in charge of the plant’s beet office. Markus Biering studied agronomics with a focus on agribusiness and subsequently worked as a beet cultivation advisor for the seed company Hilleshög in the German states of Saxony-Anhalt and Branden­ burg. In 2006, he became Head of Sales at the service supply agency Blunk, where he remained until he joined Nordzucker.

At Blunk, he was responsible for building up and expanding sales along with identifying and cultivating new business areas.

You can contact Markus Biering on: +49 (0)5128 405268, Mobile: +49 (0)170 926 3388 E-Mail: markus.biering@nordzucker.de

Nor dzu cke r AG Inte rim Rep ort Fina ncia l Yea r 201 0/2 011 Nine month s March 1 – Novem ber 30, 2010

Sale of Maribo Seed completed Following audits by the competition authorities in all relevant countries, the sale of Nordic Sugar’s seed activities was concluded in late September 2010. The new owner Syngenta has taken over the business of Maribo Seed International and the brand name Maribo®. The workforce was also retained by Syngenta.

Nordzucker sells Hübner At the end of the year Nordzucker withdrew from its involvement in the healthcare sector, selling the Hübner group to Dermapharm AG, a pharmaceutical company from Grünwald, Germany.

Nordzucker has given the Hübner Group positive long-term development prospects with this move. The buyer – Dermapharm AG – has a broad portfolio of products in the pharmaceutical sector and an outstanding sales network. Dermapharm can therefore ­utilise synergies within its group of companies.

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13

Spotlight on the market

European Union faces sugar bottleneck The global market for sugar was dominated by sizeable price fluctuations in 2010. This trend looks set to continue in 2011. When prices on the global market tumbled by more than USD 100 per tonne in the space of a month in February 2010, many market observers had expected to see record sugar prices in the near future. The situation was repeated in late 2010, when global market prices once again approached all-time highs. ing exporter to a net importer – is now hitting us with its full force. The EU’s ­degree of self-sufficiency is now between just 80 and 85 per cent. As the antici­ pated imports fail to ­materialise, we will probably experience a sugar bottle­neck before the next campaign.

At the time of going to press, raw sugar futures for March delivery were being traded on the New York Stock Exchange at over USD 0.30 per pound (more than EUR 500 per tonne). Even at such high prices, the demand for sugar keeps rising all around the world. Production can only just keep pace with this growth in demand. As a consequence, the markets ­react quickly to the latest news.

For the sake of fairness, it should be mentioned that all this began during the last sugar marketing year. Imports did not reach the forecast quantities, making the supply situation highly problematic for ­refineries. However, this did not filter through to sugar consumers. Why? Be­ cause the EU producers’ sugar stocks were large enough to overcome this bottleneck.

Ultimately, this only worked because the EU sugar producers scraped the last few kilos from their silos before the 2010/2011 campaign even began. This cannot now be repeated. We are therefore facing a problematic situation.

High global market prices encourage sugar bottleneck In autumn and winter 2010, it became clear that this highly unusual situation on the world market has a very direct, unforeseen impact on the EU sugar market. Due to high global market prices in combination with great demand, the EU was not an attractive buyer for exporting countries. This means that the basic assumption of the EU sugar market reform – that the EU would develop from a lead-

800 700 600 500 World sugar price $/t

300 200 World sugar price €/t

100

2004

2005

2006

2007

2008

2009

2010

2011

Source: LIFFE white sugar trading, London No. 5, as of January 19, 2011.

The prices for sugar on the global market reach a record high. This applies to both prices in dollars per tonne and to the Euro figures, which depend on exchange rates.

14

EU sugar market divorced from global market The crux of the problem is that the EU market price is considerably lower than the current global market price. In the EU, the most recent average price was EUR 485 per tonne. Meanwhile, the current global market price for white sugar is EUR 574 (as of 19 January 2011). There is, of course, some delay in price movements, however, the EU price has not changed markedly since October 2010.

For many years, the EU sugar market was divorced from the global market. Indeed, this was one of the main arguments for the last reform. The idea was to narrow the gap between global market and EU prices and to stimulate competition within the EU. Now, the split between the two markets is causing the problem: a sugar bottleneck.

World market prices for sugar 2004 – 2010

400

What can be done? So far, the Commis­ sion has only taken one step: temporarily suspending import duty on CXL sugar.

Normally, the customs duty is EUR 98 per tonne; currently there is no duty payable.

However, this does not solve the underlying problem: the lack of sugar in the EU. Although the Commission’s action reduces the problem, it does not solve it.

No such thing as a simple solution The current situation is new for us all, and there is no such thing as a simple solution.

In the short term – i.e. for this sugar marketing year – that means some people will have to pay a lot more for their sugar.

Furthermore, the cost of additional sugar will far exceed the current price. This will affect all market players, distort competition and, unfortunately, mean that some companies face serious problems. It is now impossible to avoid the problem this year.

Markets and Clients

But what can be done to make sure the same thing doesn’t happen to us again?

First of all, we must accept that the EU sugar market is linked to developments on the global sugar market, both now and in the future. Secondly, we must acknow­ ledge that situations like these cannot be addressed with political decisions alone.

They must be solved above all via the market.

Mats Liljestam Chief Marketing Officer, Nordzucker AG

A new situation in the EU: before the 2010/2011 campaign, the last stocks of sugar from the silos were sold.

» Mátra Cukor closes packaging facility Back in 2008, Mátra Cukor suspended its Hungarian sugar production activities completely in the course of the European sugar market regime and closed two plants. Due to the logistics involved, it no longer makes good commercial sense to continue using the packaging line.

“In November 2010, the restructuring process at Nordzucker Eastern Europe continued. It aims to strengthen the company’s structure and its logistics platform. Packaging activities at Hatvan, Hungary, are being gradually phased out. In January, we started establishing one-kilogramme ­packaging lines at the Polish sites. This process should be completed in May when the specialities are transferred to Slovakia. Nordzucker Eastern Europe can now supply its customers more cost-­ effectively because the sugar is produced and packaged at the same site. This is a logistical ­advantage. With this step, we are also succeeding in boosting our competitiveness.

All of this means that Nordzucker Eastern Europe remains a strong, competitive player in Eastern and South-Eastern Europe with ambitious revenue targets for this key strategic region.”

Flemming Lyngholm Managing Director region Eastern Europe

15

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15

Markets and Clients

New approach to sweetening Joint venture with the world’s largest stevia producer opens up new product area for Nordzucker Nordzucker is preparing for a joint venture with PureCircle, which accounts for some 80 per cent of the sweetener stevia produced worldwide.

Stevia is a calorie-free natural sweetener.

It is 200 to 300 times sweeter than sugar.

With this new business initiative, Nordzucker will now start operating in a product area which is totally new to the Group. Lars Bo Jørgensen, Product Development Manager at Nordic Sugar, is in charge of preparing for this joint venture. He explains the background to this cooperation as follows: “Several consumers in our markets want a natural sweetener with fewer calories.

So it is only logical for us to seize the ­opportunities offered by a stevia product.

Moreover, stevia works well in blends with sugar. As a natural sustainably-produced sweetener, stevia fits in with our focus on natural and sustainable sweetening and with our strategy of offering our customers as a wide range of products. Stevia is also ideal for blends with sugar.”

In the starting blocks Lars Bo Jørgensen explains that the deal is still in the preparatory stages and that stevia has not yet been approved for food use in the EU. It is expected that the necessary approval will be granted in the near future. The product is already approved for use in many countries around the world. Use of stevia as a sweetener is also permitted in Switzerland and France un-

Stevia is expected to be approved as a sweetener in 2011.

der a temporary approval. The plan is to be able to market the product as soon as approval is granted.

so we want to be ready to supply them once approval has been granted,” explains Lars Bo Jørgensen.

“At the moment, we are investing time in looking into the general level of interest in this product. We already know that a lot of our clients are planning to use the sweetener in newly developed products,

» A lot of our clients are already planning to use ­s tevia in newly developed products. «

Profile

Lars Bo Jørgensen Head of the Stevia Project

16

Lars Bo Jørgensen (53) was appointed project manager for the stevia joint venture with PureCircle in October 2010. He had previously spent several years as a product development manager in the Sales & Marketing division at Nordic Sugar. Lars Bo Jørgensen’s team includes ­specialists in sales, product development, logistics, ­production and administration. The joint venture draws on services provided by Nordzucker.

He is in charge of a project team consisting of twelve employees from Nordzucker and Nordic Sugar. At the moment, the team is examining all the relevant issues associated with the new product.

The agreement with PureCircle will secure Nordzucker the exclusive rights to distribute stevia in Germany, Scandinavia, the Baltic states, Poland, Hungary, the Netherlands, Slovakia and Austria.

Markets and Clients

Best in liquid products As Lars Jo Jørgensen explains, stevia cannot be used as a direct substitute for sugar.

“Stevia is best suited for use in beverages and liquid dairy products where the body which sugar usually adds can be achieved using water instead. We expect the greatest demand for stevia to come from these two product segments. Although stevia cannot offer many of sugar’s other functional advantages, there is great potential for mixtures with sugar. Stevia has a relatively bitter aftertaste, which can be substantially changed and toned down by combining it with sugar.

Trial production of blends of this kind is already being carried out as part of a pilot project. Preparations in all other areas are also well under way. With the exception of the finer contract details, the negotiations with PureCircle have now been completed.

Nordzucker expects to be able to sign the agreement soon.

Stevia farming in China, where 90 per cent of the stevia on the market is cultivated and processed.

The facts

Sweet, sweeter, stevia l Stevia is a product of the plant Stevia rebaudiana (also known as

“­ sugarleaf” or “sweetleaf”), which is grown in 16 countries in South America, Africa, Asia and the USA. “Stevia” is the common name for the steviol glycosides produced by the plant’s leaves. They are extracted and purified in a process which is similar to sugar extraction. l Stevia is the only natural sweetener other than sugar. l As well as being used as a foodstuff, stevia is also utilised for medicinal

Dorthe Lindgreen Communications Manager, region Northern Europe

purposes, e.g. to treat diabetes and obesity, and in cosmetic products.

Stevia is virtually calorie-free, and is suitable for all industrial uses. l Stevia is 200 to 300 times sweeter than sugar. This makes it an

­ultra-sweet sweetener. l Stevia originally comes from Paraguay and Brazil. 90 per cent of the

s­ tevia on the market is now grown in China. The majority of processing is also carried out in Asia. l No large-scale initial investments are planned for the joint venture.

Steviol glycosides from the stevia plant have great potential for ­mixtures with sugar.

Akzente 01/11

17

Markets and Clients

Sugar – the obvious Fairtrade product Nordic Sugar’s commitment to Fairtrade yields good results. The company currently has six products bearing the Fairtrade mark and they are selling well. and Denmark, but also applies to Finland and the Baltic markets, where Fairtrade conducts campaigns several times a year, which are very popular with consumers.

Johan Neikell, Vice President in charge of retail and food service sales, who is also responsible for Nordic Sugar’s Fairtrade prod­ ucts, which are sold under the brand name Dansukker.

In recent years, Nordic Sugar has succeeded in catering for a consumer trend in the Nordic and Baltic markets by combining cane sugar with the Fairtrade concept.

“Fairtrade is an international labelling scheme which helps to improve the working and living conditions of the poorest farmers around the world as well as to promote environmentally friendly production. This means the Fairtrade concept complements our sustainability activities perfectly. As the cane sugar we buy often comes from producers who fulfil Fairtrade standards, it seemed logical for us to combine the two. We offer several of the products which are popular in the Nordic markets and the countries bordering on the Baltic as Fairtrade products,” explains Johan Neikell, Vice President in charge of sales to retail and food service customers at Nordic Sugar.

A strong partnership Collaborating with the Fairtrade Organi­ sation also offers benefits in the sales work because Nordic Sugar can take part in many of the organisation’s market activ­ ities. This is particularly true in Sweden

18

“These activities go very well with our strategy of being a market leader in speciality products and of giving the customers inspiration for how to use them,” adds Johan Neikell. “We generate demand for our products by inspiring our customers with recipes and tips which make creative use of our products. Convenience products are part of this too, making it quick and easy for instance for consumers to make their own jam at home. The vast majority of our speciality products are based on beet sugar, but our Fairtrade cane sugar products provide an excellent supplement to our portfolio.”

Nordic Sugar’s Fairtrade range currently includes: cane sugar syrup, granulated cane sugar, cane sugar cubes, organic cane sugar, vanilla sugar and icing sugar made from cane sugar. Soon another new product will also be launched.

Thorough audits Almost 1.5 million producers and workers are currently involved in manufacturing products certified by the Fairtrade organi-

sation. An autonomous body carries out independent audits of their working and production conditions on behalf of the ­organisation. Johan Neikell adds: “At the same time, we also conduct our own ­audits to make sure that our requirements and standards for food safety, human rights and working conditions are upheld.”

Support for the poorest communities All of Nordic Sugar’s Fairtrade products – with the exception of its organic cane sugar – are sourced from the South-East African republic of Malawi. In the region of Kasinthula, 280 farmers have joined forces to form the Kasinthula cane sugar cooperative. Every year, they produce some 70,000 tonnes of cane sugar. Since 2008, all the sugar they produce has been sold to the USA and Europe with the Faitrade mark. Nordic Sugar is the third largest buyer.

In 2009, the Fairtrade suppliers received a premium totalling almost EUR 560,000.

This sum is divided three ways, some of it goes to the farmers, some to enhancing crop yields, and some to local improvement projects. Over the last few years, ­improvement projects have included for instance the establishment of 14 drinking water wells and an improved health clinic.

Fairtrade products are an outstanding addition to the range.

NORDZUCKER POLSKA

Nordzucker stand wins prize at Polish industry trade show

From left to right: Eva Krook, Lubomir Fischer, Mariusz Tomczak, Dr. Volker Diehl, Danuta Dabrowska, Dirk Clauss

In September 2010, Nordzucker Eastern Europe GmbH showcased its business ­activities in Eastern Europe at Polagra International Food Product Trade Fair.

The company’s appearance at the fair was overseen by Nordzucker Polska. With more than 800 exhibitors from over 30 countries and in excess of 40,000 visitors,

The Nordzucker stand proved to be a visitor magnet.

Polagra is the largest and most important food trade show in “new Europe”. Repre­ sentatives of all Nordzucker regions made the most of this valuable opportunity to meet their most important clients. They also used the fair to forge new business relationships, enabling Nordzucker to further ­develop its sales activities in the various busi-

ness areas. Nordzucker’s presentation was professionally prepared, so it was no great surprise that the stand was awarded the Acanthus Aureus Prize. The prize is awarded by the trade show’s ­organisers “for the stand which most ­effectively implements a company’s ­marketing strategy.” tsd

FACE LIFT

Energy modernisation work completed Phase one of the energy modernisation project at the company headquarters in Braunschweig was completed in time for Christmas. The work took a total of five months and focused primarily on replacing and modernising the windows, blinds, external insulation and cladding at the functional 1960s complex. This has improved working conditions for the 250 staff at the site. Each office can now be ventilated separately and the amount of sunlight entering the building can also be regulated better using

intelligent roller blinds. This package of measures cost around EUR 2.5 million. The work has also improved the appearance of the building, which is now a gleaming white to match the company’s key product: sugar. Blue window elements further accentuate Nordzucker’s colour scheme. The biggest challenge was completing the renovation work while the complex was in use and the offices were full. Phase two – the extension out towards the old scales – will commence in March 2011.

PR CAMPAIGN

Siemens PR campaign features sugar

TOP TIP

How come sugar is always white? This and other intriguing everyday questions are at the heart of an international PR campaign for Siemens. The answers to the questions use concrete examples to illustrate the global technology firm’s products and services. The footage was filmed at the plant in Klein Wanzleben.

Did you know …? … that lemons don’t dry out as quickly when you rub a little sugar into the leftover half? This will keep it fresh for about two weeks.

Akzente 01/11 01/10

19

burg’s One of Ham marks: ­ ­famous land erlooking ov ll ha ty ci ke. the Alster la

Hamburg Butter Cake Ingredients

Preparation

For the cake base: 500 g Flour 175 g Margarine 60 g SweetFamily castor sugar 3 Eggs 1/2 l Milk Lemon zest 1 Cube of yeast 125 g Raisins

(approx. 30 minutes excluding waiting time) To make the base, mix the flour, margarine, sugar, eggs, milk, lemon zest, yeast and ­raisins. Knead them well together and allow to rise for 30 minutes in a warm place. Then, knead the dough again, and roll it out on a baking tray covered in backing paper. Wait another 20 minutes.

For the topping: 125 g Butter 100 g Almond slices For the icing: 200 g SweetFamily icing sugar 2 – 3 Tbsps. Lemon juice

Then cover the dough with the butter and almond flakes. Bake in a preheated oven at 225 °C for 10 –12 minutes. In the meantime, mix the icing sugar together with the lemon juice into a smooth paste. Brush the icing onto the cake when it is still warm.