AGRANA Beteiligungs-Aktiengesellschaft (AGB2.F) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the AGRANA Results for the First Half of 2025/'26 Conference Call. I am Valentina, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. The presentation will be followed by Q&A session. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Hannes Haider. Please go ahead.

Good morning, ladies and gentlemen, and welcome to AGRANA's conference call presenting our results for the first half of '25/'26 financial year. You already got some insights in our figures when we published an ad hoc announcement on the 10th of September. Today, we will provide you with more financial details and also on the different segments. As announced in our invitation, a presentation is available in reference to this call, and you can find this presentation as always, in the IR section of our website. Our CEO, Stephan Buttner, will hold today's presentation. As you can see on Slide #2, the presentation is divided into three parts. We will start with an introduction and we will focus on the highlights of the first half. We will go on then with a segment overview and comment also on the financial performance. And finally, we will conclude with an outlook for the remaining business year. The presentation will take about 20 to 25 minutes. And afterwards, we will be glad to answer your questions. And now, I may pass over to our CEO, Stephan, who will start with the presentation on Slide #4.

Yes. Thank you, Hannes. So, good morning, ladies and gentlemen. Yes, first half of the business year was quite challenging still. In the second quarter, our decline in EBIT was less than expected, fortunately. And so, in September, therefore, we raised our forecast for the full year '25/'26, and we now expect our EBIT to be significantly higher than in the previous year, but we have to mention that this is still on a low level. So, AGRANA is still in a challenging transformation phase. On one hand, our Food & Beverage Solutions business is developing in a very positive way. On the other hand, our activities in the Agricultural Commodities business, so Sugar and Starch are still in a very challenging situation. When we look at the key figures, so revenue went down to EUR 1.691 billion in the first half of the business year. Operating profit with EUR 52.2 million, close to the result in the previous year. We also had exceptional items, but this was already expected and is due to the closure of the sites in Leopoldsdorf, Austria; and Hrušovany, Czech Republic in Sugar. And therefore, the EBIT amounted to EUR 28 million, significantly down versus prior year, but this is mainly due to the exceptional items. Our Sugar restructuring is on track. You know the background. So, we have significant challenges throughout Europe with also in combination with the Ukrainian import volumes duty-free in the last 2 to 3 business years. So, now there is, again, yes, at least normal crop for sugar beets in the European Union expected. This is still, therefore, pressure on the market prices. So, the pressure came back recently, due to the very good outlook of the Sugar produced in the European Union and also in combination with the very low world market prices, they declined further in the last 2 to 3 weeks significantly. Therefore, looking back, our decision to close the site in Austria, Leopoldsdorf, and Hrušovany, Czech Republic was absolutely the right thing to do. So, we here on a good track concerning our restructuring activities. We are further pushing on cost reduction, and we are also in negotiations with the beet farmers for the, let's say, models for getting the beets in the coming season. Key figures, part 2, so EUR 83.5 million of free cash flow. This is a positive number, I would say, also in combination with the difficulties on the profitability side. Our net debt declined to EUR 407.8 million, also down versus 28th of February, 2025 by around EUR 20 million. Gearing ratio, 35.5%, stable and the equity ratio increased to 47% versus 45.4% prior year. We also want to mention here that, again, the 100% acquisition of the Slovenian food company, Mercator-Emba. This is a company with around EUR 30 million revenues actually, but we have concrete plans to bring this significantly up in the next 3 to 5 years. EMBA employs around 100 people. So, they are producing syrups and dessert toppings. They are a big supplier of the food service industry in Central, Eastern, and South Europe. So, this goes hand-in-hand with our strategy to get more access to the sales channel food service. We think this is an excellent add-on to our capabilities in the fruit preparations business. And so therefore, we are very happy that we could realize this acquisition. We also had an enlargement or will have quite soon from the 1st of November onwards 2025, the enlargement of the AGRANA Management Board. So Franz Ennser was appointed as new member of the Management Board. He has a long history already in AGRANA. So, his last function was the CEO of the AUSTRIA JUICE Company since 2014. I personally already did with him the integration and restructuring of the AUSTRIA JUICE company after the merger of Ybbstaler and AGRANA Juice in 2012. So, we already have a joint very good track record, and I'm very happy that we can welcome Mr. Franz Ennser from 1st November, 2025 onwards in the Board of AGRANA. His responsibilities will be Agricultural Raw Materials, Operational Excellence, including Occupational Health & Safety and CapEx and also Purchasing, Logistics and Supply Chain. A quick update on our strategic priorities for the external business year or financial year. So in Food & Beverage Solutions, of course, we will now work after the approval of the competition authorities and the closure of the transaction, the closing of the transaction, which we expect in the external calendar year. We will work on the integration of AUSTRIA JUICE into AGRANA. Of course, also have an eye how to grow our core segments. We will make a good strategy to leverage our Flavors capabilities. This is also then the rollout via our footprint in the Food Preparations business. And of course, also together in the Food & Beverage Solutions segment, we are looking for overhead reduction. So, which means additional synergies. In the Agricultural Commodities & Specialties business, of course, we are still working on the cost reduction program. Site optimization is very important in Sugar, but also in Starch, also sustainability, so which means decarbonization here plays a very important role. Cost is always a factor. Also in Sugar, we need to bring down the cost further to be competitive for the future. And overall, securing our financial flexibility and creating more headroom also for the future growth is also a very important factor for the next month. We will further work on the reduction of our working capital, yes, and also overall cost optimization. We also have a new segment reporting since the 1st March 2025. As we already reported, now the new structure is that we changed Fruit segment into Food & Beverage Solutions. This -- the reason is quite clear. So Fruit is not the right, let's say, has not the right meaning anymore. So, we're doing much more here than fruit. We are in fruit preparations, we are doing brown flavors. We are doing natural flavors. We are doing beverage compounds. We want to enlarge this business in the future. And also, this is our growth engine for the future. Therefore, it's Food & Beverage Solutions from now on. And then, we have our Agricultural Commodities & Specialties segment. It's not a segment, it's a business area with two segments. One segment is Starch and the other segment is Sugar. And then separately, we will report the holding. So, we think that this is the right way to present the financial performance of the business areas in the future, and it's even more transparent and meaningful. This is our understanding. It also shows clearly our path in executing our AGRANA NEXT LEVEL strategy. Yes, on the next page, this is an even more comprehensive, let's say, picture how this looks now for the future. So, then we move on to the revenue by segment. I already mentioned that our revenues went down by 9.1% for the Group to EUR 1.691 billion. We had a growth of 4.2% in the FBS. So, Food & Beverage Solutions: In Starch, a decline by 5%, down to EUR 506.5 million. This is, of course, mainly driven by lower prices. So, we saw ethanol prices heavily under pressure in the first half year of the business year. Also, other main products like the sugarification products or saccharification products, also native starches, especially wheat starch going into the paper industry, also heavy under pressure due to lower utilization rates in the paper industry. So, all these factors together resulted in this decline in revenue. And in Sugar, you see the massive decline of 36.7% in revenue. This, of course, has to do with significantly lower prices and also lower volumes that we sold into the retail business, especially in Eastern Europe. The development of the Sugar world market prices, you can see on the next slide. So a constant decrease, we must say now since the last year. Still going on in the last 2 to 3 weeks, the world market prices further declined. Yes, so we -- there is an expectation of good harvest in the main regions for raw sugar. So, especially Brazil, India, but also Thailand everywhere, a good harvest is expected. This, of course, leads to further pressure on the world market prices. In Europe, I already also mentioned that we are expecting at least a normal crop. So therefore, the reduction in the planted areas, they do not have the effect that we were expecting, which means a stabilization of prices or increase in prices. So, now the pressure is a little bit coming back, we must say, and now we need to see what -- how this will go on in the next -- in the next Sugar marketing year. So, especially when we see what will be the acreage planted in the coming spring season in Europe. Ethanol prices also really a challenge during the first half of the year. You see it here also in the curve. Recently, prices increased significantly up to EUR 800 per cubic meter. Everything obviously has somehow to do with the import volumes, but potentially also with volumes coming from the U.K. to the European Union due to the duty-free imports in the U.K. from the U.S. for ethanol right now. Recently, the closure of the Associated British foods capacity in the U.K. was announced. So this could cause some relief, I would say, on the price pressure in Rotterdam,, due to the lower supply. But at the end of the day, the biggest impact or it comes from the United States and the importing volumes into the European Union. And as long as we see the low prices for corn in the U.S. it will be difficult to increase the prices further in the ethanol business in the European Union. When we look to the EBIT development, yes, very, very good performance in our Solutions segment, EUR 68 million, so up 34.9% versus prior year. This is really a very good development. Unfortunately, in our other businesses, so in Starch and also especially in Sugar, we again saw a massive reduction of our profitability, whereas we have to mention that in Sugar, it's mainly coming from the exceptional items due to the closure of the sites in Leopoldsdorf, Austria and Hrušovany, Czech Republic, and also additional restructuring measures related to a reduction of headcount. Outlook for '25/'26, yes. So we raised our guidance. I already mentioned this at the beginning of the presentation, significantly higher than previous year. So revenue, yes, should be moderately down. This goes hand-in-hand with what we reported already for the first half of the business year. And when we look at the different segments. And here, the guidance for our Food & Beverage Solutions is a slight increase in revenue and a slight increase in EBIT for the whole business year '25/'26. In Starch, we expect a slight reduction in revenue and a significant reduction on EBIT. And in the Sugar segment, we expect a significant reduction in revenue and a significant improvement in EBIT, but we have to mention in the second half of the business year 2024/'25, we had the exceptional items due to the closure of the sites in Leopoldsdorf and Hrušovany. So, let me come to the outlook for the third quarter '25/'26. So there, we expect a very significant improvement in EBIT versus the third quarter prior year. Last year, we reported a loss of EUR 5.5 million. So a significant improvement is not very difficult to reach. Investment plan for '25/'26, finally. So we expect an investment of around EUR 100 million. As you can see, the focus is actually very much on our Food & Beverage Solutions segment. There, we have the best performance actually. Therefore, we also investing in growth projects as well. And in Starch 18% of the EUR 100 million and in Sugar, 10% of the EUR 100 million. So therefore, due to the very poor profitability right now, we also need to save. And therefore, also, we are going for a reduction in our investment plan in these both segments. So this was my presentation. Thank you very much, ladies and gentlemen, for your participation and attention, and I hand back to Hannes Haider.

Thanks. Before we go on with the Q&A session, I just wanted to inform you that our financial calendar for the next financial year '26/'27 was published recently, and you can find all details on Slide 23, but also on our website. Additionally, you can find there the current roadshow table.