Letter from the CEO
It is a pleasure to report to you on 2010|11 – a record year. Despite an extremely volatile busi- ness environment, we were able to boost revenue by 8.9% to about € 2.2 billion. Operating profit before exceptional items jumped to € 128.1 million, an increase of 39.4% from the previous year.
Purposeful investment in our production capacity in Hungary, in our Starch business in Austria, in the Bioethanol activities and in the Sugar and fruit businesses laid the foundation for the significant sales volume growth in the year behind us. This positive volume trend will continue to drive business performance in the year ahead.
The powerful volatility in world market prices for agricultural raw materials was one of our greatest challenges last year. The dual key to success was to reflect purchasing price increases swiftly in selling prices, and to realise substantial cost savings through internal organisational and structural changes. These measures also allowed us to adjust more rapidly and nimbly to the changing market conditions and significantly increase efficiency. Thus, the interchange and coordination between the various business segments and departments was enhanced. In sales, for example, we stepped up the cross-selling between segments, and in purchasing and logistics we combined our internal activities to gain economies of scale.
In effect, last year we made AGRANA more closely integrated and synergistic, heightening the Group’s flexibility and efficiency in adapting to the increasingly complex environment in which we operate. Risk diversification through a good balance between our three equally vital business segments was and remains extremely important to us.
Sugar segment
For the Sugar market, the financial year under review – the first in which the new regulatory environment created by the reform of the EU Sugar regime applied in the form effective until 2015 – brought a recovery in prices in the EU. Our Non-Quota Sugar sales quantities saw gratifying growth. As well, particularly in the second half of the year, the world market price was well above European levels.
Revenue in the Sugar segment for the 2010|11 financial year grew by 4.2% to € 713.1 million. The segment’s operating profit before exceptional items, at € 33.1 million, more than doubled from the prior year, as did the Operating margin, which rose to 4.6%. AGRANA will continue efforts to strengthen its competitiveness and increase regional market penetration.
Starch segment
Sales volumes in the Starch segment as well expanded in the year for all groups of core products and by-products. The market trend in all sectors was characterised by strong demand. The business performance in the Bioethanol operations was also very positive.
With revenue growth of 16.8% to € 583.2 million and a 17.3% increase in operating profit to € 48.2 million, Starch was AGRANA’s fastest-growing segment. Starch also again achieved the highest Operating margin of any of our segments, at 8.3%. We will continue to invest in the Starch manufacturing operations to eliminate production bottlenecks and enable us to take full advantage of the demand growth.
Fruit segment
AGRANA is the world market leader in fruit preparations and a leading manufacturer of fruit juice concentrates in Europe. Especially in the concentrate activities, our performance improved in the reporting period. We expect the planned new joint venture with Ybbstaler Fruit Austria GmbH to significantly enlarge our capacity in fruit juice production and trading and further raise the efficiency of the AGRANA Group.
In 2010|11 we grew Fruit segment revenue by 7.9% to € 869.6 million. Operating profit before exceptional items reached € 46.7 million. The Operating margin also widened, from 4.4% in the prior year to 5.4%. Our goal in Fruit is to increase worldwide market penetration and cement our market position with made-to-measure products.
Outlook
Synergy has been the common theme running through all our business areas and activities in recent years. In the 2011|12 financial year we will continue along this path, building on the experience already gained. For instance, the even greater use of by-products is to further boost efficiency and sustainability. A good example is the construction of a new wheat Starch factory at the site of the Bioethanol plant in Pischelsdorf, Austria. The raw material residues from the production of wheat Starch and of Gluten will be utilised to produce Bioethanol.
After three financial years of focused, but modest, capital expenditure, this year we plan to invest about € 100 million, mainly in sustainable expansions of production and in projects that raise our energy efficiency. Nonetheless, I expect we will be able to hold the level of the Group’s debt steady. With these investments, the greater efficiency and flexibility, and the knowledge and capabilities gained through our continuous learning curve and development in the past several years, we will further advance the sales and profit growth in all our segments. Against this backdrop, the Management Board intends to propose at the coming Annual General Meeting to increase the dividend to € 2.40 per share.
In 2011 AGRANA celebrates its twentieth year as a publicly traded company. Alongside the opening of the Iron Curtain, the international expansion of the Group and Austria’s accession to the European Union, AGRANA’s going public surely stands as one of the major milestones in the company’s history. The demands of the capital market, particularly as to transparency and corporate governance, shape a listed company and its culture, and I believe this is a good thing. I also appreciate our stable shareholder structure, which has been and will continue to be very helpful in overcoming problems during the Group’s more difficult periods.
On behalf of the whole Management Board, I would like to thank our employees for their commitment and loyalty; our commercial partners, for the good business relationships; and our shareholders, for their confidence and trust.
Sincerely,
Johann Marihart
Chief Executive Officer