Group financial statements, results of operations, Group revenues and profits

Südzucker Group revenues rose by EUR 252 million, or 5.5 % in 2004/05, to EUR 4,827 million (EUR 4,575 million)*. Operating profit grew over-proportionately by 9.2 %, or EUR 44 million, from EUR 479 million in 2003/04 to EUR 523 million, the highest-ever profits for the Südzucker Group.

Higher revenues for sugar and special products

Growth of 3.6 % in revenue for the sugar segment, from EUR 3,395 million to EUR 3,518 million, was primarily due to positive developments in eastern Europe, where EU expansion on 1 May 2004 led to an expected sharp rise in revenues, from EUR 373 million to EUR 562 million. On the other hand, in the EU 15 area there was a decrease in revenues of some 2.2 %. This was due to low sugar production during the 2003 campaign, whereby less sugar was available for export in 2004/05. Further negative factors were price pressure and a reduction in mixed feed and molasses revenues.

In the special products segment, the climb in revenues continued with an increase of EUR 129 million, or 11.0 %, from EUR 1,180 million to EUR 1,309 million. About half this increase in turnover was due to continuing growth in the functional food, Freiberger and starch divisions. Sales growth in the special products segment was boosted by the integration of Steirerobst (9 months for 2004/05) and Stateside (only 6 months in 2003/04).

Operating profit groth stronger than for revenues

Operating profit was marked by a sound performance in the special products segment and a rise in profitability at the eastern European sugar companies. An improvement of 7.7 % in the sugar segment, from EUR 335 million to EUR 360 million, was again exceeded by profit increases in the special products segment. The latter was able to improve operating profits by 12.5 %, from EUR 144 million to EUR 163 million. Operating margin (operating profit as a percentage of revenues) could be improved from 10.5 % in 2003/04 to 10.8 % in 2004/05 for the group as a whole.

The increase in operating profit in the sugar segment was due to the positive performance of the eastern European sugar entities. Admission to the EU of the eastern European EU candidate states, in which Südzucker, with a sugar quota share of 24 %, is more strongly represented than in the original EU 15, led to a sharp increase in profitability. Indeed, the eastern European companies achieved a better operating margin than the entities in the EU 15. The inclusion for the whole year of Slaska Spolka Cukrowa holding company, in which nine Silesian sugar factories are combined (2003/04: 9 months), boosted this positive performance still further. Results of the German, Belgium, French and Austrian sugar companies were negatively affected by price reductions, particularly for exports of quota sugar to third-world countries, lower C-sugar contributions to profitability and higher energy and coking coal costs.

A double-digit profit increase of 12.5 %, to EUR 163 million, was recorded by the special products segment. Eliminating the special effects of changing Freiberger's financial year in 2003/04, this segment»s growth would be even stronger. The main driver of this expansion continues to be the functional food division, with strongly above-average growth rates. Normalisation of raw materials costs led to a clear improvement in profitability in the starch division.

ROCE

At 11.3 %, return on capital employed, or operating profit as a percentage of capital employed (ROCE), remained almost at the same level as in 2003/04 (11.7 %), due to improved profitability offset by greater capital employed.

Restructuring costs

Restructuring costs and other exceptional items could also be improved as well as operating profit, by EUR 46 million to EUR 13 million. A significant reason for this was the lack of restructuring expenses, caused in the previous year by the closure of sugar factories in Belgium and Poland as well as by Südzucker's part-time early retirement program. Further exceptional income arose from the successful placing of a package of Fresenius shares and the sale of the remaining 10 % shareholding in KWS Saat AG. On the other hand, there were charges arising from contaminated pellets which could not be used as animal feed.

Financial results

Financial results deteriorated from net expense of EUR 53 million in 2003/04 to net expense of EUR 79 million in 2004/05. This was due to the increase in net interest expense as a result of substantial capital expenditures. Financial results include income totalling EUR 16 million from the Atys Group, stated at equity for the first time, and from Eastern Sugar.

Earnings before income taxes, net earnings after tax, net earnings per share

Earnings before income taxes amounted to EUR 458 million and were thus EUR 64 million, or 16.2 %, above the EUR 394 million achieved in 2003/04. The group's effective income tax rate could be maintained at 21.7 % (21.9 %). This was partly due to the Austrian corporation tax reform, leading to a reduction in corporation tax rates from 34 % to 25 %. Furthermore, income tax rates are some 19 % in the eastern European EU countries. With taxes on income amounting to EUR 99 million (EUR 86 million), net earnings after tax for 2004/05 amounted to EUR 358 million, or 16.6 % higher than EUR 307 million achieved in 2003/04. Südzucker shareholders' share of these net earnings amounted to EUR 298 million, 17.1 % more than in 2003/04. This amounts to net earnings per share of EUR 1.73, compared with EUR 1.48 in 2003/04.

Cash flow statement

2004/05 was marked by capital expenditures on tangible assets of EUR 500 million, or EUR 193 million higher than the EUR 307 million expenditures in 2003/04. A major part of this expenditure was the construction within one year of a bioethanol production plant at Zeitz, with a total capital expenditure volume of some EUR 200 million. Capital expenditures in expanding Isomalt production capacity at Offstein continued. The growing demand for Raftiline and Raftilose; products has been reflected by the construction of a second Orafti production plant in Chile.
Südzucker used the opportunity to acquire 14.2 % of the shares in Raffinerie Tirlemontoise from institutional investors for EUR 368 million. Overall, the holding in R.T./SLS Group was increased to 99.6 %, with 0.4 % of the shares held by Belgian sugar beet farmers. Together with the increase in holdings of Atys, Steirerobst and the acquisition of Wink, EUR 590 million was invested in financial assets.

Total capital expenditures of EUR 1,090 million were primarily financed by shareholders' equity, on the one hand from increased operating cash flow of EUR 550 million (EUR 522 million) and on the other hand by capital increases at AGRANA and Z+S Holding AG in February 2005, from which cash flows of EUR 248 million increased group equity.

The remainder was financed by current and non-current third-party funds. After considering the effects of changes in working capital, group companies included in the consolidated financial statements for the first time and dividend payments, net third-party debt amounted to EUR 1,672 million (EUR 1,100 million).

Balance sheet

Südzucker Group's total assets increased by EUR 1,157 million, or 19.2 %, to EUR 7,195 million (EUR 6,038 million). This increase was significantly influenced by capital expenditures in bioethanol and expanding Palatinit and Orafti capacity. For financial assets, the increase was mainly due to the expansion of the fruit group, with an increase to 50 % in the investment in Atys Group. The increase of EUR 261 million in intangible assets is primarily due to the acquisition of 14.2 % of Raffinerie Tirlemontoise.

Shareholders' equity increased by EUR 352 million, from EUR 2,386 million on 29 February 2004 to EUR 2,738 million at 28 February 2005. Increases due to net earnings for the year of EUR 358 million and capital increases of EUR 248 million were partly offset by dividend payments of EUR 102 million and a decrease in minority interest due to the acquisition of 14.2 % of Raffinerie Tirlemontoise S.A.. The ratio of shareholders' equity to total liabilities and shareholders' equity of 38.0 % and the ratio of net financial debt to shareholders' equity of 61.1 % underline the group»s sound financing ratios. EUR 1,216 million of net financial debt is financed long-term by debentures and convertible bonds.
Recommendation on appropriation of profits

The executive board and supervisory board will recommend a dividend of EUR 0.55 per share to the annual general meeting on 28 July 2005. With share capital of EUR 174.8 million entitled to dividends, the amount distributed will be EUR 96.1 million. The dividend will be paid on 29 July 2005.