Interim report 6 months 2016/17 by Nordzucker AG

Interim report Financial Year 2016/17 6 Months / 1 March to 31 August 2016

N o r d z u c k e r I n t e r i m R e p o r t 6 M o n t h s 2016/2017

Key Figures six Months 2016/17

O P E R AT I N G B U S I N E S S 1/3/2016 – 31/8/2016

1/3/2015 – 31/8/2015

Change

Revenues

EUR m

833

768

EBIT

EUR m

– 2

Net income for the period

EUR m

– 1

Cash flow from operating activities

EUR m

258

200

Investment in property, plant and equipment and intangible assets

EUR m

BAL ANCE SHEET FIGURES 31/8/2016

31/8/2015

Change

Total assets

EUR m

1,901

1,899

Shareholders’ equity

EUR m

1,294

1,284

Debt capital

EUR m

607

615

– 8

Financial liabilities

EUR m

Cash and cash equivalents

EUR m

391

210

181

Net debt (–) / Investment (+) 1

EUR m

+378

+202

+ 176

31/8/2016

31/8/2015

Change

–

Sugar refineries

–

Liquid sugar plants

–

Bioethanol plants

–

Equity ratio

1 Cash and cash equivalents less financial liabilities.

STRUCTURAL FIGURES

Sugar plants

N o r d z u c k e r I n t e r i m R e p o r t 6 M o n t h s 2016/2017

Content

Hi g h li g h t s o f t h e fi r s t s i x m o n t h s 2016/17

4 Letter from the executive Board

7 E a r n i n g s a n d fi n a n ci a l P o s i t i o n a n d n e t a s s e t s

10 C o n s o li d a t e d i n c o m e s tat e m e n t

10 s tat e m e n t o f c o m p r e h e n s i v e income

11 S t a t e m e n t o f c a s h fl o w s

12 C o n s o li d a t e d s t a t e m e n t o f fi n a n ci a l p o s i t i o n

14 C o n s o li d a t e d s t a t e m e n t of Changes in Shareholders’ equity

15 F i n a n ci a l c a l e n d a r

Positive development in revenues and earnings

In the first six months of the 2016/2017 financial year, Nordzucker generated revenues of EUR 833.1 million. This was around eight per cent above the figure of EUR 768.4 million for the same period of the previous year. Higher sales volumes and prices for quota and non-quota sugar were mainly responsible for the revenue increase. This made it possible to generate a profit of EUR 36.8 million for the period, in contrast to the loss of EUR 0.6 million reported for the same period a year ago. C a m pa i g n u n d e r w a y : g o o d y i e l d s e x p e c t e d

This year’s campaign started on schedule on 12 September at the plant in Opalenica, Poland, which was swiftly followed by the German plants. The campaign was up and running at all Group plants by 4 October. Planned investments were completed on time beforehand and the campaign generally got off to a smooth start. Growing conditions for sugar beet were very good this year. Although sowing was slightly delayed across the Group as a whole, plenty of sunshine and warm temperatures during the summer helped the crops grow well. Long dry periods did cause some challenges with harvesting, loading and processing, however, because large quantities of leaves also ended up in the plants in some cases. The campaign is due to end in early January 2017 after an average of 110 days.

N o r dz u c k e r I n t e r i m R e p o r t 6 M o n t h s 2 016 / 2 017

THE EXECUTIVE BOARD OF NORDZUCKER AG

Dr Michael Noth

Hartwig Fuchs (Chief Executive Officer)

Dear shareholders, We were pleased with earnings for the first half-year 2016/2017. Thanks to more stable prices and good sales figures for quota and non-quota sugar we were able to increase revenues by around eight per cent. The market stabilization is a direct result of lower stocks in the EU, combined with a price recovery on the world market. Performance in the by-products area and the bioethanol market is currently less positive. Prices have fallen for both pellets and bioethanol, which has a corresponding effect on our margins. All in all, we can be well satisfied with the current situation, however, and expect to close the current financial year with higher revenues and much better earnings than the previous year. Developments on the sugar market and the savings achieved by our efficiency programme FORCE will both make a contribution. This is confirmed by the trend in the first six months. Forecasts for the period thereafter are more difficult. The market will have to find a new equilibrium after the quota regime expires on 30 September 2017. Potential imports and exports and any additional capacity planned by our competitors will play an important role. However, the fact that in almost all the countries where Nordzucker operates we have already signed delivery contracts with our beet suppliers, often for several years, means that we are in a good starting position as far as beet supplies are concerned.

N o r d z u c k e r I n t e r i m R e p o r t 6 M o n t h s 2016/2017

Axel Aumüller

Dr Lars Gorissen

Our task is to keep on planning and preparing carefully for the period after 2017. A focus on customers, markets and sustainability are the keys to success, in addition to continuous efficiency gains. At the same time it is also vital to keep up Nordzucker’s momentum. The changes in the sugar market present growth opportunities that we intend to examine and exploit. At a time of change and readjustment we are relying on our solid finances, on our well equipped plants in favourable areas of the EU, on the outstanding know-how of our employees, on the partnerships with our beet farmers and not least on the trust of our shareholders. Yours sincerely, Nordzucker AG The Executive Board

Hartwig Fuchs

Axel Aumüller

Dr Lars Gorissen

Dr Michael Noth

N o r d z u c k e r I n t e r i m R e p o r t 6 M o n t h s 2016/2017

Si t e s i n E u r o p e

Group H e a d q u a rters D

Braunschweig

R egi o n a l H e a d Office DK

Copenhagen

S u g a r Pl a nts a nd refineries D

FIN

Clauen

Nordstemmen

Uelzen

Klein Wanzleben

Schladen

Nakskov

Nykøbing

Arlöv

Örtofta

Porkkala

Säkylä

Kėdainiai

Chełmża

Opalenica

Trenč ianska Teplá

Liquid sugar plant Groß Munzel

Liquid sugar plant Nordstemmen

sugar plants – n o n - c o n s o l i dat e d M in o rit y st a k e CZ

Dobrovice

Ceské Meziříčí

13 12

2 24

10 23

6 22

5 18 25

4 19

21 17

o ther l o c a ti o ns D

Bioethanol plant, Klein Wanzleben

Köpingebro (Fibrex)

NP Sweet, Copenhagen

Office Brussels

s a les o ffices LV

Riga

Vilnius

Tallinn

Reykjavik

Oslo

Dublin

Athens

N o r d z u c k e r I n t e r i m R e p o r t 6 M o n t h s 2016/2017

E a r n i n g s a n d fi n a n ci a l position and net assets

General remarks

The interim financial statements as of 31 August 2016 for Nordzucker AG (Küchenstrasse 9, 38100 Braunschweig, Germany) have been prepared in accordance with the International Financial Reporting Standards (IFRS) adopted and published by the International Accounting Standards Board (IASB) and the IFRS Interpretations Committee (IFRS IC) as applicable in the European Union (EU-IFRS). The financial statements comply fully with EU-IFRS and give a true and fair view of the net assets, financial and earnings position of Nordzucker AG and its consolidated subsidiaries, joint ventures and associated companies (hereinafter known as “Nordzucker Group” or “Group”). No changes have been made to the accounting policies used for the preparation of the annual IFRS consolidated financial statements as of 29 February 2016. These can be found in the Annual Report 2015/2016 (www.nordzucker.de). Seasonal sugar production

The production of sugar is a seasonal business. The production phase, from the beginning of September until January, is entirely in the second half of the financial year. This should be taken into consideration when interpreting the first half earnings.

up on the figure of EUR 37.2 million in the same period of the previous year. Other income decreased significantly to EUR 8.0 million (prior-year period: EUR 17.6 million). Other expenses also fell sharply to EUR 6.6 million (prior-year period: EUR 16.2 million). Personnel expenses of EUR 88.8 million were up on the same period last year (EUR 81.1 million) and so were back at around the same level as the first six months of the 2014/2015 financial year. The increase is largely due to higher salaries and wages following the new pay settlement, higher bonuses and higher pension expenses and social security contributions. Depreciation, amortization and impairment was roughly the same as the previous year (EUR 37.1 million compared with EUR 36.6 million). The operating result (EBIT) of the Nordzucker Group totalled EUR 53.4 million in the first half of the 2016/2017 financial year, compared with EUR –2.1 million in the same period of the previous year. Financial income of EUR 0.4 million was well below the previous year’s figure (EUR 6.2 million), because the dividend has not yet been received from Tereos TTD, in contrast to the previous year. Financial expenses were roughly unchanged at EUR 4.1 million (prior-year period: EUR 3.9 million).

Revenues and earnings

In the first six months of the 2016/2017 financial year the Nordzucker Group generated revenues of EUR 833.1 million, approximately eight per cent more than in the previous year. Higher sales volumes and prices for quota sugar and non- quota sugar were mainly responsible for the revenue growth, whereas revenues for bioethanol and by-products were down. Production costs came to EUR 667.0 million, slightly above the figure of EUR 659.1 million in the same period of the previous year due to higher volumes. Sales costs of EUR 75.9 million were roughly the same as in the equivalent period last year (EUR 75.6 million). Administrative expenses came to EUR 38.1 million, slightly

Consolidated Rev enues

Consolidated EBIT

Euro m

900 800

833

70 60

768

700

600

500

400

300

200

100

–10

-2

–20 6 months 2015/16

6 months 2016/17

6 months 2015/16

6 months 2016/17

N o r d z u c k e r I n t e r i m R e p o r t 6 M o n t h s 2016/2017

In the first six months of the 2016/2017 financial year the Nordzucker Group reported a profit before minority interests of EUR 36.8 million, in contrast with the same period a year ago, which saw net income for the period of EUR –0.6 mil lion. The positive earnings were principally due to higher sales volumes and price increases for quota and non-quota sugar. Lower costs also contributed to the positive earnings.

Cash from financing activities of EUR 0.6 million was well above the previous year’s figure of EUR –5.2 million, due to the use of a bilateral credit line that did not exist the previous year by a subsidiary.

C ash flow and bal ance sheet

Total consolidated assets came to EUR 1,901.1 million as of the end of the reporting period on 31 August 2016 (31 August 2015: EUR 1,899.1 million).

Cash flow from operating activities of EUR 257.8 million in the first six months of the financial year 2016/2017 was significantly higher than the previous year’s figure (EUR 200.0 million). This increase was largely due to a rise of EUR 49.3 million in pre-tax earnings compared with the previous year. Net cash outflow from investing activities came to EUR 39.1 million compared with EUR 30.0 million for the same period last year. The increase in net outflow is largely due to higher payments for investments in property, plant and equipment (EUR 39.0 million compared with EUR 24.2 million). However, no investments were made in financial assets in the first six months of the year, whereas the figure for the same period last year was EUR 5.1 million.

Cash and cash equivalents at the end of the half-year came to EUR 391.1 million, well above the level of the previous year (EUR 209.7 million).

Inventories were down significantly by EUR 215.3 million to EUR 377.7 million. They were offset in particular by an increase in trade receivables, up by EUR 29.4 million to EUR 191.3 million and higher cash and cash equivalents, up by EUR 181.4 million to EUR 391.1 million. Trade payables fell by EUR 51.7 million to EUR 65.2 million, whereas non-current provisions for pensions and similar obli gations went up by EUR 50.4 million to EUR 242.4 million due to the fall in the discount rate. Cash and cash equivalents exceeded financial liabilities by EUR 378.2 million at the end of the reporting period as of 31 August 2016. At the end of the same period in the previous year (31 August 2015), the excess amount was EUR 202.1 million.

Consoli date d Net

N E T D E B T (–) /

I nco m e for the perio d

I N V E S T M E N T (+ )

G roup Balance sheet structure as of 3 1 August 2 0 1 6

Euro m

450

2,000

35 30

400

350

1,500

300

1,250

250

200

150

500

100

250

-5

–1

-10

378

6 months 2016/17

6 months 2015/16

20 %

750

6 months 2016/17

68 %

47 %

1,000

202

1,901

1,750

0 6 months 2015/16

1,901

20 % 33 %

Assets

12 %

Equity & liabilities

Non-current assets

Equity

Inventories

Non-current liabilities

Other current assets

Current liabilities

N o r d z u c k e r I n t e r i m R e p o r t 6 M o n t h s 2016/2017

Events after the

Nordzucker’s earnings.

b a l a n c e s h e e t dat e

In the medium term, the European sugar market should develop more positively again, however. The high economic potential of sugar beet enables European sugar producers to supply their customers on competitive terms and, after a transitional period, the market will consolidate further. Nordzucker is a strong provider in Europe, who can make use of these opportunities and is intensively preparing to do so. The company is sufficiently well set up to play an active role in the market consolidation and to further expand its position in Europe. Its capital structure is so solid that the company can also strengthen its core business further by means of investments. Growth opportunities outside of Europe can also be considered. Nordzucker has successfully dealt with all of the changes in Europe to date, and has emerged from them even stronger. The company assumes that it will be able to continue this success in a world without sugar quotas.

There have been no significant changes to the situation of the company for the current financial year since the end of the reporting period covered by these interim financial statements.

Outlook The key figures for the Nordzucker Group for the first six months of the financial year 2016/2017 confirm the p ositive outlook for the full year 2016/2017 given at the end of the last financial year. World market prices for sugar have risen signi ficantly and sugar prices have increased slightly in Europe too. This trend is expected to continue, since high sugar stocks have been depleted and lower imports are still forecast for the current sugar marketing year. After significant cuts in land under cultivation the previous year, production volumes are likely to go up again in the 2016/2017 campaign. All producers are still exposed to intense competition for market share in order to secure the best possible position for themselves when the sugar market regime expires in 2017. Nordzucker is still expecting revenues for 2016/2017 to be slightly above the level of 2015/2016. An anticipated further increase in EU sugar prices and lower energy prices, as well as even more savings created by the FORCE programme, should make it possible to report significantly higher earnings than last year. The results for the first six months of the 2016/2017 financial year confirm this. In the current year, the performance indicators used to date (EBITDA margin, return on sales and equity ratio) are to be replaced by the metric “shareholders’ cost of capital”. This performance indicator focuses on a market rate of return on capital employed. Forecasts for the following 2017/2018 financial year are virtually impossible. It will entail the last seven months of the old quota system and the first five months without q uotas. Forecasts are very difficult to make given the considerable changes to the European sugar market, the lengths to which many producers are expected to go to increase market share and the high volatility of global sugar markets. Massive upheaval may ensue, however, particularly in the transition period, which could put considerable pressure on

N o r d z u c k e r I n t e r i m R e p o r t 6 M o n t h s 2016/2017

QUARTER LY F i n a n ci a l S tat e m e n t s NO r d z u ck e r AG

C o n s o li d a t e d i n c o m e s t a t e m e n t Nordzucker AG, Braunschweig, Germany, for the period from 1 March 2016 to 31 August 2016

1/3/2016 – 31/8/2016

1/3/2015 – 31/8/2015

833,103

768,369

64,734

Production costs

–666,967

–659,065

–7,902

Gross profit

In EUR thousands Revenues

Change

166,136

109,304

56,832

Sales costs

–75,947

–75,600

–347

Administrative expenses

–38,132

–37,187

–945

7,964

17,576

–9,612

Other income Other expenses

–6,635

–16,188

9,553

53,386

–2,095

55,481

358

6,172

–5,814

–4,140

–3,891

–249

–254

–105

–149

Earnings before tax

49,350

49,269

Income taxes

–12,581

–720

–11,861

Net income for the period

36,769

–639

37,408

Operating result (EBIT) Financial income Financial expenses Result from companies accounted for using the equity method

of which attributable to non-controlling interests

879

279

600

35,890

–918

36,808

1/3/2016 – 31/8/2016

1/3/2015 – 31/8/2015

Change

Net income for the period

36,769

–639

37,408

Remeasurement of defined benefit plans

–19,813

28,655

–48,468

5,879

–8,491

14,370

–13,934

20,164

–34,098

–3,226

–3,329

103

Net result of cash flow hedges

1,941

1,622

319

Deferred taxes on items of other comprehensive income reclassified to the income statement

–602

–422

–180

of which attributable to shareholders of the parent company

S tat e m e n t o f c o m p r e h e n s i v e i n c o m e In EUR thousands

Deferred taxes on items of other comprehensive income not reclassified to the income statement Other comprehensive income from items not reclassified to the income statement Exchange differences on translating foreign operations

Other comprehensive income from items reclassified to the income statement

–1,887

–2,129

242

Consolidated comprehensive income after taxes

20,948

17,396

3,552

of which attributable to non-controlling interests of which attributable to shareholders of the parent company

878

277

601

20,070

17,119

2,951

N o r d z u c k e r I n t e r i m R e p o r t 6 M o n t h s 2016/2017

S t a t e m e n t o f c a s h fl o w s Nordzucker AG, Braunschweig, Germany, for the period from 1 March 2016 to 31 August 2016

1/3/2016 – 31/8/2016

1/3/2015 – 31/8/2015

Change

49,350

49,269

2,559

2,885

– 326

Depreciation, amortization and impairment/reversals of impairment of non-current assets

36,991

36,528

463

Change in provisions

– 7,764

– 10,051

2,287

In EUR thousands Earnings before tax Interest and similar income/expenses

Change in inventories

375,145

391,518

– 16,373

Change in trade receivables

– 64,837

– 23,274

– 41,563

– 117,915

– 210,509

92,594

– 11,298

12,552

– 23,850

1,258

186

1,072

Other non-cash expenses/income

– 826

214

– 1,040

Interest received in the financial year

6,828

226

6,602

Interest paid in the financial year

– 834

– 1,051

217

254

105

149

– 11,125

597

– 11,722

257,786

200,007

57,779

570

501

– 38,996

– 24,211

– 14,785

– 700

– 776

Change in trade payables Change in other operating assets/liabilities Gains/losses on disposal of non-current assets

Result of companies accounted for using the equity method Taxes paid in the financial year Cash flow from operating activities Proceeds on disposal of property, plant and equipment Payments for investments in property, plant and equipment Proceeds on disposal of intangible assets Payments for investments in intangible assets Proceeds on disposal of financial assets

– 3

Payments for investments in financial assets

– 5,133

5,133

– 39,051

– 30,048

– 9,003

– 4,963

– 5,176

213

5,592

Cash flow from investing activities Inflows and outflows arising from changes in equity Payments to shareholders (dividends) Proceeds from borrowing Loan repayments

– 2

Cash flow from financing activities

629

– 5,178

5,807

Changes in cash and cash equivalents

219,364

164,781

54,583

Cash and cash equivalents at the beginning of the period

171,781

44,989

126,792

– 25

– 82

391,120

209,688

181,432

Effect of foreign exchange rate changes Cash and cash equivalents at the end of the period

N o r d z u c k e r I n t e r i m R e p o r t 6 M o n t h s 2016/2017

C o n s o li d a t e d s t a t e m e n t o f fi n a n ci a l p o s i t i o n as of 31 August 2016, Nordzucker AG, Braunschweig, Germany

ASSET S In EUR thousands

31/8/2016

31/8/2015

NON-CURRENT ASSETS Non-current assets Intangible assets Property, plant and equipment Investment property

19,937

23,480

834,271

836,374

4,471

2,982

Financial investments Shares in companies accounted for using the equity method Other financial investments

7,053

7,596

23,897

23,922

30,950

31,518

889,629

894,354

Receivables and other assets Financial assets Other assets

Deferred taxes

2,383

5,022

5,325

897,034

899,684

CURRENT ASSETS Inventories Raw materials, consumables and supplies Work in progress Finished goods and merchandise

57,102

60,809

105,852

101,262

214,738

430,880

377,692

592,951

191,316

161,956

Receivables and other assets Trade receivables Receivables from related parties Current income tax receivables Financial assets Other assets

Cash and cash equivalents Current assets Assets held for sale

2,626

326

2,344

8,295

11,443

32,732

19,424

235,295

195,246

391,120

209,688

1,004,107

997,885

1,500

1,004,107

999,385

1,901,141

1,899,069

N o r d z u c k e r I n t e r i m R e p o r t 6 M o n t h s 2016/2017

Equit y and Liabilities In EUR thousands

31/8/2016

31/8/2015

123,651

Shareholders’ equity Subscribed capital Capital reserves Retained earnings Other comprehensive income Equity attributable to shareholders of the parent company Non-controlling interests

127,035

1,077,397

1,029,855

– 73,664

– 38,346

1,254,419

1,242,195

39,929

41,568

1,294,348

1,283,763

Non-current provisions and liabilities Provisions for pensions and similar obligations

242,415

192,014

Other provisions

47,529

34,084

Financial liabilities

7,090

7,353

Liabilities towards related parties

5,500

Other financial liabilities Other liabilities Deferred taxes

349

8,812

8,633

77,714

91,993

389,409

339,595

Provisions for pensions and similar obligations

10,498

11,209

Other provisions

42,073

56,434

Financial liabilities

5,857

249

18,963

14,205

Trade payables

65,189

116,839

Liabilities towards related parties

27,415

33,672

Current provisions and liabilities

Current income tax liabilities

Other financial liabilities Other liabilities

6,987

6,846

40,402

36,257

217,384

275,711

1,901,141

1,899,069

N o r d z u c k e r I n t e r i m R e p o r t 6 M o n t h s 2016/2017

C o n s o li d a t e d s t a t e m e n t o f c h a n g e s in shareholders’ equity Nordzucker AG, Braunschweig, Germany

In EUR thousands

Subscribed capital

Capital reserve

As of 1/3/2015

123,651

127,035

Net income for the period

Other Retained comprehensive income earnings 1,035,604

–56,383

Consolidated comprehensive income

–918

Dividend payment Other

Total equity

1,229,907

41,636

–918

279

–639

18,037

–2

18,035

18,037

–918

Other comprehensive income

Equity attributable Nonto shareholders of controlling the parent company interests

1,271,543

17,119

277

17,396

–4,830

–346

–5,176

–1

As of 31/8/2015

123,651

127,035

1,029,855

–38,346

1,242,195

41,568

1,283,763

As of 1/3/2016

123,651

127,035

1,046,339

–57,844

1,239,181

39,186

1,278,367

35,890

879

36,769

–15,820

–1

–15,821

–15,820

Net income for the period

35,890

Other comprehensive income Consolidated comprehensive income

35,890

Dividend payment Other As of 31/8/2016

123,651

127,035

20,070

878

20,948

–4,830

–133

–4,963

–2

–4

1,254,419

39,929

1,294,348

1,077,397

–73,664

N o r d z u c k e r I n t e r i m R e p o r t 6 M o n t h s 2016/2017

F i n a n ci a l C a l e n d a r

13 January 2017 Publication of the Interim Report for the first nine months of 2016/2017 24 May 2017 Publication of 2016/2017 Annual Report

online P ublications The following publications can be downloaded from www.nordzucker.de > Annual Reports and Interim Reports > Declaration of compliance > Letter to shareholders Subscribe to the Interim Report at www.nordzucker.de

Nordzucker AG KĂźchenstrasse 9 38100 Braunschweig Telephone: +49 (0) 531 2411-0 Fax: +49 (0) 531 2411-100 info@nordzucker.de www.nordzucker.de Corporate Communications Christian Kionka Telephone: +49 (0) 531 2411-173 pr@nordzucker.de Investor Relations Bianca Deppe-Leickel Telephone: +49 (0) 531 2411-335 ir@nordzucker.de Shares register Nicole Riedel-Elias Telephone: +49 (0) 531 2411-163 aktien@nordzucker.de

Printed copies of this Interim Report for the Nordzucker Group are also available in German. Alternatively, the report is available online in German or English and can be downloaded as a PDF at www.nordzucker.de from the Download Centre.