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Royal Cosun realises good operating profit

17 March 2005

Royal Cosun, a manufacturer of natural foods and ingredients, realised a consolidated turnover of EUR 1,317 million in 2004, virtually the same as in 2003. Offsetting the loss of turnover from Unifine Richardson, which was sold at the beginning of 2004, higher turnover was achieved from the international sugar operations and Aviko.

Operating profit before exceptional items and amortisation goodwill increased from EUR 65 million to EUR 72 million. The improvement was due chiefly to the Dutch sugar activities, Sensus and the compound ingredients activities (in particular Unifine Food & Bake Ingredients and SVZ).

Operating profit includes a number of exceptional items totalling EUR (59) million in respect of the termination of production, the closure of several locations and the impairment of the value of fixed assets. Net operating profit came to EUR 6 million.

Owing to the sale of among other things the participating interest in Advanta, Cosun achieved a net profit for 2004 of EUR 114 million, its highest profit ever.

Business groups
Basic ingredients group achieved a higher operating profit before exceptional items. Suiker Unie and Sensus profited in full from the good sugar beet and chicory harvests in combination with efficiency gains at the production sites. The Slovenian sugar company, TSO, also realised good selling margins. The reform of the EU sugar market organisation, however, will place serious pressure on the results of all three operations.
As in 2003, Nedalco again had to contend with narrow margins brought about by the oversupply of alcohol on the EU market in 2004.

reported a slight decline in its profit owing to a combination of overcapacity among producers, greater consolidation among customers and a flat market. The good harvest in 2004, which benefited the sugar and chicory activities, forced down potato prices and thus exerted pressure on prices and margins in the potato products segment.

On balance, the compound ingredients activities turned in higher operating profits. Unifine Food & Bake Ingredients had its profitability boosted by improvements in its production system, an effective pricing policy, further streamlining of the range and higher efficiency.

Unifine Sauces & Spices continued the process of cost savings and quality improvements, but its profit was depressed slightly by weaker turnover.

SVZ had a good year even though market prices came under increasing pressure. In fruit it realised higher turnover well in excess of the market growth. Interesting growth was again realised on Verifruit.

Cosun is reviewing its strategy in the first half of 2005 and assessing the activities’ return and growth potential, partly in the light of the far-reaching changes expected in the sugar market. The group must become more flexible and increase its earning capacity so that it is less reliant on income from the sugar activities. Cosun has set itself the goal of building a financial solid platform so that it can pursue sustainable growth.

As in 2003, the 2004 sugar beet harvest was exceptionally good. If the harvest and production levies return to normal in 2005, Suiker Unie’s results will be lower than in 2004. Sensus expects higher inulin sales to increase its result further. In the second year since Slovenia joined the EU, TSO’s selling margin will be slightly narrower. Nedalco is looking forward to a better balance between supply and demand on the EU alcohol market.

Both Aviko and SVZ will face low selling prices in 2005 on account of the ample harvest in 2004. Unifine Food & Bake Ingredients and Unifine Sauces & Spices expect an increase in their results.

Against this background, Cosun expects its operating profit before exceptional items to be slightly lower in 2005.