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Royal Cosun reports further growth in 2007

2 April 2008

Royal Cosun reports a turnover of EUR 1,713 million for 2007, an increase of 17% on 2006. The greater part of the growth was attributable to the acquisition of CSM Suiker in April 2007. Organic growth amounted to 6.2%. Virtually all activities contributed to the increase in turnover. Operating profit was approximately EUR 11 million lower at EUR 100 million, but before goodwill amortisation and incidental items operating profit increased from EUR 72 million to EUR 115 million.
 
Business groups
Suiker Unie's operating profit benefited from the contribution made by the former CSM Suiker but was significantly reduced by the restructuring levy imposed by the EU to finance the reorganisation of the sugar market. Suiker Unie successfully implemented the programme to integrate the former CSM Suiker locations according to plan in 2007 and the first synergy benefits were realised in line with expectations. As from mid-2008 operations on the retail market will be conducted under a single name: Van Gilse. The sugar speciality factory in Breda is expected to be integrated in full into the other Suiker Unie factories in the second half of 2008. The 2007 campaign, the lower sugar production and expected price falls in the new sugar market organisation prompted Cosun to close the factory in Groningen in early 2008.
 
Sensus had an excellent year. Inulin sales and results increased sharply, especially in the United States. Sensus profited in full from the growing worldwide demand for responsible and healthy food.


Nedalco achieved a slightly higher turnover and a virtually unchanged operating profit. High grain prices had a positive impact on alcohol prices for the drinks industry. Prices in the other sectors, however, came under pressure from alcohol imported from Brazil and elsewhere. In the course of the year, Nedalco took a new alcohol factory into operation in Manchester, England, to supply major customers on the UK and Irish markets.


Aviko successfully widened its margins, resulting in a considerable improvement in its profit. The improvement in margins that Aviko had achieved towards the end of 2006 continued throughout nearly all of 2007. At the beginning of 2008, Aviko reached agreement on the acquisition of the Belgian company, Eurofreez.


Unifine Sauces & Spices improved its results thanks to good cost control. Agreement was reached at the beginning of 2008 on the sale of this company to Clearwood.
 
Unifine Food & Bake Ingredients again reported an increase in turnover through organic growth and a number of small acquisitions. The organisation's cost structure was further improved, in part by increasing production capacity at the factory in Portugal, which allowed the location in Barcelona to be closed. Operating profit improved despite a sharp increase in raw material prices (dairy products, glucose, flour and fruit).
 
SVZ again reported strong organic growth in 2007 (up 14%) despite the weaker dollar. The higher turnover was attributable to both higher price levels and larger volumes. Purees and concentrates made particularly strong contributions to turnover growth. Despite the increase in raw material prices, SVZ successfully widened its margins and considerably improved its profitability. The renovated factory in Etten-Leur was taken back into service in early 2007.
 
Prospects
In 2008 the sugar activities will be faced with very high restructuring levies. Sugar prices will fall in the fourth quarter. The pressure on Suiker Unie's margins will not lessen until a fair balance is struck between consumption, production and imports in the European Union. It looks as though this balance will not be struck until quotas are revised appropriately throughout Europe. The synergy gains generated by the acquisition of CSM Suiker will increase and CSM Suiker will contribute to results for a full year in 2008, providing some compensation for the downward pressure on margins. Sensus and Nedalco are expected to maintain their profit levels. This is not expected of Aviko, which benefited in full from exceptional market conditions in 2007. Aviko will benefit in 2008 from the structural improvements it has achieved in recent years and the contribution from Eurofreez. Further profit growth at Unifine Food & Bake Ingredients and SVZ may make up for the loss of turnover from Unifine Sauces & Spices. On balance, Cosun expects the profit for the year, excluding non-recurring items, to be slightly lower than that for 2007.