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Cosun in 2017: higher profit, higher beet price

8 February 2018
Royal Cosun reports a higher turnover and a higher profit for 2017 in comparison with 2016. All business groups in the Cosun portfolio contributed to the group’s results. The improvement on 2016 was due chiefly to Suiker Unie benefiting from firmer sugar prices in the first half of the financial year. The cooperative pays €45.62 per tonne of quota beet of average quality supplied during the 2017 campaign (2016: €44.15 per tonne). The volume of beet receiving this price rose to 6.8 million tonnes (2016: 5.0 million tonnes).
 

Preliminary 2017 results

Consolidated turnover for the year rose to €2,112 million (2016: €1,988 million), an improvement of more than 6%. The main factors driving the increase were the higher volumes and firmer average prices underpinning Suiker Unie’s higher turnover. The results of the other activities were on balance slightly higher than in 2016. Operating profit rose to €108 million (2016: €77 million). The net profit advanced to €75 million (2016: €56 million), an increase of 34%.
 
Suiker Unie’s results for 2017 were better than those for the previous year. The average sugar price was higher, as were sales volumes. In the first half of the year, Suiker Unie benefited from higher contract prices agreed in 2016 and from favourable export conditions. Prices fell sharply to historically low levels as the year progressed on account of weakness on the world market and the huge volume of sugar produced in the EU. The consequences will be felt in the 2018 financial year.
A record beet harvest was lifted in 2017. The two sugar factories in the Netherlands had never before processed more than 8 million tonnes of beet during a single campaign. The campaign in the Netherlands will be completed on 10 February. Suiker Unie’s factory in Germany completed its excellent beet campaign on 10 January 2018. Suiker Unie is taking measures to strengthen its position both inside and outside Europe in response to the abolition of EU sugar quotas in October 2017.
 
Aviko again turned in an excellent performance in 2017. The company responded promptly to the favourable circumstances on the sales market for frozen potato products and was supplied enough raw materials to meet the demand. Higher added value products also strengthened the market position. The cost saving programme launched in 2016 is bearing fruit and operating costs are now at a structurally lower level. The granule and flake operation – Aviko Rixona – reported slightly lower results than in 2016, mainly because of setbacks on the Asian market. Nevertheless, we have identified growth opportunities for this activity in both Europe and China. Aviko is implementing a multiyear programme to expand its production capacity and made substantial investments in the Netherlands, Germany, Belgium and China in 2017.
 
Sensus turned in a lower profit in 2017 than in the previous year. Production costs remained relatively low but selling prices came under pressure, especially in the US. Sales were lower on the US market but higher on the European market. The 2017 chicory campaign was good, with above average root yields but a slightly lower inulin content than in 2016.
 
SVZ posted slightly lower results in 2017 than in 2016. The growth in volume was offset by lower average selling prices. Pressure on selling prices was particularly strong in Europe. SVZ USA’s operating profit was better than in 2016. SVZ has identified a promising opportunity to meet the growing demand from customers in the Far East for more natural fruit and vegetable products.
 
Duynie had an excellent year and reported markedly higher results than in 2016. The animal feed activity and the operation supplying pet food ingredients performed particularly well. Novidon (starch) and the bio-digester supply business – AgriBioSource – turned in comparable results to the previous year.
 
Commenting on the results, President & CEO Albert Markusse said, ‘We are proud of the results for 2017 and the contribution we have made to arable farming in the Netherlands. Sugar prices are volatile and are currently at a historical low. We therefore expect the result for 2018 to come under pressure. Despite this prospect, we are confident about the future. Cosun has a robust sugar business, bolstered by the strength of the other activities; together they form a basis for further growth.’
 

Innovation

Cosun is continuously investing in strengthening the innovative capacity within the group. It took the new Cosun innovation center into service at Nieuw Prinsenland close to Dinteloord in summer 2017. The staff of Cosun R&D have already moved into the new premises and the IRS has moved to the new location in early 2018. The R&D professionals at the Cosun business groups engaged in product and process innovation will make full use of the excellent facilities. They include several laboratories, test kitchens and a pilot factory.
 

2017 beet price

The beet price is made up of the basic price paid by Cosun, the members’ bonus, the sugar content payment and other payments. The price paid for beet with average extractability and average sugar content supplied during the 2017 campaign came to €45.62 per tonne (2016: €44.15).
 
The yield in the Netherlands from the 2017 season was 15.5 tonnes of sugar per hectare. This is a record. The campaign in the Netherlands lasted 150 days, during which more than 1.3 million tonnes of sugar were produced from the beet. The average financial yield for the growers in 2017 amounted to €4,007 per hectare (2016: €3,317).
 
Dirk de Lugt, Chairman of the Board of Royal Cosun said, ‘Not only is the price for quota beet higher than in 2016 but it was paid on a higher volume of beet. We can therefore say 2017 was an excellent beet year. Developments on the international market are currently not very encouraging. We will have to learn to live with more price fluctuations than in the past and keep our costs low. Where possible we have to anticipate changes in demand for sugar on the market. However, we are confident the cooperative can rise to the challenges.’

The table below shows an estimate of the Dutch sugar beet harvest and beet sugar production figures for 2017 in comparison with 2016* (between brackets):
 
Beet processed [in tonnes] 8,043,000 (5,577,000)
Beet sugar content [%] 16.6 (17.1)
Extractability [index] 90.9 (90.9)
Total sugar production [in tonnes] 1,329,000 (934,000)
 
*Nearly 200,000 tonnes of cane sugar were also processed in the 2016 campaign. The cane sugar was replaced with Cosun’s own beet sugar in 2017.
 
Cosun will publish its definite figures for 2017 on its website www.annualreport-cosun.com in the course of April.