Diversification leads Europe s largest sugar producer into a sucessful future Thomas Kölbl (CFO) September 10, PDF

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Diversification leads Europe s largest sugar producer into a sucessful future Thomas Kölbl (CFO) September 10, 2007 Overview 1. Südzucker-Group at a glance page 3 2. Development of Segments Sugar page

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Diversification leads Europe s largest sugar producer into a sucessful future Thomas Kölbl (CFO) September 10, 2007 Overview 1. Südzucker-Group at a glance page 3 2. Development of Segments Sugar page 7 Special Products page 14 Fruit page Outlook page 22 Südzucker-Group: Page 2 Südzucker-Group at a glance Geographic revenue split 2006/07 Single global food company with headquarters and stock quotation in Germany Above 70 % of revenues generated outside Germany Strong presence in growing region Eastern Europe Development of new growth markets (e.g. Russia, China, Brasil) Early market entry into growing business platforms (e.g. Functional Food, fruit preparations) Focus on B2B Tremendous growth option Bioethanol triggered Solid structure of shareholders supports longterm strategic acting EU 15 (48,6 %) Germany (29,3 %) revenues 5.8 bn EU 12 (13,9 %) Solid shareholder structure market capitalisation 2.7 bn rest of world (8,2 %) SZVG 55% Free Float 35 % ZSG 10% Südzucker-Group: Page 3 Südzucker-Group Segments Segment Sugar Segment Special Products Segment Fruit revenues: 3.5 bn revenues: 1.3 bn revenues: 0.9 bn 40 sugar factories and 2 sugar rafineries in Europe Bioethanol Frozen Pizza Functional Food PortionPack Europe Starch Fruit preparations Fruit-juice concentrates 37 manufacturing sites worldwide Clear strategy of market leadership in all business areas / segments Südzucker-Group: Page 4 Südzucker-Group Revenue: Past Present Future 2002/ / /10e 21% 16% * 17% 79% 23% 61% 34% 49% * 14 months Sugar Specialities Fruit Investment offensive 03/04-07/08 with 3.3 bn focused on segments Special Products (Functional Food, Bioethanol) and Fruit Until end of 2008/09 completion of capacity upgrades Bioethanol Past investments and expansion program Bioethanol lead to increasing revenues and earnings contributions of Special Products and Fruit until 2009/10 Südzucker-Group: Page 5 Overview 1. Südzucker-Group at a glance page 3 2. Development of Segments Sugar page 7 Special Products page 14 Fruit page Outlook page 22 Südzucker-Group: Page 6 Segment Sugar Short Profile (1) Key figures 2006/07 Beet growers: 62,300 Acreage: 444,900 ha Beet processing: 27.5 mn t Sugar production: 4.6 mn t Revenue development (mn ) ~2.700 Core Competences Production of high quality sugar with wide range of products 2000/ / / / / / / /10e Sugar for food appliances ( Quota Sugar ) Sugar for chemical/pharmaceutical appliances ( Industrial Sugar ) Processing and upgrading of large quantities of sugar beet and sugar Distribution: Proximity to customers within European market Key data EU-business Campaign 2006/07 EU-15 EU-12 2 EU-27 Population in mn Consumption in mn t 12,9 2,7 15,6 SZ sugar quota mn t 1 3,3 0,7 4,1 SZ production sites excl. Eastern Sugar, 2 incl. Romania, 3 incl. 2 refineries Südzucker-Group: Page 7 Strong position in Europe in challenging environment Key characteristics of new sugar market regime (since 1st July 2006) Reduction of sugar reference price on producer level and simultaneous overproportional decline of basic beet price Abolition of C sugar and simultaneous introduction of industrial sugar business Reduction of EU sugar quota (by 5 to 6 mn t) Non-recurring option for quota acquisition and quota surrender against compensation Target Market equilibrium in Europe Südzucker quota share 23,7 % (2006/07) Belgium 69 % 20 % France Germany 40 % 100 % Austria EU sugar quota 17.4 mn t 19 % Czech Republic 37 % 25 % Poland 28 % Slovakia Hungary 35 % Moldova: market share Moldova Romania 2005/ /10e Total production Total production approx. 20 mn t mn t C-sugar Industrial sugar export Quota reduction 5-6 mn t Südzucker share 22% Additional quota EU sugar quota mn t Südzucker share 22% 56 % Südzucker-Group: Page 8 further developed Südzucker quota share 24.6 % (2007/08) EU accession Romania and Bulgaria on 1st January 2007 Production and sales organisation AGRANA Romania S.A. Establishment of trading corporation and joint venture in Bulgaria Future deficit market Italy: Increase of market share via distribution partnership Belgium 69 % 20 % France Germany 40 % Austria Polen 25 % Czech Republic 100 % 51 % 25 % Hungary Slovakia 42 % 35 % 56 % Moldova* Romania Bosnia-Herzegovina: Installation of sugar refinery (capacity 150,000 t) Bosnia- Herzegovina Bulgaria Italy * Moldova: market share Südzucker-Group: Page 9 Segment Sugar Competitive environment & strategy Südzucker- Group (24.6 %) Tereos (10.0 %) Nordzucker (9.8 %) EU-Quota 2007/08: mn t 2 British Sugar (8.5 %) Pfeifer & Langen (6.5 %) Danisco (6.3 %) Ebro Puleva (4.7 %) EU east enlargement: consequent development of market share Review of expansion in non-european countries (e.g. Brasil) Continuing optimisation of cost structures White sugar yield in the EU 2005/06 t white sugar /ha Südzucker EU sugar production (incl. Südzucker) Ø EU-15 11,0 9,4 Ø EU-10 8,3 7,6 All others (29.6 %) Ø EU-25 9,7 8,0 1 Sugar marketing year 2007/08: October 2007 September as of April 2007 Südzucker-Group: Page 10 Segment Sugar: Outlook 2007/08 *) Impact temporary lasting Continued restrictive EU export policy Disappointing quota restitution 2007/08 Expected significant increase of already announced preventive withdrawal over 13.5 % for sugar marketing year 2007/08 Outlook Operating Profit (mn ) Missing contribution margin Restructuring levy increases to 174 (126) /t; further-on charge on entire quota, i.e. also on non-produced sugar (agreed withdrawal by EU commission) Idle capacities 2nd step in decline of factory margin Abolition of C sugar business First time charge of production levy new sugar market regime / /08e circa break-even *) not taking into account new proposal of EU commission to reform the reform Südzucker-Group: Page 11 Segment Sugar: Mid term outlook Improved proposal by EU commission (7 May 2007) significantly increases Beet growers share in restructuring premium after quota renouncement at least 10 % Initiative right for quota surrender alone on behalf of manufacturer probability to reach market equilibrium Current regulation New EU proposal SZ-assessment pos. neg. Share of beet growers restructuring premium after renouncement fixed at 10 % plus 237,50 /t top-up Initiative right for quota renouncement extended to beet growers for up to 10 % of quota Restructuring levy (sugar marketing year 2007/08) has to be paid on entire quota In case of quota renouncement by manufacturer exceeding individual preventive withdrawal (sugar marketing year 2007/08) no charge of restructuring levy on this withdrawal Südzucker-Group: Page 12 Overview 1. Südzucker-Group at a glance page 3 2. Development of Segments Sugar page 7 Special Products page 14 Fruit page Outlook page 22 Südzucker-Group: Page 13 Segment Special products The Divisions Division Market Position Growth / Strategy Bioethanol Goal: #1 in Europe Largest European production facility runs on full capacity until 2010 Capacity expansion from 260 T m 3 to 1 mn m 3 EU mandatory blending 5.75% by 2010 Funtional Food # 1 worldwide Product innnovations according to market trends in Isomalt and e.g. Palatinose: sugar based ingredients for Oligofructose Sports and Spa beverage Increasing awareness for nutrition Growing per capita income in emerging markets Starch Leading european B-2-B-supplier in Bio-area Development of niche starches with higher value added Frozen Pizza #1 in Europe Growing european market for frozen food PortionPack #1 in Europe Production and sales of portion articles Development of revenues (mn ) CAGR: 10,1 % ~ Revenue distribution 06/07 Starch 19% PortionPack 7% Functional Food 27% 2000/ / / / / / / /10e Freiberger 31% Bioethanol 16% Südzucker-Group: Page 14 Segment Special products Bioethanol Starting point (investment case) Diversification into sugar related growth areas Utilisation of core competences of Südzucker-Group Upgrading of agricultural raw material into premium preliminary products for processing industry Sugar thick juice as renewable resource (e.g. sugar factory Zeitz) Closeness to alternative raw material sources (wheat, sugar, corn) Market growth: (Fiscal) sponsorship of bio-fuels within EU member states Mandatory blending of bio-fuels (5.75% until 2010 further plans to increase up to 10% in 2020) Implementation & Strategy Investments into markets that have already or will implement EU-directive (GER, AUT, B, F, HU) Financial headroom through IPO of CropEnergies Triplication of capacity to 1 mn m3 bioethanol in 2010 Improvement in operating margin through higher utilisation Objective: Market leadership in Europe by 2010 (market share 10%) Development of Sales (Mio. ) Development of revenues (mn ) CAGR: ~78% 61 Umsatzentwick 206 lung SZ- Bioethanol / / /10e CropEnergies SZ Bioethanol gesamt Market Potential Bioethanol (mn m 3 ) CAGR: ~78% ~0,9 0,1 ~1,5 0,3 ~600 ~500 ~7,9 ~ 1,0 2005/ / /10e SZ Bioethanol EU-Markt market für for Bioethanol (Kraftstoffanwendungen) (fuel applications) Südzucker-Group: Page 15 Bioethanol with scheduled capacity upgrades 2005/ /10e Zeitz ( m³) Zeitz ( m³) Zeitz Annex ( m³) Loon-Plage ( m³) Loon-Plage ( m³) Pischelsdorf ( m³) Wanze ( m³) Hungrana ( m³) * Hungrana ( m³) * CropEnergies AG AGRANA (* Joint Venture-share) Südzucker Following investment phase, division bioethanol will command about 1 mn m³ production capacity in 2009/10 (market share 10 %) Diversification of raw material basis (Wheat, sugar, corn) Established production know-how in combination with strong brands (e.g. CropPower 85, ProtiGrain) and distribution network Südzucker-Group: Page 16 Segment Special Products: Outlook 2007/08 Growth Continued revenue progression division Bioethanol: 30 % Growth Functional Food on comparable basis in core products (absolute decline due to sale of inulinfructose production) Continuous growth of other divisions Optimisation Increasing capacity utilisation Enhancement of production processes (e. g. Chile) Profit increase Rising earnings contributions (especially from Bioethanol and Functional Food) Südzucker-Group: Page 17 Overview 1. Südzucker-Group at a glance page 3 2. Development of Segments Sugar page 7 Special Products page 14 Fruit page Outlook page 22 Südzucker-Group: Page 18 Segment Fruit Overview Divisions at a glance Fruit preparations: World market leader Customers: dairy, baking and ice cream industry Fruit juice concentrates: Leading European producer (market leader in apple juice concentrates) Core competences Upgrading of agricultural raw material into premium preliminary products for food industry Global sourcing and distribution of fruit ingredients Positioning & Strategy Shared customer base with segments/divisions sugar, functional food and starch Accelerated organic growth Emphasis on expansion into attractive growth regions (e.g. Brasil, Russia, China) Growth driver: Especially yogurt drinks rank among the fastest growing food products globally Increase in awareness for healthy food and growing per-capita income (emerging markets) Synergies / Production cost optimisation 39 Development of revenues (mn ) months 2003/ / / / /10e months Juice & Fruit Holding GmbH, Wien AGRANA Fruit S.A. Paris Fruit preparations: 37% world market share 26 production plants worldwide ~900 AGRANA Juice GmbH, Gleisdorf Fruit-juice concentrates: 10% world market share 11 production plants worldwide Südzucker-Group: Page 19 Segment Fruit: Outlook 2007/08 Growth Optimisation Continued growth path combined with huge effort for integration of acquired companies Growth engine: production in Russia, joint ventures in China und Brasil Realisation of price increases in light of product innovation (e.g. co-operation of Functional Food and Fruit) Clear priority on lifting synergies through integration of acquired companies (e.g. purchasing, distribution, product development, administration) Exploitation of scale effects and increase in utilisation Profit increase Increase in earnings contribution due to synergies Reduced fixed cost level/ growing top-line contribution Südzucker-Group: Page 20 Overview 1. Südzucker-Group at a glance page 3 2. Development of Segments Sugar page 7 Specialities page 14 Fruit page Outlook page 22 Südzucker-Group: Page 21 Südzucker Group: Outlook 2007/08 *) Revenues Südzucker Group: ~ bn Segment Sugar: decline in light of announced withdrawal Organic growth in segments Special Products and Fruit (previous year 14 months) Operating Profit Südzucker Group: ~ mn Segment Sugar circa break-even Segment Special Products: increase Segment Fruit: significant increase on comparable basis (previous year 14 months) Capex Südzucker Group: ~ 500 mn (fixed assets) thereof 50% bioethanol *) not taking into account new proposal of EU commission to reform the reform Südzucker-Group: Page 22 Südzucker Group: Midterm Outlook 2009/10 *) Revenues ~ bn Segments Special Products and Fruit with share of about 50% Operating Profit 450 mn Capex ~ 250 mn (fixed assets) *) not taking into account new proposal of EU commission to reform the reform Südzucker-Group: Page 23 Executive Summary Outlook 2007/ /09 Segment Sugar: Continued operational structural measures to adjust production capacities Burden from sugar market regime overlaps with high temporary charges New EU reform proposal with positive impulse Segments Special Products and Fruit: Market growth and existing production facilities generate higher earnings in Bioethanol, Functional Food and Fruit Outlook 2009/10 Group operating profit to exceed pre-regime-change level following temporary earnings burden within sugar segment ( 450 mn ) Significant increase in visibility after transition period (particularly beyond end of temporary impacts within sugar segment) and balanced earnings structure Südzucker-Group: Page 24 Disclaimer This presentation contains forward-looking statements that reflect management's current views with respect to future events. The forward looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements. Potential risks and uncertainties include such factors as general economic conditions, foreign exchange fluctuations, competitive product and pricing pressures and regulatory developments. We do not intend or assume any obligation to update any forwardlooking statement, which speaks only as of the date on which it is made. Südzucker-Group: Page 25 Südzucker-Group: Page 26
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