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Royal Cosun doubles operating profit in 2006

23 April 2007

Royal Cosun’s turnover for 2006 amounted to EUR 1,469 million, an increase of nearly 10%. Operating profit more than doubled to EUR 111 million, while the result for the year increased sharply to EUR 66 million. In line with expectations, Cosun’s income from sugar was lower on account of the new EU sugar market organisation. This setback was more than offset by the other activities, all of which achieved an increase in their turnover and results. Organic turnover growth amounted to 8%.  
 
Business groups
Suiker Unie’s operating profit fell sharply owing to pressure on prices. The fall in results would have been even greater if the EU had not decided to refund part of the production levy from the previous sugar campaign. For the first time, Sensus produced only inulin from chicory in 2006. Despite the campaign being much smaller than in the previous year owing to the surrender of the fructose quota, Sensus turned in a higher result. 
 
Nedalco profited from higher alcohol prices and from its new factory in Sas van Gent, which has now been open for just over a year. In addition to the traditional market for industrial alcohol, Nedalco is increasingly concentrating on the development and production of bioethanol.
Aviko had a mixed year. Margins came under fierce pressure. Total European production was the lowest for ten years. On balance, however, Aviko turned in a higher operating profit as cost reduction programmes more than made up for the effects on the raw material and customer sides.
 
Unifine Food & Bake Ingredients saw the improvement in the results of its European activities continue in 2006. Unifine Sauces & Spices was again successful in the foodservice and retail channels with the Wyko brand and contract production in 2006. Finally, SVZ combined strong growth in sales with an increase in results.
 
Strategy
Cosun has set itself the following goals for the years ahead:

 

  • consolidating the position in the European sugar market and strengthening it wherever possible;
  • further strengthening of Aviko’s market position;
  • seeking growth by investing in product and market development and in people;
  • creating and exploiting new opportunities in the non-food market, such as bioethanol;
  • realising synergy gains, cost savings and efficiency gains wherever possible in the chain.
Prospects

The new sugar market organisation came into force on 1 July 2006. In the run-up to the new market regime, competition in the sugar market began to increase from the end of 2004: sales areas were enlarged, market prices weakened, and suppliers sought efficiency gains and higher market shares. Sugar turnover will continue to decline in the years ahead owing to the fall in sugar prices brought about by the new market organisation and the termination of beet processing in Slovenia in 2007. The acquisition of CSM’s sugar activities will lead to a one-off increase in sugar turnover. A preventive quota reduction has been announced for 2007 of 13.5% and EU levies will be very high. In consequence, the result on sugar activities will again be lower in 2007.
 
The acquisition of CSM’s sugar activities will contribute to the result. Only limited synergy gains will be realised in the first year of the acquisition, however, while financing and amortisation charges will be higher.
 
As in 2006, the results of the other activities are expected to be higher but they will not be able to compensate in full for the decline in the sugar result. Non-recurring income is also expected to be lower than in 2006. The overall result for 2007 will therefore not reach the level of that for 2006. Nevertheless, Cosun expects to achieve a good result in the current financial year.