The completed 2008|09 financial year, as expected, brought the collapse of the speculative bubble in agricultural raw materials and the return to earlier normal prices in the commodity market. Nonetheless, the run-up in commodity prices that lasted until September 2008 determined our business performance in 2008|09. Moreover, the spreading of the global financial crisis to the real economy from the fourth quarter of the 2008 calendar year triggered a widening world economic crisis. This ushered in a period of uncertainty in the markets for our products. The steep decline in many Eastern European currencies around the turn of the year further exacerbated the business environment for AGRANA. The decrease in oil prices to 40 to 50 US dollars per barrel came too late in the 2008|09 financial year.
Revenue grows to more than € 2.0 billion,while operating profit falls sharply to € 37.8 million amid the turmoil in energy and commodity markets and the macroeconomic volatility.
AGRANA was thus confronted with extremely volatile economic conditions and an unstable market situation. All the same, after a very difficult first half of 2008|09, we were able to regain stability in the operating business. We largely achieved our growth targets with a revenue increase to more than € 2.0 billion, up from € 1.9 billion in the previous year. At the same time, the decrease in pre-exceptionals operating profit to € 37.8 million from € 111.4 million in the prior year reflected the turmoil in energy and agricultural commodity markets as well as the extremely volatile overall economic situation. The recent strong movements in exchange rates especially in Eastern Europe were the reason for the very unsatisfactory negative net financial items result of € 67.1 million and, despite the stable operating performance later in the period, led to a loss for the year of € 15.9 million, after a profit of € 63.8 million for the prior year.
Sugar segment
Europe’s sugar market remains in transition as a result of the reform of the EU sugar regime. The good harvest, efficiency improvement measures and rationalisation combined with sales volume growth allowed AGRANA to successfully defend its position in 2008|09 as the leading sugar producer in Central and Eastern Europe. The segment operating profit of € 15.8 million before exceptional items was significantly below the year-earlier level of € 32.6 million. The main causes were the expenses for EU restructuring payments and declining sugar prices. We see AGRANA as remaining very well positioned in our sugar markets.
Starch segment
The first half of 2008|09, until the new grain and corn (maize) harvest, was heavily affected by the volatility in raw material markets; the normalisation in prices in the latter half of the year brought a return to normal profit margins. The expansion of our processing capacity and higher trading volumes were beneficial for revenue. Start-up costs for our Austrian bioethanol production in Pischelsdorf were the main factor in the drop in operating profit to € 27.5 million before exceptional items (compared to the prior year’s € 35.3 million profit).
Fruit segment
Through the capacity expansion in Brazil and further product innovations, AGRANA continued to reinforce its position as the world market leader in fruit preparations in 2008|09. However, AGRANA was hurt by the price volatility in raw material markets, particularly in the concentrate business. After exceptionally high prices for apples in the 2007 harvest season, a sudden price plunge in early summer 2008 led to the need for considerable inventory write-downs at AGRANA Juice. Although operating profitability recovered in the third and fourth quarter of the financial year, the valuation losses of the first half of the year could not be made up. The segment thus registered an operating loss of € 5.5 million before exceptional items (compared to a prior-year profit of € 43.5 million).
Outlook
The current situation demands maximum effort, especially as the economic crisis will continue to dominate the business environment in 2009|10. Although the sales markets in the food industry are not subject to the extreme cyclical swings that are buffeting other sectors, economic disturbances of this severity do dampen consumer sentiment in our business as well.
Looking ahead, in future we plan to make greater use of synergies between the individual segments and at the Group holding company level. We are convinced that these measures will take us an important step forward both in cost optimisation and in even stronger operational efficiency.
Our three strategic pillars of Sugar, Starch and Fruit continue to hold good growth opportunities for us in the years ahead. Despite the financial and economic crisis, the megatrends that ultimately drive our company’s growth have not fundamentally changed: In the long term, the trend to healthy eating will buoy our Fruit segment, as will the growing prosperity and population in emerging markets. In Starch, we see sustained good long-term prospects in bioethanol and custom-designed specialty starches. In the Sugar business, AGRANA’s outstanding market position in the future sugar deficit markets of Central and Eastern Europe will be positive for our sales potential.
We will counter short-term economic weakness with fastacting, appropriate and vigorous measures without losing sight of the long view. Thus, even in difficult economic times, we will not cut budgets for the ongoing development and specialisation of our product portfolios in the Starch and Fruit segments but instead will consistently continue to expand our innovation pipeline.
Furthermore, as a financially strong company with a stable shareholder structure, we have sufficient room for manoeuvre even in the present environment. The Group’s financing is comfortably secure. Despite the current very adverse business climate, we are therefore confident of AGRANA’s continuing ability to perform well.
Finally, speaking for the whole Management Board, I would like to thank all our employees for their commitment and hard work in testing times. We are also and especially grateful to our customers and shareholders for the confidence placed in us.
Sincerely
Johann Marihart
Chief Executive Officer