Interim report 3 20162017 by Nordzucker AG

Interim report Financial Year 2016/17 9 Months / 1 March to 30 November 2016

N o r d z u c k e r I n t e r i m R e p o r t 9 M o n t h s 2016/2017

K e y Fi g u r e s

Content

nine Months 2016/17

Hi g h li g h t s o f t h e first nine months 2016/17

O P E R AT I N G B U S I N E S S 1/3/2016 –30/11/2016

1/3/2015 –30/11/2015

Change

Revenues

EUR m

1,307

1,204

103

EBIT

EUR m

107

Net income for the period

EUR m

Cash flow from operating activities

EUR m

268

177

Investment in property, plant and equipment and intangible assets

EUR m

Letter from the executive Board

7 E a r n i n g s a n d f i 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

BAL ANCE SHEET FIGURES 30/11/2016

30/11/2015

Change

Total assets

EUR m

2,191

2,137

Shareholders’ equity

EUR m

1,347

1,288

Debt capital

EUR m

844

850

–6

Financial liabilities

EUR m

Cash and cash equivalents

EUR m

382

168

214

Net debt1

EUR m

369

161

208

Equity ratio

1 Cash and cash equivalents less financial liabilities

C o n s o li d a t e d s t a t e m e n t o f comprehensive income

11 C o n s o li d a t e d c a s h f l o w s tat e m e n t

12 C o n s o li d a t e d b a l a n c e s h e e t

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

STRUCTURAL FIGURES 1/3/2016 – 30/11/2016

1/3/2015 – 30/11/2015

Change

–

Sugar refineries

–

Liquid sugar plants

–

Bioethanol plants

–

Sugar plants

15 Fi n a n ci a l c a l e n d a r

Increase in revenues and net income

In the first nine months of the 2016/2017 financial year, Nordzucker generated revenues of EUR 1,307.0 million. This was around nine per cent above the figure of EUR 1,204.2 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 81.7 million for the period, compared with EUR 0.4 million reported for the same period of the previous year. Very good growing year for the Group

The Nordzucker Group has almost reached the end of the 2016/2017 beet campaign, recording above-average sugar yields. The 13 plants were operating for an average of 104 days, a figure that was once again higher than in the previous year. In total, Nordzucker processed some 15 million tonnes of beet (previous year: 12.5 million tonnes). The sugar yield is above the long-term average in all of the countries, with particularly outstanding results achieved in some growing regions. Slovakia stood out in particular here. Beet processing at the plants was stable, which was first and foremost thanks to continuous investment in the sites and targeted, centrally managed maintenance. World market price drops again after upturn

World market prices for sugar increased significantly in recent months due to lower production volumes, which were partly attributable to weather conditions. There was a global production deficit in 2015/2016 and global production is expected to be below the level of consumption again in 2016/2017. The price and volume trends on the world market and the lower stocks in the EU have led to a stabilization of sugar prices in the EU. However, the world market price has since moved away considerably from its October 2016 high and has fallen by more than 20 per cent for raw sugar. The world market price will have a much greater influence on pricing in the EU when the old sugar market regime expires.

Nordzucker Z Inwti es rci hme n R eb pe o r ircth 9t M 9 oMnotnhas t2016/2017 e 2016/17

N o r d z u c k e r IIn n t e r i m R e p o r t 9 M o n t h s 2016/2017

THE EXECUTIVE BOARD OF NORDZUCKER AG

Dr Michael Noth

Hartwig Fuchs (Chief Executive Officer)

Axel Aumüller

Dr Lars Gorissen

Dear shareholders, Revenues and net income developed highly positively in the first nine months of our 2016/2017 financial year. We achieved a significant improvement in our profit for the period to EUR 81.7 million, following a loss of EUR 0.4 million in the same period of the previous year. We also expect to see a continued upwards trend over the final three months of the financial year. The positive development is attributable to the stabilization of market prices over the course of the year and to higher sugar sales, with both of these factors contributing to an increase in revenues of approximately nine per cent over the previous year. In addition, the comprehensive measures to cut costs and boost efficiency that we developed as part of our FORCE efficiency project are now increasingly having an impact on our net income. Among other things, we optimized our sales and production planning, streamlined the product range and improved our administration and procurement processes. We will achieve our goal of saving at least EUR 50 million per annum this year. However, making a forecast for the 2017/2018 financial year is not easy. The market will have to find a new equilibrium after the quota regime expires, with imports, exports and our competitors’ potential capacity expansions playing a significant role here. We do not believe that overproduction in the EU is the right way to go, because we want to continue to achieve adequate sugar prices in the market in future. We have prepared intensively for the more liberal sugar market conditions that will apply as of 1 October 2017. We have taken the necessary steps, and be it FORCE, LEAN or our 20.20.20 project to boost beet culti vation yields, we firmly believe that increases in efficiency all along the value chain will serve as the bedrock for securing our competitiveness, and this remains our top priority. We also have a systematic

customer focus. We are not just a reliable partner who supplies sugar flexibly, sustainably and in dependable quality, but with our sugar expertise we offer our customers true added value by advising them on and assisting them with their product development. The new era in the sugar market will provide us with opportunities for growth. And we will make the most of these opportunities. We are a leading sugar company that can count on productive and wellequipped plants, reliable beet farmers and a sound financial basis. We will actively contribute to shaping the upcoming consolidation of the EU market and will open up new markets. We will also acquire new customers outside of the EU, be it through exports or partnerships with local suppliers. We would like to thank you, our shareholders, for your trust and support. Let’s continue on our successful path into a new era together. 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 9 M o n t h s 2016/2017

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

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

Group H e a d q u a rters D

Braunschweig

Office DK

Copenhagen

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

FIN

LT PL

SK D

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

General remarks 28

The interim financial statements as of 30 November 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”).

13 12

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).

2 23

6 22

5 18 24

4 19

The operating result (EBIT) of the Nordzucker Group totalled EUR 107.1 million in the first nine months of the 2016/2017 financial year, compared with EUR 0.1 million in the same period of the previous year.

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 nine months’ earnings.

Personnel expenses of EUR 145.4 million were up significantly on the same period last year (EUR 135.2 million). 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 55.8 million compared with EUR 55.2 million).

Seasonal sugar production

period: EUR 21.5 million). The declines in other income and other expenses relate to non-recurring income and e xpenses for insurance and loss events which were recorded in the prior-year period.

21 17

o ther l o c a ti o ns D

Bioethanol plant, Klein Wanzleben

NP Sweet, Copenhagen

Office Brussels

Revenues and earnings

In the first nine months of the 2016/2017 financial year, the Nordzucker Group generated revenues of EUR 1,307.0 million, approximately nine 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.

s a les o ffices LV

Riga

Vilnius

Tallinn

Reykjavik

Oslo

Dublin

Athens

At EUR 1,022.7 million, production costs were on a par with those of the previous year, totalling EUR 1,028.6 million. Sales costs of EUR 120.8 million were roughly the same as in the equivalent period last year (EUR 119.5 million). Adminis trative expenses were likewise approximately equivalent to the previous year’s figure of EUR 38.8 million, coming in at EUR 58.3 million. Other income decreased significantly to EUR 12.9 million (prior-year period: EUR 24.2 million). Other expenses also fell sharply to EUR 10.9 million (prior-year

Consolidated R evenues

Consolidated E B I T

Euro m

120

1,600 1,400 1,200

1,204

1,307

1,000

800

600

400

200

0 9 months 2015/16

107

105

9 months 2016/17

0 9 months 2015/16

9 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 9 M o n t h s 2016/2017

Financial income of EUR 4.3 million was well below the pre vious year’s figure (EUR 6.4 million), because Tereos TTD dividend payments were lower. Financial expenses were roughly unchanged at EUR 6.1 million (prior-year period: EUR 5.9 million). In the first nine months of the 2016/2017 financial year, the Nordzucker Group reported a profit before minority interests of EUR 81.7 million, compared with net income of EUR 0.4 million in the same period of the previous year. 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. C ash flow and bal ance sheet

Cash flow from operating activities of EUR 267.8 million in the first nine months of the 2016/2017 financial year was significantly higher than the previous year’s figure (EUR 176.6 million). This increase was largely due to a rise of EUR 104.8 million in pre-tax earnings compared with the previous year. Net cash outflow from investing activities came to EUR 57.7 million compared with EUR 46.4 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 57.7 million compared with EUR 40.0 million). However, almost no investments were made in financial assets in the first nine months of the year, whereas the figure for the same period last year was EUR 5.4 million.

N o r d z u c k e r I n t e r i m R e p o r t 9 M o n t h s 2016/2017

Cash and cash equivalents came to EUR 382.4 million at the end of the first nine months, well above the level of the previous year (EUR 168.3 million). Total consolidated assets came to EUR 2,191.0 million as of the end of the reporting period on 30 November 2016 (30 November 2015: EUR 2,137.3 million). Inventories were down significantly by EUR 161.1 million to EUR 666.9 million. They were offset in particular by an increase in trade receivables, up by EUR 14.1 million to EUR 192.5 million, and higher cash and cash equivalents, up by EUR 214.1 million to EUR 382.4 million. Trade payables fell by EUR 28.6 million to EUR 303.2 million, whereas non-current provisions for pensions and similar obligations went up by EUR 28.1 million to EUR 222.4 million due to the fall in the discount rate. Cash and cash equivalents exceeded financial liabilities by EUR 369.3 million at the end of the reporting period as of 30 November 2016. At the end of the same period in the previous year (30 November 2015), the excess amount was EUR 160.7 million.

Cash flow from financing activities of EUR 0.8 million was well above the previous year’s figure of EUR –6.8 million, primarily due to the use of a bilateral credit line that did not exist in the previous year by a subsidiary. Group Balance sheet structure as of 30 November 2016

Euro m Consoli date d N et Inco m e for the period

N E T D E B T (– ) / INVESTMENT (+)

Euro m

80 60

300

250

200

150

100

1,250 369

61%

30%

1,000 750

17%

500 250 161

0 9 months 2016/17

2,191

41%

1,500

0 9 months 2015/16

1,750

400 350

2,191

2,000

450

2,250

9 months 2015/16

9 months 2016/17

29%

Assets

22%

Equity & liabilities

Non-current assets

Equity

Inventories

Non-current liabilities

Other current assets

Current liabilities

Events after the b a l a n c e s h e e t dat e There have been no significant changes to the situation of the company for the current 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 nine months of the 2016/2017 financial year confirm the positive outlook for the 2016/2017 financial year given at the end of the last financial year. World market prices for sugar continued to recover in the first nine months. However, the world market price has since moved away considerably from its October 2016 high and fell by more than 20 per cent for raw sugar in November. That said, a slight increase in the sugar price can still be observed in Europe. This trend is expected to continue, since the previous years’ high sugar stocks have been depleted and lower imports are still forecast for the current sugar marketing year. Meanwhile, measures implemented by the European Commission to convert non-quota sugar and regarding duty-reduced imports could counteract this price recovery. After a significant drop in the previous year, the area under cultivation increased 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 current sugar market regime expires in 2017. Nordzucker is expecting revenues for 2016/2017 to be signifi cantly 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 nine months of the 2016/2017 financial year already 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 “shareholders’ cost of capital” metric. This performance indicator focuses on a market rate of return on capital employed, resulting in more market-driven and shareholder-oriented management. Forecasts for the 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 quotas. 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 Nordzucker’s earnings. 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 success fully 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.

N o r d z u c k e r I n t e r i m R e p o r t 9 M o n t h s 2016/2017

C o n s o li dat e d Fi 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

S tat e m e n t o f c a s h f lo w s

Nordzucker AG, Braunschweig, Germany, for the period from 1 March 2016 to 30 November 2016

in EUR thousands Revenues Production costs

1/3/2016 –30/11/2016

1/3/2015 –30/11/2015

Change

in EUR thousands

1,306,973

1,204,229

102,744

Earnings before tax

–1,022,736

–1,028,645

5,909

Gross profit

284,237

175,584

108,653

Sales costs

–120,844

–119,463

–1,381

–58,276

–58,769

493

12,896

24,240

–11,344

–10,918

–21,539

10,621

107,095

107,042

4,301

6,353

–2,052

–6,107

–5,887

–220

–254

–239

–15

Administrative expenses Other income Other expenses Operating result (EBIT) Financial income Financial expenses Result from companies accounted for using the equity method Earnings before tax

Interest and similar income/expenses

613

Change in provisions

–6,496

–2,128

–4,368

Change in inventories

81,188

159,546

–78,358

Change in trade receivables

–67,101

–39,765

–27,336

Change in trade payables

121,542

4,457

117,085

–5,236

–3,529

–1,707

1,299

285

1,014

Change in other operating assets/liabilities Gains/losses on disposal of non-current assets Other non-cash expenses/income Interest received in the financial year

104,755 –23,411

Result of companies accounted for using the equity method

Net income for the period

81,719

375

81,344

Taxes paid in the financial year

2,855

343

2,512

78,864

78,832

Interest 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

Net income for the period Remeasurement of defined benefit plans 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 Net result of cash flow hedges Deferred taxes on items of other comprehensive income reclassified to the income statement

Change

81,719

375

81,344

28,655

–28,640

–8,491

8,494

20,164

–20,146

–9,148

1,705

–10,853

1,542

1,063

479

–353

–318

–35

Other comprehensive income from items reclassified to the income statement

–7,959

2,450

–10,409

Consolidated comprehensive income after taxes

73,778

22,989

50,789

2,853

340

2,513

70,925

22,649

48,276

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

245

–211

6,977

395

6,582

–1,451

–1,552

101

254

239

–28,049

–1,284

–26,765

267,757

176,558

91,199

767

275

492

–57,727

–40,001

–17,726

–1,375

–1,335

–40

Proceeds on disposal of financial assets

565

553

Payments for investments in financial assets

–53

–5,383

5,330

–57,748

–46,432

–11,316

–4,963

–6,760

1,797

5,726

Cash flow from investing activities in EUR thousands

–221

4,247

1/3/2015 –30/11/2015

104,755

55,122

280

1/3/2016 –30/11/2016

280

4,026

–23,316

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

Change

105,035 55,735

105,035

of which attributable to shareholders of the parent company

1/3/2015 –30/11/2015

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

Income taxes of which attributable to non-controlling interests

1/3/2016 –30/11/2016

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

–2

Cash flow from financing activities

764

–6,762

7,526

Changes in cash and cash equivalents

210,773

123,364

87,409

Cash and cash equivalents at the beginning of the period

171,781

44,989

126,792

–199

–71

–128

382,355

168,282

214,073

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 9 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 f i n a n ci a l p o s i t i o n as of 30 November 2016, Nordzucker AG, Braunschweig, Germany

ASSET S In EUR thousands

30/11/2016

30/11/2015

Equit y and Liabilities In EUR thousands

NON-CURRENT ASSETS

Shareholdersâ&#x20AC;&#x2122; equity

Non-current assets

Subscribed capital

Intangible assets Property, plant and equipment Investment property

19,194

22,718

831,004

837,707

4,447

2,982

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

Other assets

Retained earnings Other comprehensive income Equity attributable to shareholders of the parent company

7,053

7,712

23,375

23,927

Non-controlling interests

123,651

127,035

1,120,366

1,030,806

â&#x20AC;&#x201C;65,782

â&#x20AC;&#x201C;33,766

1,305,270

1,247,726

41,903

40,046

1,347,173

1,287,772

30,428

31,639 895,046

222,439

194,345

439

Other provisions

45,934

34,029

2,383

Financial liabilities

7,061

7,325

2,822

Liabilities towards related parties

5,500

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

Other financial liabilities Deferred taxes

30/11/2015

885,073 Receivables and other assets Financial assets

Capital reserve

30/11/2016

4,560

5,318

892,455

900,401

Other liabilities Deferred taxes

CURRENT ASSETS

8,660

8,489

81,942

92,492

371,536

342,198

Inventories Raw materials, consumables and supplies

70,738

67,734

Current provisions and liabilities

Work in progress

11,726

33,354

Provisions for pensions and similar obligations

9,647

11,213

584,455

726,936

Other provisions

45,839

64,551

666,919

828,024

Financial liabilities

5,992

250

21,887

11,887

303,202

331,804

27,821

33,722

Finished goods and merchandise Receivables and other assets Trade receivables

Current income tax liabilities 192,483

178,335

Receivables from related parties

1,831

1,273

Liabilities towards related parties

Current income tax receivables

8,993

2,832

Other financial liabilities

Financial assets

5,890

11,620

40,046 249,243

Other assets

Cash and cash equivalents Current assets Assets held for sale

Trade payables

9,309

8,298

48,566

45,585

45,013

472,263

507,310

239,073

2,190,972

2,137,280

382,355

168,282

1,298,517

1,235,379

1,500

1,298,517

1,236,879

2,190,972

2,137,280

Other liabilities

N o r d z u c k e r I n t e r i m R e p o r t 9 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

Fi n a n ci a l C a l e n d a r

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

Dividend payment Other

24 May 2017 Publication of the Annual Report 2016/17 Total equity

1,229,907

41,636

343

375

22,617

–3

22,614

22,617

Other comprehensive income

Equity attributable Nonto shareholders of controlling the parent company interests

1,271,543

22,649

340

22,989

–4,830

–1,930

–6,760

As of 30/11/2015

123,651

127,035

1,030,806

–33,766

1,247,726

40,046

1,287,772

As of 1/3/2016

123,651

127,035

1,046,339

–57,844

1,239,181

39,186

1,278,367

78,864

2,855

81,719

–7,939

–2

–7,941

–7,939

Net income for the period

78,864

Other comprehensive income Consolidated comprehensive income

78,864

Dividend payment Other As of 30/11/2016

123,651

127,035

70,925

2,853

73,778

–4,830

–133

–4,963

–7

–3

–10

1,305,270

41,903

1,347,173

1,120,366

–65,782

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

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.