Letter to the shareholders
Current information for the shareholders of Nordzucker AG and Nordzucker Holding AG and for partners of Union-Zucker SĂźdhannover GmbH Issue 02 | 10 June 2016
Dear shareholders, We managed to complete the 2015/2016 financial year on a better note than expected: we generated moderately positive earnings of EUR 15 million. An incipient recovery in sugar prices and a good performance in the bioethanol segment, plus one-off effects secured in court which arose in connection with interest repayments from already-paid production levies, were the factors that made these earnings possible. These were augmented by the first cost savings from our FORCE efficiency programme that was launched at the beginning of 2015. We performed well in a highly strained market environment. In this situation, our employees had to make a strenuous effort to achieve a positive result. As in the previous year, we and the Supervisory Board were able to propose to the Annual General Meeting a dividend of EUR 0.10 per share. All in all, however, our earnings level is not satisfactory for us from a long-term point of view.
Outlook: Improved earnings expected In order to further improve the company’s profitability across the board, we have initiated precedentsetting measures throughout the Group with which we intend to successfully shape the transition to 2017. The reason for this is that, as and from 2017, specified quotas and minimum prices will no longer apply. Commercial success will be decided solely by market and customer focus and efficiency in future. For us, it is a matter of the utmost importance to maintain the substance and enhance the efficiency of our plants within the Group. Having postponed a number of projects in the previous year, we are planning a fresh investment volume of EUR 82 million in the upcoming financial year. Expenditure will focus on optimizing warehouse capacities, logistics and customer deliveries, as well as on further reducing energy consumption in the plants. We are expecting to generate revenues at the previous
Nordzucker AG l Post box 49 21 l D-38039 Braunschweig l Telephone +49 531 2411-0 l ir@nordzucker.de l www.nordzucker.de
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year’s level in the current 2016/2017 financial year. Further savings from the FORCE efficiency programme, relatively low energy prices and a slight improvement in sugar revenues should, however, help to ensure that earnings at the end of the financial year are higher than at present.
Growth: our line of approach from now on We want to make use of the potential that is emerging from the consolidation of the EU sugar market, while at the same time focusing on key markets outside the EU. In addition, we are considering a possible involvement in related agricultural segments. As a debt-free company with a strong market position, Nordzucker has all the prerequisites for achieving further growth steps in the future. We will use the opportunities at our disposal to offer you, our shareholders, an appropriate rate of return on your capital.
Annual General Meeting on 7 July 2016 As has been the case since the period to July 2010, we are proposing to this year’s Annual General Meeting authorized share capital that amounts to 11.1 per cent of our share capital. This authorized share capital will enable the Executive Board, subject to approval by the Supervisory Board, to make decisions about a capital increase. In addition, we need to shape the transition to 2017 in all areas of the company, including its Articles of Association. With this in mind, your invitation to the Annual General Meeting will be accompanied by a number of amendments to the Articles of Association that serve the aforementioned purpose.
New terms of contract for beet cultivation in Germany from 2017 In conjunction with the trade association Dachverband Norddeutscher Zuckerrübenanbauer e.V. (DNZ), we have agreed on the terms of the beet supply contracts for growing years starting in 2017. As well as a one-year contract with two pricing models, beet growers can opt for a three-year contract. With this new, flexible contractual system we will secure the competitiveness of beet cultivation, guarantee stability of supply and offer our growers attractive competitive conditions in comparison with other crops. In the process, we attach importance to the fact that our volume planning is geared to the market and we are not relying solely on land expansion or capacity utilization.
Beet development in 2016 generally good to date Following a sowing process that was slightly later than in previous years, the beet has developed very well in all of Nordzucker’s countries. After a cold period at the end of April, the warm weather of the past few weeks was highly beneficial for the growth of beet in all regions. In each region we are expecting the row closure to occur from early to mid-June. Only in Finland, where the weather conditions regularly make sowing impossible until the beginning of May, will the row closure occur later than that. All in all, the current signs indicate that there will be a good average harvest.
Nordzucker AG l Post box 49 21 l D-38039 Braunschweig l Telephone +49 531 2411-0 l ir@nordzucker.de l www.nordzucker.de
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Our beet growers have achieved gold status in the Sustainable Agriculture Initiative Nordzucker is a committed member of the sustainability platform SAI (Sustainable Agriculture Initiative), an initiative run by the food and beverage industry that supports the development of sustainable agriculture all over the world. Our beet growers in Germany, Sweden and Poland were awarded gold status for the 2015 growing year. The evaluations were made using the Farm Sustainability Assessment (FSA). In Germany, 100 per cent of the company’s sugar production in 2015 is eligible for description as sustainably grown and therefore qualifies for gold status as per FSA 2.0. This was also confirmed by a third-party audit. Sweden attained gold status with 86 per cent of its sugar production and silver with 14 per cent. In Poland, we began with a smaller proportion of beet growers who accounted for some 35 per cent of total production – and they all achieved gold status. We are proud of these results, which are exceptional even in comparison with the European sugar industry as a whole, and we take our responsibility for sustainable production – which begins on the fields themselves – very seriously. The FSA is one of the most important instruments for farmers and food and beverage producers to support the production, sale and procurement of sustainably grown agricultural products. In future we will also use the instrument in other beet-growing countries. More about the FSA can be found here: www.fsatool.com
Ambitious energy and climate targets put in place Sustainability, and in particular a reduction in energy consumption, have long been important topics for Nordzucker. Now we have set ourselves new ambitious targets: we want to reduce both energy consumption and CO2 emissions by ten per cent by 2020. A corresponding investment plan that contains both short-term (by 2020) and long-term (by 2025) purchases will make a substantial contribution to achieving these targets. These include, for example, new pulp presses in Lithuania (2016) and Denmark (2017) and a biogas plant in Poland (2016). In this way we are supporting global climate protection and the achievement of the EU’s climate targets. And we are certain that every financial and organizational effort in the area of sustainability will have a positive impact on our competitiveness.
Less sugar does not mean fewer calories These days, sugar is described time and again in the media and in public debate as a cause of sickness and obesity. On behalf of the German sugar industry’s „Schmeckt Richtig!“ („Tastes Great!“) initiative, the market research institution Innofact recently conducted a representative survey on the subject and interviewed 2,024 consumers. Its results revealed that 66 per cent of respondents believe that products containing less sugar have fewer calories. This, however, is generally not the case with solid foods. That is because, when sugar is replaced in solid foods, it is often substituted for another ingredient that also contains calories. As a result, less sugar usually does not lead to fewer calories. Most consumers are not aware of this. Another astounding result of the survey was that 60 per cent of respondents did not know the meaning of the term “energy balance”. Anyone who wants to avoid becoming overweight in the long
Nordzucker AG l Post box 49 21 l D-38039 Braunschweig l Telephone +49 531 2411-0 l ir@nordzucker.de l www.nordzucker.de
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term must, first and foremost, take care to maintain an energy balance, in other words ensure that they burn off the same volume of calories that they consume. More about the survey can be found here: www.schmecktrichtig.de or on Facebook: https://www.facebook.com/schmecktrichtig/ Sugar is a natural component of a balanced diet as part of a healthy lifestyle. With this message in mind, Nordzucker will continue with its educational work as part of the initiatives and in discussions. Nordzucker AG The Executive Board
Nordzucker AG’s detailed Annual Report 2015/2016 can be found online at: http://www.nordzucker.de/aktionaere/aktuelles/top-thema.html Nordzucker AG l Post box 49 21 l D-38039 Braunschweig l Telephone +49 531 2411-0 l ir@nordzucker.de l www.nordzucker.de