Annual Report • May 21, 2007
Annual Report
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AGRANA BETEILIGUNGS-
AG
02|03 03|04 04|05 05|06 06|07 120 100 80 60 OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS €m
| May 21, 2007 |
|---|
| Press conference presenting annual results |
| for 2006 07 |
| July 5, 2007 |
| Annual General Meeting |
| July 10, 2007 |
| Ex-dividend date and dividend payment date |
| July 12, 2007 |
| Results for first quarter of 2007 08 |
| October 11, 2007 |
| Results for first half of 2007 08 |
| January 15, 2008 |
| Results for first three quarters of 2007 08 |
| 2006 07 | 2005 06 | 2004 05 | 2003 04 | 2002 03 | ||
|---|---|---|---|---|---|---|
| BUSINESS PERFORMANCE | ||||||
| Revenue | €m | 1,915.8 | 1,499.6 | 981.0 | 866.4 | 875.7 |
| EBITDA | €m | 187.5 | 164.6 | 138.6 | 116.8 | 120.4 |
| EBITDA margin | % | 9.8 | 11.0 | 14.1 | 13.5 | 13.7 |
| Operating profit | €m | 107.0 | 99.5 | 90.8 | 76.8 | 80.5 |
| Operating margin | % | 5.6 | 6.6 | 9.3 | 8.9 | 9.2 |
| Operating profit | ||||||
| after exceptional items1 | €m | 105.8 | 75.0 | 90.8 | 76.8 | 75.1 |
| Profit before tax | €m | 93.5 | 71.7 | 93.2 | 70.7 | 87.2 |
| Profit for the period | €m | 71.1 | 64.7 | 84.3 | 57.5 | 67.3 |
| Attributable to | ||||||
| equity holders of parent | €m | 68.9 | 62.7 | 79.9 | 56.5 | 65.4 |
| Minority interests | €m | 2.2 | 2.0 | 4.4 | 1.0 | 1.9 |
| Profit before tax, depreciation | ||||||
| and amortisation | €m | 150.5 | 145.3 | 116.5 | 101.2 | 106.5 |
| Purchases of property, plant and | ||||||
| equipment and intangibles2 | €m | 157.4 | 91.2 | 52.1 | 28.5 | 34.0 |
| Purchases of non-current | ||||||
| financial assets | €m | 5.6 | 7.5 | 100.9 | 61.3 | 13.0 |
| Staff count | 8,223 | 8,130 | 4,958 | 3,841 | 3,916 | |
| Return on sales | % | 4.9 | 4.8 | 9.5 | 8.2 | 10.0 |
| Return on capital employed | % | 8.6 | 8.6 | 10.7 | 14.7 | 16.3 |
| Debt/equity ratio | % | 37.9 | 31.8 | 11.5 | 0.3 | (10.0) |
| SHARE DATA | ||||||
| AT FEBRUARY 28, 2007 | ||||||
| Closing price | € | 76.00 | 78.00 | 79.85 | 61.50 | 39.60 |
| Earnings per share | € | 4.85 | 4.42 | 7.18/5.623 | 5.08 | 5.93 |
| Dividend per share | € | 1.954 | 1.95 | 1.95 | 1.80 | 1.80 |
| Dividend yield | % | 2.6 | 2.5 | 2.4 | 2.9 | 4.6 |
| Dividend payout ratio | % | 40.2 | 44.1 | 27.2/34.7 | 35.4 | 30.4 |
| Price/earnings ratio | 15.7 | 17.6 | 11.1 | 12.1 | 6.7 | |
| Market capitalisation | €m | 1,079.4 | 1,107.8 | 1,134.0 | 678.2 | 436.7 |
| FINANCIAL STRENGTH | ||||||
| Total assets | €m | 1,931.7 | 1,850.5 | 1,500.4 | 935.2 | 897.1 |
| Share capital | €m | 103.21 | 103.21 | 103.21 | 80.1 | 80.1 |
| Non-current assets | €m | 933.3 | 900.4 | 642.3 | 415.5 | 346.3 |
| Equity | €m | 895.5 | 885.8 | 835.9 | 515.8 | 475.0 |
| Equity ratio | % | 46.4 | 47.9 | 55.7 | 55.2 | 52.9 |
| Net debt | €m | 339.4 | 281.9 | 96.4 | 1.7 | (47.7) |
1 Before exceptional items, such as restructuring
2 Excluding goodwill
3 Earnings per share in relation to the number of shares outstanding on February 28, 2005
4 Propose to the Annual General Meeting
of AGRANA Beteiligungs-Aktiengesellschaft for the year ended February 28, 2007
Decision to expand the processing capacity of Hungrana, the corn starch and isoglucose plant in Hungary, from 1,500 to 3,000 tonnes of corn per day by 2008. In the expansion, bioethanol capacity will triple to about 160,000 cubic metres per year.
AGRANA enters apple juice concentrate production in China by acquiring 50% of producer Xianyang Andre Juice Co., Ltd.
AGRANA launches a joint venture to establish a sugar refinery in Brcko, Bosnia-Herzegovina.
Completion of the Fruit segment restructuring by forming two holding companies, AGRANA Fruit S.A. for fruit preparations and AGRANA Juice GmbH for fruit juice concentrates.
AGRANA's Annual General Meeting decides to pay a dividend of € 1.95 per share.
Foundation stone is laid for the AGRANA bioethanol plant in Pischelsdorf, Austria, with an annual capacity of up to 240,000 cubic metres.
The European Commission announces an early temporary quota reduction of 13.5% for the 2007|08 sugar marketing year.
AGRANA expands the sugar and starch distribution activities to Bulgaria by starting a trading company in Sofia.
Construction starts on a fruit preparations plant in Cabreúva, Brazil.
AGRANA is a multinational enterprise headquartered in Austria. AGRANA's Sugar segment and Starch segment operate in Europe. AGRANA's Fruit segment operates globally. In these markets, AGRANA's goal is to be a leader in the industrial refining of agricultural raw materials.
Growth and efficiency ensure a sustainable increase in enterprise value. We aim to be the best and most dependable partner to our customers in our core businesses, which are sugar, starch and fruit processing.
We refine natural products into high-grade foods and technical products for industrial use. Our activities range from the manufacture of industrial intermediate products to providing advisory services. We supply both industry and trade.
We offer products and services that fully meet the needs and expectations of our customers. We challenge our competitors by providing both high product quality and an exceptionally high standard of service. We are creative, flexible and dedicated. Our innovative power and research and development work will drive our leadership in the marketplace.
We operate a decentralised organisation thereby assuring close proximity to our markets. The organization is based on operating companies in the Sugar, Starch and Fruit segment which are each responsible for their respective results, and on a powerful communication network that ensures a constant and consistent exchange of information and expertise.
Profit constitutes the basis for the economic sustainability of our enterprise's activities. We ensure AGRANA's sustainable increase in enterprise value and the ability to distribute dividends to our shareholders through continued growth and consistent improvement in productivity in all our operating companies. We seek to diversify risks to our business to achieve a wellbalanced global business portfolio. Optimising our value added is a cornerstone in our efforts to provide continual increases in the enterprise value of AGRANA.
We are a multinational Group of companies. We are united by integrity, dedication and social awareness. We encourage our workforce to be willing and able to think and act with entrepreneurial spirit. Our style of work and leadership is founded on cooperation and trust. Management is remunerated on the basis of their performance. We promote the exchange of information, communication, training and continuous staff development. Flexibility and teamwork are the bedrock of our organisational structures and are the basis of our interpersonal relationships.
Our actions and decisions are taken with respect for nature and the environment. Our products are natural in origin and developed on the basis of the latest ecological research. They are bio-degradable and environment-friendly. The health and safety of the workforce are a key component of our operational policies and procedures.
Our strict manufacturing standards guarantee the safety of our products for our customers. We focus on continuing improvements in the quality and hygiene standards of the foods we make. It is both an obligation and guarantee to our customers that we provide full traceability of our products back to their natural sources.
We regularly and systematically keep our shareholders, our workforce, the media, our customers, our partners in the marketplace and the general public informed about our goals, activities and results. We strive to maintain our high level of transparency regarding all important innovations and developments.
THOMAS KÖLBL Member of the Management Board since 2005.
Born 1962. Married, one daughter, one son.
Responsible for Internal Auditing.
JOHANN MARIHART Chairman of the Management Board (CEO) since 1992.
Born 1950. Married, one daughter.
Responsible for Business Strategy, Raw Materials, Production, Human Resources, Communication, and Research & Development.
WALTER GRAUSAM Member of the Management Board
Born 1954. Married, one son.
since 1995.
Responsible for Finance & Controlling, Marketing & Sales, Information Technology & Organisation, and Subsidiaries.
In the 2006|07 financial year our company experienced a considerable growth surge in pursuit of our strategic goals in all three business segments – Sugar, Starch and Fruit. We made entrepreneurial decisions that will bring our Group substantial sales and earnings potential for the coming years. Prominent examples are the establishment of a joint venture for fruit juice concentrates in China and construction of a new raw sugar refinery in Brcko, Bosnia-Herzegovina, of the bioethanol plant in Pischelsdorf, Austria, and of the new fruit preparation manufacturing facility in Brazil.
The strategic transformation of AGRANA from a sugar and starch producer that was focused on Central and Eastern Europe to a globally operating, growth-oriented group with the three core businesses of Sugar, Starch and Fruit is a success story. For the first time in the history of our company, the Fruit segment is the biggest driver of revenue and profit. And AGRANA has continued to become more international in stature. Although most of the Group's sales are still generated in Europe, revenues and earnings in Asia and the Americas are clearly on the rise.
Given the trend in world economic growth and world trade in the past three years, AGRANA's diversification into the new business area of fruit and our associated transformation from a regional to a global player were launched at the right time. Our global growth trajectory is sustained by the visibly rising standards of living in the emerging markets. Consumer awareness of the value of healthy food and drink – the growth driver for the Fruit segment – is no longer increasing only in the highly industrialised countries of Western Europe and North America but has become a global trend. In the years ahead we will use this opportunity by further expanding our worldwide presence in the fruit market segment. In concert with our globally operating customers in the food and beverage industry, we are entering new, fast-growing regions and, around the world, consistently offer products of the highest quality backed by excellent service.
The dynamic expansion of the AGRANA Group was reflected in strong sales growth of 28% from about € 1.50 billion to € 1.92 billion. Even if part of this growth represents the changeover of the Fruit subsidiaries' financial year end to AGRANA's, our average pace of expansion in the last three years makes us one of the most rapidly growing manufacturers in our industry. Operating profit before exceptional items, at € 107.0 million, rose by 8% from the prior-year's € 99.5 million. Considering the difficult trend in the European sugar market and the rise in energy and raw materials prices, this constitutes a very good performance.
The 2006|07 financial year was year one of the European Union's sugar market reform. For the industry, the experience gained has revealed a need for stronger exit incentives and for a greater voice in the political debate. As a result of political compromises, the more efficient companies too are required to contribute to reducing the market's oversupply. Some countries where AGRANA operates will become deficit markets in the wake of the market exit of the Italian producers and of Eastern Sugar in the Czech Republic, Hungary and Slovakia. Likewise, the quota level in Romania will lead to an undersupply.
Our new raw sugar refinery in Brcko in Bosnia-Herzegovina, construction of which began in 2006, will significantly strengthen our market position in the Balkan region. As well, in 2006 we took the first important steps for entering the Bulgarian market.
Adapting to the new sugar regime, we took prompt measures that will ensure continued profitable sugar production in Central and Eastern Europe, our core markets. In the retail business we have attained a leading position through our successful regional brand concept.
In the past several years the Starch segment has developed into our highest-margin business thanks to specialisation in high-value-added products.
The intensive public debate on climate change and greenhouse gas emissions, combined with the efforts to meet the Kyoto targets, have validated our decision to become active, through bioethanol production, in the growth market for renewable energy. Bioethanol as a fuel additive boasts valuable advantages over fossil fuels when it comes to CO2 emissions. In the completed 2006|07 financial year, the construction of our bioethanol plant in Pischelsdorf, Austria, progressed rapidly. From the fall of 2007, production will both fully meet Austria's bioethanol demand and supply export markets. In the medium term, the facility's capacity should also be high enough to satisfy the Austrian government's 10% substitution target. In Hungary as well, the considerable expansion in bioethanol capacity is progressing to plan. From the 2008|09 financial year, we expect bioethanol to generate approximately 8% of Group revenue.
This was the most profitable year in AGRANA's history. The strong results were made possible by a sustainable growth strategy building on a consistent market positioning." "
By gathering the Fruit segment activities into two operating units in 2006|07 – AGRANA Juice and AGRANA Fruit – we have created a market-based organisational structure that allows us to combine and optimise purchasing and sales operations and the respective marketing activities. The benefits of this reorganisation are evident in the volume growth and higher earnings contributions achieved. In the Fruit segment, too, AGRANA is positioned as a global supplier of top-quality products for the food and beverage industry.
The Fruit segment is poised for continued growth. In the years ahead we see a persistent and significant expansion in demand both for fruit preparations and fruit juice concentrates. We plan to exploit this market trend and further cement and enlarge our market shares.
With our clear strategic focus, we will remain on our growth path in the coming years while enhancing profitability in all segments through consolidation and optimisation measures. Our focus is squarely on growth that adds value. This includes the continuation of organic growth through the expansion of existing facilities and through greenfield investments, as well as the acquisition of additional companies. Strong cash flow growth coupled with our sound equity ratio forms the economic underpinning for the realisation of our plans.
Uncertainty attaches to the further trend in the European sugar market. The effects of the further adaptation of the EU sugar regime, announced by the European Commission for this sugar marketing year, should shorten the market restructuring phase, but can only be evaluated after the decision is final.
Overall, in light of the positive trend in the Starch and Fruit segments, we are confident for the Group's current 2007|08 financial year as well. Our organic growth should enable us to compensate for the high base of sales represented by the two additional months of 2006|07 Fruit results and to cross the two-billion-euro threshold in the coming, 2008|09 financial year.
In the current 2007|08 financial year, continuing high organic growth in the Starch and Fruit segments will nearly make up for the two additional months of Fruit segment results included in the 2006|07 data. In the Sugar segment, lower volumes will be available for marketing than in the prior year and we therefore expect Sugar revenue to decrease slightly. In the subsequent, 2008|09 financial year our Group revenue will pass the two-billion-euro mark.
On behalf of the Management Board and all staff, I would like to thank our customers and suppliers for their valued working relationships with us. And a special thank you goes to our more than eight thousand employees. It is their commitment which ultimately makes AGRANA's accomplishments possible.
Sincerely
Johann Marihart Chief Executive Officer
Our core competence at AGRANA lies in refining raw materials into products for use by downstream manufacturers.
Our core competence at AGRANA lies in refining raw materials into products for use by downstream manufacturers. In the three core businesses of Sugar, Starch and Fruit, we are continually expanding our market position. This growth path is the basis for the sustained increase in earnings strength. Our business strategy is implemented through a focus on growth and efficiency, value-added investment and acquisitions, rigorous cost control and sustainable business management.
AGRANA is strategically positioned in three core businesses:
Since 1990 AGRANA has evolved into the largest supplier of sugar and isoglucose in Central, Eastern and Southeastern Europe. Market leadership, cost leadership and technological leadership in the processing of sugar beet and of raw sugar are the requirements for our sustained success in this segment. With these prerequisites in mind, we are highly confident that, thanks to new additional markets, we will be able to hold business volume broadly steady even in the fundamentally changed environment of the new EU sugar regime. Protecting the EU quota position requires a secure supply of raw material. One of the factors assuring this supply is that AGRANA's sugar factories are located in climatically favoured regions.
AGRANA is the leading producer of sugar in CEE.
Sugar is the only business segment in which AGRANA not only supplies individually tailored products to industrial customers but also operates in the consumer market. In this sector we have successfully intensified our marketing of regional sugar brands.
11
With starch, AGRANA successfully follows a wellproven, growthoriented niche strategy.
In the Starch segment, AGRANA successfully follows a well-proven, growth-oriented niche strategy. By expanding production of more highly refined specialty starches, we have set ourselves apart from our European competitors. The focus on innovative, customer-driven products supported by application advice and continuous product development, combined with cost optimisation, are the key to our sales and profit growth in the Starch segment.
In Europe, AGRANA is entrenched both as one of the leading suppliers of organic and GM-free1 starches to the food industry and as a producer of specialty starches for the paper, textile, cosmetics and pharmaceutical industries. By developing specialised products, we have also become an important supplier to the construction industry.
AGRANA's core competence – adding value to agricultural raw materials by processing them into industrial products – forms the basis for the development of the bioethanol business. Where this environmentally friendly fuel is concerned, in the medium term we seek the same leading role for AGRANA in Central Europe that we have already attained in our other activities. With the bioethanol plant in Pischelsdorf, Austria, coming on stream in the fall of 2007 and the expansion of capacity in Hungary, bioethanol will begin to generate a relevant share of the AGRANA Group's sales and earnings from the 2008|09 financial year onwards.
In the Fruit segment, AGRANA focuses on the following two areas:
In common to the Fruit and Juice activities is that the knowledge of our experts – on sourcing, grower contracting, and advising farmers on agricultural methods – is brought to bear in the fruit raw materials markets to assure quantitative and especially qualitative security of supply for our customers.
AGRANA is targeting an above average growth in the Fruit segment. We pursue this growth through acquisitions of whole companies and equity interests at the global level and by geographic expansion into regions with attractive potential for procurement and sales, as well as by raising our market share in countries where we are already established.
AGRANA is the world's leader in fruit preparations and Europe's foremost manufacturer of fruit juice concentrates.
Our aim in fruit preparations is to provide global customers – particularly the multinational food and beverage groups – with outstanding product quality, optimum service and exceptional product development expertise, all under the AGRANA brand.
Our strategic goal in fruit juice concentrates is to expand our market position beyond Europe's borders by tapping new raw materials markets and undertaking further acquisitions, and to position the AGRANA brand in the industrial market as the leading quality supplier of fruit juices and concentrates.
A sturdy equity base is important for AGRANA as a growth-oriented, capital-intensive production company. We see our shareholders as partners in realising the Group's goals and offer them an attractive long-term return on investment at a reasonable level of risk. With a policy of open and transparent communication, we aim to continue to strengthen investors' confidence in AGRANA and make our business performance and management decisions predictable and easy to understand.
Sugar
Austria, Czech Republic, Hungary, Romania, Slovakia
Argentina, Australia, Austria, Belgium, Brazil, China, Czech Republic, Denmark, Fiji, France, Germany, Hungary, Mexico, Morocco, Poland, Romania, Russia, Serbia, South Africa, South Korea, Turkey, Ukraine, USA
REVENUE: € 1,915.8 million
REVENUE: € 784.7 million
MAGYAR CUKOR ZRT. (H)
ZUCKERFORSCHUNG TULLN GMBH (A)
AGRANA STÄRKE GMBH (A)
REVENUE: € 914.6 million
AGRANA FRUIT S.A. (F)
AGRANA JUICE GMBH (A)
16
5/21/2007 Press conference presenting annual results
7/5/2007 Annual General Meeting
7/10/2007 Ex-dividend date and dividend payment date
7/12/2007 Results for first quarter
10/11/2007 Results for first half
1/15/2008 Results for first three quarters
AGRANA's share price has approximately doubled since 2003. This rise was fuelled in large part by the growth strategy and the diversification into the fruit activities. Moreover, the Group's expansion to a global scale and the move into the renewable energy market appealed to private and institutional investors.
In addition to the listing on the prime market segment of the Vienna stock exchange, the AGRANA share (ISIN AT0000603709) is traded on the floor of the Frankfurt stock exchange and on the Stuttgart and Berlin-Bremen exchanges.
Communicating with institutional and private investors is highly important to AGRANA, and we continued to intensify our investor relations and public relations activities.
In numerous individual conversations with investors, in conference calls and through Europe-wide road shows, the AGRANA Management Board presented the company, the current course of business and the strategies going forward. AGRANA also took part in several international investor conferences, where institutional investors had the opportunity for in-depth dialogue with the management. These activities were supplemented by an Investors Day for national and international investors, featuring a tour of our plant for fruit preparations and fruit juice concentrates in Gleisdorf, Austria, and of our Center of Innovation and Excellence in the same locale. The top subjects were the strategic focus of the Fruit segment and information on markets, products and upcoming developments.
Other key components of AGRANA's ongoing corporate communications and investor relations work are our regularly published financial reports, ad-hoc disclosures and press releases. Guaranteeing full transparency for the interested public, these are easily accessible on the AGRANA website (www.agrana.com). Similarly, the current calendar of financial events and the latest company presentations can be found online.
| ISIN code: | AT0000603709 |
|---|---|
| Market segment: | Prime market |
| Share class: | Ordinary shares |
| Number of shares: | 14,202,040 |
| Share capital: | 103.2 million € |
| Market capitalisation (February 28, 2007): |
1,079.4 million € |
| Reuters code: | AGRV.VI |
| Bloomberg code: | AGR AV |
| Ticker symbol: | AGR |
For financial analysts we held regular teleconferences and had many one-on-one discussions on topical subjects. Regular research on the AGRANA share is presently published by three analyst houses – Raiffeisen Centrobank, UniCredit Markets & Investment Banking (CA IB) and Morgan Stanley.
In addition, we kept the public informed on AGRANA's business performance and current events (such as acquisitions and new plant construction) through press conferences and day-to-day contact with journalists. A background briefing for media representatives and analysts on bioethanol and the construction of AGRANA's bioethanol plant in Pischelsdorf, Austria in September 2006 rounded off our extensive information offering.
At the Annual General Meeting on July 5, 2007, the management and Supervisory Board will propose paying a dividend of € 1.95 per share, the same amount as for the prior year. For the 14.2 million shares outstanding this represents a payout of about € 27.7 million. Through this dividend, the shareholders will participate in the company's sustained profitable growth. AGRANA's dividend policy is based on continuity and sustainability. The proposed payout ratio for the 2006|07 financial year is 40% (2005|06: 44%); the previous year's ratio of 44% resulted from holding the dividend constant despite the restructuring expenses. Based on the closing price of € 76.00 on February 28, 2007, the recommended payout corresponds to a dividend yield of 2.6%.
Z&S Zucker und Stärke Holding AG (Z&S), based in Vienna, holds 75.5% of the share capital of AGRANA Beteiligungs-AG. The other 24.5% of the shares represent free float. Z&S is a wholly owned subsidiary of Vienna-based AGRANA Zucker, Stärke und Frucht Holding AG, which in turn is 50% owned by Südzucker AG, Mannheim/Ochsenfurt, Germany (Südzucker) and 50% owned by Zucker-Beteiligungsgesellschaft m.b.H., Vienna (ZBG). The following five Vienna-based entities are shareholders of ZBG: Raiffeisen-Holding Niederösterreich Wien reg.Gen.m.b.H.; Marchfelder Zuckerfabriken Gesellschaft m.b.H.; Estezet Beteiligungsgesellschaft m.b.H.; Rübenproduzenten Beteiligungs GesmbH; and Leipnik-Lundenburger Invest Beteiligungs AG. Under a syndicate agreement between Südzucker and ZBG, the partners in the consortium have certain nomination rights with respect to AGRANA's governing boards.
In January 2007 Prudential plc, London, reported ownership (together with some of its subsidiaries) of more than 5% of AGRANA's share capital.
Rigorous principles of corporate governance and transparency ensure responsible management and oversight, thus promoting the confidence of customers, employees and shareholders in a company's sustained ability to create value. Adherence to these principles is a defining element of AGRANA's corporate culture and, far from being viewed only as an obligation, is seen internally as being second nature to us.
The Austrian Code of Corporate Governance, a voluntary self-regulatory initiative of private industry, was updated in January 2006 to reflect current EU recommendations and the Austrian Company Law Amendment Act of 2005. The Code of Corporate Governance can be viewed at www.corporate-governance.at. For the first time, this adaptation of the code introduced rules on supervisory board independence and brought the significance of committees to the tasks of supervisory boards more closely into line with international standards.
In its meeting on February 24, 2005 the Supervisory Board of AGRANA Beteiligungs-AG approved AGRANA's adherence to the Austrian Code of Corporate Governance and renewed this commitment at its meeting on February 20, 2006 for the updated code in its form of January 2006.
The business culture of the AGRANA Group has always been rooted in constructive teamwork between the Management Board and Supervisory Board, which together ensure that the code's requirements are fulfilled. Both at and especially between Supervisory Board meetings, the Management and Supervisory Boards, and especially their chairmen, are engaged in continual dialogue regarding the Group's development and strategic direction.
AGRANA complies as a matter of course with all rules designated by the code as legally required – so-called "L rules", which encapsulate Austrian law. Almost all recommendations in the code's "comply-or-explain" rules ("C rules") are also satisfied.
The Supervisory Board of AGRANA Beteiligungs-AG has decided to implement the guidelines for the definition of supervisory board independence set out as Annex 1 to the Austrian Code of Corporate Governance.
Openness and transparency in communications with shareholders and the interested public is of the utmost importance to AGRANA. Information given to investors during conference calls and road shows is therefore simultaneously made available to all other shareholders via our website at www.agrana.com.
In a very few points, AGRANA's practices depart from the rules of the Austrian Code of Corporate Governance. These aspects and the explanation for non-compliance are disclosed on the website and also presented below.
The upper age limit required by rules 38 and 57 for, respectively, the nomination of Management Board members and election of Supervisory Board members is currently not provided for in AGRANA's Articles of Association. AGRANA does not believe that it is necessary or would be productive or effective to include in the Articles a specific age limit for members of the Management Board or Supervisory Board.
Under section 95 (5)(12) of the Austrian Stock Corporation Act, the approval of the Supervisory Board is required for contracts with members of the Supervisory Board by which members undertake, outside their role on the Supervisory Board, to provide a service to the company or a subsidiary for a material consideration. This also applies to contracts with companies in which a Supervisory Board member has a significant economic interest. For reasons of business policy and competition considerations, the object and terms of such contracts are not published in the annual report as stipulated in rule 49.
AGRANA Beteiligungs-AG has a free float of more than 20%. From this threshold, rule 54 of the Austrian Code of Corporate Governance requires the election of an independent member of the Supervisory Board who neither is a holder of more than 10% of the company's share capital nor represents the interests of such a shareholder. The Supervisory Board of AGRANA does not have such a free-float representative.
All other C rules of the Corporate Governance Code are observed.
In the 2006|07 financial year AGRANA commissioned Univ. Prof. DDr. Waldemar Jud Unternehmensforschung GmbH to perform a voluntary evaluation of compliance with the rules of the Austrian Code of Corporate Governance. This analysis employed the evaluation questionnaire issued for this purpose by the Austrian Working Group for Corporate Governance.
| GROUP BUSINESS PERFORMANCE | 2006 07 | 2005 06 |
|---|---|---|
| in €000 | in €000 | |
| Revenue | 1,915,819 | 1,499,602 |
| EBITDA | 187,493 | 164,624 |
| Operating profit | 106,988 | 99,547 |
| Exceptional items | (1,207) | (24,534) |
| Operating profit after exceptional items | 105,781 | 75,013 |
| Return on capital employed | 8.6% | 8.6% |
| Purchases of PP&E and intangibles1 | 157,357 | 91,195 |
| Purchases of non-current financial assets | 5,555 | 7,531 |
| Staff count | 8,223 | 8,130 |
The consolidated financial statements for the 2006|07 financial year were prepared in accordance with International Financial Reporting Standards (IFRS).
With effect from the beginning of the 2006|07 financial year, AGRANA expanded its segment reporting, thus reflecting the growing importance of the fruit activities. AGRANA now reports in terms of three business segments: Sugar, Starch and Fruit. This new segmentation provides the following benefits:
From the beginning of the 2006|07 financial year, the income statement of the former DSF GmbH was included in the consolidated financial statements for the first time. In the 2005|06 accounts, only its balance sheet was included. In both years, consolidation was on a 100% basis. It should also be noted that for the comparative 2005|06 financial year, due to the date of initial consolidation, only nine months of the results of the former Atys Group companies were included in the consolidated financial statements.
From September 2006, AGRANA's 50% stake in a joint venture in China, Xianyang Andre Juice Co., Ltd. was included in the consolidated accounts.
Whereas the reporting year of the AGRANA Group runs from March 1 to February 28, in the year under review (and that year only) the reporting year of all companies in the Fruit segment covered 14 months, from January 1, 2006 to February 28, 2007. The consolidated 2006|07
data therefore represents two additional months of Fruit segment results. The Fruit companies' change-over to the AGRANA financial year has thus now been made and will not be a factor in subsequent accounting periods.
In the 2006|07 financial year, revenue grew by 28% from € 1,499.6 million to € 1,915.8 million. This increase was driven mainly by the organic growth in Starch and Fruit and by the two additional months of Fruit segment results contained in the 2006|07 data due to the change in the Fruit companies' financial year end. Added to this were the effects of the full-year consolidation of the former Atys Group, which was only included in the 2005|06 data for nine months, and the first-time inclusion of the income statement of the German fruit preparations business, the former DSF. All three of AGRANA's business segments – Sugar, Starch and Fruit – registered significant growth in sales. For the first time, the Fruit segment became the Group's revenue leader.
Operating profit (which in AGRANA's reporting, when not further qualified, is defined as before exceptional items) increased by 8% to € 107.0 million (prior year: € 99.5 million) despite the downside effects of the sugar regime reform and the higher energy and raw material costs. As a result of the erection of the AGRANA bioethanol plant in Pischelsdorf, Austria, exceptional items were a net negative € 1.2 million. Operating profit after exceptional items was thus € 105.8
million (prior year: € 75.0 million). The Fruit segment, the largest contributor to pre-exceptionals operating profit, more than offset the decrease in Sugar and Starch results.
With a rise in interest expenses to € 7.0 million that reflected primarily the acquisitions in the Fruit segment, and in the absence of at-equity income from the now consolidated former Atys Group, net financial expenses increased by € 9.0 million to € 12.3 million (prior year: € 3.3 million). In the first quarter of 2005|06 the then Atys Group, as an associated company, was still reflected in the accounts at equity.
Profit before tax rose by 30% to € 93.5 million (prior year: € 71.7 million). After income taxes calculated at a rate of 23.9% (prior year: 9.8%), net profit for the period before minority interests reached € 71.1 million, an increase of 10% from the prior year's level of € 64.7 million. Net profit for the period attributable to AGRANA's shareholders was € 68.9 million, compared to € 62.7 million in the year before. Earnings per share grew by almost 10% to € 4.85 (prior year: € 4.42).
The Group's total investment in purchases of property, plant and equipment and intangibles in the year under review was € 157.4 million (prior year: € 91.2 million). The increase of € 66.2 million or 72.6% served to underpin AGRANA's growth trajectory. In the Starch segment alone, purchases of prop-
erty, plant and equipment and intangibles more than doubled from € 34.9 million to € 79.2 million. The investment related primarily to the construction of the Austrian bioethanol plant in Pischelsdorf and the capacity expansion at Hungarian subsidiary Hungrana to 3,000 tonnes of corn (maize) per day.
The Sugar segment spent about € 30.3 million of this (prior year: € 13.4 million), about half of it for the purchase of additional sugar quota. Other important objects of capital expenditure were plant optimisation projects, asset replacement and energy conservation measures. All projects were successfully completed and commissioned in time before the 2006 campaign.
The investment of € 47.8 million (prior year: € 42.9 million) in property, plant and equipment and intangibles in the Fruit segment related to, among other items, the construction of the new fruit preparations plant in Brazil which came on stream at the beginning of May 2007, and the expansion of the production lines in Moscow.
Depreciation, amortisation and impairment of property, plant and equipment and intangibles was € 80.5 million. This was above the prior year's figure of € 65.1 million because of the full consolidation of the former Atys Group and DSF as well as the two additional months of Fruit segment results.
Property, plant and equipment increased from € 499.3 million in 2005|06 to € 545.0 million in the financial year completed. In total in 2006|07 the Group invested € 157.4 million (prior year: € 91.2 million) in property, plant and equipment and intangibles. This level of investment highlights AGRANA's growth ambitions.
Total equity grew from the prior year's € 885.8 million to € 895.5 million. The increase in non-current borrowings to € 331.7 million (prior year: € 253.7 million) and in current
borrowings to € 194.4 million (prior year: € 166.9 million) is attributable to the intensive investment during the 2006|07 financial year.
Profit before tax, depreciation and amortisation was € 150.5 million (prior year: € 145.3 million), or 8% of revenue (prior year: 10%). After changes in working capital, net cash from operating activities amounted to € 136.9 million (prior year: € 179.2 million). Other non-cash expenses consisted mainly of restructuring provisions (for redundancy-transition benefit plans and facility closure costs).
The absolute amount of the negative cash flow from investing activities increased to € 167.0 million from the prior year's negative amount of € 148.2 million due to the high capital expenditure in 2006|07.
| 2006 07 in €000 |
2005 06 in €000 |
|
|---|---|---|
| Revenue | 804,574 | 770,418 |
| Inter-segment revenue | (19,908) | (16,625) |
| External revenue | 784,666 | 753,793 |
| Operating profit | ||
| – before exceptional items | 32,915 | 38,707 |
| – after exceptional items | 32,915 | 14,173 |
| Purchases of PP&E and intangibles1 | 30,337 | 13,356 |
| Purchases of non-current | ||
| financial assets | 2,784 | 7,373 |
| Staff count | 2,723 | 2,881 |
Revenue in the Sugar segment grew by 4% from the prior year's level of € 770.4 million to € 804.6 million. This increase resulted chiefly from higher sales volumes on the Eastern European markets. The Sugar segment's contribution to Group revenue eased to about 42%. Operating profit reached € 32.9 million as compared to € 38.7 million in 2005|06 (before restructuring). Major factors in the yearon-year decrease were the temporary quota reduction, the significantly more restrictive export policy of the European Commission beginning in the autumn of 2006, higher energy costs for the campaign and the first-time payment into the market restructuring fund. Positive influences were lower beet procurement prices as well as cost savings arising from the previous year's restructuring measures that involved the closing of two sugar plants.
| 2006 07 in €000 |
2005 06 in €000 |
|
|---|---|---|
| Revenue | 253,429 | 232,558 |
| Inter-segment revenue | (36,891) | (27,907) |
| External revenue | 216,538 | 204,651 |
| Operating profit | ||
| – before exceptional items | 28,511 | 33,594 |
| – after exceptional items | 27,304 | 33,594 |
| Purchases of PP&E and intangibles1 | 79,232 | 34,941 |
| Purchases of non-current | ||
| financial assets | 142 | – |
| Staff count | 776 | 762 |
In 2006|07 the Starch segment achieved revenue growth of 9% to € 253.4 million (prior year: € 232.6 million). The result reflected, on the one hand, higher sales volumes for specialty starches thanks to the completed capacity expansion at the starch plant in Aschach, Austria, to 1,000 tonnes of corn per day, and due to lasting good organic growth. On the other hand, isoglucose prices were lower as a consequence of the change in the EU's sugar regime. The segment's operating profit of € 28.5 million was down from the prior year's result of € 33.6 million due to significantly higher prices for corn from the 2006 harvest and an increase in energy costs. Owing to the one-off expenses for bringing the bioethanol plant into production, Starch segment operating profit after exceptional items in the 2006|07 financial year was € 27.3 million.
| 2006 07 in €000 |
2005 06 in €000 |
|
|---|---|---|
| Revenue | 914,619 | 541,158 |
| Inter-segment revenue | (4) | – |
| External revenue | 914,615 | 541,158 |
| Operating profit | ||
| – before exceptional items | 45,562 | 27,246 |
| – after exceptional items | 45,562 | 27,246 |
| Purchases of PP&E and intangibles1 | 47,788 | 42,898 |
| Purchases of non-current | ||
| financial assets | 2,629 | 158 |
| Staff count | 4,724 | 4,487 |
Generating about 48% of AGRANA's consolidated revenue, the Fruit segment for the first time became the Group's largest sales driver. The segment's revenue was boosted by 69% from € 541.2 million in the prior year to € 914.6 million in 2006|07. This was made possible particularly by the first-time inclusion of the former DSF's income statement and the full-year consolidation of the former Atys Group, as well as the change in the Fruit companies' financial year end. Other positive factors were continuing high organic growth and the price increases that took effect from the third quarter of 2006|07.
Increasing as strongly as revenue, the Fruit segment's operating profit thus rose by 68% to € 45.6 million (prior year: € 27.2 million).
In April 2007, after obtaining antitrust approval, AGRANA and Bulgarian sugar manufacturer Zaharni Zavodi AD established a joint venture, AGRANA Bulgaria AD, that is 51% owned by AGRANA.
No other events of particular significance occurred after the balance sheet date that would have led to a different presentation of the financial position or results of operations.
SAVOUR THE SWEET SIDE OF LIFE.
SUGAR SEGMENT: AGRANA is the leading producer of sugar in Central and Eastern Europe (CEE). The key ingredients of our success: creating and improving premium brand products, always putting quality first, and working cost-effectively. A recipe that again proved its worth in 2006|07.
| KEY FIGURES SEGMENT | 2006 07 | 2005 06 |
|---|---|---|
| Revenue (€m) | 804.6 | 770.4 |
| Operating profit before exceptional items (€m) | 32.9 | 38.7 |
| Purchases of PP&E and intangibles1 (€m) | 30.3 | 13.4 |
| Staff count | 2,723 | 2,881 |
AGRANA Zucker GmbH manages the Austrian sugar activities and serves as the parent company for the Sugar segment subsidiaries in Hungary, Slovakia, the Czech Republic, Bulgaria, Bosnia-Herzegovina and Romania; it is also responsible for the coordination and operational management of these foreign subsidiaries. The interests previously held in what is now the Fruit segment were spun off into AGRANA Juice & Fruit Holding GmbH in July 2006.
The Sugar segment also includes instant products, a related business area that is operationally represented by Austrian company INSTANTINA Nahrungsmittel Entwicklungs- und Produktions Gesellschaft m.b.H. and its Hungarian subsidiary. An Austrian beet seed multiplication company, Österreichische Rübensamenzucht Gesellschaft m.b.H., is likewise under the umbrella of the Sugar segment.
Another unit assigned to the Sugar segment, AGRANA Marketing- und Vertriebsservice Gesellschaft m.b.H. (AMV), is both a distributor of sugar and food starch products and carries on an extensive animal feed business (selling by-products of sugar and starch production and trading in feeds). AMV is also in charge of the brand management for all products of AGRANA Zucker GmbH in Austria and handles the marketing and sales of the flour brands of Erste Wiener Walzmühle Vonwiller Ges.m.b.H., Fritsch Mühlenbetriebsges.m.b.H. and FARINA Mühlen Ges.m.b.H. In addition, AMV distributes the catering products of Hellma Lebensmittel-Verpackungs-Ges.m.b.H. (a member of the PortionPack Europe Group).
According to agriculture information agency F.O. Licht, global sugar production from October 2006 to September 2007 will total about 161.8 million tonnes (prior year: approx.152.8 million tonnes). This growth reflects mainly an increase in sugar production in South America and Asia. As a result, world inventories rose by 14% to 73.1 million tonnes, bringing the ratio of reserves to consumption in the 2006|07 sugar marketing year to about 49%.
Following the period of high prices between the last quarter of 2005 and the second quarter of 2006, the market corrected in July and August. The raw sugar quotation in New York fell by approximately 32% from USD 370 per tonne on February 28, 2006 to USD 250 as of February 28, 2007. Over the same period, the world market price for white sugar (quoted in London) declined from USD 451 per tonne to USD 333, or by about 26%.
Of particular relevance to AGRANA is the new EU sugar regime which took effect on July 1, 2006 and is in force until September 30, 2015. Key elements of the market regime are the phased, drastic cutting of EU sugar prices and the reduction of EU sugar production by the amount of lost world market export volumes and the preferential imports. The reference price for sugar is being lowered from € 632 per tonne to € 404 per tonne. The minimum price for beet is decreasing from € 43 per tonne to € 26 per tonne. The EU sugar quota is to be reduced by almost one-third, or 5 to 6 million tonnes, to 12 to 13 million tonnes.
The new sugar regime has significantly restricted exports of EU quota sugar into the world market and re-exports of ACP sugar2 . As a result of the adverse ruling by the WTO panel, licences for exports of above-quota C sugar to the world market were issued only until May 22, 2006.
With effect from July 1, 2006, tariffs on imports from least developed countries (LDC) were reduced by 20% in the first tariff cut. To date, sugar imports from LDC countries have not yet risen significantly. The duties are to be phased out completely by July 1, 2009.
The sugar policy reform, and particularly its sharp curtailment of the scope for exports, already led to a considerable decrease in total EU beet sugar production in the 2006 campaign from 20.2 million to 17.6 million tonnes. AGRANA reduced its sugar output from the previous year's of 895,000 tonnes to 749,000 tonnes, or by 16.3%.
Through the reform, the EU seeks to ramp down less-competitive production capacity in the EC by a restructuring scheme running until the 2009|10 marketing year and thus intends to bolster the competitiveness of the European sugar industry. To do so, sugar quotas are to be reduced by offering restructuring aid to sugar factories and beet farmers. This aid is financed from restructuring levies. Regions that largely withdraw from sugar production are compensated
with supplementary regional aid (so called diversification aid) for the closure of sugar plants and for taking beet cultivation area out of production. At the same time, to offset the loss of C sugar production, producers in the most efficient regions were offered additional quota totalling 1.1 million tonnes at a price of € 730 per tonne; in the 2006|07 marketing year, EU sugar producers bought 0.9 million tonnes of quota. AGRANA accounted for about 30,000 tonnes of this.
Overall, the measures adopted are to restore the balance of the EU sugar market. Should the restructuring fund fail to purchase and retire sufficient quota, the new sugar regime holds the risk of a linear cut in quotas from the 2010|11 sugar marketing year that would affect the remaining sugar producers equally.
The restructuring fund started out in line with plans as about 1.5 million tonnes of quota was renounced in the 2006|07 marketing year (including the full inulin quota of approximately 321,000 tonnes). However, the amount of quota renounced for the 2007|08 marketing year was only 0.7 million tonnes, far below the European Commission's expectations. The Commission had planned the fund to purchase 3.5 million tonnes of quota for this year. On February 22, 2007 the Commission therefore announced that the restructuring aid would be made more attractive. Sufficient money to do so is available to the EU from the restructuring tax. One of the measures will take the form of fixed, improved aid payments to beet growers. This is designed to reduce the size of a linear quota reduction for the competitive growing regions as well.
| Austria | Hungary | Czech | Slovak | Romania1 | Total | Prior year | |
|---|---|---|---|---|---|---|---|
| Republic | Republic | ||||||
| Number of beet growers | 8,940 | 198 | 144 | 130 | 105 | 9,517 | 9,950 |
| Harvest area (hectares) | 39,000 | 19,340 | 12,708 | 7,034 | 10,003 | 88,085 | 93,880 |
| Length of campaign (days) | 99 | 70 | 77 | 111 | 74 | 892 | 852 |
| Daily processing | |||||||
| throughput (tonnes) | 25,228 | 14,184 | 8,396 | 2,926 | 3,990 | 54,7243 | 71,3354 |
| Total beet processed | |||||||
| (tonnes) | 2,493,097 | 991,476 | 636,459 | 324,782 | 295,275 | 4,741,089 | 5,894,294 |
| Beet yield | |||||||
| (tonnes per hectare) | 63.93 | 51.27 | 49.11 | 47.84 | 29.49 | 53.692 | 62.792 |
| Sugar content | 17.85% | 16.65% | 18.40% | 16.30% | 15.52% | 17.42%2 | 17.15%2 |
| Beet sugar extraction | |||||||
| (tonnes) | 407,590 | 150,229 | 107,320 | 46,311 | 38,040 | 749,490 | 895,362 |
| Quota (tonnes) | 348,565 | 138,321 | 81,891 | 52,789 | – | 621,566 | 619,392 |
1 Sugar beet campaign only, i.e., excluding refining of raw cane
2 weighted average
3 8 plants
4 10 plants
In light of the inadequate utilisation of the restructuring fund, to alleviate the foreseen quota overhang for the 2007|08 marketing year, the Commission has decided on a temporary withdrawal of quota sugar production graduated according to individual progress in relinquishing quota. For member states that have not yet surrendered any quota to the restructuring fund, the mandatory withdrawal of quota is 13.5%. The average cut for AGRANA is about 10.5%. In the event that the necessary market stabilisation is not evident by October 2007, the European Commission has announced further quota reductions for the 2007|08 marketing year. At the same time, however, restructuring levies are collected even on the quota lost in the withdrawal, an approach that AGRANA is currently challenging in court.
New market opportunities exist in the production of industrial sugar; sales of sugar to bioethanol producers and to the chemical, pharmaceutical and fermentation industries are not subject to quotas. This market, which is not tied to reference prices for sugar or minimum prices for beet, is only serviced by the most competitive producers. In the 2006|07 campaign AGRANA produced some 95,000 tonnes of industrial sugar.
The WTO II negotiations under way since 2001 remain pending. Thus far, only a ministerial declaration was published in December 2005 in Hong Kong. The measures cited in it – such as the parallel phasing-out of all export subsidies by 2013 – will only become effective once the participating countries agree on all items negotiated in the WTO II talks. The offer tabled by the EU on 28 October 2005 for the easing of tariff protection is consistent with the price cuts decided under the EU sugar market reform. No WTO agreement is on the horizon at present.
In view of the expiring inter-trade agreement, new agreements became necessary for the 2007|08 financial year and 2007 beet sowing. The changes in the sugar regime are taken into account in new agreements concluded by AGRANA with the umbrella organisation of Austrian sugar beet farmers ("Die Rübenbauern") and the local representatives in the subsidiaries' home countries.
As a result of the one-year quota cut ordered by the EU, the Austrian sugar quota of 387,326 tonnes was reduced to 330,079 tonnes for the 2006|07 campaign year, a decrease of 14.78%. By purchasing 18,486 tonnes of C quota, the production quota for 2006 was increased to 348,565 tonnes.
For the 2007|08 financial year, after the preventive quota reduction of February 2007 (by 13.5%), AGRANA has a sugar quota of 351,027 tonnes available in Austria.
In 2006|07, as in the year before, conditions on the Austrian sugar market were shaped by considerable pressure from imports in the industrial segment. These imports originated mainly in the Balkans and Eastern Europe. Despite the intense competition, AGRANA succeeded in strengthening its market position through steady refinement of product quality. Part of the products' popularity reflects the consistent application of the brand strategy. The marketing slogan that had already proved successful in 2005|06, "Nur Wiener Zucker ist Zucker aus Österreich" ("Only Wiener Zucker is sugar from Austria"), continued to be used last year.
AGRANA Zucker GmbH took in sales revenue of € 306.5 million in 2006|07, a decrease of 3% from the prior year's level of € 316 million. The dip in revenue resulted from the lower sugar production quota – and therefore lower sales volume – due to the "declassification"-induced quota reductions of 2005 and 2006. By contrast, sales volume in Austria (including out-of-quota sugar) was pushed up from 277,000 tonnes to 335,000 tonnes. The oversupply of quota sugar on the European market from the 2005 campaign led to price declines at the beginning of the financial year. However, prices were successfully increased before the beginning of the 2006 campaign. Higher prices were also obtained on exports of quota sugar and C sugar into the EU and other countries.
Prices of by-products (molasses and beet pulp) rose in the year amid the significantly reduced supply due to the lower sugar production, and because of higher feed grain prices. This trend was amplified, especially for dried pulp, by the global increase in feed grain prices. The further rise of 22.3% in energy prices compared to the previous year pushed sugar extraction costs significantly higher in 2006|07. However, through the structural actions taken (primarily the closing of the Hohenau plant), fixed costs were markedly reduced and utilisation boosted substantially, with a beneficial effect on overall costs.
The expansion of the extraction plant at the Tulln facility allowed energy consumption for pulp drying to be cut by 6.9% year-on-year based on processed beet. As a result of the longer campaign and the usual decline in beet quality towards the end of the campaign, combined total energy consumption at both Austrian plants went up 2.1% from the year before.
The capital expenditure for property, plant and equipment and intangibles in 2006|07 of € 9.9 million related to the purchase of additional sugar quota and to improvements made at the plants in Tulln and Leopoldsdorf.
The Hungarian market continued to be strained by low-priced imports from the West Balkan countries. Despite this difficult market environment, AGRANA was able to stabilise sales volumes and thus slightly raise sugar prices in response to higher energy costs.
Of the total Hungarian sugar quota of 401,684 tonnes, Group subsidiary Magyar Cukor Zrt. held 147,137 tonnes or 36.6%. After the EU's one-year quota cut and the additional purchase of 5,000 tonnes of C quota, Magyar Cukor Zrt.'s production quota for 2006 was 138,321 tonnes.
The one-time quota reduction (in February 2007) for 2007 resulted in a decrease of 9,448 tonnes for Magyar Cukor Zrt. The production quota available for the 2007 campaign year is thus currently 142,689 tonnes.
For the 2006|07 financial year Magyar Cukor Zrt. posted revenue of € 135.4 million (prior year: € 123.2 million). Domestic sales were about 95,000 tonnes, up more than 4% from the year before. This also involved a marginal increase in market share. A notably positive sales trend was achieved in the industrial market, with volume growth of 7,000 tonnes.
Total energy consumption (calculated on the amount of sugar produced) was brought down by 5.3% compared to the prior year. The persistent high energy prices and the limited economic uses of the spent pulp prompted AGRANA to invest in construction of a biogas plant at the Kaposvár sugar factory. As early as the 2007 campaign, a sizeable portion of the plant's energy needs is to be met by the biogas produced. This represents the first industrial-scale biogas facility in the European sugar industry.
The oversupply in the Czech sugar market gradually abated in the course of the financial year, which in the end also had a positive effect on sugar prices. The strong appreciation of the Czech koruna towards the end of 2006|07 led to growth in imports from adjacent countries.
The Czech sugar quota for 2006 was 454,862 tonnes. The temporary quota cut reduced the share of Moravskoslezské Cukrovary a.s. to 78,081 tonnes. After purchasing 3,810 tonnes of C quota, this subsidiary ultimately produced 81,891 tonnes of quota sugar.
The temporary cut by the EU will leave a production quota for the 2007 campaign year of at most 83,582 tonnes, corresponding to a reduction of 7.29% from the maximum quota.
In 2006|07 Moravskoslezské Cukrovary a.s. posted revenue of € 79.8 million (prior year: € 75.0 million).
Domestic sugar sales were down somewhat overall in volume terms to 62,500 tonnes (prior year: 71,500 tonnes). The decrease occurred primarily in the industrial market, while a small volume gain was visible in the consumer segment thanks to the consistent brand strategy and product portfolio management.
The investment of € 4.2 million in property, plant and equipment and intangibles was spent largely on energy-saving measures and quality improvement activities, as well as the purchase of sugar quota. Energy consumption on a processed-beet basis fell by 9% from the previous year.
The Slovak sugar market experienced a production surplus, which was sold mostly in the neighbouring countries. Slovakia too thus achieved a positive price and market trend, notably in the latter half of the year.
The Slovak sugar quota for 2006 was 207,423 tonnes. Of this, Slovenské Cukrovary s.r.o. was allotted 56,671 tonnes. With the EU's temporary quota withdrawal this was reduced to 50,057 tonnes in the 2006 financial year, representing a cut of 11.67%. Additionally, Slovenské Cukrovary s.r.o. used the scope for buying 2,732 tonnes of C quota and thus had a final quota of 52,789 tonnes for the 2006 campaign year.
34
For the 2007 campaign year a further temporary quota cut of 4.32% has already been announced, leaving a maximum production quota of 56,837 tonnes.
In the 2006|07 financial year Slovenské Cukrovary s.r.o. generated revenue of € 52.1 million (prior year: € 53.2 million), with the volume of domestic sugar sales up from the previous year's 45,000 tonnes to 47,000 tonnes. The trend was particularly positive in business with food retailers, where focused brand management was a key asset in the successful differentiation from competitors.
The capital expenditure of € 1.7 million in the 2006|07 financial year was used in large part for the closure of the Rimavska Sobota facility, expansion of processing capacity at the Sered plant and the purchase of sugar quota.
Until the end of the 2006 calendar year the Romanian sugar market was driven by the world market price of raw sugar. Thanks to the high at the beginning of 2006, high prices were obtained in Romania as well; toward the end of the year, however, prices declined. Since the country's accession to the EU on January 1, 2007 it is subject to the European sugar regime.
Even before it became an EU member, Romania was awarded a production quota of 329,636 tonnes of raw sugar and 109,164 tonnes of beet sugar. At EU accession, AGRANA Romania S.A. was allocated a beet sugar quota of 24,240 tonnes and raw sugar refining quota of 130,668 tonnes.
With revenue climbing to € 176.0 million (prior year: € 117.8 million), the 2006|07 financial year of AGRANA Romania S.A. was highly satisfactory. Especially sales to food retailers and wholesalers saw a significant increase of 22,000 tonnes. The vigorously pursued brand strategy in Romania was rewarded by an expansion of market share to more than 50%. As well, both in the industrial and food segment, the gap to EU prices was successfully narrowed.
In the 2006|07 financial year, in addition to the 38,041 tonnes of white sugar produced in the 2006 beet campaign, about 179,163 tonnes of white sugar was refined from raw sugar. The limits set by the EU on annual white sugar inventories prevented the achievement of the company's 2006|07 target of 220,000 tonnes. Stocks thus had to be drawn down in January and February 2007 and the planned production quantities postponed to March 2007.
Capital expenditure in property, plant and equipment and intangibles in the 2006|07 was € 6.1 million and represented replacement investments and the construction of a distribution warehouse in Bucharest.
With C sugar exports abolished as a result of the WTO panel decision, and following the reform of the EU sugar regime, there is now only limited scope for sugar exports from the EU. In order to continue to supply the West Balkan region, AGRANA together with Vienna-based Bosnian-Austrian company SCO Studen & Co Holding as a 50% partner began construction of a raw sugar refinery in Bosnia. The plant's annual capacity will be approximately 150,000 tons of sugar. Building started in the autumn of 2006 and is progressing on schedule. Production is to begin at the end of 2007.
Bulgaria's recent accession to the EU creates a new market for AGRANA. The market potential for sugar in Bulgaria measures about 260,000 tonnes per year and is supplied by raw sugar refining and white sugar imports. In November 2006, to service the Bulgarian market, AGRANA formed AGRANA Trading EOOD, a trading company based in Sofia. A packaging and distribution joint venture, AGRANA BUL-GARIA AD, was then established in April 2007 together with Bulgarian sugar company Zaharni Zavodi AD.
LOOKING GOOD WITH AGRANA STARCH.
STARCH SEGMENT: Through power of innovation, AGRANA today is a leading starch specialist in Europe. From simple starch, a commodity, we develop sophisticated products such as premium components for the cosmetics industry – used in lip sticks, for instance. In 2006|07, this kind of technological refinement continued to strengthen our reputation as a leader in specialty starches – making the future look good.
| KEY FIGURES SEGMENT | 2006 07 | 2005 06 |
|---|---|---|
| Revenue (€m) | 253.4 | 232.6 |
| Operating profit before exceptional items (€m) | 28.5 | 33.6 |
| Purchases of PP&E and intangibles1 (€m) | 79.2 | 34.9 |
| Staff count | 776 | 762 |
AGRANA Stärke GmbH manages the Austrian starch business and coordinates and operationally manages the subsidiaries in the Starch segment. These include Hungrana, the 50%-owned Hungarian corn starch and isoglucose plant (a joint venture with Tate & Lyle and ADM); the Romanian corn starch plant, S.C. A.G.F.D. Tandarei; and in Austria, the potato starch plant in Gmünd, the AGRANA corn starch plant in Aschach and the AGRANA bioethanol plant in Pischelsdorf.
In the summer of 2006 AGRANA began construction of Austria's first industrial-scale bioethanol facility, which will significantly expand the Group's diversification into renewable fuels. Commissioning of the facility is planned for the autumn of 2007. At Hungrana in Hungary, AGRANA has for some years been successfully producing alcohol for the beverage and chemical industry and bioethanol as a fuel additive. Hungrana's capacity too is being enlarged.
The world's grain production is estimated at about 1.56 billion tonnes (2.6% less than in the year before). Corn (maize) is the most important grain globally at 688 million tonnes or almost 44% of world cereal production, followed by wheat at 587 million tonnes or 38% of global grain production.
In the EU-27 the corn harvest in the 2006|07 marketing year was approximately 53 million tonnes, versus about 61 million tonnes in the previous year.
In Austria about 4.1 million tonnes of grain were produced in 2006. This was down 10% from 2005. Area under corn declined from about 166,000 hectares in 2005 to 158,000 hectares in 2006. Corn production in 2006 was some 1.5 million tonnes.
Two satisfactory crop years for starch potatoes in 2004 and 2005 in the EU were followed in 2006 by a below-average harvest. EU output of potato starch reached only about 80% to 85% of the quota set under the Community's starch regime. At AGRANA, quota achievement in Austria was about 91% thanks to the carryover of surplus from the year before.
The EU quota system for potato starch was last extended in May 2005 for the years 2005|06 and 2006|07. In December 2006 the European Commission proposed another two-year extension of the current quota system, holding quotas constant for all member states. This covers the 2007|08 and 2008|09 marketing years. The total EU potato starch quota would remain unchanged at 1.9 million tonnes and the Austrian quota at 47,691 tonnes. The final decision is expected in May 2007.
The positive revenue trend of the previous several years continued in the 2006|07 financial year. Revenue grew by about 12% to € 185.2 million (prior year: € 165.8 million). The optimisation of the product mix was stepped up further, particularly by expanding the business with higher-value-added, specialty starches. Unwavering customer focus, innovative products and high flexibility are the key success factors.
The total volume of starch sales (potato and corn starch), at 441,000 tonnes, was approximately 12% higher than the preceding year's figure of 395,500 tonnes. The expansion of procession capacity at the Aschach corn starch factory to 1,000 tonnes of corn per day was completed earlier than expected, in May 2006. This increase in production volume and the development of new markets and market niches were instrumental in the sales volume growth. Average daily corn processing volume at the Aschach plant mounted to 1,017 tonnes in 2006|07 (prior year: 854 tonnes).
As a consequence of unfavourable weather, potato starch production from the 2006 harvest reached only 41,123 tonnes, falling short of the EU quota of 47,691 tonnes. Sales of potato starch products therefore declined in 2006|07 to 54,300 tonnes (prior year: 57,800 tonnes).
Given the above-quota production of potato starch in 2005, a portion of the 2006 quota was used in advance at the time. In 2006 the contracted volume thus had to be reduced by 5% to 205,000 tonnes. The dry, very hot weather in July 2006 depressed average starch potato yields, leaving the harvested crop about 9% below the contract volume. In total over the 116 days of the 2006 campaign (prior year: 141 days), 187,000 tonnes of starch and organic starch
potatoes (prior year: 246,000 tonnes) were processed into 41,123 tonnes of potato starch (prior year: 52,595 tonnes). The crop's starch content of 19.0% was higher than the year-earlier level of 18.3%. On a crop area of about 6,200 hectares (prior year: about 6,600 hectares), the 1,882 growers achieved an average yield per hectare of approximately 30 tonnes (prior year: 37 tonnes). As a result, AGRANA utilised only about 91% of its potato starch quota. An unrestricted quota is once again available in 2007. For the 2007 harvest AGRANA has contracted for approximately 213,000 tonnes of (conventional and organic) starch potatoes.
In the 2006 campaign the company also bought a total of 12,300 tonnes (prior year: 14,600 tonnes) of food potatoes and organic food potatoes for use in long-life potato products.
The Aschach corn starch plant processed 352,000 tonnes of corn in 2006|07 (prior year: 299,000 tonnes). The higher throughput was attributable to the completed expansion of the plant's capacity to 1,000 tonnes of corn per day. The volume of freshly harvested wet corn processed was 84,000 tonnes, down slightly from the prior-year level of 86,000 tonnes due to weather factors.
The price for corn feedstock in 2006|07 was up significantly year-on-year because of increased demand and the EU's smaller harvest.
Sales of corn starch products were pushed up by 19% from the prior year's 193,700 tonnes to 231,000 tonnes in 2006|07. The poor potato crop resulting from the inclement summer weather led to a reduced sales volume of potato starch products. At the same time, European sales prices rose significantly due to energy and raw material costs.
The non-food sector (industrial starches) accounts for 23% of AGRANA's Austrian starch sales by volume. In the 2006|07 financial year 100,000 tonnes (prior year: 110,700 tonnes) of starch were sold into the paper, corrugated board, textile and building industries.
Sales quantities on the export side were lower than in 2005|06 as a result of volume shifts in favour of the food starch segment with its higher prices. Potato starch prices, which at the start of the year were below corn starch prices, rose again from September onwards as a consequence of the small potato harvest in Europe. From January 2007 the paper industry thus began to import tapioca and corn starch from Asia and South America.
Sales to the corrugated board industry saw a harvest-induced decrease to 18,000 tonnes (prior year: 21,000 tonnes). However, sales volume in Austria increased.
In general export sales to Asian textile manufacturers were hurt by the strong euro. As in the paper industry, some textile producers too are switching to tapioca starch in view of the increase in potato starch prices.
The building sector enjoyed a boom made possible by the good weather in the winter of 2006|07. Starch sales volume in this industry thus rose by 23%.
In the food segment of the market (starches for the food industry), sales in 2006|07 reached 121,000 tonnes (prior year: 98,600 tonnes). Until June 2006, prices were very low. Poor forecasts for potato, wheat and corn harvests drove a price surge in all starch areas beginning in September. Shortfalls of potato starch and low inventory levels finally produced potato starch prices far above the prices for corn starch.
Since more than ten years ago, AGRANA has been processing organically grown potatoes and corn at the Gmünd and Aschach facilities to produce organic starches, organic saccharification products and organic potato products (potato flakes and dehydrated potatoes). In organic starch products and GM-free1 starch products, AGRANA has a strong reputation as a pioneer in Europe. The complete supply and processing chain is exhaustively documented, audited and certified – from seed to crop, and from receipt of the raw material through every production stage all the way to shipping. These products are marketed to the entire food industry, such as for use in fruit preparations, sweets, baby food, baked goods and gourmet foods. More than 90% of the products are exported. The foremost markets are the EU, Switzerland, North America and South East Asia.
Since the EU approved the cultivation of genetically modified corn, demand has increased for guaranteed GM-free starch products. The US market for non-GM organic products from Europe is also continuously growing. With an increase of about 23% in sales volume, AGRANA further expanded its market share in 2006|07.
In long-life potato products the volume sold rose by 9%.
The Starch segment's capital expenditure for property, plant and equipment and intangibles in Austria was € 11.5 million in 2006|07 (prior year: € 22.6 million). Investment focused above all on the final stage in the expansion of the Aschach corn starch factory to a processing capacity of 1,000 tonnes of corn per day. The expansion was completed in May 2006 with the commissioning of a new starch saccharification plant and the enlargement of the waste water treatment plant. At the potato starch facility in Gmünd the plant infrastructure was improved and a largely automated packaging area for baby food was completed and brought on stream. In this way AGRANA is responding to the growth in demand for specialty starch products.
In the 2006|07 marketing year the Hungarian isoglucose quota reflected both a declassification-induced reduction of 9.4% and an increase resulting from the reform of the sugar regime (the quota is being raised by 27,109 tonnes per year for three consecutive years). On balance, the isoglucose quota thus rose to approximately 177,000 tonnes from the previous year's level of 137,627 tonnes. This also includes 34,000 tonnes of one-off isoglucose quota arising from the extension of the sugar marketing year by three months. The Hungarian isoglucose quota is fully allocated to Hungrana, AGRANA's 50%-owned subsidiary.
For the 2007|08 marketing year the quota will probably be about 180,000 tonnes. This figure is the result of two successive quota increases under the new sugar regime from originally 137,627 tonnes and of an early, temporary quota reduction of 6.21%.
The ownership interests in Hungrana, the corn starch and isoglucose plant, are held by AGRANA Stärke GmbH and by Szabadegyházai Szolgáltató es Vagyonkezelö Kft, a subsidiary of Tate & Lyle and ADM.
In 2006|07 AGRANA's 50% share in Hungrana's revenue was € 66.9 million (prior year: € 67.4 million). The reasons for the dip in revenue were the weak Hungarian forint in the first half of 2006|07 and the decline in isoglucose prices driven by the reform of the sugar regime.
In the 2006|07 financial year Hungrana processed roughly 451,000 tonnes of corn. Raw material prices were up from the year before. A year-on-year decrease in corn yields led to a shorter wet corn campaign and smaller wet corn harvest of about 72,000 tonnes.
In 2006|07 Hungrana completed the expansion of daily processing capacity to 1,500 tonnes of corn and the enlargement of bioethanol production capacity to 150 cubic metres per day. To prepare for the increase in the isoglucose quota under the new EU sugar regime to a total of 218,927 tonnes – to be reached in 2008|09 – and to raise alcohol production capacity to 450 cubic metres per day, investment began for a further enlargement to 3,000 tonnes of daily corn processing capacity. AGRANA's 50% share of the total investment in property, plant and equipment and intangibles was € 21.3 million.
Revenue of the Romanian corn starch plant, S.C. A.G.F.D. Tandarei, grew by 32% in 2006|07 to € 6.6 million (prior year: € 5.0 million). Sales volume of corn starch products increased to about 16,000 tonnes (prior year: 11,800 tonnes) and the market shares both for starch and glucose were maintained at the high year-earlier level.
In Romania in the 2006|07 financial year, direct contracts with farmers were increased to about 16,000 tonnes of corn. At the Tandarei corn starch plant some 20,000 tonnes of corn were processed, as in the year before. Average processing capacity was 100 tonnes of corn per day.
In 2006|07 investment was completed in a group of corn silos with a storage capacity of 20,000 tonnes that allows AGRANA to exploit the lower raw material prices during harvest season and thus to safeguard the feedstock required for production until the new crop comes in. Capital expenditure on the thermal utilisation of by-products was concluded in the fourth quarter of 2006|07. Early results show that this project is significantly cutting energy costs and greatly improving the cost structure. Total capital spending in 2006|07 was 1.3 million.
The EU plans to more than double the biofuel component in automotive fuels from 2% of energy content to 5.75% in 2010 in order to contribute to environmental protection, work towards meeting the Kyoto targets and lessen dependence on petroleum. By 2010, based on a share of 5.75%, approximately 10 million cubic metres of bioethanol will be needed, compared to about 3.1 million in 2006 (source: F.O. Licht). At the beginning of March 2007 the EU heads of state and government expanded the EU directive by agreeing on a 10% substitution of biogenic for fossil fuels by 2020.
In Austria the EU biofuels directive was transposed by requiring biogenic fuel shares (by energy content) of 2.5% from October 1, 2005, 4.3% from October 1, 2007 and 5.75% from October 1, 2008. This is accompanied by a tax reduction from October 1, 2005 for diesel containing at least 4.4% of biogenic fuel by volume and, from October 1, 2007, for petrol containing at least 4.4% biogenic fuel by volume. In addition, on October 1, 2007 the bioethanol blend regulation takes effect, which likewise offers a tax break for petrol with a high (85%) bioethanol content.
What is more, in March 2007 the Austrian government announced its ambitious goal of reaching the EU's 10% substitution target by 2010 rather than by 2020.
In this favourable environment, AGRANA is currently building Austria's first industrial-scale bioethanol facility. Located in Pischelsdorf, the plant will cost about € 125 million and have a capacity of up to 240,000 cubic metres per year.
AGRANA Bioethanol GmbH is 74.9% owned by AGRANA Stärke GmbH. The other 25.1% of the shares are held by Rübenproduzenten Beteiligungs GesmbH.
The mild winter speeded the pace of construction. From the autumn of 2007 – coinciding with the coming into effect of the tax reduction for bioethanol-petrol blends on October 1 – the bioethanol plant will thus be able to supply Austria's entire demand.
The ethanol production process for the plant was chosen to allow the use of a wide variety of agricultural raw materials, such as wheat, corn or concentrated sugar beet juice. For instance, it takes 2.59 kilograms of wheat to make one litre of ethanol. To produce the planned volume of bioethanol in Pischelsdorf will require, in addition to concentrated beet juice, approximately 450,000 tonnes of wheat per year.
A by-product of the bioethanol production from grain will be up to 170,000 tonnes of protein-rich animal feed per year – so-called "DDGS" (distillers dried grains with solubles), which can partly replace imported soy-based feed from overseas.
In the first quarter of 2006|07 AGRANA signed a mediumterm contract to supply about one-third of the plant's total production capacity to OMV AG. Production that exceeds domestic demand will be marketed under a distribution partnership with CropEnergies AG.
In the 2006|07 financial year € 45.0 million was invested in the construction of the bioethanol facility.
From July 1, 2007 a 4.4% biogenic content in fossil transport fuels will be mandatory in Hungary. Sales of noncompliant fuels will be subject to an additional tax of 8%. At present about 1% bioethanol, in the form of ETBE1 , is added to fuels in Hungary. However, as ETBE production capacity is limited, it is also becoming necessary to directly add ethanol to fuels so as to reach the required blend.
In order to be able to satisfy the demand for ethanol, which is growing throughout Europe, ethanol capacity at the Hungrana production plant was raised in April 2006 from 60 cubic metres to 150 cubic metres per day. The facility thus currently distils about 55,000 cubic metres of bioethanol per year. In concert with the further increase in daily corn processing capacity to 3,000 tonnes, ethanol production capacity too is to be raised to approximately 160,000 cubic metres per year. This expansion is progressing to plan and should be implemented by April 2008.
In the 2006|07 financial year Hungrana increased its volume of ethanol sales by 26.7% to about 25,000 cubic metres. Owing to the high oil prices, the ethanol prices obtained were well above prior-year levels.
ENJOY THE FRUITS OF SUCCESS.
FRUIT SEGMENT: AGRANA is a world-leading supplier of premium fruit preparations and fruit juice concentrates. The market trend towards healthy food and drink, the quality of our products, our efficient organisation and sustained growth as a global business – all these ensure that everyone can enjoy AGRANA fruit, now and in the future.
| KEY FIGURES SEGMENT | 2006 07 | 2005 06 |
|---|---|---|
| Revenue (€m) | 914.6 | 541.2 |
| Operating profit before exceptional items (€m) | 45.6 | 27.2 |
| Purchases of PP&E and intangibles2 (€m) | 47.8 | 42.9 |
| Staff count | 4,724 | 4,487 |
AGRANA Juice & Fruit Holding GmbH indirectly holds all companies of the Fruit segment. The segment is coordinated and operationally managed by two business-specific holding companies: AGRANA Fruit S.A. (based in Paris, France) for the fruit preparations activities, and AGRANA Juice GmbH (based in Gleisdorf, Austria) for the fruit juice concentrate activities.
The restructuring of the Fruit segment and its fruit companies acquired since 2003 – Atys, DSF, Steirerobst, VallØ Saft and Wink – was completed in the middle of 2006. As a result of this reorganisation, all companies of the Fruit segment are now able to operate in the global market under the unified identity of the AGRANA brand and fulfil customers' requirements and preferences more completely than ever. Moreover, the companies' combination into a single business segment unlocks additional potential and synergies – in raw material procurement, administration, research and development, product sales and internal communication – and facilitates the AGRANA Group's becoming ever more global.
In 2006|07 AGRANA vigorously continued to pursue the dynamic growth strategy of the past several years both in the fruit preparations and the fruit juice concentrates business.
In June 2006 AGRANA acquired 50% of Xianyang Andre Juice Co., Ltd., a subsidiary of Hong Kong-listed Yantai North Andre Juice Company Ltd. The joint venture is located in China and produces apple juice concentrate, primarily for the world market.
In September 2006, construction work began on a new fruit preparations plant in Cabreúva in the Brazilian state of Sao Paulo. Since the spring of 2007, this facility is producing high-quality fruit preparations products for the Brazilian dairy industry.
At its European apple juice production locations in Austria, Poland, Romania, Hungary and Ukraine, AGRANA predominantly produces sour (high-acidity) apple juice concentrate. Sweet (low-acidity) apple juice concentrate, by contrast, is produced with joint venture partner Yantai North Andre Juice Co., Ltd. in China. In the course of the year under review, prices of sweet and of sour apple juice concentrate converged. Next to the US market, sweet apple juice concentrate is in particularly strong demand in the rapidly growing Russian market, which creates new sales opportunities for AGRANA in this market segment.
The heightened demand from the worldwide fruit juice industry for apple juice concentrates is explained by the poor orange harvest and reduced orange orchard planting area in Brazil, conditions which resulted in production bottlenecks and price increases for orange juice concentrate.
In the autumn of 2006, in reaction to complaints from Polish strawberry producers, the European Commission imposed a provisional anti-dumping duty of 34.2% on frozen strawberries from China. After expiration of the six-month term, in April 2007, the EU suspended the anti-dumping duty and introduced a minimum import price of € 598 per tonne for Chinese frozen strawberries without added sugar (exclusive of a 14.4% import tariff).
In the 2006|07 financial year, in spite of in some cases poor harvests, AGRANA was able to fully meet its worldwide requirements for high-quality fruit for fruit preparations. A trend towards tighter raw material markets was especially evident in berry fruits (strawberry, raspberry and blueberry).
Owing to dry summer weather and less area planted than in the previous year, the Polish market was characterised by a low strawberry supply, which caused field prices to rise. For California strawberries, the continued high demand on the world market also translated into higher prices. In South America the harvest period was shorter than usual and growing conditions less favourable, resulting in a lower supply of raw materials. Having less area under strawberries than in the previous year, China, a relatively new producer of frozen strawberries, was not able to fully make up the global-level shortfall in the fruit.
The antidumping duty on frozen Chinese raw material led to further price hikes and the almost total depletion of European inventories.
Regarding "wild" blueberries in Poland and Russia, the comparatively dry summer led to reduced crop size, even as demand climbed by up to 50% above the year-earlier level. In North America, cultivated blueberries, amid the strong increase in demand, even reached prices 80% higher than in the previous harvest season. The dry weather also reduced the Polish raspberry crop. The resulting lower supply of frozen raspberries was compensated for by the good Serbian and North American harvests.
Stone fruit crops (mainly peaches, plums and cherries), despite some adverse regional growing conditions, remained at the prior year's level. Tropical fruits such as mangoes, pineapples and bananas are increasingly in fashion and, in addition to the large fresh fruit market, are also fast gaining popularity for use in smoothies, the pureed-fruit drinks with a high fruit content. This trend is reflected in the tight supply situation for these fruits, which is expected to mean continuing high prices in 2007|08 as well.
AGRANA is countering this rising tendency in prices with a global procurement system that makes the Group less dependent on individual source regions.
The Group's ten European production sites for fruit juice concentrates are located in the midst of the Central and Eastern European apple- and berry-growing areas. In Poland, Hungary, Romania, Ukraine, Denmark and Austria, AGRANA purchases and locally processes apples and – under the collective term "red berries" – strawberries, raspberries, black and red currents, sour cherries, chokeberries and elderberries. Besides fruit juice concentrates, products include not-from-concentrate juices and purees.
Processing of the 2006 harvest for apple juice concentrate began in August. In Poland, where about 20% of Europe's apple crop is harvested, the crop was better than in the previous year thanks to good availability of fruit from trees grown outside intensively managed orchards. Even after a two-month drought in June and July that resulted in smaller fruit size and weight, purchasing volumes in Poland were increased by more than 15% from the year before. In all three Polish production facilities, capacity utilisation was therefore high.
The crops harvested in Hungary were smaller than expected. Because of mediocre growing conditions during the flowering season, the poor harvest of the previous year was only slightly exceeded. All the same, through improvements in the procurement system, AGRANA was able to purchase about 20% more processing apples at the three plants in eastern Hungary than in the prior year.
Apple orchards in Ukraine and Romania were affected by severe frosts in the winter of 2005|06. As early as the spring of 2006 it was thus clear that the previous year's large harvest would not be repeated this time. In the summer and autumn that led to a sharp rise in raw material prices. In the interest of optimising plant locations, the EU enlargement prompted the closing of the western Romanian factory in Carei. The three eastern Hungarian fruit juice concentrate plants very close to Carei will take over the processing of raw materials from the western Romanian catchment area.
In Austria an expansion of the geographic area from which raw materials are sourced allowed the feedstock procurement for apple juice concentrate to be improved in comparison to the previous years and thus led to better utilisation at the Gleisdorf plant.
Overcoming the net deterioration in the purchasing environment described above, AGRANA was able to boost the volume of apples bought by 10% compared to the 2005|06 financial year. Purchasing prices for apples went up over the entire processing season, but remained just below the high prices paid in 2005.
The Chinese joint venture plant in Xianyang (Shaanxi Province) producing sweet apple juice concentrate for export ran at full capacity from the beginning of the record apple harvest in August 2006. Sustained by the extremely abundant apple crop in China, the processing of winter apples at this plant continued even beyond the balance sheet date of February 28, 2007. The key factors behind the Chinese bumper apple crop were the increase in the area under apple orchards (which in recent years has been promoted by the government) and favourable weather during the growing season.
The amount of raw material procured for berry juice concentrates surpassed expectations. In the two countries most important to AGRANA's procurement of red berries – Poland and Denmark – the purchased quantities of strawberries, sour cherries and black currants were boosted by more than 10% from the preceding year. Only raspberries were marked by a crop failure in the wake of drought in June and July. The raw material supply of the manufacturing plants was nonetheless ensured throughout and the quality of the fruit juice concentrates produced was very good. In addition to concentrates, the facility in Vinnitsa, Ukraine, makes premium fruit purees to order for AGRANA customers.
Even with partially tight raw material supplies and the rapid globalisation of the market, AGRANA successfully covered its fruit buying needs and strengthened its competitive position in raw material procurement. This was achieved by efficient worldwide sourcing, constant monitoring and analysis of the market for fruit preparations and close contact with producers and suppliers.
To achieve the highest product quality and reinforce customer satisfaction, AGRANA further improved internal quality management and supplier certification. The chief focus was on the traceability of fruit sources all the way back to the grower.
In 2006|07 investment in the Fruit segment totalled € 47.8 million. Capital expenditure in the fruit preparations area centred especially on construction of the new fruit preparations plant in Cabreúva, Brazil, which began in September 2006. The plant was commissioned in the spring of 2007. The installation of a third fruit preparations production line in Serpuchov, Russia, was successfully concluded in 2006 and the plant contributes to meeting the high demand on the Russian market.
In the production of fruit juice concentrates, the investment priority was the expansion of chilling and freezing capacity. Hungary was the site of investment in an energyefficient evaporator system. Capital expenditure also included replacement investment and optimisations for yield increases, quality improvement and assurance as well as process safety at the AGRANA facilities.
AGRANA is the world's leading manufacturer of fruit preparations for the dairy, bakery and ice-cream industry. Through the high organic growth, the top position in the world market was cemented further.
Until 2008 the global market volume for yoghurt products is expected to grow by about 5% annually, with double-digit rates of expansion forecast especially for Eastern Europe (10% per year) and Asia (14% per year) (Source: Global Food Markets, Leatherhead Food International, June 2005). As the world market leader in fruit preparations, AGRANA is operating fruit preparations plants in both of these growth regions. All told, AGRANA has production facilities for fruit preparations in 26 different locations worldwide.
South America represents an attractive, fast-growing market that since 1994 has been supplied from a fruit preparations plant in Argentina. In September 2006, construction began of a new fruit preparations manufacturing facility in Cabreúva in the Brazilian state of Sao Paulo, at the business location of Ricaeli, a local frozen foods company. The new plant is designed to supply the Brazilian dairy industry's growing demand for fruit preparations. Ricaeli, a producer of frozen fruit and frozen purees for retailers and industrial customers, will hold a minority interest of up to 25% in the venture. AGRANA is benefiting from Ricaeli's local knowledge – particularly in raw material buying – and the partner's provision of the necessary infrastructure. Production at the plant began in the spring of 2007. From 2008 the facility's production capacity is to be expanded in the next project stage.
In addition to the strategically important growth markets in Central and Eastern Europe, Asia and South America, AGRANA retains its successful and leading operational presence in the well-developed, high-volume dairy markets of Western Europe and North America, as well as in Africa and Australia/Oceania. These markets demand consistent leadership in innovation and technology.
To satisfy the global rise in demand for fruit preparations on a dependable basis, the purchasing of raw materials was reorganised and the different procurement systems were unified. Through the assignment of global areas of responsibility and the pooling of purchasing activities into functional units (notably category buying, logistics, finance and food safety), additional procurement synergies are mobilised. The result is that the increased purchasing volume created by the organic growth and by the completed integration of all companies can be organised more efficiently, with critical deliverables being security of supply and quality of raw materials.
In studies of the capacity utilisation of the European fruit preparation plants, optimisation criteria are currently being developed for these facilities. The aim is to avoid capacity bottlenecks and utilise the production plants in Europe as efficiently as possible. Furthermore, hauling distances to customers are to be minimised in order to control transport costs and environmental effects.
AGRANA is Europe's leading manufacturer of apple juice concentrate and a major European producer of other fruit juice concentrates.
Until 2008 the world fruit juice market is forecast to grow at about 7% a year in terms of volume; especially Eastern Europe (12% p.a.) and Asia (31% p.a.) are important growth markets (source: Global Food Markets, Leatherhead Food International, June 2005). AGRANA has presence in both regions.
The Group operates ten fruit juice concentrate plants in Central and Eastern Europe and with their output supplies not only the highly specialised Western European fruit juice industry, but also the growing demand for apple and berry juice concentrates in the CEE markets.
In China the year's apple harvest produced a record crop of approximately 24.5 million tonnes of fruit (prior year: 20.4 million tonnes) (source: USDA). This represents about one-third of average world apple production. Because of the good harvest the facility in Xianyang, which produces sweet apple juice concentrate for worldwide export, is running at capacity for longer than the fruit juice concentrate plants in Europe. The plant's product is sold mainly into the large North American market, the Russian market (characterised by strong demand) and into Europe. The joint venture also targets the expanding Asian market for fruit juices. AGRANA is the first European maker of fruit juice concentrates to have made the move into the world's largest procurement market for process apples.
Compared to the previous year, the price for sour apple juice concentrate remained relatively steady while sweet concentrate rose in price. This development reflected above all the increase in demand from the fruit-juice-using industry. This sector is favouring new recipes and blends – especially in the North American and Asian market – that lean heavily towards the (lower-priced) sweet concentrate and offset shortages of concentrated orange juice.
AGRANA aims at economising on a long-term and sustainable basis.
AGRANA is an international company that processes plant crops into high-quality products. Sustainable use of the available resources has been a crucial principle for AGRANA for decades. This is evident in the raw materials and production methods employed, which optimise the efficient, environmentally sound use of energy and reduction of emissions. Food safety, quality assurance, traceability of all industrial processes back to the farmer's field – including the handling of the raw materials from seed to harvest – as well as extensive certification all contribute to the documented sustainability of AGRANA's products and environmental practices.
AGRANA continually invests in improving energy efficiency and in minimising the use of resources in transport, production and packaging. In addition, a continuous improvement process for environmental standards is consistently applied and intensified.
Beginning in the autumn of 2007, AGRANA wants to supply clean energy from Austria. With the construction of the first industrial-scale bioethanol plant in Austria, AGRANA will provide an important contribution to the improvement of the CO2 balance: The combustion of bioethanol releases only as much CO2 as the plants have captured from the atmosphere during their growth. The use of bioethanol as a fuel thus actively contributes to slowing the greenhouse effect. What is more, bioethanol burns without producing soot, is sulphur-free and contains no poisons or hazardous substances.
In the environmental impact assessment for the construction of the AGRANA bioethanol plant in Pischelsdorf, Austria, particular emphasis was placed on preserving the existing ecosystem. For instance, an amphibian fence was installed to safeguard the continued existence of the natural ecological balance around the facility.
AGRANA has for years been investing in energy conservation and environment-saving emissions reduction at its plants.
Sugar extraction is an energy-intensive process. The process heat and electrical energy needed to evaporate the sugar beet's water content of 75% is generated in cogeneration plants (combined-cycle systems of steam and gas turbines), which provide maximum energy efficiency. They achieve a high utilisation of the primary energy used, less consumption of fossil fuels and lower specific (per-unit-of-product) emissions, thus minimising environmental impacts.
Bioethanol contributes to the improvement of the CO2 balance.
1 Selected examples of the long list of AGRANA's certifications held and standards followed are ISO 9001, IFS (International Food Standard), Codex Alimentarius (FAO/WHO food standards): HACCP principles, good manufacturing practices, good hygienic practices, FDA CFR 21 in the USA, GMP B2, kosher certificates, etc.
Since 1990 in Austria, AGRANA's consumption of fossil fuel energy (per unit of beet processed) for sugar production and drying of spent beet pulp has been cut by almost 31% through investment in improved plant processes, instrumentation and control technology. The Austrian plants already rank among the best in Europe in energy efficiency. This standing is regularly verified by international benchmarking in the Group.
CO2 emissions per unit of output product were brought down by 32% over the same period, thus contributing significantly to reducing the environmental footprint.
With this disproportionately steep reduction, Austria's sugar industry has also already now fulfilled the Kyoto target of a 13% cut in CO2 emissions by 2010 in Austria compared to 1990 levels.
Steps to further reduce energy consumption – and thus emissions – in 2006|07 included, for example, the additional installation of an extraction tower and a press for vegetable matter at the sugar factory in Tulln, Austria. At the facilities in the new EU countries as well, energy consumption was drastically lowered. Continuous work is also done to improve production technologies.
Next to the investments already made in energy-saving measures, further capital expenditure are already planned for the future. In 2007|08 a biogas plant is scheduled to be built at the sugar factory in Kaposvár, Hungary. AGRANA is thus choosing alternative sources of energy supply. The plant will generate enough biogas from the pulp left after sugar beet processing to take the place of more than half the fossil fuel otherwise used. Accordingly, less CO2 will also be released by fossil fuel combustion. This production-scale biogas plant will be the first of its kind in the European sugar industry.
In the starch plants, AGRANA is currently also working on reclaiming energy from the by-products of potato and corn starch production. Here natural gas as a primary energy source has been partly replaced with biogas or biomass. Another focal point of the present programmes to increase energy efficiency are energy reclamation measures, such as making the best possible use of waste heat from furnaces.
AGRANA thus continues to find ways to make the energy supply more sustainable.
AGRANA has set itself the task of making comprehensive business and environmental advice available to farmers, the Group's most important raw material suppliers.
In the Sugar and Starch segments, AGRANA has therefore long been providing intensive consulting services to growers, which has led to a significant reduction in pesticide and fertiliser use. Methods were also developed to refine irrigation by measuring soil moisture in the rooting zone.
In the Fruit segment a similar knowledge transfer is achieved through the close contact maintained with fruit growers by the AGRANA category buyers (responsible for global fruit purchasing) and the team of quality assurance staff and agricultural advisors supporting them. Mandatory cultivation regimes are to some extent prescribed to farmers in terms of whether, when, how much and which herbicides and fertilisers are to be used. To assure high quality standards and promote sustainable management, AGRANA works with certified raw material suppliers.
Beet is transported to the Austrian sugar plants in Leopoldsdorf and Tulln largely by rail, with the rail component further increased to 54% in the year under review.
About one-third of the potatoes used by the starch plant in Gmünd, Austria also arrive by rail.
A hallmark of production processes at the AGRANA factories is that they feature closed cycles where possible. In addition to almost complete utilisation of all raw material components and by-products, this also means the treatment and reuse of waste process water. For instance, by installing closed cooling cycles instead of once-through systems, fresh water consumption was greatly reduced, as now essentially only the water lost to evaporation in the cooling towers needs to be replaced.
For production to be environmentally sound, wastewater from production processes must also be cleaned appropriately. State-of-the-art water treatment plants help reduce effluent to a minimum. For some years an investment priority at the AGRANA plants has therefore been the continual improvement of wastewater treatment systems. At the fruit juice concentrate plants in Bialobrzegi, Poland and Vaslui, Romania, existing wastewater treatment plants were enlarged and improved.
The commissioning of a new evaporation plant in Hungary has cut energy use by 30%. The high degree of process integration and the exploitation of other utilisation potential leave only small quantities of organic waste to be composted.
At the potato starch manufacturing facility in Gmünd, Austria, the potato water left after starch extraction, which contains valuable minerals from the potato, is concentrated and returned to the soil. Similarly, at the corn starch plant in Aschach, Austria, the corn steep liquor is reclaimed after evaporation and used to enrich animal feed. In the final
phase of expansion to a daily corn processing capacity of 1,000 tonnes in Aschach, the company worked closely with experts, authorities and neighbouring property owners to reduce dust, smells and noise emitted by the plant. A modern biofilter system removes odour-bearing compounds from the waste air from the by-product lines.
AGRANA places a high value on the constant improvement of production facilities in terms of safety, environmental soundness and especially resource conservation. Important contributions in this area are coming from the Group's R&D units, both located in Austria: Zuckerforschung Tulln and, in Gleisdorf, the Center of Innovation and Excellence.
Efforts to reduce lime consumption in sugar production led to the development of LIMOS (Lime Optimization System), a computer program. It determines the exact optimum concentration of milk of lime needed in juice purification and thus helps save lime and coke.
Similarly, use of alkalizing agents was reduced by the development and use of LISA (Lime Salts Analyzer), an automated hardness testing system.
With respect to foam control in potato starch and sugar production processes, AGRANA implemented both structural measures for foam prevention and mechanical measures for breaking foam. As well, foam detectors with an integrated rinsing system were developed that permit more efficient use of foam control agents.
Success in the global competitive arena will in the future also turn in large part on companies' innovative power, speed of innovation, and flexibility. AGRANA's research and development (R&D) activities pursue the goal of innovating in all business areas and with a rigorous focus on customers. Our R&D work aims at opening up new markets and producing goods that are less interchangeable. Relentless targeting of market needs and close collaboration with customers are the other foundations for the successful implementation of product innovations.
With the development of innovative products from renewable resources, AGRANA also makes an important contribution to improving the sustainability of the resources we all need in order to live.
The research and development operations for the whole AGRANA Group are concentrated mainly in Austria-based Zuckerforschung Tulln Ges.m.b.H. (ZFT). They range from agricultural R&D, to food, sugar, starch and bioethanol technology, all the way to microbiology and biotechnology.
In the 2006|07 financial year in the Fruit segment, the process of integrating the individual innovation teams continued and a new organisational structure was put in place. The research and development activities in Mitry Mory in France were moved to the Center of Innovation and Excellence in Gleisdorf, Austria, where new products are developed in response to customer and market requirements. As well, additional experts were brought on staff to devise product concepts for new markets. The R&D priorities in Gleisdorf also include process development, process optimisation, and (for the Fruit segment) product safety and quality assurance.
AGRANA had an average total of 188 employees in the R&D departments in the financial year.
Internal and external expenditure on R&D in 2006|07 was about € 12.2 million.
Sugar-related research and development during the year continued to centre on cost optimisation through reduced consumption of supplies and on the use of natural antibacterials.
4.5
04|05
At the Tulln processing plant, valuable insights were gained into the limits of lime conservation in the purification of sugar beet juice. Supported by LIMOS, the software programme for applying precisely the required concentration of milk of lime for juice purification, the optimum dosage was found in the first one-third of the campaign at a lower-than-average level of lime consumption. In addition to its use in the Tulln factory, LIMOS was successfully introduced in other plants within and outside the Group, thus generating licence revenue.
Early encouraging results were also achieved in the efforts to market, outside Europe, the Tulln sugar research facility's devices for reducing consumption of process supplies. Thanks to presentations and poster sessions, the first specific requests were already received, primarily for LISA, the automated hardness measurement system.
In the area of natural antibacterial agents – products based on hop acids, resin acids and myristic acid – success was achieved in using these substances in cooling water systems. At the Tulln plant, for the first time, chlorine-based products were thus entirely eliminated. Through careful coordination of dosage and water routing, any negative effects on the water treatment plant were prevented.
Although the use of the products in the extraction area can already be regarded as state of the art, we went even further: The small extraction tower (with a capacity of 3,000 tonnes per day) additionally installed in the Tulln factory made possible the first trials aimed at virtually complete suppression of microbiological activity. This had not previously been an option in Austria due to the requirements for the pressability of the extraction residue. The innovation allowed a dosage control system to be tested in the tower juice. Other activities in new applications focused on silage (suppression of undesirable kinds of fermentation) and corn starch extraction. Industrial-scale tests in connection with the processing of deteriorated beet, however, could not be carried out as a result of the mild winter.
An initiative steadily gaining in importance is the Group-wide collaboration in the center of excellence for sugar technology. Thus, the most recent campaign produced more intensive sharing of expertise and best practices through regular video conferences. Likewise, participation was stepped up in joint projects relating, for example, to the operation and maintenance of lime kilns and to alternative flocculants.
The examination of the various primary and intermediate products for parameters relevant to quality likewise represents an important tool for maintaining the high standard of the finished products.
Through intensification of the activities in the food market segment and raising of synergies in the Group, new specialised starch derivatives were developed, especially for use as thickeners in fruit preparations. Another area of emphasis was the development of organic starches for special applications. These novel, premium products have outstanding thickening and gelling properties that until now could be achieved only by chemical modification processes.
The main research subjects in the non-food segment include thickeners in paint systems, applications in construction, finishing agents for fiberglass wallcovering, adhesives for the packaging industry, and additives for cosmetics. Spurred by the strong rise in oil prices, interest in products from renewable materials is clearly growing.
Through the combined use of high-viscosity starch derivatives and cellulose ethers as thickening agents, particularly in emulsion paints, a new area of application was unlocked for starch products. These new products are being brought to market based on intensive application research conducted in an emulsion paint laboratory specifically established for the purpose. Patent applications were filed to secure the rights to the technologies.
A major area of application for starch derivatives has for some years been the building industry. Special starch ethers are employed in cement-based systems (such as mortar), in a wide range of plaster systems (among them cement, plaster of paris and polymer), as conditioners in tile adhesive and as additives in concrete.
For economic reasons the packaging industry is searching for alternatives to casein for attaching labels to glass packaging. With the aid of extrusion technology, AGRANA answered this need by developing a new starch product with significantly improved properties (concerning adhesion, rheology, stability and other attributes) compared to the existing products. The new solution was successfully launched on the market.
Through product innovation and application support for customers, AGRANA developed new market segments for starch products and made established processes more economical.
For the production of bioethanol, development efforts are favouring varieties of wheat that are high in starch, in contrast to bread cereals, where high protein content and hardness are top selection criteria. The high-starch wheat varieties were less in demand in the past and thus less widely cultivated. With the emphasis on renewable energy in Europe, these strains are becoming attractive again. Accordingly, AGRANA is participating in a multi-year research project designed to develop cereal varieties particularly suitable as raw material in the production of bioethanol. In addition to satisfying standard requirements, these varieties must have a high starch content, starch yield and ethanol yield, as well as rapid fermentability. The best eligible genotypes are selected for national-list trials and refined in breeding programmes, thus serving as parents for the development of improved populations. From systematic field trials, samples are taken and the starch content and ethanol yield determined. Operationally realistic field trial
results on ethanol yield and on cultivation-method-specific production costs serve as the basis for the economic comparison of wheat and triticale as raw materials. The researchers are also examining the general utility of launching a focused programme to develop triticale varieties.
In parallel, another research project is underway to chart the potential of bioethanol as an alternative fuel. One of its goals is to find out the effects of higher-ethanol blends and of improved engines, efficiency levels and emissions. As well, a fleet trial is being conducted to answer the question of the everyday usability of these vehicles and the changes to existing infrastructure necessary for problem-free mass use with fuel blends high in bioethanol.
Given the short innovation cycles in the fruit yoghurt market, manufacturers of fruit preparations must respond very rapidly to changing consumer preferences and be quick to spot or anticipate trends. To ensure these capabilities, a new cutting-edge Center of Innovation and Excellence for product and process development, process optimisation, product safety and quality assurance was established in 2005 in Gleisdorf, Austria to serve the entire AGRANA Fruit segment.
The development activities for fruit juice concentrates dealt primarily with increasing juice yields and colour yields of the processed raw materials, with quality enhancement, and with yield improvement of the fruit aromas generated during processing. Another thrust of development was aimed at adjusting technology to achieve optimum energy efficiency.
In the 2006|07 financial year the AGRANA Group had an average of 8,223 employees, about 1% more than in the prior year (8,130).
The breakdown of the staff count by segment was as follows:
The number of employees in the Fruit segment rose by 237, due in large part to the inclusion of the AGRANA joint venture in China and of the former DSF in Germany in the Group staff count.
Increasing internationalisation brought about changes for the AGRANA company culture.
In the Sugar segment, employee numbers in 2006|07 fell by 158 people owing to redundancies from the two plant closures in Austria and Slovakia. Based on consultation with the employee councils, comprehensive benefit plans for redundancy transition were implemented in the financial year. Some of the employees involved were offered replacement positions at other AGRANA locations, including the bioethanol plant under construction in Pischelsdorf. The Sugar segment's average staff count for the 2006|07 financial year was 2,723 employees (prior year: 2,881) employees.
The creation and development of the Fruit segment involved a strong surge in AGRANA's globalisation and ushered in sweeping changes in the corporate culture. Over a very few years, AGRANA transformed itself from a regional business into an international Group with a global focus. Thus, in 2006|07 the Group employed 1,650 people in Austria (prior year: 1,746) and 6,573 people (prior year: 6,384) in the international holdings of the Sugar, Starch and Fruit segments. Most of the staff – about 80% – thus works outside Austria. The orientation of the AGRANA management team is correspondingly international.
The Group's rapid growth is proactively supported by an AGRANA corporate culture project launched in 2004|05 that has included establishing principles for working together as the foundation of the Group's culture. These standards of interaction and cooperation connect employees across all business areas and geographical boundaries and thus create a common understanding from which to achieve the Group's goals and implement its strategy. These criteria also form the basis of the annual appraisal and development interview, which in addition to the setting and evaluation of personal targets also focuses more generally on discussing the expectations for and appraisal of performance, as well as employees' further development. The introduction of these regular meetings with each staff member is an important strategic initiative for supporting an emphasis on feedback, promoting performanceand results-oriented management, and systematic people development.
The corporate culture project continues in the current 2007|08 financial year, highlighting service practices and communication policy in order to improve inhouse communication and achieve the best possible information management.
Against the backdrop of the recent years' acquisitions, particular attention in 2006|07 was given to harmonising the various performance-oriented compensation systems. In an international integration project, a uniform new performance incentive scheme was designed that is currently being put into practice worldwide. Likewise, a single job evaluation system was introduced for the whole AGRANA Group.
In addition to individualised training, AGRANA offers annual in-house programmes for personal development. For example, this is done through international workshops and strategy meetings for junior managers-in-training that give participants the opportunity to discuss the Group's strategies directly with AGRANA's Management Board and with the managing directors of the operating companies.
The Group also conducted cross-segment seminars – such as intercultural training – that focus on building soft skills.
The high importance attached to employee training was also reflected in the intensive apprenticeship programme in Austria and the introduction of similar systems abroad. The most strongly prevalent apprenticeship occupations are mechanical engineering technician, plant electrician, process control technician, lathe operator and chemical laboratory technician.
The accident prevention programme begun in 2003 continued to be run successfully in 2006|07, further reducing the number of injuries.The sharing of best practices between the Group's work locations was further intensified.
In Austria, for example, to promote general health and wellness among staff, a programme known as "AGRANA-Fit" encouraged health improvement and maintenance as well as greater health consciousness. Variations on this initiative already exist at numerous AGRANA companies worldwide, from non-smoking campaigns in the USA to group fitness training in China.
| 2,723 | 06 07 |
|---|---|
| 2,881 | 05 06 |
| 2,819 | 04 05 |
AGRANA uses an integrated system for the early detection and monitoring of risks that are specific to the Group. The approach to managing risks is guided by the aim of balancing risks and returns. The Group's risk culture is characterised by risk-aware behaviour, clearly defined responsibilities, independence of risk control, and the implementation of internal control systems.
AGRANA believes that the responsible treatment of business risks and opportunities is a vital element of sustainable and value-driven corporate governance. Risk management thus forms an integral part of the entire planning, management and reporting process and is directed by the Management Board. The Group and all subsidiaries employ risk management systems that are tailored to the respective operating activity. Their aim is the systematic identification, assessment, control and documenting of risks.
Risk management is integral part of the entire planning, management and reporting process.
In a three-pronged approach, risk management at the AGRANA Group is based on risk control at the operational level and strategic control of Group companies – both supported by reporting and control systems – and on the Group's internal auditing, which systematically and regularly scrutinises business processes, transactions and systems.
In addition, emerging trends that could adversely affect business performance are identified and analysed early and continually re-evaluated as part of the risk management process.
In the strategic control of Group holdings, the main focus is on strategic planning in the business segments and units. Material developments that may affect business performance are identified and assessed. Based on market analysis and competitive analysis, relevant opportunities and threats are taken into account in management decisions. Controlling of Group companies involves monitoring the attainment of business targets and steering the companies via uniform measures of performance. It evaluates the Group's portfolios of strategic holdings to achieve the best portfolio structure and supports acquisitions and disposals of businesses.
Operational-level risk control is performed by the operational controlling department on a continuous basis. Through a comprehensive reporting system, the Management Board is kept informed continually, both regularly and on an ad-hoc basis.
The internal group auditing team carries out its auditing and reporting tasks in the parent company and the other Group companies. Internal Group auditing is a Management Board function. The internal auditors examine and evaluate the security, cost-effectiveness and propriety of business processes and transactions as well as the effectiveness of the internal controls.
As a manufacturing company in the agricultural sector, AGRANA's business activities expose it to specific operational risks that may have significant negative effects on its financial position and results of operations.
Potential effects of international and national trade agreements and market policy are analysed at an early stage and evaluated within the risk management process.
Of particular relevance to AGRANA in this context is the new EU sugar regime, which took effect on July 1, 2006 and is in force until September 30, 2015.
The new sugar market regime and its effects are discussed in detail beginning on page 34 in the report on the Sugar segment.
AGRANA as a processor of agricultural products is subject to procurement risks that may arise from weather conditions. This could result in an insufficient supply of agricultural raw materials. Moreover, these raw materials, especially grain, may be subject to price fluctuations that cannot be fully passed through to customers. These risks are relevant primarily in the Starch and Fruit segments. Procurement risks are less significant in the Sugar segment because under the sugar regime, beet growers strive to utilise their supply quotas as fully as possible. AGRANA mitigates procurement risks by concluding delivery contracts with a large number of suppliers and, in the Fruit segment, by sourcing worldwide.
The restructuring of the Fruit segment and the resulting capability for global purchasing have significantly reduced these procurement risks. With a view to lessening dependence on local markets and single regions, procurement for the Fruit segment is – to the extent deemed environmentally and economically appropriate – conducted on a global basis in order to provide customers with consistent high quality and reliable delivery. To this end, AGRANA also enters into long-term contracts with suppliers and customers to maximise mutual benefit through mutual commitment. These firm ties help to ensure procurement of only the best raw materials and their production and processing to exacting, approved standards.
Energy price risks are mitigated at AGRANA by careful monitoring of the market, by hedging of future price movements when making energy purchases, and by continually evaluating and promptly implementing measures to conserve energy.
In AGRANA's markets, demand for the Group's products is relatively stable. Signs of possible changes in consumer behaviour are identified at an early stage through AGRANA's risk management process. Implications for the market position are analysed and, as appropriate, reflected in modifications to business strategy. Competition-induced swings in sales prices – encountered particularly in the Starch and Fruit segments – are met by continually optimising cost structures, with the goal of cost leadership.
In the Fruit segment, the sustained strong growth and the requirements of the new markets in Central and Eastern Europe, Russia and Asia with their rapidly developing fruit juice and dairy industries all make it vital to watch the markets at all times. Only with the help of accurate and above all continual market analyses and market development can the largely double-digit growth and high potential of these markets be harnessed for the further growth of the AGRANA Group.
Making products of excellent quality that benefit customers and consumers is something that AGRANA inherently expects of itself and thus takes for granted as its mission. Complying with all relevant food and beverage legislation is therefore something that AGRANA does as a matter of course. Risks associated with quality shortcomings, arising for instance from contaminated raw materials or processing defects, are mitigated by applying very high, certified internal quality standards. Adherence to these standards is regularly monitored throughout the Group.
Other operational risks arising in the areas of production, logistics, research and development as well as from the use of information technology are of comparatively little importance. AGRANA reduces these risks by permanent monitoring, clear documentation and continuous improvement of processes.
No actions are pending against AGRANA or its Group companies that could have material impacts on the Group's financial position.
AGRANA is exposed to the risk of possible changes in the legal environment, particularly in food and environmental legislation. AGRANA identifies such risks at an early stage, assesses their potential impact on the Group's business activity and takes countermeasures where appropriate.
AGRANA is subject to risks from movements in exchange rates, interest rates and share prices. To hedge risks arising from operating and financing activities, the Group, to a limited extent, makes use of derivatives.
AGRANA uses derivatives largely to hedge the following exposures:
To hedge the risks cited above, AGRANA uses conventional instruments such as interest rate swaps, interest rate caps and/or floors, interest rate futures, exchange rate contracts and commodity futures. The use of these instruments is regulated by Group policies under the Group's risk management system. These policies set ceilings appropriate to the underlying transactions, define authorisation procedures, rule out the speculative use of derivative financial instruments, minimise credit risks, and specify internal reporting rules and the organisational separation of risk-taking and risk control. Adherence to these rules and the proper processing and valuation of transactions are regularly and independently monitored.
On balance, the aggregate risk exposure of the Group has increased in comparison to the prior year, due especially to the insufficient amount of quota surrendered voluntarily by non-competitive sugar producers.
AGRANA's consistent pursuit of a sustainable, value-driven corporate strategy also creates many opportunities.
The reform of the European Community's sugar regime, while holding the risks described above, also offers scope for a lasting strengthening of the Group's competitive position in the sugar market. The structural changes to the European sugar industry caused by the price reductions will prompt a number of rivals to withdraw from the market, particularly in climatically less favoured regions of Europe. AGRANA commands a superb competitive position and seeks to expand its market share further, not least on the strength of logistic advantages from being located close to large industrial sugar customers.
Another major opportunity is that of producing alcohol fuel from renewable resources, with the twin benefits of reducing dependence on fossil fuels and cutting carbon dioxide emissions. In some countries, such as Brazil, the associated market potential is already widely pursued by industry. The EU as well has committed itself to the use of renewable sources of energy under the Kyoto Protocol, the EU's Biomass Action Plan and its Strategy for Biofuels. The process of making these commitments more specific and implement them is underway. Austria has passed laws requiring the partial substitution of biogenic for fossil fuels. Through the expansion of the Hungarian bioethanol capacity and the construction of the new plant in Austria, AGRANA has already set the stage for remaining a prominent supplier in the burgeoning market for biogenic fuels.
The Fruit segment newly formed in the last financial years by acquisitions is growing strongly. This growth provides a counterbalance to the risks from the changes in the EU sugar market. The AGRANA Group is already the world market leader in fruit preparations for the dairy industry. The Fruit segment's business is anticipated to expand both in saturated markets and emerging growth markets, with the expansion driven above all by the global high demand for dairy products and the rise in consumption of fruit juice.
On balance for the current 2007|08 financial year, the Management Board of AGRANA Beteiligungs-AG sees no risks to AGRANA's status as a going concern.
64
Value-added growth will remain AGRANA's focus for the 2007|08 financial year.
The aim in the Fruit segment is to continue the global expansion and add to the capacity of our existing facilities to maintain a growth rate above that of the market.
In the Starch segment, AGRANA will remain on the growth path in 2007|08, particularly by targeting specialty and niche products. The Starch segment is also expanding its bioethanol capacity; in the market for this environmentally friendly alternative fuel, AGRANA wants to become a leading Central European supplier.
AGRANA also plans to further consolidate its market position in the Sugar segment and expand its strong position in Eastern Europe and the Balkan region.
Value-added growth will remain AGRANA's focus.
The sound financial position, good earnings and strong cash flow underpin AGRANA's ability to achieve these strategic goals.
Group revenue in 2007|08 is projected to be almost € 1.9 billion.
While this figure is marginally below that in 2006|07, the difference is attributable to the shorter reporting period in the Fruit segment (12 months instead of 14) and the lower product quantities available for marketing in the Sugar segment. The high organic growth will not fully offset these factors.
Profits in the Starch and Fruit segments this year are expected to rise compared to last year. The Sugar segment will be influenced by the amendments to the sugar market reform that are expected to be adopted by the European Commission in October 2007, after which more detailed forecasts can be prepared for this segment.
| BEET CONTRACTS | Area under beet | Number of growers | Contracted beet volume |
|||
|---|---|---|---|---|---|---|
| 2007 (hectares) |
2006 (hectares) |
2007 | 2006 | 2007 (1,000 to) |
2006 (1,000 to) |
|
| Austria | 43,000 | 39,562 | 8,574 | 8,944 | 3,170 | 2,680 |
| Czech Republic | 14,000 | 12,703 | 160 | 144 | 740 | 675 |
| Hungary | 19,000 | 19,913 | 190 | 198 | 1,020 | 941 |
| Slovakia | 8,000 | 6,973 | 101 | 139 | 408 | 294 |
| Romania | 7,500 | 8,248 | 93 | 243 | 205 | 250 |
| Total | 91,500 | 87,399 | 9,118 | 9,668 | 5,543 | 4,840 |
Due to a combination of the temporary reduction in sugar quotas in the reporting period, the withdrawal already agreed for 2007|08 and the lower level of exports compared to 2006|07, AGRANA expects sugar revenue to decline despite the start of production at the refinery in Bosnia and sales activities in Bulgaria.
The restructuring levy imposed by the EU in the 2007|08 marketing year of € 173.80 per tonne of sugar is nearly 40% higher than last year. If the European Commission continues to impose the restructuring levy on unutilised quotas, this will substantially impair results in the Sugar segment.
In order to compensate for these external factors, AGRANA will continue to pursue efficiency gains in production and marketing. Additional steps to stabilise results include bolstering the Group's market position, particularly in Central and South-Eastern Europe, cost-cutting measures and a focus on customer service and satisfaction.
Thanks to Eastern Sugar's relinquishing of quota and the associated closing of five of its sugar refineries in the Czech Republic, Slovakia and Hungary, supply-side pressure has eased considerably in these markets. The closure of the only sugar refinery in Slovenia has also boosted sales potential for AGRANA.
Beet cultivation area for 2007 has been increased. The reason is the chemical industry's expected demand for sugar, which does not come under the quotas for sales to the pharmaceutical and fermentation industries.
A total of € 4.5 million has been earmarked for capital expenditure at the two Austrian plants in the 2007|08 financial year. Investment of around € 15.0 million to replace equipment and achieve energy savings is planned for the sugar refineries in Hungary, the Czech Republic, Slovakia and Romania.
The majority of the € 16.2 million set aside for investment to strengthen the market position in the Balkan region will be used for completion of the raw sugar refinery in Brcko, Bosnia-Herzegovina, and expansion of the distribution centre in Sofia, Bulgaria.
The weather-related poor starch potato harvest in 2006 led to relatively low inventories and a marked increase in potato starch prices.
As the above-quota production from 2005|06 carried forward to 2006|07 was thus used up last year, an unrestricted potato starch quota of 47,691 tonnes is again available for 2007|08. Contracts totalling around 213,000 tonnes of conventional and organic starch potatoes have therefore been concluded for the 2007 season. Assuming favourable weather conditions, AGRANA expects potato starch production to reach the quota.
Following the addition of further capacity, the corn processing volume in Hungary is to increase to about 525,000 tonnes in the 2007|08 financial year. Throughput in Romania is also expected to rise, to 22,000 tonnes. The corn starch plant in Aschach, Austria, is forecast to see processing levels rise to around 360,000 tonnes of corn.
Starch prices – currently high for commodity starches amid the raw material supply situation – will be influenced by the 2007 harvest. For specialty starch products, volumes are expected to rise, yet prices are likely to remain stable.
Considerable boosts to revenue in 2007|08 will be generated by the coming-on-stream of the bioethanol facility in Pischelsdorf, Austria, and the higher processing capacity at the Hungrana corn starch and isoglucose plant. Slightly detracting from the rise in earnings will be the start-up costs of the bioethanol plant that is scheduled to enter operation in October 2007, and the payments into the restructuring fund for the isoglucose quota.
A total of € 112.9 million is budgeted for investment in property, plant and equipment and intangible assets in the Starch segment during 2007|08.
The portion designated to be spent in Austria is € 73.0 million, including approximately € 57.7 million for the construction of the bioethanol plant in Pischelsdorf. The remaining € 15.3 million will be invested in the Austrian starch factories.
In Hungary, AGRANA's 50% share of investment will be about € 39.0 million. Most of the capital spending will be for the expansion of Hungrana's corn processing capacity to 3,000 tonnes per day. Investment in Romania of approximately € 0.7 million will involve various replacement and efficiency-improvement projects.
Both in the fruit preparations and fruit juice concentrate operations, AGRANA expects dynamic organic growth and a significant increase in profit.
The Group will continue to increase its penetration of existing markets and development of new markets.
The aim is to expand AGRANA's lead in market share in the high-volume European as well as the North and Central American markets for fruit preparations. In the fast-growing CEE, Asian and South American markets, the goal is to outpace the market's growth rates.
In fruit juice concentrates, AGRANA intends to expand its world market position as the joint venture in China exports rising volumes of sweet apple juice concentrate to Europe, the USA and Russia. In Europe, AGRANA plans to identify new business areas and markets through systematic, focused marketing activities and in-depth market analysis. The current trend towards health drinks with a high fruit content (such as smoothies) will be exploited by working closely with customers to develop new product concepts.
The Fruit segment is to invest a total of € 41.9 million in 2007|08.
The majority of the investment in the fruit preparations business will pay for additional capacity and the associated infrastructure. At the Serpuchov fruit processing facility in Russia, for instance, a new production line is planned to satisfy rising demand. Other investment is scheduled for the completion of the new fruit processing facility and the startup of operations in Brazil.
In the fruit juice concentrate activities, the on-going projects to optimise yields continue. A further focus will be the expansion and renewal of existing wastewater plants. We will also work together with our joint venture partner in China to increase capacity for apple juice concentrate at the Xianyang Andre Juice Co., Ltd. This investment aims to ensure that the potential offered by the large supply of apples in this stragically important procurement region is utilised to the fullest extent possible.
(based on IFRS)
68
| Before | Total | |||||
|---|---|---|---|---|---|---|
| 2006 07 | restructuring | Restructuring | 2005 06 | |||
| €000 | €000 | €000 | €000 | |||
| (1) | Revenue | 1,915,819 | 1,499,602 | 1,499,602 | ||
| (2) | Changes in inventories of finished | |||||
| and unfinished goods | (29,851) | 1,245 | 1,245 | |||
| (2) | Own work capitalised | 4,301 | 2,164 | 2,164 | ||
| (3) | Other operating income | 31,620 | 28,169 | 28,169 | ||
| (4) | Cost of materials | (1,181,424) | (984,094) | (204) | (984,298) | |
| (5) | Staff costs | (213,979) | (173,924) | (8,881) | (182,805) | |
| (6) | Depreciation, amortisation | |||||
| and impairment losses | (80,600) | (65,077) | (13,449) | (78,526) | ||
| (7) | Other operating expenses | (340,105) | (208,538) | (2,000) | (210,538) | |
| (8) | Operating profit | |||||
| after exceptional items1 | 105,781 | 99,547 | (24,534) | 75,013 | ||
| (9) | Finance income | 15,227 | 16,433 | 16,433 | ||
| (10) | Finance expenses | (27,600) | (21,356) | (21,356) | ||
| (11) | Share of profit of associates | 51 | 1,608 | 1,608 | ||
| Net financial items | (12,322) | (3,315) | (3,315) | |||
| Profit before tax | 93,459 | 96,232 | (24,534) | 71,698 | ||
| (12) | Income tax expense | (22,362) | (12,741) | 5,749 | (6,992) | |
| Profit for the period | 71,097 | 83,491 | (18,785) | 64,706 | ||
| Attributable to shareholders of the parent | 68,865 | 62,745 | ||||
| Minority interests | 2,232 | 1,961 | ||||
| (13) | Earnings per share under IFRS | |||||
| (basic and diluted) | € 4.85 | € 4.42 | ||||
1 The line item name "Operating profit after exceptional items" applies only to the columns titled "2006|07" and "Total 2005|06", not to the columns "Before Restructuring" and "Restructuring". For the latter two columns, the line item name is "Operating profit".
| 2006 07 | 2005 06 | ||
|---|---|---|---|
| €000 | €000 | ||
| Profit for the period | 71,097 | 64,706 | |
| Depreciation, amortisation and impairment | |||
| of non-current assets | 81,338 | 79,355 | |
| Valuation gains on non-current assets | (477) | (6) | |
| Changes in non-current provisions | (1,279) | (8,044) | |
| Share of profit of associates | (51) | (1,608) | |
| Other non-cash (income)/expenses | (104) | 10,944 | |
| Profit before tax, depreciation and amortisation | 150,524 | 145,347 | |
| Gains on disposal of non-current assets | (1,850) | (783) | |
| Changes in inventories | 20,621 | (43,075) | |
| Changes in receivables, deferred tax assets | |||
| and current assets | (1,811) | 46,253 | |
| Changes in current provisions | (16,741) | (11,648) | |
| Changes in payables (excluding borrowings) | (15,472) | 45,975 | |
| Changes in non-cash items resulting | |||
| from foreign exchange translation | 1,656 | (2,837) | |
| Change in working capital | (11,747) | 34,668 | |
| Net cash from operating activities | 136,927 | 179,232 | |
| Proceeds from disposal of non-current assets | 7,744 | 8,805 | |
| Purchases of property, plant and equipment | |||
| and intangible assets | (145,882) | (91,195) | |
| Proceeds from disposal of available-for-sale securities | 5,262 | 74,803 | |
| Purchases of non-current financial assets | (5,181) | (7,531) | |
| Purchases of businesses | (28,965) | (133,091) | |
| Net cash used in investing activities | (167,022) | (148,209) | |
| Capital increase by a subsidiary | |||
| through minority interests | 10,040 | 0 | |
| Changes in non-current borrowings | 78,028 | 49,585 | |
| Changes in current borrowings | 25,327 | (43,869) | |
| Dividends paid | (30,166) | (30,153) | |
| Net cash from/(used in) financing activities | 83,229 | (24,437) | |
| Net increase in cash and cash equivalents | 53,134 | 6,586 | |
| Effect of changes in foreign exchange rates | |||
| on cash and cash equivalents | (1,728) | 961 | |
| Cash and cash equivalents at beginning of period | 80,812 | 73,265 | |
| Cash and cash equivalents at end of period | 132,218 | 80,812 |
(14)
(15)
(16)
69
70
Feb 28, 2007 Feb 28, 2006
€000 €000
584,878 579,284
| ASSETS | A. Non-current assets | |||
|---|---|---|---|---|
| (17) | Intangible assets | 254,516 | 230,852 | |
| (18) | Property, plant and equipment | 545,005 | 499,283 | |
| (19) | Investments in associates | 576 | 526 | |
| (20) | Securities | 27,434 | 25,507 | |
| (20) | Investments in non-consolidated subsidiaries | |||
| and outside companies, and loan receivables | 105,802 | 144,243 | ||
| (21) | Receivables and other assets | 5,705 | 4,150 | |
| (22) | Deferred tax assets | 9,230 | 14,490 | |
| 948,268 | 919,051 | |||
| B. Current assets | ||||
| (23) | Inventories | 510,037 | 528,018 | |
| (21) | Trade receivables and other assets | 305,488 | 283,240 | |
| Current tax assets | 8,615 | 7,070 | ||
| (24) | Securities | 27,060 | 32,322 | |
| Cash and cash equivalents | 132,218 | 80,812 | ||
| 983,418 | 931,462 | |||
| Total assets | 1,931,686 | 1,850,513 | ||
| EQUITY AND | ||||
| LIABILITIES | (25) | A. Equity | ||
| Share capital | 103,210 | 103,210 | ||
| Share premium and other capital reserve | 411,362 | 411,362 | ||
| Retained earnings | 356,582 | 357,622 | ||
| Equity attributable to equity holders of the parent | 871,154 | 872,194 | ||
| Minority interests | 24,345 | 13,611 | ||
| 895,499 | 885,805 | |||
| B. Non-current liabilities | ||||
| (26a) | Retirement, termination and | |||
| long-service benefit obligations | 49,011 | 51,925 | ||
| (26b) | Other provisions | 28,294 | 26,577 | |
| (27) | Borrowings | 331,700 | 253,673 | |
| (28) | Other payables | 2,078 | 2,976 | |
| (29) | Deferred tax liabilities | 40,226 | 50,273 | |
| 451,309 | 385,424 | |||
| C. Current liabilities | ||||
| (26b) | Other provisions | 38,233 | 54,973 | |
| (27) | Borrowings | 194,447 | 166,892 | |
| (28) | Trade and other payables | 348,122 | 346,600 | |
| (28) | Current tax liabilities | 4,076 | 10,819 |
Total equity and liabilities 1,931,686 1,850,513
| Retained earnings | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Share | Share | Revalua- | Other | Currency | Profit | Minority | Total | ||
| capital | premium | tion | retained | translation | for the | interests | |||
| reserve | earnings | reserve | period | ||||||
| At February 28, 2007 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | |
| At March 1, 2006 | 103,210 | 411,362 | 46,727 | 249,481 | (1,331) | 62,745 | 13,611 | 885,805 | |
| Loss on | |||||||||
| available-for-sale | |||||||||
| financial assets | 0 | 0 | (30,221) | 0 | 0 | 0 | 0 | (30,221) | |
| Cash flow hedge | 0 | 0 | (753) | 0 | 0 | 0 | 0 | (753) | |
| Currency | |||||||||
| translation loss | 0 | 0 | 0 | 0 | (8,386) | 0 | (94) | (8,480) | |
| Net income/(expense) | |||||||||
| recognised directly | |||||||||
| in equity | 0 | 0 | (30,974) | 0 | (8,386) | 0 | (94) | (39,454) | |
| Profit for the period | 0 | 0 | 0 | 0 | 0 | 68,865 | 2,232 | 71,097 | |
| Total recognised | |||||||||
| income and expense | 0 | 0 | (30,974) | 0 | (8,386) | 68,865 | 2,138 | 31,643 | |
| Dividends paid | 0 | 0 | 0 | 0 | 0 | (29,695) | (471) | (30,166) | |
| Transfer to reserves | 0 | 0 | 0 | 33,050 | 0 | (33,050) | 0 | 0 | |
| Other changes | 0 | 0 | 0 | (850) | 0 | 0 | 9,067 | 8,217 | |
| At February 28, 2007 | 103,210 | 411,362 | 15,753 | 281,681 | (9,717) | 68,865 | 24,345 | 895,499 | |
| 356,582 | |||||||||
| At February 28, 2006 | |||||||||
| At March 1, 2005 | 103,210 | 411,362 | 14,318 | 199,084 | (8,482) | 79,872 | 36,487 | 835,851 | |
| Gain on | |||||||||
| available-for-sale | |||||||||
| financial assets | 0 | 0 | 31,656 | 916 | 0 | 0 | 0 | 32,572 | |
| Cash flow hedge | 0 | 0 | 753 | 0 | 0 | 0 | 0 | 753 | |
| Currency | |||||||||
| translation gain | 0 | 0 | 0 | 0 | 7,151 | 0 | 1,368 | 8,519 | |
| Net income/(expense) | |||||||||
| recognised directly | |||||||||
| in equity | 0 | 0 | 32,409 | 916 | 7,151 | 0 | 1,368 | 41,844 | |
| Profit for the period | 0 | 0 | 0 | 0 | 0 | 62,745 | 1,961 | 64,706 | |
| Total recognised | |||||||||
| income and expense | 0 | 0 | 32,409 | 916 | 7,151 | 62,745 | 3,329 | 106,550 | |
| Dividends paid | 0 | 0 | 0 | 0 | 0 | (29,190) | (963) | (30,153) | |
| Transfer to reserves | 0 | 0 | 0 | 50,682 | 0 | (50,682) | 0 | 0 | |
| Other changes | 0 | 0 | 0 | (1,201) | 0 | 0 | (25,242) | (26,443) | |
| At February 28, 2006 | 103,210 | 411,362 | 46,727 | 249,481 | (1,331) | 62,745 | 13,611 | 885,805 | |
| 357,622 |
71
72
Segment reporting, which conforms with International Accounting Standard (IAS) 14, distinguishes between three business segments, Sugar, Starch and Fruit, thus following the AGRANA Group's internal reporting structure. The Sugar segment comprises sugar extraction in Austria, Hungary, the Czech Republic, Slovakia and Romania as well as sugar-related business areas. The Starch segment encompasses production facilities in Austria, Hungary and Romania. The Fruit segment is composed of two units: Juice (producing fruit juice concentrates notably in Austria, Denmark, Poland, Romania and Hungary) and Fruit (producing fruit preparations worldwide).
| Consoli | |||||
|---|---|---|---|---|---|
| Sugar | Starch | Fruit | dation | Group | |
| Financial year 2006 07 | €000 | €000 | €000 | €000 | €000 |
| Revenue | 804,574 | 253,429 | 914,619 | (56,803) | 1,915,819 |
| Inter-segment revenue | (19,908) | (36,891) | (4) | 56,803 | 0 |
| External revenue | 784,666 | 216,538 | 914,615 | 0 | 1,915,819 |
| EBITDA | 57,658 | 41,336 | 88,499 | 0 | 187,493 |
| Depreciation and | |||||
| impairment of property, | |||||
| plant and equipment1 | 24,743 | 12,825 | 42,937 | 0 | 80,505 |
| Operating profit | 32,915 | 28,511 | 45,562 | 0 | 106,988 |
| Exceptional items | 0 | (1,207) | 0 | 0 | (1,207) |
| Operating profit | |||||
| after exceptional items | 32,915 | 27,304 | 45,562 | 0 | 105,781 |
| Share of profit | |||||
| of associates | 51 | 0 | 0 | 0 | 51 |
| Carrying amount | |||||
| of associates | 576 | 0 | 0 | 0 | 576 |
| Segment assets | 559,124 | 250,609 | 796,522 | 0 | 1,606,255 |
| Segment liabilities | 305,205 | 48,851 | 111,681 | 0 | 465,737 |
| Purchases of property, | |||||
| plant and equipment | 30,337 | 79,232 | 47,788 | 0 | 157,357 |
| Purchases of non-current | |||||
| financial assets | 2,784 | 142 | 2,629 | 0 | 5,555 |
| Total capital expenditure | 33,121 | 79,374 | 50,417 | 0 | 162,912 |
| Staff count | 2,723 | 776 | 4,724 | 0 | 8,223 |
1 PP&E denotes property, plant and equipment; intangibles exclude goodwill
73
| Consoli | |||||
|---|---|---|---|---|---|
| Sugar | Starch | Fruit | dation | Group | |
| Financial year 2005 06 | €000 | €000 | €000 | €000 | €000 |
| Revenue | 770,418 | 232,558 | 541,158 | (44,532) | 1,499,602 |
| Inter-segment revenue | (16,625) | (27,907) | 0 | 44,532 | 0 |
| External revenue | 753,793 | 204,651 | 541,158 | 0 | 1,499,602 |
| EBITDA | 61,878 | 45,358 | 57,388 | 0 | 164,624 |
| Depreciation and | |||||
| impairment of property, | |||||
| plant and equipment1 | 23,171 | 11,764 | 30,142 | 0 | 65,077 |
| Operating profit | 38,707 | 33,594 | 27,246 | 0 | 99,547 |
| Restructuring expenses | (24,534) | 0 | 0 | 0 | (24,534) |
| Operating profit | |||||
| after restructuring | 14,173 | 33,594 | 27,246 | 0 | 75,013 |
| Share of profit | |||||
| of associates | 43 | 0 | 1,565 | 0 | 1,608 |
| Carrying amount | |||||
| of associates | 526 | 0 | 0 | 0 | 526 |
| Segment assets | 596,005 | 174,378 | 761,375 | 0 | 1,531,758 |
| Segment liabilities | 336,730 | 32,630 | 113,691 | 0 | 483,051 |
| Purchases of property, | |||||
| plant and equipment | 13,356 | 34,941 | 42,898 | 0 | 91,195 |
| Purchases of non-current | |||||
| financial assets | 7,373 | 0 | 158 | 0 | 7,531 |
| Total capital expenditure | 20,729 | 34,941 | 43,056 | 0 | 98,726 |
| Staff count | 2,881 | 762 | 4,487 | 0 | 8,130 |
The revenue and asset data represents consolidated amounts. Capital expenditures consist of additions to intangible assets (excluding goodwill) and property, plant and equipment. Inter-segment charges for products and services are based on comparable market prices.
The exceptional items in the 2006|07 financial year result from the cost of the construction stage of AGRANA Bioethanol GmbH.
Segment assets and segment liabilities are based on total segment assets and liabilities, respectively, and do not take into account financial receivables and borrowings. As well, the following items are eliminated in the segment data to the extent that they cannot be allocated: investments in associates, equity interests in other Group companies, securities and loan receivables. Current and deferred tax assets/liabilities are also eliminated.
| Feb 28, 2007 | Feb 28, 2006 | |
|---|---|---|
| €000 | €000 | |
| Total assets | 1,931,686 | 1,850,513 |
| Less non-current financial assets | (133,812) | (170,276) |
| Less securities, cash and cash equivalents | (159,278) | (113,134) |
| Less tax assets and other assets | (32,341) | (35,345) |
| Segment assets | 1,606,255 | 1,531,758 |
| Provisions and other liabilities | 1,036,187 | 964,708 |
| Less borrowings | (526,148) | (420,565) |
| Less deferred tax liabilities and tax payable | (44,302) | (61,092) |
| Segment liabilities | 465,737 | 483,051 |
The division into geographic segments is based on the domicile of the company in question.
| 2006 07 | 2005 06 | |
|---|---|---|
| €000 | €000 | |
| Revenue | ||
| Austria | 642,475 | 643,459 |
| Rest of EU | 890,408 | 645,120 |
| EU-27 | 1,532,883 | 1,288,579 |
| Rest of Europe (Russia, Serbia, Turkey, Ukraine) | 85,208 | 43,383 |
| Other foreign countries | 297,728 | 167,640 |
| Total | 1,915,819 | 1,499,602 |
| Segment assets | ||
| Austria | 725,186 | 674,226 |
| Rest of EU | 649,260 | 647,971 |
| EU-27 | 1,374,446 | 1,322,197 |
| Rest of Europe (Russia, Serbia, Turkey, Ukraine) | 86,132 | 87,979 |
| Other foreign countries | 145,677 | 121,582 |
| Total | 1,606,255 | 1,531,758 |
| 2006 07 | 2005 06 | |
|---|---|---|
| €000 | €000 | |
| Purchases of property, plant and equipment | ||
| and intangible assets | ||
| Austria | 70,000 | 36,504 |
| Rest of EU | 63,044 | 26,767 |
| EU-27 | 133,044 | 63,271 |
| Rest of Europe (Russia, Serbia, Turkey, Ukraine) | 4,561 | 14,289 |
| Other foreign countries | 19,752 | 13,635 |
| Total | 157,357 | 91,195 |
AGRANA Beteiligungs-AG ("the Company"), whose registered office is Donau-City-Strasse 9, A-1220 Vienna, Austria, together with its subsidiaries constitutes an international group engaged mainly in worldwide processing of agricultural raw materials.
The consolidated financial statements of the AGRANA Group for 2006|07 were prepared in accordance with International Financial Reporting Standards (IFRS) in effect at the balance sheet date and with International Financial Reporting Interpretations Committee (IFRIC) interpretations, as adopted by the European Union.
Amounts in the consolidated financial statements are presented in thousands of euros (€000) unless otherwise indicated. Rounding errors may occur in totals of rounded amounts and percentages as a result of the use of automated calculation.
New standards issued by the International Accounting Standards Board (IASB) are applied from the time of their entry into force.
A number of standards and interpretations that became binding from the financial year under review have little or no effect on the Company's reporting. They are the following: the amended IAS 19 (Employee Benefits); IFRS 6 (Exploration for and Evaluation of Mineral Resources); IAS 21 (The Effects of Changes in Foreign Exchange Rates: Net Investment in a Foreign Operation); IFRIC 4 (Determining Whether an Arrangement Contains a Lease); IFRIC 6 (Liabilities Arising from Participating in a Specific Market); IFRIC 7 (Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies) and amendments to IAS 39 (Financial Instruments). The application of an amendment to IAS 1 (Presentation of Financial Statements: Capital Disclosures) led to additional disclosures.
New standards and interpretations already issued, but not yet effective, by the balance sheet date are not early adopted. These are particularly IFRS 7 (Financial Instruments: Disclosures), which will supersede IAS 32 (Financial Instruments: Disclosure and Presentation) from the 2007|08 financial year; IFRS 8 (Operating Segments), which will be effective from the 2009|10 financial year; and IFRIC 8 (Scope of IFRS 2) and IFRIC 9 (Reassessment of Embedded Derivatives), both of which will be binding from the 2007|08 financial year. With the exception of IFRS 7, which exclusively adds new disclosure requirements, the changes cited above are not expected to have material effects on the presentation of the financial position and results of operations of the AGRANA Group.
In preparing the consolidated financial statements, the principles of clarity, understandability and materiality were observed. The nature of expense method was used in the presentation of the income statement. The separate financial statements of the fully consolidated companies represented in the consolidated financial statements are based on uniform accounting policies.
The consolidated financial statements include by full consolidation all domestic and foreign companies controlled by AGRANA Beteiligungs-AG (i.e., all subsidiaries), unless the subsidiary's effect on the Group's financial position and results of operations is of minor significance. Subsidiaries' accounts are consolidated from the time that control is acquired until control ceases.
Companies operated jointly with another entity (joint ventures) are included in the consolidated financial statements by proportionate consolidation based on the Group's equity interest in the joint venture.
Companies over which AGRANA Beteiligungs-AG directly or indirectly exerts significant influence (associated entities, or associates) are included in the consolidated financial statements by the equity method of accounting.
At the balance sheet date, 63 (prior year: 66) companies besides the parent were fully consolidated in the Group financial statements and 4 (prior year: 2) companies were proportionately consolidated.
An overview of the fully consolidated, proportionately consolidated, and equity-accounted entities, as well as Group entities is found on page 120.
The number of companies included in the consolidated financial statements changed as follows in the 2006|07 financial year:
| At February 28, 2007 | 63 | 4 | 1 | |
|---|---|---|---|---|
| Deconsolidation | (1) | 0 | 0 | |
| Reorganisation | (6) | 0 | 0 | |
| First-time inclusion | 4 | 2 | 0 | |
| At March 1, 2006 | 66 | 2 | 1 | |
| consolidation | consolidation | method | ||
| Full | Proportionate | Equity |
In 2006|07 AGRANA began production operations in the Chinese market, thus gaining a presence in the world's largest raw materials procurement region for sweet apple juice concentrate.
The year under review saw the reorganisation of the Fruit segment, which entailed changes in company names. The number of fully consolidated entities was reduced by the merging of the Hungarian juice companies into AGRANA Juice Magyarország Kft. in the third quarter and by the merging of the Austrian fruit companies into AGRANA Fruit Austria GmbH in the fourth quarter.
The sole instance of deconsolidation was Vallø Saft Holding A/S, Køge, Denmark, which was liquidated. The effects of the deconsolidation were not material.
In addition to the above changes in the scope of consolidation, in 2006|07 additional shares in some fruit preparations subsidiaries were acquired by the Group from minority shareholders.
The changes in the scope of consolidation and the purchase of additional shares from minority shareholders had the following effects on the consolidated financial statements (before consolidation):
| 2006 07 | ||
|---|---|---|
| €000 | ||
| Non-current assets | 4,548 | |
| Inventories | 2,640 | |
| Receivables and other assets | 287 | |
| Cash, cash equivalents and securities | 604 | |
| Current assets | 3,531 | |
| Non-current liabilities | (2) | |
| Current liabilities | (3,114) | |
| Net assets | 4,963 | |
| Minority interests | 1,813 | |
| Goodwill | 13,991 | |
| Cash used in purchase of businesses | 20,767 | |
| Cash of acquired companies | (604) | |
| Net cash used in purchase of businesses | 20,163 | |
| 2006 07 | 2005 06 | |
| €000 | €000 | |
| Revenue | 6,843 | 334,057 |
The information below presents the Group's share of the aggregated results of proportionately consolidated companies. The companies involved are joint venture HUNGRANA Kft. and its subsidiary Hungranatrans Kft., Szabadegyhaza, Hungary (Vienna-based AGRANA Stärke GmbH owns 50% of the latter subsidiary), and, from the 2006|07 financial year, AGRANA-STUDEN Beteiligungs GmbH, Vienna, and Xianyang Andre Juice Co., Ltd., China.
Profit for the period 873 17,098
| Feb 28, 2007 | Feb 28, 2006 |
|---|---|
| €000 | €000 |
| 47,414 | 21,501 |
| 17,498 | 6,056 |
| 16,586 | 8,175 |
| 867 | 1,774 |
| 34,951 | 16,005 |
| 82,365 | 37,506 |
| 42,346 | 22,602 |
| 1,005 | 807 |
| 39,014 | 14,097 |
| 82,365 | 37,506 |
| 2006 07 | 2005 06 | |
|---|---|---|
| €000 | €000 | |
| Revenue | 72,823 | 67,381 |
| Profit for the period | 16,290 | 18,394 |
The balance sheet date (reporting date) of the consolidated financial statements is the last day of February. Group companies with other reporting dates prepare interim financial statements at the Group reporting date.
In the consolidated financial statements for the year ended February 28, 2006 the Fruit segment subsidiaries were included based on their accounts for the year ended December 31, 2005. In the 2006|07 financial year the year-end of the Fruit segment companies' annual or interim financial statements was changed from the end of December to the end of February. As a result, the annual financial statements of the Fruit segment companies incorporated in the consolidated income statement for the 2006|07 financial year represent a period of 14 months, that is, they include January and February 2007. This fact should be considered when comparing the current 2006|07 IFRS consolidated financial statements with the prior-year data.
The standardisation of the reporting date had the following effects on revenue and profit after tax:
| 12 months | 14 months | Difference | |
|---|---|---|---|
| €000 | €000 | €000 | |
| Revenue | 780,615 | 914,619 | 134,004 |
| Profit after tax | 14,621 | 13,483 | (1,138) |
In addition to these effects, it should be noted that for the comparative 2005|06 financial year, because of the date of initial consolidation, only nine months of the former Atys Group companies' results are included in the consolidated financial statements.
❚ Acquisitions of companies that are fully or proportionately consolidated are accounted for using the purchase method, by allocating their acquisition cost to the acquired identifiable assets and liabilities (including contingent liabilities) at the time of acquisition. Where the acquisition cost exceeds the net fair value of the acquired assets and liabilities, the difference is recognised as goodwill under intangible assets. Conversely, where the acquisition cost is less than the net fair value of the acquired assets and liabilities, this difference (sometimes referred to as "negative goodwill") from initial consolidation is recognised in income in the period of acquisition.
❚ Pursuant to IFRS 3, goodwill is not amortised. Instead, by what is known as the impairment-only approach, goodwill is tested for impairment at least annually and written down only in the event of impairment.
❚ Investments in associates are measured at equity (by the purchase method) on the basis of the associated entities' most recent available annual financial statements. In accordance with IFRS 3, negative goodwill (any excess of the net fair value of acquired assets and liabilities over acquisition cost) is recognised under "share of profit of associates" in the year of acquisition. As required under IFRS 3, goodwill arising from initial measurement is recognised in the carrying amount of the equity interests held in the associates and is not amortised but is tested for impairment at least annually.
❚ All expenses, income, receivables, payables and provisions resulting from transactions between fully or proportionately consolidated companies are eliminated.
❚ For assets that arise from intragroup flows of products or services and are included in noncurrent assets or in inventories, inter-company balances are eliminated unless insignificant.
❚ Financial statements of foreign Group companies were translated into euros in accordance with IAS 21. The functional currency of every Group company was its respective national currency. Assets and liabilities are translated at middle rates of exchange at the balance sheet date. Expenses and income were translated at annual average rates of exchange. Differences compared to prior-year amounts arising from the translation of balance sheet items at current
balance sheet exchange rates or arising from the use of average rates in translating expenses and income compared to the use of current balance sheet date rates are recognised directly in equity.
❚ Foreign currency monetary items are measured at exchange rates at the balance sheet date, with currency translation gains and losses recognised in profit or loss in the consolidated income statement.
❚ The following exchange rates were applied in the translation of those companies for which the prior-year data was already based on a year end of February 28:
| Rate at reporting date | Average rate for year | ||||
|---|---|---|---|---|---|
| to Feb 28, | |||||
| Country | Currency | Feb 28, 2007 | Feb 28, 2006 | 2007 | 2006 |
| € | € | € | € | ||
| Romania | RON | 3.40 | 3.50 | 3.49 | 3.60 |
| Slovakia | SKK | 34.44 | 37.08 | 36.74 | 38.44 |
| Czech Republic | CZK | 28.30 | 28.26 | 28.25 | 29.50 |
| Hungary | HUF | 254.70 | 252.83 | 264.55 | 249.08 |
❚ The financial statements of the Fruit segment companies, which changed their year end from the end of December to the end of February, were translated at the following rates:
| Rate at reporting date | Average rate for | ||||
|---|---|---|---|---|---|
| Jan 1, 2006– | Jan 1, 2005– | ||||
| Country | Currency | Feb 28, 2007 | Dec 31, 2005 | Feb 28, 2007 | Dec 31, 2005 |
| € | € | € | € | ||
| Argentina | ARS | 4.10 | 3.59 | 3.89 | 3.61 |
| Australia | AUD | 1.68 | 1.61 | 1.67 | 1.63 |
| Brazil | BRL | 2.81 | – | 2.73 | – |
| Bulgaria | BGN | 1.96 | – | 1.96 | – |
| China | CNY | 10.23 | 9.55 | 10.03 | 10.21 |
| Denmark | DKK | 7.45 | 7.46 | 7.46 | 7.45 |
| Fiji | FJD | 2.21 | 2.07 | 2.18 | 2.10 |
| South Korea | KRW | 1,244.15 | 1,190.99 | 1,201.49 | 1,274.39 |
| Morocco | MAD | 11.15 | 10.88 | 11.05 | 11.02 |
| Mexico | MXN | 14.75 | 12.61 | 13.78 | 13.58 |
| Poland | PLN | 3.92 | 3.87 | 3.90 | 4.03 |
| Romania | RON | 3.40 | 3.68 | 3.50 | 3.62 |
| Russia | RUB | 34.53 | 33.97 | 34.15 | 35.16 |
| Rate at reporting date | Average rate for | |||||
|---|---|---|---|---|---|---|
| Jan 1, 2006– | Jan 1, 2005– | |||||
| Country | Currency | Feb 28, 2007 | Dec 31, 2005 | Feb 28, 2007 | Dec 31, 2005 | |
| € | € | € | € | |||
| Serbia | CSD | 80.00 | 85.65 | 83.50 | 83.13 | |
| South Africa | ZAR | 9.58 | 7.49 | 8.64 | 7.92 | |
| Czech Republic | CZK | 28.30 | 28.99 | 28.29 | 29.77 | |
| Turkey | TRL | 1.87 | 1.59 | 1.81 | 1.67 | |
| USA | USD | 1.32 | 1.18 | 1.26 | 1.25 | |
| Ukraine | UAH | 6.67 | 5.99 | 6.37 | 6.37 | |
| Hungary | HUF | 254.70 | 252.66 | 262.64 | 248.06 |
❚ Purchased intangible assets (other than goodwill) are capitalised at cost and amortised on a straight-line basis over their expected useful lives of between 5 and 15 years.
❚ Goodwill and intangible assets with an indefinite useful life are not amortised but are reviewed for impairment at least annually. Details on this impairment test are presented in the notes to the balance sheet.
❚ Intangible assets acquired through business combinations are recorded separately from goodwill if they are separable by the definition in IAS 38 or if they result from a contractual or legal right and their fair value can be reliably measured.
❚ The additional quotas for sugar production, included in intangible assets, are amortised on a straight-line basis over the nine-year period to the end of the sugar regime in 2014|15. The "sugar regime" is the European Union's Common Market Organisation (CMO) for sugar.
❚ Product development costs are capitalised at cost where costs can be accurately allocated and where both the technical feasibility and the marketing of the new products are assured. In addition, the development must be sufficiently likely to generate future cash inflows. Under IAS 38, research costs cannot be capitalised and are charged directly to expense in the income statement.
❚ Items of property, plant and equipment are valued at cost of purchase and/or conversion less straight-line depreciation and impairment losses. Besides materials and labour costs, prorated overheads were capitalised in the conversion costs of internally generated assets. Financing costs are not included. Maintenance costs are expensed as incurred. They are capitalised only if they lead to an expansion or material improvement of the asset concerned.
❚ Where rental agreements or leases transfer all material risks and rewards of ownership to the AGRANA Group (finance leases), the asset rented or leased is recorded as an asset. The asset is initially measured at the lower of its fair value at the inception of the rental period or lease and the present value of the future minimum rental or lease payments. This amount is simultaneously recorded as a liability under borrowings.
❚ Depreciation of property, plant and equipment is generally based on the following useful lives:
| Buildings | 30 to 50 years |
|---|---|
| Plant and machinery | 10 to 15 years |
| Office furniture and equipment | 3 to 10 years |
❚ Impairment losses are recognised, in accordance with IAS 36, if the recoverable amount of an asset has declined below its carrying amount. The recoverable amount is the higher of the asset's net selling price and its value in use.
❚ Government grants to reimburse the Group for costs are recognised as other operating income in the period when the related costs are incurred, unless the grant is contingent on conditions that are not yet sufficiently likely to be met.
❚ Grants to support capital expenditure are deducted from the cost of intangible assets and property, plant and equipment beginning at the time of the binding award of the grant.
❚ Investments in associates, unless of minor significance, are recognised by the equity method based on the ownership interest held.
❚ Investments in non-consolidated subsidiaries and outside companies are as a rule measured at fair value in accordance with IAS 39. If fair value cannot be reliably determined, they are recorded at cost. An impairment loss is recognised upon evidence of sustained impairment.
❚ Loan receivables are measured at their nominal amount. Interest-free or low-interest longterm loans are measured at their present value.
❚ Inasmuch as the Group has the intent and ability to hold fixed-maturity securities until maturity (these assets are referred to as "held-to-maturity"), they are measured at amortised cost. Any difference between cost and redemption value is allocated over the total life of the security using the effective interest method. All other securities (these assets are referred to as "available-for-sale") are measured at market prices, with changes in fair value recognised directly (after deferred taxes) in equity in a separate reserve item. Only after the cumulative changes in fair value are realised by selling the security are they recognised in profit or loss.
❚ Financial assets are recognised at the settlement date.
❚ Where there is substantial evidence of impairment and the estimated recoverable amount of a non-current financial asset is lower than its carrying amount, an impairment loss is recognised in the income statement for the period.
❚ Cash equivalents are measured at their face amount.
❚ Inventories are measured at the lower of cost of purchase and/or conversion and net selling price. The weighted average cost formula is used. In accordance with IAS 2, the conversion costs of unfinished and finished products include – in addition to directly attributable unit costs – reasonable proportions of the necessary material costs and production overheads inclusive of depreciation of manufacturing plant (based on the assumption of normal capacity utilisation) as well as production-related administrative costs. Financing costs are not taken into account. To the extent that inventories are at risk because of prolonged storage or reduced saleability, an impairment loss is recognised.
❚ Receivables are carried at face amounts, less provisions for impairment in the case of identifiable risks. Non-interest-bearing receivables with a remaining maturity of more than one year are recognised at their present value. Receivables denominated in foreign currencies are translated at the middle rates of exchange at the balance sheet date.
❚ Emission rights are accounted for in accordance with IAS 38 (Intangible Assets), IAS 20 (Accounting for Government Grants and Disclosure of Government Assistance) and IAS 37 (Provisions, Contingent Liabilities and Contingent Assets). Emission certificates issued for the calendar year in question are intangible assets for the purposes of IAS 38 and must be classified as current assets. They are assigned a cost of zero. From the point when emissions exceed allocated certificates, a provision for CO2 emissions must be established for actual additional emissions and recognised in the income statement. The provision is calculated on the basis of the fair value of emission certificates at the relevant valuation date.
❚ Assets (other than inventories and deferred tax assets) are tested at every balance sheet date for evidence of impairment. Goodwill and other intangible assets with an indefinite useful life are reviewed for impairment shortly before every balance sheet date, regardless of whether there is indication of possible impairment.
❚ The impairment test involves determining the asset's recoverable amount. The recoverable amount is the higher of value in use and net selling price. If the asset's recoverable amount is less than its carrying amount, the difference is expensed as an impairment loss in the income statement.
❚ An asset's value in use is the present value of the estimated future cash flows from the asset's continuing use and from its disposal at the end of its useful life. The discount rate used in determining present value is a pre-tax market rate adjusted for the specific risks of the asset concerned. Where no independent cash flows can be determined for the individual asset, value in use is determined on the basis of the next larger unit (the cash-generating unit) to which the asset belongs and for which independent cash flows can be identified.
❚ The net selling price of an asset is its fair value (the amount obtainable from its sale in a bargained transaction between knowledgeable, willing parties) less costs to sell.
❚ Where an impairment loss later decreases or is eliminated, the amount of the reversal of the impairment loss (except in the case of goodwill) is recognised as income in the income statement up to the lower of amortised original cost and value in use. Impairment losses on goodwill are not reversed.
❚ The AGRANA Group maintains both defined contribution and defined benefit pension plans. Under the defined contribution pension arrangements, AGRANA has no further obligation after paying the agreed premium. Therefore no provision is recognised for defined contribution plans. ❚ The provisions for defined benefit retirement, termination and long-service obligations are calculated using the projected unit credit method in accordance with IAS 19 (Employee Benefits), based on actuarial valuations. This involves determining the present value of the defined benefit obligation and comparing it to the fair value of plan assets at the balance sheet date. In the case of a deficit, a provision is recorded; in the case of a surplus, an asset (other receivable) is recorded. The defined benefit obligation is measured by the projected unit credit method. Under this method, the future payments determined on the basis of realistic assumptions are accumulated over the period during which the respective beneficiaries acquire the entitlement to these benefits.
❚ A difference between the provision's amount determined in advance on the basis of the assumptions used and the actual amount of the obligation (an actuarial gain or loss) is not recognised in the provision until it exceeds 10% of the actual amount. This is sometimes referred to as the corridor method. When the 10%-corridor is breached, the amount of the difference in excess of 10%, divided by the average remaining working life of the participating employees, is recognised as income or expense.
❚ The calculation is based on extrapolated future trends in salaries, retirement benefits and employee turnover, as well as a discount rate of 4.50% (prior year: 4.50%).
❚ A portion of pension obligations was transferred to pension funds. Retirement benefit contributions are calculated in such a way as to fully fund the retirement benefit obligation at the time of retirement. If a plan deficit occurs, there is an obligation to fund the shortfall. The individual assets allocated to the pension fund are netted against the provision for retirement benefits.
❚ Other provisions are recognised where the following conditions are met: the AGRANA Group has a legal or constructive obligation to a third party as a result of a past event, the obligation is likely to lead to an outflow of resources, and the amount of the obligation can be reliably estimated.
❚ Provisions are measured at the amount representing the best estimate of the expenditure required to settle the obligation. If the present value of the obligation determined on the basis of a market interest rate differs materially from its nominal amount, the present value of the obligation is used.
❚ The risks arising from contingent liabilities are covered by sufficient provisions.
❚ Deferred taxes are recognised on temporary differences between the IFRS carrying amounts of assets and liabilities and the tax base; on consolidation entries and on tax loss carryforwards expected to be utilised. Significant differences existed between the IFRS carrying amounts and the tax base for property, plant and equipment, for inventories and for provisions. Deferred tax assets are recognised for unused tax loss carryforwards insofar as these are deemed to be usable within five years.
❚ Deferred taxes are calculated by the liability method (under IAS 12), based on the pertinent national income tax rates. Consequently, with the exception of goodwill arising on consolidation, deferred taxes are recognised for all temporary differences between the IFRS balance sheet and the tax base.
❚ Deferred taxes are measured at the future tax rates expected to apply to the period when the asset is realised or the liability is settled. Future changes in tax rates are taken into account if the change in tax rate had already been enacted in law at the time of the preparation of the of the financial statements.
❚ Deferred tax assets are classified as non-current assets; deferred tax liabilities are recorded as non-current liabilities. Deferred tax assets are offset against deferred tax liabilities if they relate to the same tax authority.
❚ Borrowings are initially measured at their actual proceeds. Premiums, discounts or other differences between the proceeds and the repayment amount are realised over the term of the instrument by the effective interest method and recognised in finance cost or expense (amortised cost).
❚ Trade payables are initially measured (at inception of the liability) at the fair value of the goods or services received. Subsequently these payables are measured at amortised cost. Other payables not resulting from the receipt of goods or services are measured at their payable amount.
❚ Payables denominated in foreign currencies are recognised at middle rates of exchange at the balance sheet date.
❚ Derivative financial instruments are used to hedge risks from changes in interest rates, exchange rates and commodity prices. At inception of the derivative contract, derivatives are recognised at cost. Subsequently they are measured at market value at every balance sheet date. Value changes are as a rule recognised in profit or loss. If the conditions for cash flow hedge accounting under IAS 39 are met, unrealised value changes are recognised directly in equity.
❚ The market value of derivative financial instruments is determined on the basis of quoted market prices, information from banks or discounting-based valuation methods. The market value of forward exchange contracts is the difference between the contract rate and the current forward rate.
❚ Revenue from goods sold is recognised when substantially all risks and rewards incident to ownership have passed to the purchaser. Revenue from services provided is recognised to the extent that the services have been rendered by the balance sheet date.
❚ Operating expenses are recognised in the income statement upon use of the product or service or as incurred.
❚ Finance expenses comprise the interest expenses, similar expenses and transaction costs on borrowings including finance leases; financing-related currency translation gains and losses; and financing-related hedging gains and losses.
❚ Income from financial investments consists of interest, dividend and similar income realised from cash-equivalent investments and investments in other financial assets; gains and losses on the disposal of financial assets; as well as impairment losses and impairment loss reversals.
❚ Interest income is recognised on an accrual basis using the effective interest method. Dividend income is recognised at the time of the decision to pay the dividend.
❚ The preparation of these consolidated financial statements in accordance with IFRS requires the Company's management to make judgements and to proceed on assumptions about future developments. These judgements and assumptions can have a material effect on the recognition and measurement of the assets and liabilities, the disclosure requirements for other liabilities at the balance sheet date, and the amounts of income and expenses reported for the financial year. ❚ The following assumptions involve a not insignificant risk that they may lead to a material change in the carrying amounts of assets and liabilities in the next financial year:
❚ Goodwill is reviewed for impairment by reference to a cash flow forecast for the next five years and using a discount rate adjusted for the industry and for the Group's specific risk profile.
❚ The measurement of existing retirement and termination benefit obligations involves assumptions regarding interest rate, age at retirement, life expectancy, employee turnover and future increases in benefits.
❚ The recognition of deferred tax assets is based on the assumption that sufficient tax income will be realised in the future to utilise tax loss carryforwards.
❚ The accounting for government grants that support capital expenditure has been changed from the previous years. For greater clarity and ease of understanding of the balance sheet, such government grants are no longer carried as liabilities, but deducted from intangible assets and property, plant and equipment. In accordance with IAS 8 this change was applied retrospectively to March 1, 2005. The effect on carrying amounts can be discerned from the movement in intangible assets and property, plant and equipment. The comparative prior-year figures for intangible assets and property, plant and equipment and for other payables were each reduced by € 4,572 thousand.
❚ In the segment reporting, the Fruit activities have been recognised as a separate segment in view of their growing importance. The prior-year data for the corresponding items has been restated.
❚ Available-for-sale securities were reclassified out of cash and cash equivalents in the cash flow statement. As a result, cash and cash equivalents as defined for the purposes of the cash flow statement now contain only cash on hand, cheques and bank deposits. This change was also made retrospectively to March 1, 2005. This reduced cash and cash equivalents at February 28, 2006 by € 32,322 thousand while cash flow from investing activities in 2005|06 increased by € 74,803 thousand.
❚ Owing to their materiality, gains and losses on foreign currency translation of receivables and payables were offset both in operating profit after exceptional items and in net financial items.
| Total | 1,915,819 | 1,499,602 |
|---|---|---|
| Service revenue | 9,373 | 9,079 |
| of goods purchased for resale | 136,897 | 121,748 |
| Revenue from the sale | ||
| Revenue from the sale of finished goods | 1,769,549 | 1,368,775 |
| By nature of activity | ||
| €000 | €000 | |
| 2006 07 | 2005 06 |
The regional analysis of revenue is presented in the Segment reporting section above.
| 2006 07 | 2005 06 | |
|---|---|---|
| €000 | €000 | |
| Changes in inventories | ||
| of finished and unfinished goods | (29,851) | 1,245 |
| Own work capitalised | 4,301 | 2,164 |
The decrease of € 29,851 thousand in inventories of finished and unfinished goods occurred mainly in the Sugar segment and was attributable to the high sales in Romania and Austria.
| 2006 07 | 2005 06 | |
|---|---|---|
| Income from: | €000 | €000 |
| Disposal of non-current assets | ||
| other than financial assets | 2,961 | 1,562 |
| Release of provisions | 0 | 4,489 |
| Group levies (from non-consolidated companies) | 2,954 | 399 |
| Services rendered to third parties | 2,127 | 1,205 |
| Insurance benefits and payments for damages | 1,427 | 5,506 |
| Leases | 1,752 | 1,558 |
| Currency translation differences | 0 | 130 |
| Reversal of impairment losses on receivables | 551 | 445 |
| Marketing services | 2,840 | 2,668 |
| Beet and pulp cleaning, transport and handling | 623 | 1,033 |
| Total | 31,620 | 28,169 |
|---|---|---|
| Other items | 11,009 | 7,574 |
| Expenses passed through to third parties | 3,156 | 0 |
| Raw material procurement | 1,255 | 1,214 |
| Storage cost reimbursement | 965 | 386 |
| Income from: | €000 | €000 |
| 2006 07 | 2005 06 |
| Total | 1,181,424 | 984,298 |
|---|---|---|
| Purchased services | 43,450 | 35,423 |
| Consumables | 148,594 | 120,345 |
| Goods purchased for resale | 229,344 | 152,002 |
| Raw materials | 760,036 | 676,528 |
| Cost of: | €000 | €000 |
| 2006 07 | 2005 06 |
| Total | 213,979 | 182,805 |
|---|---|---|
| Expenses for termination benefits | 4,738 | 2,935 |
| Expenses for retirement benefits | 2,864 | 1,317 |
| Social security taxes | 41,630 | 34,632 |
| Wages and salaries | 164,747 | 143,921 |
| €000 | €000 | |
| 2006 07 | 2005 06 |
Additions to the provisions for retirement, termination and long-service benefit obligations are reported in staff costs, without their interest component. Net interest expense of € 3,190 thousand (prior year: € 2,946 thousand) arising from these items is included in net financial items.
| Total | 8,223 | 8,130 |
|---|---|---|
| Apprentices | 73 | 72 |
| Salaried staff | 2,013 | 1,924 |
| Wage-earning staff | 6,137 | 6,134 |
| By employee category | ||
| 2006 07 | 2005 06 |
| 2006 07 | 2005 06 | |
|---|---|---|
| By region | ||
| Austria | 1,650 | 1,746 |
| Rest of EU | 3,539 | 3,435 |
| EU-27 | 5,189 | 5,181 |
| Rest of Europe (Russia, Serbia, Turkey, Ukraine) | 889 | 1,068 |
| Other foreign countries | 2,145 | 1,881 |
| Total | 8,223 | 8,130 |
| 2006 07 | 2005 06 | |||||
|---|---|---|---|---|---|---|
| Amortisation, | Impairment | Amortisation, | Impairment | |||
| Total | depreciation | losses | Total | depreciation | losses | |
| €000 | €000 | €000 | €000 | €000 | €000 | |
| Intangible assets | 7,701 | 7,701 | 0 | 4,071 | 4,070 | 1 |
| Property, plant and equipment | 73,280 | 69,848 | 3,432 | 61,006 | 60,931 | 75 |
| Reversal of impairment losses | ||||||
| recognised in operating profit | (476) | 0 | (476) | 0 | 0 | 0 |
| Depreciation, amortisation | ||||||
| and impairment losses | ||||||
| recognised in operating profit | 80,505 | 77,549 | 2,956 | 65,077 | 65,001 | 76 |
| Exceptional items | 95 | 95 | 0 | 0 | 0 | 0 |
| Restructuring | 0 | 0 | 0 | 13,449 | 0 | 13,449 |
| Depreciation, amortisation | ||||||
| and impairment losses | ||||||
| recognised in operating profit | ||||||
| after exceptional items | 80,600 | 77,644 | 2,956 | 78,526 | 65,001 | 13,525 |
| Non-current financial assets | 263 | 0 | 263 | 195 | 0 | 195 |
| Impairment losses | ||||||
| recognised in net financial items | 263 | 0 | 263 | 195 | 0 | 195 |
| Total | 80,863 | 77,644 | 3,219 | 78,721 | 65,001 | 13,720 |
The impairment losses relate to the Sugar segment, primarily the closed plant in Hohenau, Austria.
| 2006 07 | 2005 06 |
|---|---|
| €000 | €000 |
| 90,118 | 72,433 |
| 88,962 | 75,787 |
| 10,971 | 10,985 |
| 88,453 | 0 |
| 2,175 | 7,081 |
| 7,831 | 6,505 |
| 1,118 | 778 |
| 4,361 | 4,205 |
| 3,684 | 7,536 |
| 6,865 | 174 |
| 2,910 | 0 |
| 5,791 | 4,655 |
| 26,866 | 20,399 |
| 340,105 | 210,538 |
Internal and external R&D costs totalled € 12,158 thousand (prior year: € 9,961 thousand).
| Total | 105,781 | 75,013 |
|---|---|---|
| Restructuring | 0 | (24,534) |
| Exceptional items | (1,207) | 0 |
| Operating profit | 106,988 | 99,547 |
| €000 | €000 | |
| 2006 07 | 2005 06 |
Exceptional items represent the construction costs for the new bioethanol plant in Pischelsdorf, Austria. The facility is to be commissioned in the autumn of 2007.
| Total | 15,227 | 16,433 |
|---|---|---|
| Of which recognition of negative goodwill | [104] | [203] |
| Of which from subsidiaries | [1,699] | [1,951] |
| Of which from investments in other companies | [3,374] | [3,183] |
| Of which currency translation gains | [1,266] | [2,115] |
| Other finance income | 7,054 | 8,030 |
| Interest income | 8,173 | 8,403 |
| €000 | €000 | |
| 2006 07 | 2005 06 |
| Total | 27,600 | 21,356 |
|---|---|---|
| available-for-sale securities | [286] | [1,394] |
| Of which impairment loss on | ||
| Other finance expenses | 1,263 | 2,065 |
| Interest expenses | 26,337 | 19,291 |
| €000 | €000 | |
| 2006 07 | 2005 06 |
Interest expenses include the interest component of allocations to the provisions for retirement, termination and long-service benefits of € 3,190 thousand (prior year: € 2,946 thousand).
| 2006 07 | 2005 06 | |
|---|---|---|
| €000 | €000 | |
| Share of profit | 51 | 1,608 |
The prior-year share of profit of associates came primarily from the former Atys Group, which in the first quarter of 2005|06 was still accounted for as an associate using the equity method.
Current and deferred tax expenses and income pertain to Austrian and foreign income taxes and had the following composition:
| 2006 07 | 2005 06 | ||
|---|---|---|---|
| €000 | €000 | ||
| Current tax expense | 17,896 | 18,803 | |
| Of which Austrian | [3,474] | [606] | |
| Of which foreign | [14,422] | [18,197] | |
| Deferred tax expense/(income) | 4,466 | (11,811) | |
| Of which Austrian | [(113)] | [(5,306)] | |
| Of which foreign | [4,579] | [(6,505)] | |
| Total | 22,362 | 6,992 | |
| Of which Austrian | [3,361] | [(4,700)] | |
| Of which foreign | [19,001] | [11,692] | |
Reconciliation of the deferred tax amounts in the balance sheet to the deferred taxes in the income statement:
| 2006 07 | 2005 06 | |
|---|---|---|
| €000 | €000 | |
| (Decrease)/increase in deferred tax assets | ||
| in the consolidated balance sheet | (5,260) | 11,570 |
| Of which from addition to scope of consolidation | ||
| not recognised in income statement | [(176)] | [1,622] |
| Of which from other changes | ||
| not recognised in income statement | [(716)] | [(105)] |
| Of which from changes recognised in income statement | [(4,368)] | [10,053] |
| Decrease/(increase) in deferred tax liabilities | ||
| in the consolidated balance sheet | 10,047 | (25,101) |
| Of which from addition to scope of consolidation | ||
| not recognised in income statement | [0] | [(15,003)] |
| Of which from other changes | ||
| not recognised in income statement | [10,145] | [(11,855)] |
| Of which from changes recognised in income statement | [(98)] | [1,757] |
| to income tax expense | ||
|---|---|---|
| 2006 07 | 2005 06 | |
| €000 | €000 | |
| Profit before tax | 93,459 | 71,698 |
| Austrian tax rate | 25% | 25% |
| Theoretical tax expense | 23,365 | 17,925 |
| Differences due to: | ||
| Different tax rates | (3,320) | (2,352) |
| Tax reduction through tax-exempt income | (4,159) | (7,810) |
| Tax increase through non-deductible | ||
| expenses and additional tax debit | 4,447 | 3,323 |
| Non-recurring tax expenses | 2,029 | (252) |
| Non-temporary differences due to consolidation | 0 | (3,842) |
| Income tax expense | 22,362 | 6,992 |
| Effective tax rate | 23.9% | 9.8% |
The theoretical tax expense is based on the application of the Austrian corporation tax rate of 25%.
The Tax Reform Act of 2005 introduced a new concept for the taxation of company groups. In accordance with its provisions, the AGRANA Group established a group consisting of AGRANA Beteiligungs-AG as the group parent and the following group members: AGRANA Zucker GmbH, AGRANA Stärke GmbH, AGRANA Marketing- und Vertriebsservice Gesellschaft mbH, AGRANA Bioethanol GmbH, Agrofrucht GmbH, AGRANA Juice & Fruit GmbH, AGRANA Internationale Verwaltungs- und Asset-Management GmbH, AGRANA Juice GmbH, and Brüder Hernfeld GmbH. In the financial year a tax transfer took place between the Group members and the parent company at one-half of the Austrian tax rate.
Deferred taxes are recognised on differences between carrying amounts in the consolidated financial statements and the tax bases of the individual companies in their home countries. Deferred taxes take into account carryforwards of unused tax losses.
In the interest of conservative planning, deferred taxes reflect carryforwards of tax losses only to the extent that sufficient taxable profit is likely to be earned over the next five years to utilise the deferred tax assets.
| 2006 07 | 2005 06 | ||
|---|---|---|---|
| Profit for the period attributable | |||
| to equity holders of the parent | |||
| (i.e., of AGRANA Beteiligungs-AG) | €000 | 68,865 | 62,745 |
| Average number of shares outstanding | units | 14,202,040 | 14,202,040 |
| Earnings per share based on IFRS | |||
| (basic and diluted) | € | 4.85 | 4.42 |
| Dividend per share | € | 1.951 | 1.95 |
| 1 Proposed |
Assuming that the Annual General Meeting approves the proposed allocation of profit for the 2006|07 financial year, AGRANA Beteiligungs-AG will distribute € 27,694 thousand (prior year: € 27,694 thousand).
The cash flow statement is prepared using the indirect method and in accordance with IAS 7. The statement traces the movements in the AGRANA Group's cash and cash equivalents arising from operating, investing and financing activities.
Cash and cash equivalents for the purpose of the cash flow statement represent cash on hand, cheques and bank deposits. They do not include current bank borrowings or availablefor-sale securities. The effects of business acquisitions are eliminated and are presented in the item "purchases of businesses". Currency translation differences, with the exception of those relating to cash and cash equivalents, are already eliminated within the corresponding items in the balance sheet.
Profit before tax, depreciation and amortisation was € 150,524 thousand (prior year: € 145,347 thousand), which represented 7.9% of revenue (prior year: 9.7%). After changes in working capital, net cash available from operating activities was € 136,927 thousand (prior year: € 179,232 thousand). Other non-cash expenses in the prior year consisted mainly of restructuring provisions (for redundancy-transition benefit plans and facility closure costs). Net cash from operating activities included the following interest, tax and dividend payments:
| 2006 07 | 2005 06 | ||
|---|---|---|---|
| €000 | €000 | ||
| Interest received | 8,154 | 8,252 | |
| Interest paid | 17,040 | 16,378 | |
| Tax paid | 25,903 | 14,617 | |
| Dividends received | 5,073 | 5,135 |
❚ In the year under review, the definition of cash and cash equivalents was changed to the effect that the item now consists only of cash, cheques and bank deposits. This led to a restatement of the corresponding prior-year data.
❚ € 167,022 thousand (prior year: € 148,209 thousand) was required to finance the investing activities.
❚ Purchases of property, plant and equipment and intangible assets increased to € 145,882 thousand (prior year: € 91,195 thousand).
❚ Proceeds from disposal of non-current assets were € 7,744 thousand (prior year: € 8,805 thousand).
❚ Investment in financial assets used cash in the amount of € 5,181 thousand (prior year: € 7,531 thousand).
❚ The amount of € 28,965 thousand (prior year: € 133,091 thousand) spent on purchases of businesses represented the acquisition and other smaller investments in the Fruit segment as well as the establishment of Bosnian sugar company STUDEN-AGRANA Rafinerija Secera d.o.o. The outflow of € 29,569 thousand compared with an inflow of € 604 thousand. The outflow included an acquisition made in the prior year that did not result in a cash movement until the financial year under review.
In 2006|07, borrowings increased by € 103,355 thousand (prior year: € 5,716 thousand). The disposal of shares in AGRANA Bioethanol GmbH with a simultaneous capital increase led to a cash inflow of € 10,040 thousand. Dividends paid consisted mainly of the cash dividend payable to the shareholders of AGRANA Beteiligungs-AG.
| (17) Intangible assets | Commercial | ||||
|---|---|---|---|---|---|
| privileges, | |||||
| Production | licences and | ||||
| Goodwill | rights | similar rights | Total | ||
| Financial year 2006 07 | €000 | €000 | €000 | €000 | |
| Acquisition costs | |||||
| At March 1, 2006 | 199,505 | 0 | 61,799 | 261,304 | |
| Currency translation differences | 0 | 0 | (664) | (664) | |
| Changes in scope of consolidation | 5,673 | 0 | 0 | 5,673 | |
| Additions | 8,317 | 14,527 | 2,503 | 25,347 | |
| Reclassifications | 0 | 0 | 425 | 425 | |
| Disposals | 0 | 0 | (389) | (389) | |
| At February 28, 2007 | 213,495 | 14,527 | 63,674 | 291,696 | |
| Accumulated amortisation | |||||
| and impairment | |||||
| At March 1, 2006 | 0 | 0 | 30,452 | 30,452 | |
| Currency translation differences | 0 | 0 | (337) | (337) | |
| Changes in scope of consolidation | 0 | 0 | 0 | 0 | |
| Additions | 0 | 1,847 | 5,854 | 7,701 | |
| Reclassifications | 0 | 0 | (247) | (247) | |
| Disposals | 0 | 0 | (389) | (389) | |
| Reversal of impairment | 0 | 0 | 0 | 0 | |
| At February 28, 2007 | 0 | 1,847 | 35,333 | 37,180 | |
| Carrying amount | |||||
| at February 28, 2007 | 213,495 | 12,680 | 28,341 | 254,516 | |
| Financial year 2005 06 |
| Acquisition costs | ||||
|---|---|---|---|---|
| At March 1, 2005 | 42,968 | – | 22,963 | 65,931 |
| Adjustment March 1, 2005 | 0 | – | (76) | (76) |
| Currency translation differences | 0 | – | 400 | 400 |
| Changes in scope of consolidation | 156,537 | – | 34,573 | 191,110 |
| Additions | 0 | – | 3,988 | 3,988 |
| Reclassifications | 0 | – | 56 | 56 |
| Disposals | 0 | – | (105) | (105) |
| At February 28, 2006 | 199,505 | – | 61,799 | 261,304 |
| at February 28, 2006 | 199,505 | – | 31,347 | 230,852 |
|---|---|---|---|---|
| Carrying amount | ||||
| At February 28, 2006 | 0 | – | 30,452 | 30,452 |
| Reversal of impairment | 0 | – | 0 | 0 |
| Disposals | 0 | – | (49) | (49) |
| Reclassifications | 0 | – | 0 | 0 |
| Additions | 0 | – | 4,071 | 4,071 |
| Changes in scope of consolidation | 0 | – | 6,396 | 6,396 |
| Currency translation differences | 0 | – | 260 | 260 |
| Adjustment March 1, 2005 | 0 | – | (64) | (64) |
| At March 1, 2005 | 0 | – | 19,838 | 19,838 |
| and impairment | ||||
| Accumulated amortisation | ||||
| €000 | €000 | €000 | €000 | |
| Goodwill | Production rights |
licences and similar rights |
Total | |
| privileges, | ||||
| Commercial | ||||
❚ Intangible assets are dominated by goodwill, capitalised in accordance with IFRS 3, that resulted from the acquisition of companies beginning in the 1995|96 financial year. Intangibles also include acquired customer relationships of the former Atys Group, software, patents and similar rights, as well as prepayments made. In 2006|07 the Group purchased additional quota offered by the EU for sale to the former "C sugar" producers. The net value of this quota purchase was € 12,680 thousand. This quota is amortised on a straight-line basis over a nineyear period to the end of the current sugar regime (September 2015).
❚ Of the carrying amounts of goodwill, the Sugar segment accounted for € 19,501 thousand (prior year: € 19,501 thousand), the Starch segment for € 2,090 thousand (prior year: € 2,090 thousand) and the Fruit segment for € 191,904 thousand (prior year: € 177,914 thousand). The increase in the Fruit segment resulted from the acquisition of Xianyang Andre Juice Co., Ltd. and of additional shares in companies already partly owned.
❚ To satisfy the provisions of IFRS 3 in conjunction with IAS 36 and to allow the calculation of any impairment of goodwill, AGRANA has defined its cash-generating units to match its internal reporting structure. The cash-generating units within the AGRANA Group are the
Sugar segment, Starch segment and Fruit segment, consistent with the internal management accounting and reporting processes.
❚ To test for impairment, the carrying amount of each cash-generating unit is measured by allocating to it the corresponding assets and liabilities, inclusive of attributable goodwill and other intangible assets. An impairment loss is recognised when the recoverable amount of a cash-generating unit is less than its carrying amount inclusive of goodwill. The recoverable amount is the higher of net realisable value and the present value of future cash flows expected from an asset.
❚ When testing for impairment, AGRANA uses a discounted cash flow method to determine the value in use of the cash-generating units. The determination of expected cash flows from each cash-generating unit is based on validated business plans that are approved by Supervisory Board committees and have a planning horizon of five years. The projections for the Sugar segment were revised in the fourth quarter of 2006|07 as the sugar market reform is expected to exert further strain on business results. However, this did not detract from the value of Sugar segment goodwill. More information is provided in the Risk report chapter of this annual report. Projections beyond a five-year horizon are based on the assumption of a constant, inflation-induced growth rate of 1.0% per year (assumption in the prior year: 1.0%). The weighted average cost of capital (WACC) derived from the AGRANA Group's capital costs is calculated at between 7.8% and 9.1% (prior year: 7.0%) before tax.
❚ The quality of the forecast data is frequently checked against actual outcomes with the help of variance analysis. The insights gained are then taken into account during the preparation of the next annual plan. Projections of value in use are highly sensitive to assumptions regarding future local market developments and volume trends. Value in use is therefore ascertained both on the basis of experience and of assumptions that are reviewed with experts in the regional markets.
❚ The absence of impairment was documented for all goodwill reported in the consolidated financial statements. No impairment charges were therefore recognised in the 2006|07 financial year.
❚ No other intangible assets with indefinite useful lives required recognition at the balance sheet date.
| At February 28, 2007 | 436,618 | 840,201 | 157,280 | 77,988 | 1,512,087 |
|---|---|---|---|---|---|
| Government grants | (962) | (1,579) | (50) | (9,900) | (12,491) |
| Disposals | (3,723) | (30,103) | (8,266) | (642) | (42,734) |
| Reclassifications | 6,996 | 17,165 | (1,592) | (22,994) | (425) |
| Additions | 11,689 | 38,129 | 12,031 | 78,477 | 140,326 |
| of consolidation | 1,219 | 2,742 | 147 | 725 | 4,833 |
| Changes in scope | |||||
| differences | (2,344) | (8,517) | (1,803) | (450) | (13,114) |
| Currency translation | |||||
| At March 1, 2006 | 423,743 | 822,364 | 156,813 | 32,772 | 1,435,692 |
| Cost | |||||
| Financial year 2006 07 | €000 | €000 | €000 | €000 | €000 |
| buildings | machinery | equipment | struction | Total | |
| and | plant and | and | under con | ||
| similar rights | Technical | furniture | Plant | ||
| Land, | office | ||||
| Other plant, |
| at February 28, 2007 | 212,954 | 215,652 | 38,883 | 77,516 | 545,005 |
|---|---|---|---|---|---|
| Carrying amount | |||||
| At February 28, 2007 | 223,664 | 624,549 | 118,397 | 472 | 967,082 |
| Reversal of impairment | (146) | (303) | (27) | 0 | (476) |
| Disposals | (3,140) | (27,222) | (7,677) | 87 | (37,952) |
| Reclassifications | 249 | 1,815 | (1,829) | 12 | 247 |
| Additions | 17,241 | 44,128 | 12,017 | (12) | 73,374 |
| of consolidation | 49 | 211 | 24 | 0 | 284 |
| Changes in scope | |||||
| differences | (45) | (3,589) | (1,179) | 9 | (4,804) |
| Currency translation | |||||
| At March 1, 2006 | 209,456 | 609,509 | 117,068 | 376 | 936,409 |
| and impairment |
103
| Other plant, | |||||
|---|---|---|---|---|---|
| Land, | office | ||||
| similar rights | Technical | furniture | Plant | ||
| and | plant and | and | under con | ||
| buildings | machinery | equipment | struction | Total | |
| Financial year 2005 06 | €000 | €000 | €000 | €000 | €000 |
| Cost | |||||
| At March 1, 2005 | 330,680 | 658,648 | 90,126 | 18,293 | 1,097,747 |
| Adjustment March 1, 2005 | (2,698) | (2,638) | (835) | 0 | (6,171) |
| Currency translation | |||||
| differences | 4,701 | 10,222 | 1,539 | 965 | 17,427 |
| Changes in scope | |||||
| of consolidation | 67,911 | 134,233 | 53,338 | 5,797 | 261,279 |
| Additions | 18,679 | 28,411 | 14,520 | 25,597 | 87,207 |
| Reclassifications | 9,134 | 2,286 | 2,419 | (13,896) | (57) |
| Disposals | (4,437) | (8,355) | (4,002) | (3,984) | (20,778) |
| Government grants | (227) | (443) | (292) | 0 | (962) |
| At February 28, 2006 | 423,743 | 822,364 | 156,813 | 32,772 | 1,435,692 |
| Accumulated depreciation and impairment | |||||
| At March 1, 2005 | 168,783 | 481,347 | 65,889 | 235 | 716,254 |
| Adjustment March 1, 2005 | (555) | (825) | (560) | 0 | (1,940) |
| Currency translation | |||||
| differences | 1,517 | 4,921 | 1,067 | 2 | 7,507 |
| Changes in scope | |||||
| of consolidation | 26,521 | 84,393 | 43,343 | 87 | 154,344 |
| Additions | 16,639 | 47,487 | 10,278 | 52 | 74,456 |
| Reclassifications | 5 | (537) | 532 | 0 | 0 |
| Disposals | (3,454) | (7,277) | (3,481) | 0 | (14,212) |
| Reversal of impairment | 0 | 0 | 0 | 0 | 0 |
| At February 28, 2006 | 209,456 | 609,509 | 117,068 | 376 | 936,409 |
| Carrying amount | |||||
| at February 28, 2006 | 214,287 | 212,855 | 39,745 | 32,396 | 499,283 |
| ❚ Additions (purchases) of intangible |
|||||
| assets and property, plant and equipment: | 2006 07 | 2005 06 | |||
| €000 | €000 | ||||
| Sugar segment | 30,337 | 13,356 | |||
| Starch segment | 79,232 | 34,941 | |||
| Fruit segment | 47,788 | 42,898 |
Total 157,357 91,195
❚ The increase in the Sugar segment resulted from the purchase of the additional sugar production quotas under the sugar regime. The increase in the Starch segment related largely to the construction of the new bioethanol plant in Pischelsdorf, Austria.
❚ Currency translation differences are the differences between amounts arising from the translation of the opening balances of foreign Group companies at the exchange rates prevailing at the start and at the end of the reporting period.
❚ The AGRANA Group, in addition to operating leases, also employs a small number of finance leases. The change in property, plant and equipment under finance leases was as follows:
| Carrying amount | 4,844 | 5,626 |
|---|---|---|
| Accumulated depreciation and impairment | 3,170 | 2,307 |
| Cost | 8,014 | 7,933 |
| €000 | €000 | |
| 2006 07 | 2005 06 |
❚ The use of off-balance sheet property, plant and equipment (operating leases) gives rise to the following obligations under lease, licence and rental agreements:
| 2006 07 | 2005 06 | |
|---|---|---|
| €000 | €000 | |
| In the next year | 1,170 | 1,369 |
| In years 2 to 5 | 3,188 | 3,724 |
| Beyond 5 years | 3,586 | 4,546 |
❚ Expenses for operating leases, licence and rental agreements were € 2,253 thousand (prior year: € 1,492 thousand).
| At February 28 | 576 | 526 |
|---|---|---|
| Changes in scope of consolidation | 0 | (97,890) |
| Share of profit | 51 | 1,608 |
| Additions | 0 | 28 |
| At March 1 | 526 | 96,780 |
| €000 | €000 | |
| 2007 | 2006 |
| At February 28, 2007 | 106,265 | 29,408 | 135,673 |
|---|---|---|---|
| Fair value changes (IAS 39) | (42,000) | 1,344 | (40,656) |
| Disposals | (90) | (1,289) | (1,379) |
| Reclassifications | 0 | 0 | 0 |
| Additions | 3,635 | 1,920 | 5,555 |
| Changes in scope of consolidation | 0 | 6 | 6 |
| Currency translation differences | (29) | (12) | (41) |
| At March 1, 2006 | 144,749 | 27,439 | 172,188 |
| Cost | |||
| Financial year 2006 07 | €000 | €000 | €000 |
| and loan receivables | securities | Total | |
| outside companies, | Non-current | ||
| subsidiaries and | |||
| non-consolidated | |||
| Investments in |
| Carrying amount at Feb 28, 2007 | 105,802 | 27,434 | 133,236 |
|---|---|---|---|
| At February 28, 2007 | 463 | 1,974 | 2,437 |
| Reversal of impairment | 0 | (2) | (2) |
| Disposals | (44) | (224) | (268) |
| Reclassifications | 0 | 0 | 0 |
| Additions | 1 | 262 | 263 |
| Changes in scope of consolidation | 0 | 6 | 6 |
| Currency translation differences | 0 | 0 | 0 |
| At March 1, 2006 | 506 | 1,932 | 2,438 |
| At February 28, 2006 | 144,749 | 27,439 | 172,188 |
|---|---|---|---|
| Fair value changes (IAS 39) | 42,100 | 1,997 | 44,097 |
| Disposals | (839) | (572) | (1,411) |
| Reclassifications | 6 | (6) | 0 |
| Additions | 7,461 | 42 | 7,503 |
| Changes in scope of consolidation | 1,068 | 358 | 1,426 |
| Currency translation differences | 343 | 41 | 384 |
| At March 1, 2005 | 94,610 | 25,579 | 120,189 |
| Cost |
| 169,750 | 25,507 | 144,243 | at February 28, 2006 |
|---|---|---|---|
| Carrying amount | |||
| 2,438 | 1,932 | 506 | At February 28, 2006 |
| (6) | (6) | 0 | Reversal of impairment |
| (12) | (12) | 0 | Disposals |
| 0 | 0 | 0 | Reclassifications |
| 196 | 53 | 143 | Additions |
| (1) | (1) | 0 | Changes in scope of consolidation |
| 14 | 0 | 14 | Currency translation differences |
| 2,247 | 1,898 | 349 | At March 1, 2005 |
| and impairment | |||
| Accumulated amortisation | |||
| €000 | €000 | €000 | |
| Total | securities | and loan receivables | |
| Non-current | outside companies, | ||
| subsidiaries and | |||
| non-consolidated | |||
| Investments in | |||
| Feb 28, 2007 | Feb 28, 2006 | |
|---|---|---|
| €000 | €000 | |
| Trade receivables | 211,555 | 187,637 |
| Of which due in more than 1 year | [71] | [807] |
| Amounts owed by affiliated companies | 8,114 | 8,198 |
| Of which due in more than 1 year | [0] | [18] |
| Amounts owed by associates | 1,205 | 1,013 |
| Amounts owed by other related companies | 1,785 | 1,047 |
| VAT credits and other tax credits | 37,728 | 52,779 |
| Reimbursement receivable under the sugar regime | 6,463 | 10,492 |
| Receivable from beet growers for quota purchase | 7,835 | 0 |
| Receivable under government grants | 10,450 | 0 |
| Prepayments and accrued income | 3,392 | 3,527 |
| Other assets | 22,666 | 22,697 |
| Of which due in more than 1 year | [5,634] | [3,325] |
| Total | 311,193 | 287,390 |
| Of which due in more than 1 year | [5,705] | [4,150] |
Amounts owed by affiliated companies represent open accounts with non-consolidated subsidiaries as well as with the Group's parent Südzucker AG and its subsidiaries.
Deferred tax assets were attributable to the following balance sheet items:
| Feb 28, 2007 | Feb 28, 2006 | |
|---|---|---|
| Deferred tax assets | €000 | €000 |
| Retirement, termination and | ||
| long-service benefit obligations | 2,552 | 2,027 |
| Inventories and receivables | 210 | 5,204 |
| Other provisions and liabilities | 3,364 | 3,742 |
| Carryforwards of unused tax losses | 8,152 | 10,495 |
| Total deferred tax assets | 14,278 | 21,468 |
Deferred tax assets offset against deferred tax liabilities
| Net deferred tax assets | 9,230 | 14,490 |
|---|---|---|
| relating to the same tax authority | (5,048) | (6,978) |
The net deferred tax liabilities of € 40,226 thousand (prior year: € 50,273 thousand) are detailed in note 29.
| (23) Inventories | Feb 28, 2007 | Feb 28, 2006 |
|---|---|---|
| €000 | €000 | |
| Raw materials and consumables | 107,881 | 115,180 |
| Unfinished goods | 20,588 | 21,017 |
| Finished goods and goods purchased for resale | 379,464 | 390,229 |
| Prepayments | 2,104 | 1,592 |
| Total | 510,037 | 528,018 |
A reversal of € 249 thousand (prior year: € –603 thousand) of impairment losses was recognised on inventories.
Other securities had a carrying amount of € 27,060 thousand (prior year: € 32,322 thousand) and comprised mainly floating-rate debt securities held as a liquidity reserve.
❚ The Company's share capital of € 103,210,246 at the balance sheet date consisted of 14,202,040 ordinary voting bearer shares without par value.
❚ The movements in the Group's equity are presented on page 71.
| (26) Provisions | Feb 28, 2007 | Feb 28, 2006 |
|---|---|---|
| €000 | €000 | |
| Provisions for: | ||
| Retirement benefits | 32,746 | 36,394 |
| Termination benefits | 16,265 | 15,531 |
| Long-service benefits | 4,889 | 4,184 |
| Other | 61,638 | 77,366 |
| Total | 115,538 | 133,475 |
Provisions for retirement and termination benefits are actuarially measured using the projected unit credit method and taking into effect future trends. For both the retirement and termination benefit obligations, the plans are defined benefit plans.
In respect of the Austrian companies, the following assumptions were used regarding probable future increases in pay and in retirement benefits:
| 2007 | 2006 | |
|---|---|---|
| % | % | |
| Expected rate of wage and salary increases | 2.50 | 2.50 |
| Expected rate of pension increases | 2.00 | 2.00 |
| Discount rate | 4.50 | 4.50 |
| Expected rate of return on plan assets | 4.5–8.5 | 4.5–8.5 |
For foreign entities the assumptions are adjusted to the particular conditions.
Over the last five years the present values of the defined benefit obligations changed as follows:
| Feb 28, 2007 | Feb 28, 2006 | Feb 28, 2005 | Feb 29, 2004 | Feb 28, 2003 | |
|---|---|---|---|---|---|
| €000 | €000 | €000 | €000 | €000 | |
| Retirement | |||||
| benefits | 44,378 | 47,491 | 41,004 | 38,201 | 37,757 |
| Termination | |||||
| benefits | 18,906 | 17,403 | 18,777 | 15,005 | 15,626 |
| Long-service | |||||
| benefits | 4,908 | 4,184 | 4,750 | 4,886 | 4,734 |
| Feb 28, 2007 | Feb 28, 2006 | Feb 28, 2005 | Feb 29, 2004 | Feb 28, 2003 | |
|---|---|---|---|---|---|
| €000 | €000 | €000 | €000 | €000 | |
| Present value | |||||
| of obligation | 44,378 | 47,491 | 41,004 | 38,201 | 37,757 |
| Plan assets | 7,156 | 6,327 | 1,946 | 1,578 | 1,294 |
| Unfunded | |||||
| obligation | 37,222 | 41,164 | 39,058 | 36,623 | 36,463 |
The provisions showed the following movements:
| Retirement | Termination | Long-service | |
|---|---|---|---|
| benefits | benefits | benefits | |
| Financial year 2006 07 | €000 | €000 | €000 |
| Provision in balance sheet | |||
| at March 1, 2006 | 36,394 | 15,531 | 4,184 |
| Current service cost | 740 | 966 | 199 |
| Interest cost | 2,210 | 799 | 181 |
| Expected income | |||
| from plan assets | (477) | 0 | 0 |
| Actuarial gain | 828 | 189 | 201 |
| Total amount recognised | |||
| in income statement | 3,301 | 1,954 | 581 |
| Changes in scope of consolidation | 0 | (33) | (52) |
| Benefits paid | (3,683) | (1,756) | (564) |
| Contributions to plan assets | (851) | 0 | 0 |
| Currency translation differences | (97) | 0 | 0 |
| Reclassifications | (1,323) | 587 | 736 |
| Other changesn | (995) | (18) | 4 |
| Provision in balance sheet | |||
| at February 28, 2007 | 32,746 | 16,265 | 4,889 |
| Unrecognised actuarial gain | 4,476 | 2,641 | 19 |
| Fair value of plan assets | 7,156 | 0 | 0 |
| Present value of obligation | |||
| at February 28, 2007 | 44,378 | 18,906 | 4,908 |
| Retirement | Termination | Long-service | |
|---|---|---|---|
| benefits | benefits | benefits | |
| Financial year 2005 06 | €000 | €000 | €000 |
| Provision in balance sheet | |||
| at March 1, 2005 | 34,716 | 17,236 | 4,750 |
| Current service cost | 325 | 941 | 215 |
| Interest cost | 1,869 | 860 | 217 |
| Expected income | |||
| from plan assets | (104) | 0 | 0 |
| Actuarial gain/(loss) | 255 | (2,427) | (812) |
| Total amount recognised | |||
| in income for the period | 2,345 | (626) | (380) |
| Changes in scope of consolidation | 3,427 | 178 | 30 |
| Benefits paid | (3,729) | (1,257) | (216) |
| Contributions to plan assets | (365) | 0 | 0 |
| Provision in balance sheet | |||
| at February 28, 2006 | 36,394 | 15,531 | 4,184 |
| Unrecognised actuarial gain | 4,770 | 1,872 | 0 |
| Fair value of plan assets | 6,327 | 0 | 0 |
| Present value of obligation | |||
| at February 28, 2006 | 47,491 | 17,403 | 4,184 |
There were no expenses for or income from changes in benefit plans and benefit payments or as a result of changes in assumptions.
The present value of expected future benefits reflects the benefits to which employees are expected to be entitled based on conditions at the balance sheet date. It includes actuarial gains and losses resulting from the differences between expected risks and actual occurring individual risks. The provision for direct benefit obligations does not take into account actuarial gains and losses within the corridor allowed by IAS 19 of 10% of the actual amount of the defined benefit obligation.
Similar obligations exist, in particular, at foreign Group companies. They are measured actuarially and take into account future cost trends.
Of the total other provisions, € 23,406 thousand (prior year: € 22,393 thousand) were classified as non-current liabilities and € 38,232 thousand (prior year: € 54,973 thousand) were current liabilities.
The provision for reclamation comprises both recultivation obligations as well as the emptying of landfills and removal of waste residues.
| Feb 28, | Of which due in | Feb 28, | Of which due in | |||||
|---|---|---|---|---|---|---|---|---|
| 2007 | up to | 1 to | more than | 2006 | up to | 1 to | more than | |
| 1 year | 5 years | 5 years | 1 year | 5 years | 5 years | |||
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | |
| Bonds | 20,000 | 0 | 20,000 | 0 | 20,000 | 0 | 20,000 | 0 |
| Bank loans | ||||||||
| and overdrafts | 505,235 | 193,796 | 306,583 | 4,856 | 398,627 | 165,904 | 224,030 | 8,693 |
| Lease liabilities | 912 | 651 | 261 | 0 | 1,938 | 988 | 950 | 0 |
| Borrowings | 526,147 | 194,447 | 326,844 | 4,856 | 420,565 | 166,892 | 244,980 | 8,693 |
| Non-current securities | (27,434) | 0 | 0 | 0 | (25,507) | 0 | 0 | 0 |
| Available-for-sale | ||||||||
| securities | (27,060) | 0 | 0 | 0 | (32,322) | 0 | 0 | 0 |
| Cash and cash equivalents | (132,218) | 0 | 0 | 0 | (80,812) | 0 | 0 | 0 |
| Net debt | 339,435 | 0 | 0 | 0 | 281,924 | 0 | 0 | 0 |
Details of bank loans and bank overdrafts are found in the section Notes on financial instruments and derivative financial instruments.
Bank loans and overdrafts were secured as follows at the balance sheet date:
| Total | 24,097 | 18,209 |
|---|---|---|
| Other liens | 10,184 | 1,338 |
| Mortgage liens | 13,913 | 16,871 |
| €000 | €000 | |
| Feb 28, 2007 | Feb 28, 2006 |
| Feb 28, | Of which due in | Feb 28, | Of which due in | |||||
|---|---|---|---|---|---|---|---|---|
| 2007 | up to | 1 to | more than | 2006 | up to | 1 to | more than | |
| 1 year | 5 years | 5 years | 1 year | 5 years | 5 years | |||
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | |
| Trade payables | 191,875 | 191,873 | 2 | 0 | 229,117 | 229,117 | 0 | 0 |
| Amounts owed to | ||||||||
| affiliated companies | 6,250 | 6,250 | 0 | 0 | 56,505 | 56,186 | 319 | 0 |
| Deferred income | 6,825 | 6,825 | 0 | 0 | 6,814 | 6,814 | 0 | 0 |
| Other payables | 149,326 | 147,250 | 1,424 | 652 | 67,959 | 65,302 | 1,847 | 810 |
| Of which: | ||||||||
| Restructuring levy | [89,248] | [89,248] | [0] | [0] | [0] | [0] | [0] | [0] |
| Purchase of | ||||||||
| additional quota | [17,268] | [17,268] | [0] | [0] | [0] | [0] | [0] | [0] |
| Income tax | [4,076] | [4,076] | [0] | [0] | [10,819] | [10,819] | [0] | [0] |
| Other tax | [5,339] | [5,326] | [13] | [0] | [7,335] | [7,335] | [0] | [0] |
| Social security | [4,844] | [4,844] | [0] | [0] | [5,847] | [5,847] | [0] | [0] |
| Total | 354,276 | 352,198 | 1,426 | 652 | 360,395 | 357,419 | 2,166 | 810 |
Trade payables include obligations to beet growers of € 75,581 thousand (prior year: € 103,321 thousand).
Other payables consist mainly of tax liabilities, liabilities to employee benefit schemes and payables on payroll accounts.
Deferred tax liabilities were attributable to the following balance sheet items:
| Feb 28, 2007 | Feb 28, 2006 | |
|---|---|---|
| Deferred tax liabilities | €000 | €000 |
| Non-current assets | 22,477 | 31,501 |
| Inventories and receivables | 15,055 | 14,311 |
| Untaxed reserves in separate financial statements | 7,656 | 8,171 |
| Other provisions and liabilities | 86 | 3,268 |
| Total deferred tax liabilities | 45,274 | 57,251 |
| Deferred tax assets offset against deferred tax liabilities | ||
| relating to the same tax authority | (5,048) | (6,978) |
| Net deferred tax liabilities | 40,226 | 50,273 |
The net deferred tax assets of € 9,230 thousand (prior year: € 14,490 thousand) are detailed in note 22.
| other financial liabilities | Feb 28, 2007 | Feb 28, 2006 | |
|---|---|---|---|
| €000 | €000 | ||
| Sureties | 6,059 | 2,023 | |
| Warranties, cooperative liabilities | 2,139 | 2,088 | |
| Parent guarantees | 460 | 316 | |
| Contingent liabilities | 8,658 | 4,427 | |
| Present value of lease payment due within 5 years | 5,030 | 6,274 | |
| Order commitments | |||
| (purchases of property, plant and equipment) | 73,275 | 23,030 | |
| Other financial liabilities | 78,305 | 29,304 | |
| Total | 86,963 | 33,731 |
114
NOTES ON FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS
To manage the seasonally fluctuating cash flows, the AGRANA Group in the course of its dayto-day financial management uses conventional investments (in call money, time deposits and securities) and borrowings (in the form of overdrafts, short-term funds and fixed-rate loans).
Financial instruments are typically subject to interest-rate, currency and credit risks.
In the case of a financial instrument for which a fixed interest rate has been agreed to maturity, the risk is that its price may change as the market interest rate fluctuates; this is known as interest rate price risk. By contrast, floating-rate investments or borrowings are subject to minimal price risk, as their interest rate is adjusted to market rates very frequently. However, the fluctuation in the short-term interest rate creates risk as to the amounts of future interest rate payments; this is referred to as interest rate cash flow risk. Investments in equity securities and short-term receivables and payables are not subject to interest rate risk.
Currency risk is defined as the risk that the value of a balance sheet item will fluctuate due to changes in foreign exchange rates.
AGRANA minimises the credit risks of non-current investments, of securities and of receivables from derivative positions by dealing only with counterparties with excellent credit standing.
The material primary investment and debt instruments held at February 28, 2007 had the following composition by balance sheet item:
| Investments in non-consolidated | |||
|---|---|---|---|
| subsidiaries and outside companies, | Contracted | Market | |
| and other non-current securities currency |
value | Cost | |
| €000 | €000 | ||
| Available for sale | |||
| Equities, Ges.m.b.H. (limited liability | EUR | 102,264 | 86,336 |
| companies) shares, shares in cooper- | CZK | 275 | 156 |
| atives, other equity interests | HKD | 1,261 | 1,261 |
| Investment funds | EUR | 19,790 | 15,712 |
| Other securities | EUR | 8 | 8 |
| USD | 292 | 292 | |
| Bonds | EUR | 4,865 | 4,307 |
| Total | 128,755 | 108,072 | |
| Previous year | [168,121] | [108,581] | |
| Securities classified | Contracted | Market | |
| as current assets | currency | value | Cost |
| €000 | €000 | ||
| Available for sale | |||
| Investment funds and | EUR | 19,483 | 19,179 |
| money market funds | MXN | 6,511 | 6,511 |
| TRL | 968 | 968 | |
| Other securities | EUR | 98 | 98 |
| Total | 27,060 | 26,756 |
Previous year [32,322] [32,326]
Unrealised differences between costs and the carrying amounts in the balance sheet are not recognised in the income statement but in equity, in the revaluation reserve.
Payables are recognised at amounts repayable. In the case of payables denominated in foreign currencies, nominal values were translated into euros by applying the exchange rates prevailing at the balance sheet date. Fair values could therefore be higher or lower compared to the prior-period values, depending on movements in exchange rates.
116
| Average effective | Feb 28, | Of which due in | |||||
|---|---|---|---|---|---|---|---|
| interest rate | 2007 | up to | 1 to | more than | |||
| 2006 07 | 2005 06 | 1 year | 5 years | 5 years | |||
| in % | in % | €000 | €000 | €000 | €000 | ||
| Fixed rate | |||||||
| EUR | 2.49 | 2.78 | 228,950 | 7,941 | 216,443 | 4,566 | |
| PLN | 4.00 | 4.00 | 169 | 85 | 84 | 0 | |
| SKK | 0 | 3.30 | 0 | 0 | 0 | 0 | |
| 2.49 | 2.81 | 229,119 | 8,026 | 216,527 | 4,566 | ||
| Variable rate | |||||||
| EUR | 4.32 | 2.93 | 172,563 | 110,692 | 61,581 | 290 | |
| CHF | 0 | 1.17 | 0 | 0 | 0 | 0 | |
| DKK | 4.29 | 2.84 | 4,161 | 0 | 4,161 | 0 | |
| GBP | 7.49 | 7.32 | 313 | 313 | 0 | 0 | |
| HUF | 8.11 | 6.08 | 17,002 | 17,002 | 0 | 0 | |
| KRW | 0 | 6.05 | 0 | 0 | 0 | 0 | |
| MAD | 12.00 | 12.00 | 3 | 3 | 0 | 0 | |
| PLN | 3.71 | 4.07 | 34,412 | 34,412 | 0 | 0 | |
| RON | 9.40 | 7.54 | 435 | 435 | 0 | 0 | |
| SKK | 4.96 | 0 | 2,353 | 2,353 | 0 | 0 | |
| USD | 5.88 | 5.02 | 44,859 | 20,556 | 24,303 | 0 | |
| ZAR | 10.00 | 10.00 | 15 | 4 | 11 | 0 | |
| 4.75 | 3.75 | 276,116 | 185,770 | 90,056 | 290 | ||
| Total | 3.72 | 3.46 | 505,235 | 193,796 | 306,583 | 4,856 |
To hedge part of the risks arising from its operating activities (risks due to movements in interest rates, foreign exchange rates and raw material prices), the AGRANA Group to a limited extent uses derivative financial instruments. The Group employs only conventional derivatives for which there is a sufficiently liquid market (for example, interest rate swaps, interest rate options, interest rate caps, forward exchange contracts and currency options). The use of these instruments is governed by Group policies under the Group's risk management system. These policies prohibit the speculative use of derivative financial instruments, set ceilings appropriate to the underlying transactions, define authorisation procedures, minimise credit risks, and specify internal reporting rules and the organisational separation of risk-taking and risk control. Adherence to these standards and the proper processing and valuation of transactions are regularly monitored by an independent part of the organisation.
117
| Of which due in | Feb 28, | |||
|---|---|---|---|---|
| more than | 1 to | up to | 2006 | |
| 5 years | 5 years | 1 year | ||
| €000 | €000 | €000 | €000 | |
| 8,347 | 98,724 | 9,143 | 116,214 | |
| 0 | 169 | 85 | 254 | |
| 0 | 0 | 6,607 | 6,607 | |
| 8,347 | 98,893 | 15,835 | 123,075 | |
| 346 | 67,490 | 91,596 | 159,432 | |
| 0 | 0 | 1,887 | 1,887 | |
| 0 | 4,154 | 3,881 | 8,035 | |
| 0 | 0 | 252 | 252 | |
| 0 | 0 | 26,602 | 26,602 | |
| 0 | 0 | 420 | 420 | |
| 0 | 0 | 6 | 6 | |
| 0 | 0 | 24,807 | 24,807 | |
| 0 | 0 | 584 | 584 | |
| 0 | 0 | 0 | 0 | |
| 0 | 53,493 | 8 | 53,501 | |
| 0 | 0 | 26 | 26 | |
| 346 | 125,137 | 150,069 | 275,552 | |
| 8,693 | 224,030 | 165,904 | 398,627 |
The notional principal amounts and the fair values of the derivative financial instruments held by the AGRANA Group were as follows:
| Notional principal amount | Fair value | |||
|---|---|---|---|---|
| Feb 28, 2007 | Feb 28, 2006 | Feb 28, 2007 | Feb 28, 2006 | |
| €000 | €000 | €000 | €000 | |
| Currency derivatives | 38,073 | 38,110 | (296) | 601 |
| Interest-rate derivatives | 31,000 | 47,000 | (353) | (120) |
| Commodity derivatives | 0 | 7,310 | 0 | 259 |
| Total | 69,073 | 92,420 | (649) | 740 |
All derivative transactions presented are used solely to hedge the Group's currency risks and interest rate risks. To some extent, hedge accounting under IAS 39 is used for the transactions presented. The fluctuations in the value of these hedging instruments are offset against the fluctuations in the value of the hedged transactions. The value changes of the derivative positions to which hedge accounting is not applied are recognised in profit or loss.
The notional principal amount of a derivative is the nominal amount that is used to calculate the payments made by the parties to the derivative contract. The hedge is designed to protect against – and the risk resides in – the price changes in relation to this notional amount.
Fair values of derivatives are measured at quoted market prices at the balance sheet date without offsetting against any opposite movements in the values of hedged items.
The fair value of a derivative is the amount which the AGRANA Group would have to pay or would receive in the event of early termination of the hedge position.
Value changes of derivatives employed to hedge future cash flows (cash flow hedges) are initially recognised in the revaluation reserve without an effect on the income statement. Only when the cash flows are realised are the value changes recognised in profit or loss.
AGRANA Zucker, Stärke und Frucht Holding AG holds 100% of the ordinary shares of Z & S Zucker und Stärke Holding AG, which in turn holds 75.5% of the ordinary shares of AGRANA Beteiligungs-AG. Both holding companies are exempt from the obligation to prepare consolidated financial statements, as their accounts are included in the consolidated financial statements of Südzucker AG, Mannheim/Ochsenfurt, Germany.
Related parties for the purposes of IAS 24 are Südzucker AG, Mannheim/Ochsenfurt, Germany, and Zucker-Beteiligungsges.m.b.H., Vienna, as shareholders of AGRANA Zucker, Stärke und Frucht Holding AG. AGRANA's consolidated financial statements are included in the consolidated financial statements of Südzucker AG, Mannheim/Ochsenfurt.
RAIFFEISEN-HOLDING NIEDERÖSTERREICH-WIEN reg.Gen.m.b.H., Vienna, and its subsidiaries are also considered to be related parties.
At the balance sheet date, current borrowings in respect of the related companies named above stood at € 48,361 thousand (prior year: € 53,016 thousand). These borrowings were based on normal commercial terms. There were current trade receivables of € 3,671 thousand (prior year: € 5,917 thousand) resulting from sales of goods. In relation to joint venture partners there were other liabilities of € 1,543 thousand (prior year: € 3,231 thousand); amounts owed by these partners totalled € 2,512 thousand (prior year: € 0).
Remuneration paid to members of the Management Board of AGRANA Beteiligungs-AG totalled € 1,472 thousand (prior year: € 1,596 thousand), consisting of total fixed base salaries of € 975 thousand (prior year: € 957 thousand) and a total performance-based component of € 497 thousand (prior year: € 639 thousand). The performance-based elements are tied to the amount of the dividend payout.
On July 14, 2006 the Annual General Meeting voted to pay the Supervisory Board annual aggregate remuneration of € 165 thousand (prior year: € 165 thousand) and gave the Supervisory Board Chairman the responsibility for allocating this sum. The amount paid to the individual Supervisory Board members is linked to their function on the Board. No meeting fees were paid in the year under review.
Post-employment benefits granted to the Management Board under the Company's plan are pension, disability insurance and survivor benefits. The pension becomes available when the pension eligibility criteria of the Austrian public pension scheme (ASVG) are met. The amount of the pension is calculated as a percentage of a contractually agreed assessment base. In the event of early retirement within ASVG rules, the amount of the pension is reduced. The retirement benefit obligations to the Management Board have been transferred to an external pension fund. The obligation's excess of € 1,322 thousand (prior year: € 1,246 thousand) over existing plan assets was recognised in provisions.
In the event that a Management Board appointment is terminated, severance pay has been agreed consistent with the Employees Act.
Vienna, May 3, 2007
The Management Board
Johann Marihart (by his own hand) Walter Grausam (by his own hand) Thomas Kölbl (by his own hand)
(interests held of at least 20% of share capital)
| Equity interest | ||||
|---|---|---|---|---|
| Name of company | City/town | Country | Direct | Indirect |
| in % | in % | |||
| I. Subsidiaries | ||||
| Fully consolidated companies | ||||
| AGRANA Bioethanol GmbH | Vienna | Austria | – | 74.90% |
| AGRANA Internationale Verwaltungs | ||||
| und Asset-Management GmbH | Vienna | Austria | – | 100.00% |
| AGRANA Juice & Fruit Holding GmbH | Vienna | Austria | 98.91% | 1.09% |
| AGRANA Marketing- und Vertriebsservice | ||||
| Gesellschaft m.b.H. | Vienna | Austria | 100.00% | – |
| AGRANA Zucker GmbH | Vienna | Austria | 98.91% | 1.09% |
| AGRANA Stärke GmbH | Vienna | Austria | 98.91% | 1.09% |
| Agrofrucht, Handel mit landwirtschaftlichen | ||||
| Produkten Gesellschaft m.b.H. | Vienna | Austria | – | 100.00% |
| Brüder Hernfeld Gesellschaft m.b.H. | Vienna | Austria | – | 100.00% |
| INSTANTINA Nahrungsmittel Entwicklungs | ||||
| und Produktions Gesellschaft m.b.H. | Vienna | Austria | 66.67% | – |
| AGRANA Magyarorzág Értékesitési Kft. | Budapest | Hungary | – | 87.36% |
| Elsö Hazai Cukorgyártó és Forgalmazó Kft. | Budapest | Hungary | – | 99.19% |
| INSTANTINA Hungária Élelmiszergyartó | ||||
| és Kereskedelmi Kft. | Petöháza | Hungary | – | 66.67% |
| Magyar Cukorgyártó és Forgalmazó Zrt. | Budapest | Hungary | – | 87.32% |
| Moravskoslezské Cukrovary a.s. | Hrusovany | Czech Republic | – | 97.66% |
| Slovenské Cukrovary s.r.o. | Sered | Slovakia | – | 100.00% |
| S.C. A.G.F.D. Tandarei s.r.l. | Tandarei | Romania | – | 99.99% |
| S.C. AGRANA Romania S.A. | Buzau | Romania | – | 91.33% |
| S.C. Romana Prod s.r.l. | Roman | Romania | – | 91.33% |
| AGRANA BiH Holding GmbH | Vienna | Austria | – | 75.00% |
| AGRANA Trading EOOD | Sofia | Bulgaria | – | 100.00% |
| AGRANA Juice GmbH | Gleisdorf | Austria | – | 100.00% |
| AGRANA Juice Sales & Marketing GmbH | Bingen | Germany | – | 100.00% |
| AGRANA Juice Service & Logistik GmbH | Bingen | Germany | – | 100.00% |
| AGRANA Juice Denmark A/S | Køge | Denmark | – | 100.00% |
| AGRANA Juice Magyarorzág Kft. | Vásásarosnamény | Hungary | – | 100.00% |
| AGRANA Juice Poland Sp z.o.o. | Bialobrzegi | Poland | – | 100.00% |
| AGRANA Juice Romania Vaslui s.r.l. | Vaslui | Romania | – | 100.00% |
| AGRANA Juice Romania Carei S.R.L | Carei | Romania | – | 100.00% |
| Financière Atys S.A.S. | Paris | France | – | 100.00% |
121
| Equity interest | ||||
|---|---|---|---|---|
| Name of company | City/town | Country | Direct | Indirect |
| in % | in % | |||
| AGRANA Fruit S.A. | Paris | France | – | 100.00% |
| AGRANA Fruit France S.A. | Paris | France | – | 100.00% |
| AGRANA Fruit Services S.A.S. | Paris | France | – | 100.00% |
| AGRANA Fruit Austria GmbH | Gleisdorf | Austria | – | 100.00% |
| AGRANA Fruit Argentina S.A. | Buenos Aires | Argentina | – | 99.97% |
| AGRANA Fruit Australia Pty Limited | Central Mangrove | Australia | – | 100.00% |
| AGRANA Fruit Bohemia s.r.o. | Kaplice | Czech Republic | – | 100.00% |
| AGRANA Fruit Brasil Participações Ltda. | Sao Paulo | Brazil | – | 99.99% |
| AGRANA Fruit Brasil Indústria, Comércio, | ||||
| Importação e Exportação Ltda. | Sao Paulo | Brazil | – | 99.22% |
| AGRANA Fruit Dachang Co., Ltd | Dachang | China | – | 100.00% |
| AGRANA Fruit Fiji Pty. Ltd | Sigatoka | Fiji | – | 100.00% |
| AGRANA Fruit Germany GmbH | Konstanz | Germany | – | 100.00% |
| AGRANA Fruit Istanbul Gida San Ve Tic A.S. | Zincirlikuyu | Turkey | – | 100.00% |
| AGRANA Fruit Korea Co., Ltd | Seoul | South Korea | – | 100.00% |
| AGRANA Fruit México, S.A. de C.V. | Michoacan | Mexico | – | 100.00% |
| o.o.o. AGRANA Fruit Moscow Region | Serpuchov | Russia | – | 100.00% |
| AGRANA Fruit Latinoamerica S. de R.L de C.V | Michoacan | Mexico | – | 99.99% |
| AGRANA Fruit Luka TOF | Winniza | Ukraine | – | 100.00% |
| AGRANA Fruit Polska SP z.o.o. | Ostroleka | Poland | – | 100.00% |
| AGRANA Fruit Ukraine TOF | Winniza | Ukraine | – | 100.00% |
| AGRANA Fruit US, Inc | Brecksville | USA | – | 100.00% |
| Flavors from Florida, Inc | Bartow | USA | – | 100.00% |
| AGRANA Fruit Services Inc. | Tampa | USA | – | 100.00% |
| AGRANA Fruit South Africa (Proprietary) Ltd | Cape Town | South Africa | – | 100.00% |
| AGRANA Fruit Investments | ||||
| South Africa (Proprietary) Ltd | Cape Town | South Africa | – | 100.00% |
| Fruimark (Proprietary) Ltd | Cape Town | South Africa | – | 100.00% |
| Dirafrost FFI | Herk-de-Stad | Belgium | – | 100.00% |
| Frefrost Sarl | Laouamra | Morocco | – | 100.00% |
| Diramar Sarl | Laouamra | Morocco | – | 100.00% |
| Dirafrost France S.A. | St. Genis Laval | France | – | 100.00% |
| Yube d.o.o. | Grdovici | Serbia | – | 100.00% |
| Dirafrost Deutschland GmbH | Hof | Germany | – | 100.00% |
| Equity interest | ||||
|---|---|---|---|---|
| Name of company | City/town | Country | Direct | Indirect |
| in % | in % | |||
| Companies accounted for | ||||
| by the equity method | ||||
| Österreichische Rübensamenzucht | ||||
| Gesellschaft m.b.H. | Vienna | Austria | – | 86.00% |
| Non-consolidated subsidiaries | ||||
| Zuckerforschung Tulln Ges.m.b.H. | Vienna | Austria | 100.00% | – |
| Dr. Hauser Gesellschaft m.b.H. | Garmisch-Partenkirchen | Germany | – | 100.00% |
| Hottlet Sugar Trading N.V. | Berchem | Belgium | 25.10% | – |
| Schoko-Schwind Kft. | Kecskemet | Hungary | – | 100.00% |
| AGRANA Skrob s.r.o. | Hrusovany | Czech Republic | – | 100.00% |
| Caragrimex S.A. | Carei | Romania | – | 99.26% |
| PFD-Processed Fruit Distribution Ltd. | Nicosia | Cyprus | – | 100.00% |
| Diragri Sarl | Laouamra | Morocco | – | 100.00% |
| Egybe Sarl | Cairo | Egypt | – | 100.00% |
| DIVA2 GmbH | Hamburg | Germany | – | 100.00% |
| II. Joint ventures | ||||
| Companies accounted for | ||||
| by proportionate consolidation | ||||
| HUNGRANA Keményitö- és | ||||
| Isocukorgyártó és Forgalmazó Kft. | Szabadegyhaza | Hungary | – | 50.00% |
| Hungranatrans Kft. | Szabadegyhaza | Hungary | – | 50.00% |
| AGRANA-STUDEN Beteiligungs GmbH | Vienna | Austria | – | 37.50% |
| Xianyang Andre Juice Co., Ltd. | Xianyang City | China | – | 50.00% |
| Non-consolidated joint venture | ||||
| STUDEN-AGRANA Rafinerija Secera d.o.o. | Brcko | Bosnia- | – | 37.50% |
Herzegovina
123
Christian Konrad, Vienna, independent; from December 19, 1990; term ends at 20th AGM (in 2007)
Rudolf Müller, Ochsenfurt, independent; from March 30, 1995; term ends at 20th AGM (in 2007)
Erwin Hameseder, Mühldorf from March 23, 1994;
term ends at 20th AGM (in 2007)
Ludwig Eidmann, Gross-Umstadt, independent; from July 2, 2004;
term ends at 20th AGM (in 2007)
❚ Member of the Supervisory Board of Südzucker AG, Mannheim/Ochsenfurt
Hans-Jörg Gebhard, Eppingen, independent; from July 9, 1997;
term ends at 20th AGM (in 2007)
❚ Chairman of the Supervisory Board of Südzucker AG, Mannheim/Ochsenfurt
Weinheim/Bergstrasse, independent; from March 23, 1994 to July 14, 2006
❚ Member of the Supervisory Board of Vossloh AG, Werdohl
Theo Spettmann, Ludwigshafen, independent; from July 14, 2006;
term ends at 20th AGM (in 2007)
❚ Member of the Supervisory Board of Mannheimer AG Holding, Mannheim
Hermann Schultes, Zwerndorf, independent; from July 12, 2002 to July 14, 2006
Baumgarten/March, independent; from July 14, 2006; term ends at 20th AGM (in 2007)
Christian Teufl, Vienna from July 10, 2003; term ends at 20th AGM (in 2007)
❚ Member of the Supervisory Board of VK Mühlen AG, Hamburg
SUPERVISORY BOARD
Thomas Buder Tulln (from August 1, 2006)
Franz Ennser Vienna
Harald Toth Leopoldsdorf (until July 31, 2006)
Peter Vymyslicky Leopoldsdorf
Erich Weissenböck Gmünd
Christian Konrad Rudolf Müller Erwin Hameseder
Christian Konrad Rudolf Müller Erwin Hameseder Hans-Jörg Gebhard
Erwin Hameseder Theo Spettmann Franz Ennser
MANAGEMENT BOARD
Chairman (Chief Executive Officer)
Johann Marihart Limberg
Walter Grausam Vienna
Thomas Kölbl Mannheim
We have audited the accompanying consolidated financial statements of AGRANA Beteiligungs-Aktiengesellschaft, Vienna, which comprise the balance sheet as at February 28, 2007, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and for the preparation of the management report for the group in accordance with Austrian regulations. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to state whether the management report for the group is consistent with these consolidated financial statements. We conducted our audit in accordance with laws and regulations applicable in Austria and Austrian Standards on Auditing and International Standards on Auditing (ISAs). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement and whether the management report for the group is consistent with these consolidated financial statements.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion an the effectiveness of the entity's internal control. An audit also includes evaluation the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
In our opinion the consolidated financial statements are in accordance with legal requirements and present fairly, in all material respects, the financial position of the group as of February 28, 2007 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. The management report for the group is consistent with the consolidated financial statements.
Austrian Commercial Law requires that the Management Report, which has to be prepared by the Management in accordance with Austrian Commercial Law, has to be audited.
In our opinion, the Management Report for the group is consistent with the consolidated financial statements.
Vienna, May 3, 2007
KPMG Austria GmbH LOGOS Wirtschaftsprüfungs- und Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Steuerberatungsges.m.b.H.
Rainer Hassler ppa Reiner Kaps Michael Rab (Austrian Chartered Accountants) (Austrian Chartered Accountant)
| Abbreviation | Indicator Definition |
2006 07 €000 |
2005 06 €000 |
|---|---|---|---|
| Borrowings | 526,147 | 420,565 | |
| + Bank loans and overdrafts + bonds + lease liabilities | |||
| CE | Capital employed (PP&E + intangibles including goodwill) + working capital |
1,246,087 | 1,151,735 |
| Debt/equity ratio | Net debt / equity including minority interests x 100 | 37.9% | 31.8% |
| Dividend yield | Dividend per share / closing share price | 2.6% | 2.5% |
| EBIT | Operating profit Earnings before interest and tax and before exceptional items |
106,988 | 99,547 |
| EBITDA | Earnings before interest, tax, depreciation | ||
| and amortisation (Income statement items 8 + 6) Operating profit + depreciation and amortisation |
187,493 | 164,624 | |
| EBITDA margin | EBITDA x 100 / revenue | 9.8% | 11.0% |
| EPS | Earnings per share Profit for the period / number of shares outstanding |
€ 4.85 | € 4.42 |
| Equity ratio Equity / total capital |
46.4% | 47.9% | |
| EVS | Equity value per share Equity attributable to equity holders of the parent / number of shares outstanding |
€ 61.3 | € 61.4 |
| FCF | Free cash flow Cash flow from operating activities + cash flow from investing activities |
(30,095) | 31,023 |
| Intangible assets including goodwill | 254,516 | 230,852 | |
| P/E | Price/earnings ratio Financial year-end closing share price / earnings per share |
15.7 | 17.6 |
| PP&E | Property, plant and equipment | 545,005 | 499,283 |
| Net debt Borrowings less (cash + cheques + other bank deposits + available-for-sale securities + non-current securities) |
339,435 | 281,924 | |
| Operating margin | Operating profit x 100 / revenue | 5.6% | 6.6% |
| ROCE | Return on capital employed Operating profit / capital employed |
8.6% | 8.6% |
| ROS | Return on sales Profit before tax x 100 / revenue |
4.9% | 4.8% |
| WC | Working capital Inventories + trade receivables + other assets – current provisions – current prepayments – trade payables – other payables |
446,566 | 417,027 |
130
| €000 | €000 | ||
|---|---|---|---|
| A. Non-current assets | |||
| I. Intangible assets |
929 | 38 | |
| II. Property, plant and equipment | 1,229 | 975 | |
| III. Non-current financial assets | 434,002 | 313,874 | |
| 436,160 | 314,887 | ||
| B. Current assets | |||
| I. Receivables and other assets |
125,641 | 295,703 | |
| II. Securities | 10,156 | 10,456 | |
| III. Cash and bank balances | 3 | 5 | |
| 135,800 | 306,164 | ||
| Total assets | 571,960 | 621,051 | |
| A. Equity | |||
| I. Share capital |
103,210 | 103,210 | |
| II. Share premium and other capital reserves | 418,990 | 418,990 | |
| III. Retained earnings | 13,928 | 13,928 | |
| IV. Net profit available for distribution | 27,765 | 27,734 | |
| Of which brought forward from prior year: | |||
| € 40 thousand (prior year: € 2 thousand) | |||
| 563,893 | 563,862 | ||
| B. Untaxed reserves | 0 | 0 | |
| C. Provisions | |||
| I. Retirement, termination and |
|||
| long-service benefit obligations | 1,607 | 1,486 | |
| II. Provisions for tax and other liabilities | 2,529 | 3,023 | |
| 4,136 | 4,509 | ||
| D. Payables | |||
| I. Borrowings |
0 | 0 | |
| II. Other payables | 3,931 | 52,680 | |
| 3,931 | 52,680 | ||
| Total equity and liabilities | 571,960 | 621,051 | |
| Contingent liabilities | 391,868 | 277,530 | |
Feb 28, 2007 Feb 28, 2006
| 2006 07 | 2005 06 | ||
|---|---|---|---|
| €000 | €000 | ||
| 1. Revenue | 191 | 147 | |
| 2. Other operating income | 20,723 | 17,102 | |
| 3. Cost of materials and other purchased inputs | (21) | 0 | |
| 4. Staff costs | (11,382) | (9,989) | |
| 5. Depreciation, amortisation and impairment of | |||
| intangible assets and property, plant and equipment | (736) | (484) | |
| 6. Other operating expenses | (12,246) | (9,618) | |
| 7. Operating profit (subtotal of items 1 to 6) | (3,471) | (2,842) | |
| 8. Income from investments in subsidiaries | |||
| and other companies | 26,610 | 28,941 | |
| Of which from subsidiaries: € 23,236 thousand | |||
| (prior year: € 25,755 thousand) | |||
| 9. Income from other non-current securities | 192 | 131 | |
| 10. Other interest and similar income | 6,300 | 7,097 | |
| Of which from subsidiaries: € 5,172 thousand | |||
| (prior year: € 2,497 thousand) | |||
| 11. Income from disposal of non-current financial assets | 0 | 0 | |
| 12. Expenses from non-current financial assets | |||
| and from available-for-sale securities | (157) | (1,519) | |
| 13. Interest and similar expenses | (83) | (267) | |
| 14. Net financial items | 32,862 | 34,383 | |
| (subtotal of items 8 to 13) | |||
| 15. Profit before tax (subtotal of items 1 to 13) | 29,391 | 31,541 | |
| 16. Income tax expense | (1,666) | (109) | |
| 17. Profit for the period | 27,725 | 31,432 | |
| 18. Transfer from untaxed reserves | 0 | 0 | |
| 19. Transfer to retained earnings | 0 | (3,700) | |
| 20. Profit brought forward from prior year | 40 | 2 | |
| 21. Net profit available for distribution | 27,765 | 27,734 |
131
We have audited the financial statements including the underlying accounting records of AGRANA Beteiligungs-Aktiengesellschaft, Vienna, for the fiscal year from March 1, 2006, to February 28, 2007. The maintenance of the accounting records and the preparation and contents of these financial statements including the management report in accordance with the Austrian Commercial Code are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit and to state whether the management report is consistent with the financial statements.
We conducted our audit in accordance with laws and regulations applicable in Austria and Austrian standards on auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement and whether we can state that the management report is in accordance with the financial statements. In determining the audit procedures we considered our knowledge of the business, the economic and legal environment of the Company as well as the expected occurrence of errors. An audit involves procedures to obtain evidence about amounts and other disclosures in the financial statements and underlying accounting records predominantly on a sample basis. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
Our audit did not give rise to any objections. In our opinion, which is based on the results of our audit, the financial statements are in accordance with legal requirements and present fairly, in all material respects the financial position and the results of its operations and its cash flows in accordance with generally accepted accounting principles in Austria. The management report is consistent with the financial statements.
Vienna, April 30, 2007
KPMG Austria GmbH LOGOS Wirtschaftsprüfungs- und Wirtschaftsprüfungs- und
Rainer Hassler ppa Reiner Kaps Michael Rab (Austrian Chartered Accountants) (Austrian Chartered Accountant)
Steuerberatungsgesellschaft Steuerberatungsges.m.b.H.
| 2006 07 | ||
|---|---|---|
| € | ||
| The financial year to February 28, 2007 | ||
| closed with the following profit available for distribution | 27,764,784 | |
| The Management Board proposes to the Annual General Meeting | ||
| to allocate this net profit available for distribution as follows: | ||
| The distribution of a dividend of € 1.95 per ordinary | ||
| no-par value share on 14,202,040 participating ordinary shares, | ||
| that is, a total of | 27,693,978 | |
| Profit to be carried forward | 70,806 | |
| 27,764,784 |
During the 2006|07 financial year the Supervisory Board, in a total of five meetings and through regular reports from the Management Board and detailed written information, kept abreast of the Company's business and financial position, course of business, business performance, financial situation, investment plans and exceptional business transactions as well as corporate strategy, and discussed these matters with the Management Board. The thorough deliberations in the meetings of the Supervisory Board and Strategy Committee centred especially on the Company's strategies, future growth opportunities, and acquisition-related activities, including acquisition financing. The Nomination and Remuneration Committee considered the personnel matters relating to the Management Board members.
As of the end of the Annual General Meeting (AGM) on July 14, 2006 Christoph Kirsch and Hermann Schultes retired from the Supervisory Board. In their stead the AGM elected Ernst Karpfinger and Theo Spettmann to the Supervisory Board. From August 1, 2006, Thomas Buder took the place of Harald Toth as the Group staff council's representative on the Supervisory Board. The Board thanks the retired members for their many years of constructive involvement.
The parent company financial statements, consolidated financial statements and management report for the 2006|07 financial year presented by the Management Board, as well as the accounting records, were audited by the independent auditors appointed by the Annual General Meeting – KPMG Austria GmbH, Wirtschaftsprüfungs- und Steuerberatungsgesellschaft, Vienna, and LOGOS Wirtschaftsprüfungs- und Steuerberatungsges.m.b.H., Vienna – and received an unqualified audit opinion. The Supervisory Board has taken note of and endorses the results of this audit.
The Supervisory Board's Audit Committee – which is responsible for examining the financial statements – examined these documents and reported to the Supervisory Board in the presence of the auditors. The Supervisory Board examined the parent company financial statements, consolidated financial statements and management report for the 2006|07 financial year as well as the Management Board's proposal for the allocation of profit.
The final results of all these examinations did not give rise to objections.
The Supervisory Board has approved the parent company financial statements and consolidated financial statements prepared by the Management Board for the 2006|07 financial year, which are thus adopted for the purposes of section 125 (2) of the Austrian Stock Corporation Act. The Supervisory Board takes note of and approves the management report on the 2006|07 financial year and endorses the proposed allocation of profit.
The Supervisory Board would like to express its appreciation and thanks to the Management Board and to all staff of the Company and AGRANA Group for their effective work.
Vienna, May 2007
The Chairman of the Supervisory Board
Christian Konrad
Donau-City-Strasse 9, A-1220 Vienna, Austria Phone: +43-1-211 37-0 Fax: +43-1-211 37-12998 E-Mail: [email protected]
Doris Schober Phone: +43-1-211 37-12084 Fax: +43-1-211 37-12045 E-Mail: [email protected] www.agrana.com
Headquarters: Donau-City-Strasse 9, A-1220 Vienna, Austria Phone: +43-1-211 37-0 Fax: +43-1-211 37-12998 Administration: Josef-Reither-Strasse 21–23, A-3430 Tulln, Austria Phone: +43-2272-602-0 Fax: +43-2272-602-11225 E-Mail: [email protected]
Headquarters: Donau-City-Strasse 9, A-1220 Vienna, Austria Phone: +43-1-211 37-0 Fax: +43-1-211 37-12998 Administration: Conrathstrasse 7, A-3950 Gmünd, Austria Phone: +43-2852-503-0 Fax: +43-2852-503-19420 E-Mail: [email protected]
Donau-City-Strasse 9, A-1220 Vienna, Austria Phone: +43-1-211 37-0 Fax: +43-1-211 37-12853 E-Mail: [email protected]
Headquarters: Donau-City-Strasse 9, A-1220 Vienna, Austria Phone: +43-1-211 37-0 Fax: +43-1-211 37-12998 E-Mail: [email protected] Administration: Industriegelände, A-3435 Pischelsdorf, Austria Phone: +43-2277-903 03-0 Fax: +43-2277-903 03-13133 E-Mail: [email protected]
Donau-City-Strasse 9, A-1220 Vienna, Austria Phone: +43-1-211 77-0 Fax: +43-1-211 77-12021 E-Mail: [email protected]
Published by: AGRANA Beteiligungs-AG Donau-City-Strasse 9, A-1220 Vienna, Austria Corporate Communications/Investor Relation Doris Schober Phone: +43-1-211 37-12084, Fax: -12045 E-Mail: [email protected]
Design: Kreativstudio Marchesani Concept of images: Martrix Photography: Bernhard Angerer, Peter Rigaud (Management Board)
The English translation of the AGRANA Annual Report is for convenience. Only the German text is binding.
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