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Cosun: lower beet price due to disappointing result

14 February 2019
Royal Cosun had a disappointing financial year in 2018. Its operating profit fell sharply on slightly lower turnover. Weak sugar prices placed pressure on Suiker Unie’s profit for the year, and therefore on Cosun’s. The cooperative is paying €35.59 per tonne of quota beet of average quality supplied during the campaign (2017: €45.65 per tonne). The price per tonne of surplus beet of average quality has been set at €30.72 (2017: €28.98). 2018 was not a good beet year for Dutch arable farmers as the yield was affected by the drought, too.

Preliminary results for 2018
At €2,046 million, consolidated turnover for the year was lower than in 2017 (€2,112 million). Turnover at Aviko, Sensus and Duynie was higher but turnover at Suiker Unie and SVZ was lower. The net result fell to €1 million (2017: €75 million). An amount of €14 million was distributed by way of members’ bonus (2017: €96 million).

Suiker Unie
Prices on the world sugar market fell to their lowest level in ten years in 2018. The abolition of the European sugar production quota had triggered a sharp increase in European sugar production in 2017. An increase in the beet area and a record crop in the 2017 campaign triggered a sharp drop in prices on the European market in 2018. The entire European sugar industry is suffering from the adverse effects of these developments.
As a result, Suiker Unie ended the year in the red. The impact of low sugar prices will continue to be felt in 2019 as many contracts have been concluded at a low level. Our ambition is to retain our position in the European market and manage costs wherever possible. The extreme drought during the 2018 growing season led to a sharp fall in the beet yield and thus in sugar production. Production and consumption levels on the world market are expected to be better in balance after the current financial year.

Aviko
For the third year in succession, Aviko turned in a good result. The European chipped potato businesses and the potato flakes and granule activity, Aviko Rixona, performed very well in 2018. Raw material prices rose during the fourth quarter on account of the disappointing potato harvest. The result came under pressure. Nevertheless, profitability on the whole remained firm.
The Amberger facility in Germany was closed at the end of 2018. The joint venture with Snow Valley in China has been successful in the market but the partnership has proven difficult. It has therefore been decided to bring the joint venture to an end. Aviko will now go its own way in this promising growth market.

Sensus
Sensus achieved a higher turnover in 2018. Inulin sales were firmer in both Europe and Asia. Sales in the USA were more or less unchanged. The business reported a lower financial result than in 2017. Selling prices are under pressure due to increased competition. The US Food and Drug Administration reached a positive decision on the status of inulin as a dietary fibre during the summer. Sensus accordingly expects a boost in US sales.

SVZ
SVZ’s turnover for 2018 was slightly lower than that for 2017. Its profit for the year, however, fell more sharply, partly because of the disappointing carrot harvest in Poland and low red fruit prices forcing a write-off on existing stocks. Furthermore, SVZ had to cope with higher energy prices in both Europe and the USA and with higher staff costs in eastern Europe. SVZ will continue to strengthen its position as a reliable supplier that promotes all aspects of sustainability in the production chain.

Duynie
Duynie Group performed well and its profit for the year was comparable with that for the previous year. All parts of Duynie contributed to the result. Turnover was lifted by additional sales of co-products from the European food industry, with particularly high demand from the livestock industry. Novidon profited from good demand for starch products. To enable further growth of sales of pet food ingredients, Duynie is investing in a new low-energy factory in Cuijk.

Beet price for 2018
The beet price is made up of a base price set by Cosun, the members’ bonus and a payment based on sugar content and other factors. The price paid per tonne of beet with average extractability and average sugar content supplied during the 2018 campaign has been set at €35.59 (2017: €45.65). The base price for surplus beet has been held at the previous year’s level: €30.00 per tonne. As the average quality was slightly higher than in 2017, the price per tonne of average quality came to €30.72 (2017: €28.98).
The sugar yield in the Netherlands in the 2018 season came to 13.2 tonnes of sugar per hectare. This is less than in 2017 (15.5 tonnes/ha). The campaign in the Netherlands lasted about 120 days, with more than 1.1 million tonnes of beet sugar being produced in total. The farmers’ average financial yield per hectare came to €2,666 (2017: €4,041).

The table below presents an estimate of the Dutch beet harvest and beet sugar production for 2018 in comparison with 2017 (between brackets).
 
Beet processed [tonnes] 6,555,683 (8,029,768)
Beet sugar content [%] 17.4 (16.7)
Extractability [index] 89.9 (90.8)
Total sugar production [tonnes] 1,103,435 (1,325,501)
 
The figures in this press release have not been audited by an external auditor and this press release is not an announcement within the meaning of article 395 paragraph 2, Book 2 of the Dutch Civil Code. Cosun will publish its definite figures for 2018 on its website in April www.annualreport-cosun.com
 
Breda, 14 February 2019