AGRANA Beteiligungs-Aktiengesellschaft (AGR) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to AGRANA's conference call presenting the annual results for 2019/'20. You already got some insights in our figures when we posted an ad-hoc announcement regarding the dividend proposal on the 22nd of April. Today, we will provide you with further details on the audited financial statements. With us today are 4 out of 5 members of the management Board. Mr. Marihart, CEO of the group, will start the presentation with an overview on the results and highlights of 2019/'20. Our CTO, Mr. Harringer, will present an investment overview and CapEx outlook. Mr. Gattermayer, our CSO, will continue and give you more color then on all segments. Then our CFO, Mr. Büttner, will present the financial statements in detail. And finally, again, the CEO will conclude with an outlook and a section on COVID-19. There is, as always, a presentation available in the IR section of our website. The presentation will take about 40 minutes. And afterwards, the management Board will be glad to answer your questions. And now I may hand over to Mr. Marihart.

Thank you, Mr. Haider. Yes, a warm welcome, and thank you that you successfully are able to join our conference call on the results of business year '19/'20. Our annual report '19/'20 highlights why we feel ready for the future. Bringing the slogan of this year's annual report to life, HELLOTOMORROW. We also invite you to launch the digital experiences on the image pages of our report and on reports.agrana.com. Our HELLOTOMORROW hashtag has a vision, future and strengths where we highlight the biorefinery concepts of our factories. We highlight the digitalization of our manufacturing processes for better yields, for better -- for less energy consumption. We highlight, of course, that R&D is very important for us that we are powered by people and progress through research. Now a short overview on the results of our business year '19/'20. So we achieved the goal of a significant improvement in operating profit EBIT at group level. The EBIT was EUR 87.1 million. Last year, EUR 66.6 million. The revenue increased a little bit from EUR 2.433 billion to EUR 2.488 billion. And the EBIT margin increased from 2.7% to 3.5%. The breakdown by segment of the revenue shows that the total increase is 1.5%. More or less stable in the Fruit segment, with plus 0.5%. And Starch made the bigger step, is plus 5.8%, now lying at EUR 807 million. And Sugar stopped its heavy decrease by more or less maintaining the turnover figure minus 2.6% to EUR 488.3 million. Of course, the share of Starch increased, therefore, to 32.5%. Fruit decreased a little bit by 0.5% to 47.8%, and Sugar fell below the 20% level. Concerning the EBIT breakdown. We had a decrease in the Fruit segment from EUR 77.3 million to EUR 55.9 million or 27.7%. An increase in Starch from EUR 51.2 million to EUR 75.2 million by 46.9% plus. And in Sugar, still negative, but an increase or an improvement of 28.9%. This means, overall, an increase of the EBIT margin to 3.5%. The Fruit part is now 4.7%. EBIT margin in Starch part, 9.3%, and Sugar, still negative. So now I hand over to my colleague, Dr. Harringer, concerning the projects and investments.

Thank you, Mr. Marihart. Dear, ladies and gentlemen, the next point in our today's agenda is an overview about our most important investment project of the last and then outlook about the current business year. AGRANA invested in 2019/'20 EUR 149.7 million, thereof EUR 56.5 million in the segment Fruit for the installation of the second production line in our new plant, Changzhou in China. Meanwhile, the new line is in continuous operation, and second, in a new laboratory for product development in Mitry in France. In our segment Starch, we invested EUR 73.6 million in our biggest project, the expansion of our wheat starch plant in Pischelsdorf, more on later. And in 2 projects in our corn starch factory in Aschach. In the segment Sugar, we did an investment in a new warehouse in Romania and in our factory in the Czech Republic concerning energy efficiency with a total amount of EUR 19.6 million. Now a short summary about our biggest project in Pischelsdorf, the expansion of the wheat Starch plant, which was completed on schedule. The plant successfully began operation at the end of November 2019 with a total investment of -- at about EUR 102 million. We chained 45 new jobs. With the new daily grind of 3,300 tonnes, we will be able to process a yearly amount of about 1.2 million tonnes of raw material in our biorefinery in Pischelsdorf. Now I would like to give a short outlook about our investment plans in the new business year 2020/'21. We are planning to invest approximately EUR 80 million across our 3 segments, Fruit, Starch and Sugar. This amount will be significantly below both the capital expenditure of the last business years' and this year's depreciation of close to EUR 120 million. Our investment plan was already determined before the COVID-19 crisis and will stay unchanged so far. The most important project in our group in the new business year is the installation of a new factory for the production of crystalline betaine nearby our sugar factory in Tulln in Austria. The construction is proceeding well, and the completion is foreseen in August of this year 2020. We do this within a joint venture with our partner, the Amalgamated Sugar Company an U.S.-based company. This project with an investment volume of about EUR 40 million will chain 16 new jobs. The production capacity will be 8,500 metric tons a year. Ladies and gentlemen, if we look back on the CapEx evolution of the last decade, we see a long-lasting period of continuous improvements above depreciation. With the new business year, we will start a period of consolidation, where we will chain and maximize efficiency in our production lines and within, we will drive our continuous improvement processes. Now I'm glad to hand over to Mr. Gattermayer for his view on the market environment.

Thank you, Mr. Harringer. Dear, ladies and gentlemen, I will start with the Fruit segment concerning food preparation. I want to say that the Spoonable fruit yogurt, the actual main market for our Fruit prep production, grew slightly. Planned growth in North and South America and Europe and the Middle East was negatively affected by business cycle-driven reversals and political developments in different countries like Argentina and so on. The ice-cream market showed moderate growth in 2019 globally, with higher growth in some areas. In this segment, AGRANA continued to work on expanding collaboration with the global market leaders like Dannon, Chobani and so on. AGRANA also continued to channel its strength in the foodservice activities cooperation with Starbucks, McDonald's, all those international companies. The market for dairy alternatives in the yogurt and plant-based products and ice-cream sector still represents only a niche in the overall market, but is showing positive growth, mainly plant-based products. Concerning food juice concentrates, in 2019, the apple campaign was marked by lower availability of apples, mainly in Hungary and partly in Poland. At the same time, there was a supply overhang from the very good crop year 2018. Concerning the revenues and the EBIT, we have to state that the revenue was stable at EUR 1.2 billion. Concerning fruit prep, the revenue went up slightly due to this higher sales volume. Revenue growth was seen mainly in North America and India, Middle East and Africa and partly in Russia and Mexico. Concerning fruit juice concentrates, the revenue was down compared to the year before due to lower prices for apple juice concentrate, from the 2018 crop volume went up moderately. The EBIT was lower than in the year before. The reasons for this development are linked to the fruit prep business mainly. The sales volume growth went up but was below expectations, and the general cost increase were higher than expected. We could -- we were not able to fully offset them by higher sales volumes. In addition, onetime impacts relating to raw material issues in Mexico concerning strawberry and mango, combined with slow sales price for apples in Ukraine for the fresh market, reduced the margins in Europe as well as staff costs, which were an addition. The EBIT in the fruit juice concentrate business declined significantly, mainly from a combination of poor contribution margin in apple juice concentrate and idle-capacity costs due to the smaller apple crop 2019. Now I want to continue with Starch. We realized high bioethanol quotations throughout the whole financial year, with significant contribution to the EBIT growth of the Starch segment. Due to higher blending quotas in some European countries and also a stronger focus of climate policy on fuels in a lot of countries with higher greenhouse gas savings. The market for native and modified starches was stable in the last year. Sales volume and the revenue, both in the food industry and the paper and the packaging sector went up compared to the year before. The organic sector is also benefiting from growing consumer demand, as was already mentioned in the past. Concerning the expansion of the wheat starch plant in Pischelsdorf in Austria, the demand for containerboard remains still high and new competitors on the other side are increasingly entering the market, and therefore, the competition will be more intensive than it was in the past. The next chart shows you the ethanol and the petrol prices. You see on the right side, that more or less, there's a correlation between the ethanol and the petrol prices and due to the effect of COVID-19 or corona, we -- and the people that stay at home due to the shutdowns, of course, there was a lower demand for gas or benzene, gas, petrol and therefore, we have also lower sales of ethanol during the last 5, 6 weeks. Concerning the financial results of the Starch segment, the revenue went up to EUR 807 million. The main reason was a significant improvement in ethanol revenue due to market development, demand in the European Union and also higher prices. The production volumes and the sales quantities were increased in all plants. And in addition, in new secondary starch plant at Pischelsdorf, Austria began production in November 2019, and the sales was able to deliver to the market as it was planned. The increased revenue we achieved in organic and specialty products in addition. The EBIT significantly went up to EUR 75.2 million. There was a significant earning due to the price of ethanol as well as from the volume gains in core products. And the profit contributed from HUNGRANA was EUR 16.3 million. This was in line with the year before, and the company was able to make up for volume with improved bioethanol earnings like in Austria, too. The next chart shows you the information concerning our acquisition of Marroquin Organic in United States. Marroquin is, with 29 years, already 30 years of experience in supplying organic and non-GMO ingredients and had a turnover of USD 20 million. The acquisition of 100% of the shares was able to manage to finalize at the end of the business year. And therefore, it's very important because the U.S. markets for packet organic foods is the world's largest market, and it has a growth between 7% and 10% per year. And particularly in the United States, where Starch mainly is being based on GMO corn, demand for non-GMO corn starch is rising. And therefore, we are very positive. The next one is the Sugar. The world sugar market -- concerning the world sugar market, the world market price of sugar fluctuated at a very low level since the beginning of the 2019/'20 financial year. White sugar quotation even had a new 10-year low in July 2019, around $290 per tonne. And there was an upward trend in world market quotation from the financial fourth quarter to the middle of February 2020, then there was a change due to corona issues. The more important issue for us is the European sugar market because we have still a tariff, and therefore, more or less the European sugar market has some kind of protection. The sugar production expectation for the ongoing sugar marketing year 2019/'20 were low due to a result of drought, and therefore, lower yields in the large European beet growing rate are areas in Western and Middle Europe. In December 2019, the estimation of the European Union was a production of around 17.3 million euro -- million tonnes, sorry for that. And we had -- 2 years ago, we had a production at above 20 -- around 26 million tonnes. During the year 2019, the average price increased, again, slightly. The next chart shows you the sugar quotation across for white sugar and raw sugar. And on the right side, you see that on the 4th of May, we had more or less the raw sugar price around EUR 209 per tonne, and the white sugar quotation around EUR 312, meaning a difference of EUR 100. And this morning, the difference was EUR 110, it's for proactive situation concerning raw sugar and white sugar worldwide. The next chart shows you the monthly European average price. As you see on the red line, this was the, how should I say, the proposed price by the European Commission in 2011, around EUR 404 per tonne. On the other side, you see the 2 [ charts ]. The one is the London #5 quotation and the other one is the European reported average price during the period. And you see more or less, there's a correlation or was a correlation between the last 4 years before it was no correlation at all. But now we see that we are in the system and that, of course, is a slow correlation. Concerning the financial results concerning the Sugar segment. The revenue went down to EUR 488.3 million. We had to realize significant drop in Sugar sales volume and that outweighed the rise in sugar selling price what we were able to get. The by-product revenue increased from 1 year earlier due to higher beet pulp prices. The EBIT is still negative but improved significantly. Improvement was due to higher sales price compared to the year before. And the EBIT contribution of HUNGRANA-STUDEN Group was EUR 0.4 million. The year before, it was a loss of EUR 4 million. Therefore, we had a clear improvement as a result of the positive market and better utilization of the plants. Thank you very much. And now I will hand over to Mr. Büttner.

Thank you. So let's start with the consolidated income statement. As already mentioned in the business year '19/'20, we had revenues of EUR 2,480.7 million. This is a slight increase of 1.5% versus the prior year. EBITDA amounted to EUR 183.1 million, this is an increase of 24%. And our EBIT was EUR 87.1 million, also a significant increase by 30.8%. The EBIT margin, 3.5%, and the profit for the period after tax reached EUR 51.3 million. This means earnings per share of $0.77. On the next page, you see the analysis of the net financial items. So our net interest expense was EUR 8.4 million. This is an increase -- a significant increase, mainly due to EUR 1 million effect of IFRS 16. And also, we had an increase of EUR 150 million in debt, which also led to additional interest expense. Currency translation differences improved and went down to EUR 6.6 million. So this led to a total of the net financial items of minus EUR 17.2 million. The exceptional items were 2. -- minus EUR 2.8 million, mainly coming from the Fruit prep business. Here we had exceptional items of EUR 2.1 million, mainly coming from the region, Asia Pacific and South America. These were restructuring costs due to the cancellation of contracts of management resources. And also, we had EUR 1 million effect in Serbia because of the closure of [ first transformation ] facility. In the Sugar segment, we had net expense of EUR 0.7 million. This is coming from, not realized, but expected tax refunds in Romania. And also, we had additional provisions due to a lawsuit in Romania. The tax rate was 26.6%, was back to normal. We had a very high tax rate of 40.7% in '18/'19, mainly due to unrecognized tax loss carryforwards coming out of the sugar segment. This was significantly improved in the year '19/'20. And so our tax rate went down to 26.6%. The consolidated cash flow statement shows a net cash from operating activities of EUR 110.1 million. So after the net cash used in the investing activities of minus EUR 155.6 million still leads to a negative free cash flow, but also an increase of the net financial debt. The consolidated balance sheet shows an increase of our noncurrent assets of EUR 79.8 million. There is an IFRS 16 effect of EUR 32.4 million, and the rest comes from the difference of our capital expenditures of EUR 142.7 million minus the depreciation of EUR 98.9 million. The biggest item here comes from Starch and is our doubling of the wheat starch capacity. The current assets also increased by EUR 91 million, mainly due to an increase in our inventories coming from the -- mainly from the segment from the Sugar segment, with approximately EUR 43 million, but also in the juice business, we had increasing inventories, and also in Starch, also due to the start of the new wheat starch capacity. The equity slightly reduced to EUR 1,387.1 million. There is -- this is simply the effect of the dividend payout of EUR 63.2 million in the business year '19/'20, minus the profit after tax of EUR 51.3 million. And additionally, here, we have currency translation differences. The equity ratio with 54.4% is still very solid despite a reduction of approximately 5%. The net debt with EUR 464 million, there is a sharp increase of 44%. This is due to the CapEx, capital expenditures and also the dividend payout and leads to a gearing of 33.5%. So finally, I would like to present you our dividend proposal. The management Board of AGRANA decided to propose a dividend payout in the amount of EUR 0.77 per share for the financial year '19/'20. We would like to mention that we are taking into consideration here our results, also the balance sheet structure, the net financial debt situation, but also the actual situation concerning the coronavirus. On the last slide of my presentation, you see the history of our dividend and earnings per share. And there you see that our proposal is 100% payout of our profit after tax. So -- and now I would like to hand over again to Mr. Marihart, who will give you an outlook on the business year '20/'21.

Thank you, Mr. Büttner. Yes, outlook, I think all of you know that's a difficult exercise in these times. And therefore, of course, I have to say that this outlook given on the next slide is given with the provision that the economic and financial impacts and the duration of the COVID-19 pandemic are not yet clear at the beginning of May now. In view of the dynamic nature of the pandemic and assumptions about its economic and financial impacts, such an outlook would be largely speculative. AGRANA has, therefore, decided not to incorporate such assumptions in this outlook and instead publishes here a forecast before COVID-19 based on the budget originally planned for the current business year 2021. Also, negative impact of COVID-19 on revenue and operating profit are expected in all business segments, these effects are not yet quantifiable. However, this outlook on the next pages also provides an assessment of the COVID-19 risk factors that may affect the pre-COVID-19 forecast. Let me start with the Fruit segment, the forecast before the corona crisis. The fruit preparations business is projecting moderate revenue growth, which is to be achieved through the full utilization of the capacity created and by further diversification in the non-dairy business through higher margins, which are to be realized partly through smaller cost increases than in '19/'20. The EBIT is to be raised significantly. In the fruit juice concentrate business, revenue is projected to rise significantly this financial year with a solid earnings situation. This is forecast before COVID-19. And now the risk assessment of COVID-19, especially in the Fruit segment, which is -- with its global production operations in 42 sites in 22 countries, the pre-COVID-19 forecast is fraught with high uncertainty. In March 2020 was the first months of the current business year, the business was nonetheless still very good, both in the fruit preparations and the fruit juice concentrate activities, particularly in terms of sales volumes. The risks are currently seen above all in the foodservice product segment, where fruit preparations and fruit products are sold into the quick-service industry among other sectors. But this business accounted for about 3% of total fruit preparations revenue in '19/'20. So it has not the biggest influence. Let me come to the Starch segment. Again, the forecast before COVID-19. The slight revenue growth trend in the Starch segment overall will again be shaped by ethanol price volatility. For native starches and wheat gluten, selling prices are coming under pressure through increased supply volumes. No major recovery in prices is expected for Starch-based saccharification products, which are still impacted by the Sugar price situation. Consistently, positive impetus for growth is anticipated in organic and GMO-free products, as Mr. Gattermayer already mentioned. The Starch segment EBIT is projected to decrease due to foreseeable margin reductions resulting from lower sales prices. Now the risk assessment. It concerns bioethanol. It's a core product in the Starch segment. It stays for -- stands for 25% of the segment revenue in '19/'20. And the business performance in '20/'21 will thus again be largely determined by prices in the European ethanol markets. The fundamentally positive market sentiment, which was driven by the climate debate, is strained by the temporary restrictions on mobility imposed across Europe to contain the COVID-19 pandemic. The impact on the whole ethanol value chain cannot be predicted until later in the financial year. Finally, the Sugar segment. In the Sugar segment, before COVID-19 effect, AGRANA anticipates an improvement in conditions in the EU Sugar market, mainly in connection with the volumes available in the market. On group level, AGRANA expects that the capacity utilization of our sugar beet factories can be increased significantly again as it has initiated various measures together with the beet farmers to improve the beet supply. The sugar prices in the EU are expected to rise. And the positive trend in the EU sugar market environment, combined with rigorous cost management implies a significantly better profitability. The risk assessment related to COVID-19. First, in March 2020, the trend in sales volumes was very positive, particularly in the retail sector. Whether and to what extent the COVID-19 pandemic will affect the expectations for the '20/'21 sugar marketing year cannot be predicted at present. Thus, among other factors, the effect with the current erosion in world market prices for sugar will have on EU prices in the coming sugar marketing year '20/'21 cannot be projected meaningfully. So this brings me to resume for the AGRANA group. The forecast before COVID-19 was EBIT goes significantly up, revenue also. Based on the segments' forecast before COVID-19, a significant increase in EBIT effects is expected for the group in the financial year, and the revenue is also projected to grow significantly. The risk assessment concerning COVID-19. There is still a rapid evolution of the impacts from the COVID-19 pandemic currently prevents any specific determination of parameters and thus presently does not allow to realistically quantify its post-coronavirus forecast to be made in '21. But with our diversified business model and our sound balance sheet and financing structure, we think that AGRANA itself is well positioned for the future. Depending on the trajectory of the COVID-19 pandemic, a more specific forecast will be provided in the course of the financial year, possibly already in connection with the publication of the results of the first quarter of 2020/'21 at the beginning of July. Let me come to the COVID-19 itself, not only the effects on our forecast. The status quo in AGRANA is that we are -- belong to the critical infrastructure as a food producer, and the continuation of our production activities safeguards supplying the population with food and feed products and also keeps the jobs by coordinating future actions on a daily basis and taking prudent decisions. AGRANA is living up to its responsibility as a food product supplier. Health and safety are of paramount importance to AGRANA in this context. At the current point in time, AGRANA is able to supply its customers despite the high level of demand. Yes, and all of the group sites around the world are operating and AGRANA is working diligently and responsibly to ensure the optimal deployment of its resources and to sustainably safeguard business continuity. Just a remark, so far, we had 6 infections with COVID-19 out of more than 9,000 employees in this 57 sites worldwide. If we split our revenues into food and non-food, assuming that food is probably less hit than nonfood, it shows that on a group level, 75% of our revenue is -- stems from food, 18% from non-food and 7% from feed. The Fruit segment, that's even more, it's 97% food and 3% nonfood. And in the Sugar, it's 86% food and 14% non-food. And Starch is much more diversified into 40% non-food, 38% food and 22% animal feed. Maybe that's also important information in that respect. Now to the challenges and risks. The business areas, as already mentioned, which are potentially negatively impacted is ethanol from the Starch segment. It's nonfood from the starch segment. And it's the foodservice sector in the fruit preparations, but with the lower impact, representing 3% of the fruit preparations turnover. There are general risks, of course, is it possible to maintain the logistics and the supply chain? So far, we succeeded. And there is, of course, possibly ForEx impacts, the exchange rate due to the worldwide operations we have. We have no sites -- production sites in Italy and Spain, but of course sales activities. We mentioned that especially because those countries are very strongly hit by the pandemic. And we have production sites in China and South Korea. And the impact there can be already measured but seems to be limited. The influence on the market side concerning ethanol prices was already mentioned by Mr. Gattermayer. You can see in the -- in the notations that there was a heavy fall in gasoline prices, but also in ethanol prices, meanwhile, there was a recovery, and we are more or less at the EUR 500 per cubic meters. Yes. And this -- why we feel in this situation well prepared? That's due to our strategic approach. It's our diversified business model and our sound balance sheet, therefore, we consider ourselves well positioned. We execute properly and utilize our growth projects, the wheat starch plants, the China second factory of fruit preparations, we manage for working capital improvements. We think that food is less sensitive and we push forward the organizational harmonization. And in total, the diversification means prices resistance. We showed in the past, prices resistance and stable dividend payout. We did it, we achieved it by means of regional diversification towards the eastward expansion and the worldwide expansion, the vertical integration with the specialization strategy and with horizontal diversification with the additional fruit segment. We did that all along the value-added chain and in core competencies of the group, B2B, adding value to agrarian commodities. So not taking too much risk, not able to manage it. This strategic mix has been applied differently across the segments, of course, many options in line with the relevant business strategy out there. It's different in Sugar, Starch and Fruit. In Sugar, we have beet sugar, isoglucose and refining as components for serving the markets. In Starch, our products are based on wheat, corn and potato. And in fruit, we have the global production and a very broad portfolio. This means crisis resistance. So in a highly competitive environment, we are aiming for the following targets: highest efficiency in production, best possible prices through qualitative differentiation of our products and further growth. This was just a resume to see our strategy, and we think that especially in this situation, our diversification helps to stay on track. Thank you.

Thank you, Mr. Marihart. Before we go on with the Q&A session, I just wanted to remind you that our Annual General Meeting for financial year '19/'20 will take place as planned on the 3rd of July, this time as a virtual or digital AGM. All details for this important event will be published at the beginning of June. And now the management Board is glad to answer your questions.

[Operator Instructions] The first question comes from the line of Vladimira Urbankova with Erste Bank.

I would have 2 questions, one backward and one forward looking. The backward-looking question would be the idle cost. How big were idle cost in '19/'20 in the Sugar segment and Fruit segment potentially? And forward looking would be the COVID situation. You were talking about risks. I would like to maybe talk if there are any opportunities if you see maybe you're better positioned than some of your competitors in some segments, if you see anything where, I'd say, could even work into your favor, your business model? If you can maybe elaborate on that?

Yes, I don't [indiscernible] by the idle costs. So in the Sugar -- in the Sugar segment, we had idle cost of EUR 14.1 million, attributable to Austria of this EUR 14.1 million were EUR 9.4 million. And in the year '18/'19, we had approximately EUR 13 million idle costs in the Sugar segment. In the Fruit segment, there -- the main factor is the juice business. And in the juice business, we had EUR 6 million idle costs in the business year '19/'20. In '18/'19, there were no idle costs, generally speaking. The next question, Mr. Gattermayer will answer.

Concerning the opportunities, maybe I want to raise the issue that, of course, due to our experience in the raw material sourcing, we expect that we are -- have a better situation than some of our competitors. That's the one thing. The other thing is that due to the supply chain organization, which we were able to develop during the last years, mainly in the food business, but also in the Starch business, I assume that we will be able to fulfill the requirement of our clients under this difficult situation maybe better than others. And concerning specialities, concerning the Starch business, of course, we have this no-GMO, this organic business. I assume that due to our market position, we will be able to develop this further on. And the same is for our food prep business, where we have a world market share of around 47%, 48%. We expect that we will be able to do it in partly better than our competitors that I would say are the opportunity to get some additional market share due to that. Now I give it to Mr. Marihart.

Yes, I add something. A short-term opportunity we took is the bioethanol for disinfectants. So it was possible that we could fill this essential gap, especially in Austria, but also in other countries in Hungary, for instance, with our bioethanol production. And in coincidence with the lack of sales into the fuel sector, we had this -- we have now this outlet into this use for disinfectants. And it's higher than we originally expected. It's more than 1,000 cubic meters a week. So it comes close to a 2-days production of Pischelsdorf factory. So that's a short-term opportunity. And I'm sure after the COVID crisis, this business will be smaller again, become smaller again, but it helps to overcome the breakdown in sales into the petrol business.

The next question comes from the line of Roland Neuwirth with Salus Alpha.

It's actually a question -- just a follow-up on the lady before on the disinfection stuff on ethanol. Mr. Marihart, could you just give us a little bit more of a feeling. You said that 1,000 cubic meters a week, 2-days production of Pischelsdorf. Basically 2 days within a week? So basically on the volumes. And on the pricing side, I would like to get a feeling, I assume, I talked to CropEnergies, they told me it's pricing-wise, it's much better, that's for sure, but it's -- causes obviously much more logistics. So basically, could you give us a feeling of how much you think this -- and as you said, totally, you're right, obviously, in 2, 3 years' time probably this business is gone. It kind of can make up for the loss of other quantities and pricing. Because obviously, the ethanol price being up almost about EUR 500. So the spread to gasoline went up massively. So there has been obviously a reason that these quantities make up for a little bit of loss. So that's my question. More detail, more flavor on that front, please.

First of all, I have to stress that our Pischelsdorf production concept is highly integrated because we make use of the by-products of the wheat starch factory, fermenting it to bioethanol. And a drop in bioethanol production would mean also a drop in wheat starch production, and especially in vital wheat gluten production, which would affect our business negatively because there is a high demand on that product. So therefore, it's very important to have this compensation, partly compensation for the bioethanol use in the disinfectants. And capacity-wise, I mentioned, so our daily production is between 600 and 700 cubic meters in Pischelsdorf. And this means, in a week, it's roughly 4,000 to 5,000 cubic meters. And 1,000 of that is for disinfectants or sometimes also 1,200 could be [ meters ]. Concerning the pricing and the margins, I would hand over to Mr. Gattermayer. He is our CSO.

There's also additional price, as you already mentioned. And for the time being, we're in a very good situation. The price -- and additional, I would say, is between 10% and 20%, even higher in some part, it depends how the supply chain is able to organize this. But of course, as you said, the volume and the price situation is helping us to less -- to suffer less from this ethanol development.

The next question comes from the line of [ Stefan Maxine ] with RZB.

One question with regard to the current drought that we have in Central Europe. What -- how would you expect would that impact the beet and harvest going forward? If you could have any estimates so far? And secondly, as we had, I think, quite a warm winter, and last year there was, in general, the problem with this weevil. Any idea how this enemy actually has survived throughout the winter? Yes. That is my first question.

I'm not sure if I get the question right, but I expect it's concerning the crop of wheat and corn under these drought situations. We have to add some issues. The one thing is the production itself, and it was in the European Union. Of course, it depends from the rainfall, which we had in the past and which we'll get in the future too. For corn, it's mainly important in July and August. For wheat, more or less, it's gone, except in northern countries. And the other issue, what is very important for the price level is the exports out of Ukraine and Russia, and maybe you noticed Russia stopped the export 2 or 3 weeks ago due to this corona issue. Normally, due to the fact that now Russia and Ukraine limited their exports, of course, there is some market potential for the European markets out of U.K. or France or Romania. But if this is -- how should I say, it's solved in the next week, I expect due to the demand and supply situation within the European Union, just based on European Union our numbers that it will be in line what we expected, and for our company, we are more or less -- we [ boat ] already wheat and corn until the next wet corn, our campaign will, therefore, be on the safe side. And for the time being, if no political issue will appear, in addition due to, as I said, Ukraine and Russia, United States, China, this trade issues also has an impact, we expect that there will be not a big increase for corn and wheat in the next weeks and months. But of course, as I said, the difference between corn and wheat what's in European Union is normally around between EUR 5 and EUR 10. It is now for EUR 20, maybe it will continue, maybe it goes up to EUR 30 or maybe it will go down to Europe 10 again. But that will depend how the quality and the volumes are during the harvest time in July and August. And the beet weevil will occur -- the weevil is one issue, which we have in our areas, of course. But this year, it's less than last year, but we are suffering due to the no rainfall or the drought, which we have now. And therefore, the sowing was done, but the growing of the beets itself [ offering ] and the smaller the beets are, the more negative is the impact of the beet weevil. We will see it, I think, in 2, 3 weeks, how it will be the final outcome due to that.

And another question on that -- or actually on something with regard to working capital. You said previously that, especially in fruit supply, you had to increase your internal stock to secure a 2-month production in case of supply disruptions. Is this effect also -- I would assume that we don't see this effect yet in the full year numbers, how would you assume that effect going forward?

You mean in the fruit preparations business?

Yes. Actually, previously, I think you said you need to increase your stock level overall, but especially in the fruit preparation business to secure 2 months of product.

This is a measure that we took in order to not run out of raw materials in our fruit preparation plants due to potential logistic problems of the coronavirus. So we increased our stock level of raw materials. This is just a security measure. It's not a permanent effect. And as the problems with the virus get lower, then we also will again start to decrease these stock levels. This will not have any significant impact, I would say, on our total working capital because usually, the impact of the inventories on the working capital of the group in the fruit prep business is not really significant because the business model is just in -- more or less just-in-time delivery and then production. The difference is always in -- the big difference can always come from sugar due to higher raw material prices or higher production volumes or from the juice business because there we have more to always store the whole production of the campaigns. So in the fruit prep business, it is a safety measure, but the impact on the total working capital will not be significant over the total year.

The next question comes from the line of [ Ralph Barkett ] with [ MAV ].

My questions have been answered. One was the neutral alcohol and the other was the working capital. But perhaps I can ask something anyway about the increase of the working capital last year that was EUR 53 million. I understood that part of it came from inventories for the new Starch factory. What have been the other 2 effects? You've mentioned fruit but...

Yes. No. So...

EUR 3 million and...

Yes. I will answer. Yes, in the change in working capital is EUR 53 million. And yes, on a net basis, I would say, you can see it only comes out of the Starch segment. And the main effects are, on one hand, of course, is the higher inventories due to this increase of the wheat starch large capacity, and on the other hand, also higher receivables because we have more revenues there and more business. And half of the effect comes out of the -- we have a group taxation. And there, we had kind of a shift of liabilities out of these tax liabilities, which also were reflected in the liabilities, which were also considered in the working capital. Now they were shifted to a different position. And therefore, the liabilities get lower, and this led to an increase of the working capital of EUR 26 million. This is just due to a definition effect of our working capital.

So the tax liabilities have been part of the working capital?

Yes. And now it's not anymore, and therefore, the liabilities are lower, which leads to a higher working capital.

And that was EUR 26 million?

Yes.

[Operator Instructions] There are no further questions at this time. I hand back to Hannes Haider for closing comments. Thank you.

Yes. Thank you for your interest in the call. As you know, we also published our annual report today, so please also read through the report. Thank you for your participation. Stay healthy and goodbye.