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

Ladies and gentlemen, thank you for standing by. I am Emma, your Chorus Call operator. Welcome, and thank you for joining the AGRANA Q1 2021/2022 Conference Call. [Operator Instructions] I would now like to turn the conference over to Hannes Haider, responsible for Investor Relations. Please go ahead, sir.

Yes. Good morning, ladies and gentlemen, and welcome to our conference call presenting our results for the first quarter '21, '22. You already got some insights when we published an ad hoc announcement on the 16th of June. Today, we will provide you with further details also on all segments. With us today are 3 out of 4 members of the management Board. Our new CEO, Mr. Muhleisen will start the presentation introducing the new management Board and providing an overview on the highlights of the first quarter, then he will talk about the market environment in the 3 segments. Afterwards, our CTO, Mr. Harringer, will present to you what is going on in the group regarding raw materials and production. He will also provide you with an investment overview and CapEx outlook. And finally, our CFO, Mr. Büttner, will report on the financials in detail, and will also conclude with an outlook for the full year '21, '22. As announced in our invitation, a presentation is available in reference to the calls. You can find it on our website in the IR section. The presentation will take about 30 minutes. And afterwards, the management Board will be glad to answer your questions. And now I may pass over to our CEO, Mr. Muhleisen.

Well, thank you, and good morning, everyone, and welcome to my first quarterly conference call. My name is Markus Muhleisen, I am absolutely delighted to be the new CEO of AGRANA. Let me take this opportunity to first of all, thank my predecessor, Johann Marihart, not only for his long service and his leadership of AGRANA, but also for the help he has given me to ensure a very, very smooth transition. What we first want to do is actually introduce the new team to you, because along with my appointment, we've had a few other changes. And so I would like to welcome Helen Arnold to the team. Unfortunately, she cannot join us this morning on the call. But I'm excited to have her on the team with her background, with her experience and with her expertise. She is a great addition to the AGRANA management Board replacing Thomas Kölbl, who decided to focus on his duties as CFO for the Südzucker Group. I also would like to say thank you and farewell to Fritz Gattermayer, who, along with Johann Marihart decided to retire at the end of May. And I want to thank him also for his long service to AGRANA. We've taken this opportunity to make some other changes in the Board and also to the executive management team to send a bit of a signal to that in the spirit of being agile and lean, we've decided to reduce the number of members of the management Board as well as at the level below the Board. So we have a new leaner team. In addition to that, we decided to be much more involved in the daily operations of our business to be closer, to drive faster decision-making and react more quickly to changing market conditions. So a signal to be both more agile and more lean. And so for that reason, I have taken over the sales portfolio, also signaling probably a strong orientation towards our customers on our markets. And I'm also going to be much more heavily involved in the Sugar segment. Stephan Büttner, our CFO, he's taken on responsibilities for purchasing as well as responsibility for the Fruit segment. And our CTO, Norbert Harringer, he has taken all responsibility for raw materials, R&D as well as for the Starch segment. And just to give you a bit of a sense of my first priorities as well as the agenda that this new team is pursuing, we've included a slide on some of the key topics that we'll be focusing on over the next weeks and months. But before I get into that, let me also say that, obviously, for me, it's still early days. It's been now a number of weeks, and I'm thrilled to meet so many members already of the AGRANA team as well as I've had numerous conversations with our customers as well as with our external partners. And from that, I can tell you that I am quite confident that we are in a good position. AGRANA is clearly well diversified. I can also tell you from my previous experience on the customer side that AGRANA has a strong innovation capabilities. And I think we're well positioned to take advantage of many of the big trends that we see coming our way. But most importantly, and I've seen this during my first few weeks already. We have fantastic employees. They're motivated. They're dedicated. They have great experience. They got great expertise, and that makes me very confident as we move on. Now the other big priority, obviously, in a year, which will still be very much impacted by corona is to actually ensure and secure strong results this fiscal year. I can tell you also from my conversations with our customers, it is going to be another volatile and more on very difficult to predict here. And so our full focus has to be to respond quickly to changing market conditions to take advantage of opportunities as they present themselves, but also to make corrections as we see things moving in a negative way. And so that clearly needs to be a strong focus for this new team. At the same time, we will take this opportunity to take a look more into the future and building on a strong foundation. We will take this opportunity to look at how do we want to refine the strategies as we now enter this next chapter in the exciting growth of AGRANA. And there are sort of 5 themes that you will see on Slide 3 that we will focus on, in particular. One of the key questions that we'll look into is how can we further drive profitable growth with an emphasis on profitable. AGRANA has got great capabilities. We have great competencies. We have, as I mentioned, a great team. We also have lots of really good ideas. The question is how can we further accelerate in particular those areas that will deliver more profit as I do see some further potential there. The second very important area that's linked to this first 1 is also looking at it from a customer and market perspective, what are those opportunities? And so that's 1 of the reasons why I personally will spend quite a lot of time together with our customers to see how we can shift further towards -- moving from a supplier of individual raw materials to much more of a partnership and being able to be a partner for complex solutions and relevant solutions to our customers. We also recognize that this is an opportunity to reevaluate a bit what we are as an organization. So we're going to be looking at organizational change. And themes there are how do we become even more efficient, how can we simplify our processes, simplify our structure, so that's going to be 1 focus area. But also what new competencies, what new capabilities do we need to invest in to pursue the growth that I talked about just earlier. And then finally, as AGRANA has evolved into a global business headquartered here out of beautiful Vienna, but we are now a global business, what organizational change, culture change do we need to drive? As I mentioned, we have wonderful employees now in 56 sites around the world, how do we come together as a strong -- in a strong organizational culture. This also links to a fourth focus area, which is sort of looking at how do we make a shift from a predominantly volume-oriented business to 1 that's focusing more and more on added value. And then finally, sustainability, which we all know is the big challenge of today and that it presents a lot of challenges for us. At the same time, also presents a lot of opportunities. And I can tell you that I think AGRANA is actually well positioned to take opportunity, to take a lead in many areas. And so we're going to look at how do we best do that, how can you accelerate the exciting work that's already been happening today. So that hopefully gives you a bit of a sense of some of our current priorities for this fiscal year, but also a little bit of a sense of what are we going to be looking at as we now then towards this next chapter of our growth. Then just looking at the results of the first quarter, and Stephan will go into that in a bit more detail in a moment. But as you know, our revenues were up slightly. Our EBIT down versus first quarter last year. But as also Stephan will explain to you, these quarter versus quarter comparisons are a bit tricky in the pandemic years. Our EBIT margin was 3% of profit for the period EUR 12.1 million. And we have a strong equity ratio of 54.5% and a gearing ratio of 38.8%. So Stephan will take you through that in more detail in a moment. And then actually turning towards sustainability, as I mentioned, the big challenge, I think, for everyone we do see it also as an area of opportunity, and I'm delighted to tell you that AGRANA is already well underway with a strong climate strategy on Page 6. You see some of our highlights of that strategy. We have a first milestone target to reduce our CO2 emissions by 25% by '25, '26. We will -- in order to achieve that, invest about EUR 10 million per year in sort of 4 focus areas, it's about the use of green electricity. It's about phasing out coal. We have 2 coal-fired sugar production sites left that we're going to be turning over by '25, '26, it's about implementation of energy efficiency measures, but then also looking at the increased usage of residual low protein raw materials or biomass for energy. Now it's something that offers a lot of potential, but we have to do this carefully as we're currently also our marketing some of these residual materials. So also, we have to look at the business case for that. While we're driving those changes, we're also looking at further in particular, our Scope 3 emissions. And so as we speak, we're analyzing as to how do we work here with our partners and suppliers along the whole chain, looking at raw materials, looking at transport and the whole chain. And as you can see here on Slide 6, our goal is then by 2030, being able to offer a mostly CO2 neutral portfolio of products. So very, very exciting. Let me then actually quickly mention some other exciting news in just 2 days. We will have our 30th anniversary of being listed on the Vienna Stock Exchange. So it was on July 10th, 30 years ago that we were listed and we had 2 major capital increases since in 2004, 2005 and then again in '16, '17. And I'm delighted to report that for the investors that meant in a total return, including dividends of more than 450%. And we look forward to the next 30 years as a stable and reliable partner of the Vienna Stock Exchange. So now just to give you a bit of a sense on some of the market environment. Before turning it over to my colleagues a few remarks on the Fruit segment, you'll see some of this also on the Slide 9. And fundamentally, as you know very well, in Fruit, the markets are very much linked to developments in dairy, in ice cream, in food service and bakery. And we see a continued trend consumer demand for products that are natural, that are healthy, but they also provide pleasure and convenience and its sustainability, which is becoming increasingly important. Now we've also seen obviously a big impact of COVID-19 on many of these markets in different ways. So on the consumer side, for example, growth for comfort foods, but then also at the same time, an increased demand for healthy products in particular, products that boost the immune system, and we see their potential both in the short term but also in the medium term. On the other hand, more and more, we also see the impact of -- the economic impact of the coronavirus crisis, which is driving demand for lower-priced products and also simpler products. And so 1 of the things that we're working on with our customers is on the 1 side, how do we deliver against that. On the other hand, how do we help them differentiate their premium products so they can succeed in that environment. One segment that, of course, we have in focus, in particular, is that of Fruit yogurt. That's the key segment or product segment that we market here. And here, based on the latest data by Euromonitor, we do see a slight decline in the calendar year of about 0.8%. And so that's something that we are discussing extensively with our customers, how we can help them to reverse that trend. In the fruit juice concentrate business, 1 of the key things here is that the apple quantities that we have available from the 2020 campaign were well below expectations. And as a result, the raw material prices have been quite high. And it's been a bit of a challenge to pass that through to the market. However, what we do see now as the markets are opening as with corona restrictions lifting that the demand for apple juice concentrate has rebounded significantly already in the first quarter of 2021. And we're actually moderately optimistic here for also the current berry juice campaign. So that's on the Fruit segment. Now turning to the Starch segment, which, as you know, falls into 3 key segments in the saccharification products, we do see a continued price pressure. However, as the hotel and the food service sector are recovering, we do see that demand is picking up and that should move to a more favorable market environment. In native and modified starches, we do see quite a good increase in demand which is supporting not just the top line but also increasingly we see opportunity to pass prices through on the bottom line. And then looking at ethanol, we have included for your reference there, some of the market developments on Slide 11. As you know, it's been a very volatile year. But we now see that prices are on the rise again. And we do forecast a bit of additional demand in the market driven by the planned introduction of E10 in the United Kingdom and in Sweden for later this year. And then finally, on the Sugar segment, as you know, a lot depends on the global and European sugar balance here. The latest data would indicate that we're seeing of the world market a slight deficit, which is leading to a reduction in the global sugar stocks, which should provide a positive market environment also for pricing. And again, we have included here on Slide 13, sort of a reference of historical sugar prices and after some difficult years following the evolution of the sugar quota in 2017. And with declining market prices, we now see those prices on the rise again. And more closely to home in Europe, we also see that with sugar production being below sort of demand, we also see support for increasing prices. And so the 1 factor which is difficult to forecast right now is the coming sugar crop with the weather conditions becoming a little bit dry in the last few weeks. But in general, we were reasonably optimistic here, and Norbert will talk about that a bit more in detail in a moment. So that's really it for me. And so I'd like to turn it over now to Norbert Harringer. Thank you.

Thank you, Markus. Good morning, ladies and gentlemen, also from my side, a very warm welcome to our Q1 conference call. Let me now continue with an overview about raw materials production and investment in the first quarter of the current business year. Let's start with raw materials in our Fruit segment. The harvest of strawberry, the most important fruit for fruit preparations went as planned in the countries in Mediterranean climate like Morocco, Egypt, Spain and Mexico. And overall volumes were in line with the previous year. The average purchase price was significantly lower than in the prior year in Egypt and slightly lower in Morocco and in Spain. In Mexico, the foremost sourcing country, the prior year's volumes were slightly exceeded. For the strawberry harvest now underway in China, there are signs of lower raw material availability due to reduced crop production area and unfavorable weather conditions, price increases are therefore expected in China. Harvesting of another major fruit mango started in May 2020, while in India, the main production region. Production is expected to be limited due to the critical COVID-19 situation there. Prices are expected to slightly exceed the prior year's level, due in part to higher freight rates from Asia to Europe. To secure AGRANA's mango requirements, some of the fruit is being purchased in other sourcing regions such as Vietnam and Mexico. Frost in the European peach and apricot growing regions lead us to expect reduced raw material availability in the crop production countries of Italy, Greece and Spain. Based on the current crop development, average berry harvest can be assumed in Serbia, in Poland and in the Ukraine. In the first quarter of the current business year, about 100,000 tonnes of raw materials were purchased for the fruit preparations activities. In the fruit juice concentrate business for 2021 berry juice processing season that has just begun, availability of raw materials is expected to be good. For apples, the most important fruit in the juice concentrate business good availability is expected in all relevant crop production regions. Within our Starch segment, the purchasing of a feedstock for the Starch plant in Aschach here in Austria and in Pischelsdorf, from the 2020 crop is fully completed. Raw material prices in the first quarter of the current business year were significantly above budgeted levels, due to the powerful increase in international market prices. In the bioethanol activities, the grain and corn purchases for the biorefinery Pischelsdorf are largely secured until up to the new crop. At the plant in Hungary, a total of at about 1 million tonnes of corn is expected to be processed in the current business year '21, '22. Concerning potato starch for the '21 crop year contracts were concluded with about 1,300 farmers to grow 252,000 tonnes of regular and organic industrial starch potatoes, this is significantly below the prior year's amount of 281,000 tonnes. Contracts for food industry potatoes increased year-on-year to 17,600 tonnes from 17,000 tonnes in the prior year due to a higher contract volume for organic potatoes. Now ladies and gentlemen, let me come to an overview about the raw material commodity markets. World grain production in '21, '22 grain marketing yield from July to June is estimated by the International Grains Council in its forecast of the 27th of May '21 at 2.29 billion tonnes, which is about 72 million tonnes more than in the prior year, at around 5 million tonnes short of expected consumption. Wheat production is forecasted at 790 million tonnes. In the prior year, we had 774 million tonnes and the estimated consumption in '21, '22 is 787 million tonnes. And the projected production of corn is 1,194 million tonnes, estimated consumption in this period is 1,200 million tonnes. Total ending grain stocks are to ease by approximately 5 million tonnes to a new balance of 595 million tonnes. The grain production in the EU27 is estimated by about 288 million tonnes. In the prior year, we had 278 million tonnes. Of this total, the soft wheat harvest is to account for about 130 million tonnes, significantly more than the 2020 crop of 119 million tonnes. The '21 corn harvest in the European Union is expected to reach 65 million tonnes, we had in the prior year, 63 million tonnes. The computations on the Euronext Exchange in Paris rose since the beginning of March '21 on draft in Brazil and high imports by China. At the balance sheet date, the quotations were around EUR 269 per tonne for corn and EUR 214 per tonne for wheat. In the year earlier, we had EUR 167 per tonne for corn and EUR 188 per tonne for wheat, respectively. Now some comments on sugar beet. The sugar beet production area contracted with beet farmers by the AGRANA Group is just under 87,000 of hectares in the '21 crop year. In the prior year, we had about 86,000 hectares. Of this, about 2,200 hectares represents organic sugar beet. With the exception of the Czech Republic and Hungary, an area increase was achieved in all of these countries. The increase was the largest in Austria, where the contracted area actually planted to beet was expanded by about 4,500 hectares or 13% from the prior year to almost 39,000 of hectares. Planting of the beet, which was delayed for weather reasons, began from early March and except in Romania was completed by mid of April. Cold nights at the beginning of April with temperatures as low as minus 10 degrees centigrade caused frost damage and consequently led to the turning under of around 6,000 hectares of beet fields, mainly in Slovakia, in Hungary and in Austria. Almost all of this acreage was replanted to beet. In addition to the frost damage, a further approximately 500 hectares was turned under because of animal pests, around 50% of it in Austria. The persistently cool and rainy weather, the deployment of 144,000 pheromone traps and the effect of the neonicotinoid seeds dressing very sharply restricted the activity of the beet weevil. Thus, in 2021, only 160 hectares of beet fields had to be turned under due to the weevil infestation. The AGRANA Group's current area under sugar beet is about 85,800 hectares, including around 38,000 hectares in Austria. Rainfall has been good in all countries. Currently, the growth of the beet stocks is about 7 to 10 days behind the 10 years average. And optimal weather conditions, this delay can be made up if there is continuing sufficient precipitation and moderate summer heat. While maintenance work and investment projects are being implemented at the beet sugar factories, raw sugar has been refined at the raw sugar refinery in Buzau, Romania since the middle of March. And raw sugar campaign is also run at the refinery in Bosnia since mid of June. At our plant in Tulln, Austria the molasses desugarization facility is operated year-round and crystallized betaine is also produced. Ladies and gentlemen, let me now come to my report about our main investments of the current business year. In the first quarter of the 2021, '22 financial year, AGRANA invested at about EUR 14.3 million or EUR 3.2 million more than in the year earlier cooperative period. In addition to the regular projects for product quality improvement, asset replacement and maintenance across all production sites, the following individual investments are above fee of note. In the Fruit segment, a new filling line in Mitry, in France and an application and new product development laboratory in Dachang, in China. In our Starch segment, we invested into measures to increase specialty corn processing in our corn starch factory in Aschach, in Austria, and in efficiency improvements to the spray drying towers in Gmünd and upgrading of the drum drying plant for the production of potato flakes also in Gmünd and the expansion of the company wastewater treatment plant in our factory in Gmünd. In the Sugar segment, our main investment is the conversion of the boiler plant at our site in Sered', in Slovakia from coal to natural gas. Additionally, in the first quarter of the current business year, EUR 3.1 million were invested in the equity accounted joint ventures, HUNGRANA, STUDEN and Beta Pura GmbH. As an outlook for the whole business here, the total investment across the 3 business segments will be at approximately EUR 90 million. This is significantly below the budgeted depreciation of about EUR 121 million. We are continuing our implementation phase after completion of major projects and capacity expansion in the recent years. Ladies and gentlemen, let me now hand over to Stephan Büttner for his financial overview.

Yes. Thank you very much, Norbert. So let's start with the financials. So with an overview of the revenues by segment. So overall, we had an increase of 8.2%, up to EUR 705.8 million in revenues in the group. The Fruit segment showed an increase by 5.6%. This is -- the split there in the fruit preparations business, we had an increase of nearly EUR 19 million or a plus of 7.7% up to EUR 265.7 million worth in juice. In the juice business, in the juice concentrate business, we had a decline of minus 3.6% or minus EUR 2 million. In starch, we had an increase from EUR 204.4 million by 14.8%, up to EUR 234.6 million revenues. This was mainly driven by volume increases in the native starches, especially in wheat starch and potato starch, but also volume increase in the saccharification product. When it comes to ethanol, we saw a price increase of about 8% and also volume increase compared to the first quarter in the prior year. Sugar, the revenues remained more or less stable. We had an increase of 4.2% but this was mainly driven by an increase in higher sales of beet seeds and other agricultural products. When we look at the EBIT development, it was already mentioned in the group overview that we had a decline from EUR 32 million in the first quarter of the prior year, down to EUR 20.9 million. This is a decrease of 34.7%. So again, when we look at the different segments, so we had more or less a stable result in the Fruit segment. So there, we had a positive contribution from the fruit preparations business of nearly EUR 3 million, but the negative contribution in the juice business of also minus EUR 3 million, therefore, a stable result in the total segment, improved the EBIT amounted to EUR 16.9 million and in juice to minus EUR 1 million. Also here in fruit, we had an increase of 19.5%. In native starches, we saw a significant price decrease despite -- this was a negative impact in the weak starch sales and EBIT contribution, especially due to a significant price decrease, but also in the potato starch. As I already mentioned, we had a positive contribution also on the EBIT level from ethanol by EUR 2.5 million and the starch business showed a significant decline in EBIT contribution. This is mainly due to lower sales prices in combination with significantly increased raw material prices, especially in wheat and corn. In sugar, we also had a significant decrease on the EBIT level. This is mainly due to production -- sales production -- sorry, sales volume reduction of around 5%. And also we started into the business here with higher inventory prices, and this is mainly due to the lower utilization rate in our factories, mainly due to the lower supply of sugar beets in the last sugar beet campaign. So now let's jump to the consolidated income statement. Here again, the revenues of EUR 705.8 million, resulting in an EBIT of EUR 20.9 million. EBIT margin amounted to 3% this resulting in a profit for the period after taxes of 12.1%, also here, a significant decline of minus 37%. When we look at the financial items, so we had a significant improvement of the result. This is mainly driven by the currency translation differences due to let's say, more stable development of the foreign currencies, also the other financial items improved from minus EUR 1.2 million to minus EUR 0.7 million. The tax rate shows a higher value of 29.2%. There is nothing special in it. This is mainly due to the regional split of the profits before tax and then with the application of the respective regional tax rates. The consolidated cash flow statement here, we also see a decrease in the operating cash flow before change in working capital, down to EUR 44.5 million, mainly driven by the decline in the EBIT. Also, we had changes of EUR 97.9 million negative changes in the working capital. Also there is a significant increase versus the development of the first call in the prior year so that we ended up with a net cash from operating activities of minus EUR 60.5 million. And also, of course, a significant negative free cash flow in the first quarter. The consolidated balance sheet shows more or less no significant deviations or changes. So we end up with total assets of EUR 2,481 million. The equity amounted to EUR 1,353.3 million, is a plus of 1.8%, of course, mainly coming from the profit after tax. The ratio is -- the equity ratio stable with 54.5%, net debt, an increase up 525.6% mainly driven by the negative reflection and this resulting in the gearing of 38.8%. So let's come to the 34th Annual General Meeting, where also the decision was made on the dividend payout in the amount of EUR 0.85 per share for the 2021 financial year. So this was, of course, accepted by the general assembly. And therefore, already, I think, in the last 2 days, we had a payout of the dividend according to the assembly. So let's come to the outlook for '21, '22. So our outlook, our guidance for the financial year remains still valid. So we are expecting a significant increase on the EBIT level, and also a moderate increase in revenues for the whole business year. When it comes to the EBIT in the second quarter of '21, '22, we expect more or less currently an EBIT at the level of the first quarter of the business year '21, '22. When we look at the segments at the different segments, also here our guidance and our outlook is still valid. So in Fruit, a moderate increase in revenues and a significant increase in EBIT. This should be mainly driven by, hopefully, a recovery of the juice business in the second half of the year when the new apple processing campaign starts. In Starch, we expect a moderate increase in revenues but a significant decrease in EBIT, mainly driven by the higher raw material prices. And let's say, the temporary difficulties to pass this on to our clients. And in Sugar, we expect a significant increase in revenue and in EBIT also here mainly due to the recovery, the expected higher utilization rate of our factories during the next sugar marketing campaign and this in combination with at least the wholesale prices. Thank you.

Yes. Thank you to the Management Board. On Slide 35, you can find our next publication date. I just wanted to inform you that during the summer months, we will prepare the financial calendar for the next business year. We will now go on with the Q&A session.

[Operator Instructions] The first question comes from the line of Bernd Maurer with RBI.

Welcome Mr. Muhleisen, happy to listen to your remarks. Three questions from my side, if I may, to start. First, regarding the Sugar segment. Although guiding still quite then in Q2, your outlook for second half must be very good. You also referred to the good harvest and so on. Would you see it possible that the segment turn breakeven or even slightly positive for the full year? Or would you see that after Q1 with minus EUR 6 million EBIT and the Q2, you already and you should know quite well a breakeven more -- even slightly positive result should be out of reach? That's point one. Question number 2 is, just a clarification from my side. I would assume and we talked about in 1 of the last conference calls that this full year guidance is also -- can also be seen that the substantial EBIT increase is expected from an adjusted level of last year's EBIT, meaning adjusted for about EUR 11 million, EUR 12 million extraordinary results? Just want to clarify this again. And the third is a more general question to Mr. Muhleisen. You referred to Johann now in getting started, overview having a lot of ideas for the transformation of AGRANA. Is there something scheduled like a new vision, mission capital market strategy, whatever, is there any date or a time frame where you say that we want to announce something? Or is it rather a gradual development expected these other big events, so to say.

Thank you, Mr. Maurer for your question. So let me first answer the first 2 questions. So I think the first question was concerning the Sugar segment. So you were referring to the EBIT development of the first quarter and when we guide also this second quarter to be quite a challenge. Of course, we understand this question concerning the potential breakeven for the whole segment. So yes, as I already mentioned, so we are expecting a much better utilization rate of our capacities. As you might remember, we had idle costs in the last year, again, of nearly EUR 14 million. So hopefully, this will not happen this year and thus leading also to favor cost of goods sold. On 1 hand, on the other hand, we are also expecting at least a slight increase of our sales prices. So in these 2 factors should help us to have a much better performance in the second half of the year. And hopefully, then we will be able to compensate the negative result in the first half of the year. But what we also have to mention is that there are also quite -- some quite big challenges ahead of us, especially when we look at the increase in energy prices. So second question was you asked, I think if we would also stick to a guidance, which would mean a significant improvement in our -- on our EBIT level compared to the whole year's performance of the prior year, let's say, before extraordinary expenses. And currently, we would also confirm that we also against this basis, we expect an increase -- a significant increase of our EBIT, which means at least a part of 10%. Now I hand over to Markus Muhleisen.

Thank you, Stephan, and thank you, Maurer, for your question, and thanks for your kind remarks welcoming me to the group here. Look, on transformation, what I will say is, obviously, this is still very much early days. And so it will take us some time. I will also say that, as I mentioned, that our full focus right now is on delivering the current fiscal year. We cannot forget with all the easing of the restrictions that the corona pandemic is not over. What we hear from our clients, from our customers, but we also hear from our partners is that there's a lot of uncertainty. And so that needs to be our first focus is ensuring a strong delivery in the current fiscal year. And then we won't be working behind the scenes as to -- on our strategic agenda. We don't have a specific time line. We don't have a specific plan yet. But as soon as we have something, we will share it with you. Thank you.

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

I would have basically 3 questions. First one would be rather a technical 1 related to your working capital changes in first quarter and particularly growth in trading receivables. Could you maybe elaborate a little bit more what was behind it? And what do you target in terms of working capital development in the rest of the year? Then next question would be related to the Sugar segment, what is the sales mix for the Sugar segment? How big is the portion of retail first Q this year, first Q last year? And what are the anticipated developments in this respect? And third 1 would be broader one, maybe linked also to the strategy. M&A activities, are you planning to be active? If yes, which segments you are -- which companies you are looking at what would be your criteria for possible acquisitions?

Yes. Thank you for your questions. So first, the working capital change in the first quarter. So when you compare it to the changes in the first quarter of the prior year, we have a significant increase, let's say, and this is quite easy to answer. So we had a significant increase in purchasing volumes of raw sugar, for our refining activities in these amounts up to EUR 30 million. So the rest is, I would say, the normal course of the business, where we always in the first quarter, have an increase in the working capital in this position, especially in the receivables position compared to the balance sheet date. The second question is sales mix. You know that we traditionally have quite a good split, let's say, when it comes to industrial sales volumes and retail sales volumes. So it's around, I would say, 45% is retail sales volume. This is quite stable. In the last business year, we had a significant increase also due to the corona pandemic, I would say, and also due to the consumer habits that the food service channels, the restaurants, all these things were closed. And therefore, we had an increase in our retail business, which was also favorable to our overall volume sales. I would say that our target in the coming periods or, let's say, years mid-term is, of course, to further increase our retail volumes and maybe to come to an equal split between industrial sales and retail volumes.

Thank you. And Mr. Urbankova, thank you for your question on strategy. Look, I think the key here is, I think we first want to take the step back to review the strategy, take our time to clarify the focus areas. Then in the second step, ask ourselves the question, what can we do organically and -- but also consider M&A. I think it's always on our table and I'll tell you that if opportunities come along, I mean, our door is always open, but the first piece right now is to clarify the strategy. Thank you.

At this time, there are no further questions. I hand back to Hannes Haider for closing comments.

Thank you. As there are no more questions, I wish you a nice remaining day, a nice summer time and stay healthy. Goodbye.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.