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

Yes. Good morning, ladies and gentlemen, and welcome to AGRANA's conference call presenting our annual results for 2022-'23 financial year. You already got some insights in our figures when we published 2 talk announcements on the 27th of March and on the 28th of April. Today, we will provide you with more details on all segments and the audited financial statements. As announced in our invitation, presentation is available in reference to our call. You can find this presentation in the IR section of our website. With us today are 3 out of 4 members of the management Board. Markus Muhleisen, CEO of the group, will start the presentation with an overview on the highlights of the last financial year. He will also comment on the market environment in the 3 segments. CTO, Norbert Harringer, will afterwards present to you the group's ESG activities. He will also tell you what is going on in the group regarding raw materials, production and investment. And finally, our CFO, Stephan Buttner, will report on the audited financial statements in detail, and we will also conclude with an outlook for the current '23-'24 financial year. The presentation will take about 35 minutes. And afterwards, the management board will be glad to answer your questions. And now, I may pass over to our CEO, Markus, who will start with the presentation.

Thank you, Hannes, and good morning to everyone. Today, we present our results for the past fiscal year, but let me start off with a bit more strategic view here if you turn to Slide 2 of the presentation deck. I want to reiterate a point that we discussed about a year ago which is that we're on our path to writing the next chapter in the history of AGRANA. AGRANA is a strong, innovative and well-positioned company with lots of potential. We're working very hard on that, focusing on 5 priorities, driving greater customer and market orientation, leveraging the synergies and the innovation potential within AGRANA to provide more of value-added products to our customers, delivering the organizational change necessary to make us relevant in the future to focus on driving those higher margin parts of our business for more profitable growth but also doing business sustainably. Those are 5 strategic priorities that we've been working on. And if you turn to Slide 3, we will talk more about our strategic direction and of our plans for the upcoming years at our annual meeting, and we invite you in to join us there. Now moving to Slide #4. Let's talk about the past year though. '22-'23 was a year, of course, marked by different multiple crisis, high volatility, many, many challenges on many fronts. But despite these many challenges, we have delivered very strong operational results, which you see in our numbers. Our diversified, sustainable business model really came to the forefront in these turbulent times. But our teams have done also a great job in managing through these multiple challenges and I just want to point out that this is not taken for granted also by our customers. In many conversations I've had with our customers, it's become clear that they really value the ability of AGRANA to deliver day in, day out even when times are tough. And it is something that does differentiate us from many other competitors in the marketplace. We're also proud of the fact that when you look at our '22-'23 results, they were actually driven by all of our segments and divisions. I do want to highlight a turnaround in the Sugar segment. As you know, we've had a number of challenging years now since the liberalization of the EU sugar market in 2017. But in the past year, we are able to return the segment to profits. And of course, a more favorable pricing environment helped, but it's also been the result of really hard work, restructuring the business, taking cost out and making sure that we are phasing into the challenges of this business, and that's been reflected in the numbers. We've also seen great performance in the other divisions and segments, and Stephan will comment on that a bit more. But we've also been, as I mentioned, working hard on our strategic agenda. And one of the focus areas, of course, has been doing business sustainably. And so, we're very proud of the fact that we not only completed our greenhouse gas footprint assessment for Scope 1, 2 and 3 last year, but we also submitted our climate action plans and our plans to get to net-zero to SBTi in the fall, Norbert will comment on that a bit more in a moment. Now looking forward, we do see the good development in our business continuing in '23 and '24. But we also do see market volatility continuing. So it will require us to continue to remain very agile and continue the strong execution that you've seen in our '22-'23 numbers. If we turn to Page 5, Slide 5. Here are some of the highlights and Stephan will go into this a bit more in detail, but you can see our top line was up 25% to EUR 3.6 billion. Our operating profit was up over 80% to EUR 158 million. Our operating margin improved by 140 basis points to 4.4%. Our EBIT, which, of course, was impacted by the write-downs we had to make in the Fruit segment still was up over 2.5x to EUR 88 million and also our earnings per share obviously, over a loss in the prior year to EUR 0.25 share. As a result, we have now recommended to the Board and to the general assembly that will happen in July to pay EUR 0.90 dividends per year. And as you know, we have a policy of consistent dividend earnings, and you see that reflected in the number. A couple of comments on the market environment. We turn to Page 6 and 7. In the Fruit segment, we do see on the one side, some of the bigger players struggling a bit now and as consumers turn to cheaper private label products. Now for AGRANA as we're serving all players in the market, it's not really affecting our volumes that much, but clearly, we're trying to figure out how to help the bigger players to continue to drive growth and innovation in our juice segment, juice division, we see continued good demand for our products, allowing us to achieve better margins than in prior years. And we also see more demand for our added value products. In Starch, quite a mixed picture in general with different customers being challenged, obviously, by a very tough market environment with high raw material costs and energy costs which is making life difficult for everyone. We do see that a lot of discussions around pricing and one of the things that we've been able to do, I think, quite well navigating through this tough environment is to work very closely with our customers on good price management and we do see that, that is being recognized. And then in the sugar, as I mentioned, we've been able to turn around the segment. It's been -- the market environment has helped us there. We have seen a bit of an influx of sugar out of the Ukraine, but in the past year, it was not at a level, which significantly distorted the market. We'll have to monitor it, how it goes this year. There are some predictions that there will be more sugar coming in from the Ukraine this year, but we'll have to monitor that. But in general, we do see a good pricing levels in the sugar market with the European sugar market more or less balanced between supply and demand. The subsequent slides in the presentation are more for your reference, I'm going to skip over it and turn over now to Norbert to talk about our ESG focus.

Thank you, Markus. Ladies and gentlemen, also from my side, a very warm welcome to our today's conference call. Let me begin with our focus on ESG. In July 2021, AGRANA joined the science-based targets initiative. Within these initiatives, companies commit to setting emission reduction targets in line with the Paris climate agreement. In November 2022, our group submitted its science-based targets to the SBTi for validation. The process of validating these targets will start at the end of this May 2023. Under the science-based targets submitted, AGRANA commits to reducing emissions from its production operations that means Scope 1 and Scope 2 by 50% by 2030, 2031 relative to our base year 2019/'20. And lowering emissions from the upstream and downstream value chain that means scope-free emissions by about 34% over the same period. The company's long-term goal is to be able to report net-zero emissions in its own production activities, Scope 1 and Scope 2 by 2040 and net-zero emissions across the entire value chain by 2050 at the latest. Coming now to operations. Ladies and gentlemen, AGRANA processed 8.6 million tonnes of agricultural raw materials in the last fiscal year. As you can see on Page 14, 4.7 million tonnes of beets and around 340 tonnes of raw cane sugar were processed with raw materials in the Sugar segment. In the Starch segment, our plants processed 2.5 million tonnes of corn and wheat and around 240,000 tonnes of potatoes. Of the 900,000 tonnes of fruit processed in the Fruit segment, a very large proportion was apple which is the main input material for fruit juice concentrate production, while strawberry accounts for the majority of fruit preparation production with a total of around 70 different fruits being processed in this business line. In the last business year, about 343,000 tonnes of raw materials were purchased for the fruit preparation activities. The volatile market setting for commodities and the fact that the global trend in freight costs for the full year was still rising drove an average increase of about 20% year-on-year in raw material costs for fruit and ingredients. There were increases in purchasing prices across all fruit categories as well as for sugar and starches used. AGRANA thought to pass these higher input costs on via adjusted contracts with customers. The group's global requirement of 55,000 tonnes of strawberry, the most important fruit by volume in the fruit preparation business was contracted at significantly higher prices than in the year before due to largely to higher production costs on the supplier side. In the fruit juice concentrate business, the 2022 apple harvest was characterized a very good raw material availability in the Polish growing regions. The high apple plants that is harvested there largely made up for lower availability of apples in Hungary, Romania and in China. At the Ukrainian side as well, the apple processing volume reached 90% of normal despite the difficult circumstances. There was also good availability of red berries. In the 2022-2023 campaign, the potato starch factory in Gmünd, in Austria, processed about 217,000 tonnes of starch potato compared to the prior year period 274,000 tonnes. At the 2 Austrian locations, a total of about 1.4 million tonnes of corn and other cereals was processed in the financial year. In '22-'23, the HUNGRANA facility in Hungary was not able to duplicate its grinding volume of the year before. The plant in Romania processed more specialty corn and less yellow corn than in the previous year. On Page 16, now a step to the commodity markets. Grain futures prices were marked by strong volatility throughout the financial year, buffered by war-driven turmoil and unfavorable weather conditions. Quotation for corn and wheat on the market commodity derivative exchange initially rose sharply in the first month of the financial year following the outbreak of the war in Ukraine. Since summer 2022, a falling trend could be seen. The price declines on the exchange were caused by lower demand and absence of further escalations of the war and agreed export corridors from Ukraine and large harvests in important production regions. At the balance sheet date of 28th of February in this year on [ Euronext, ] Paris, wheat brought at EUR 274 per tonne and corn was at EUR 279 per tonne. So now some comments on our investments. In all segments, we focused on energy efficiency and plant modernization. And the fruit and starch segments also invested in capacity expansion. The key projects in the individual business were in the fruit segment, the acquisition of new stainless steel containers for asset replacement and capacity expansion in our factory in Mitry-Mory in France. The installation of new facilities of product diversification, the so-called brown flavors in Jacona in Mexico and the completion of the application laboratory in Dachang in our factory in China. In the Starch segment, we completed the measures to increase specialty corn processing in Aschach in Austria; the expansion of the company wastewater treatment plants in Aschach and in Gmünd and enhancing the flexibility regarding the energy sources used in order to safeguard production at all of our sites. In the Sugar segment, we did replacement of evaporators in Sered, in Slovakia. To reduce energy consumption, we did a renewal of the evaporation station in Opava in the Czech Republic to Save Energy and the conversion of our packaging lines and plants in Buzau, in Romania. Ladies and gentlemen, as an industrial process of raw materials, our group has no high priority than safeguarding the continuity of supply to our customers and ensuring the energy and processing security that this requires. This is why with a view to the dependence on Russian gas, we started planning as early as March 2022, how to maintain our energy supplies, especially during the energy-intensive campaigns and thus assure security of processing in the production plants. The solution we chose was to use extra light heating oil alongside natural gas. This requires the conversion of systems in the relevant sugar and starch factories and ultimately worked well. Coming now to Slide 20. Our investment plan foresees a total investment in the new business year across the 3 business segments at approximately EUR 150 million. It significantly exceeds both the last year's value and this year's budgeted depreciation of about EUR 120 million. Approximately 16% of the capital expenditure will be for emission reduction measures in the group's own production operations under the AGRANA climate strategy. On Slide 21, the bar chart is just a reminder what happened in the group on CapEx level in the last 13 years. We had heavy investments between 2010 and 2019, of around EUR 1.2 billion. Then with the outbreak of the COVID-19 pandemic, investment was reduced below depreciation level for 3 years in a row. With the new business year, we started again to invest significantly more than in the recent years also in terms of reaching our sustainability goals. Ladies and gentlemen, let me now hand over to Stephan Buttner.

Thank you. So also welcome, ladies and gentlemen. We start with the revenue overview. So already mentioned, we had an increase in total revenue of 25.4%, up to EUR 3.6 billion in the last business year. So this was driven by all segments. So as you can see, in fruit, we had an increase of 18.4% up to EUR 1.48 billion revenue. This was mainly driven by price increases in the food preparations business, we had a slight decrease in sales volume by around 5% in the juice business. We had an increase in sales volumes, especially in the berry juice concentrate with also apple juice concentrate and also a slight increase in our added value business, the juice compounds but also there in all areas, price increases. In Starch, also an increase of 28% on the revenue side, so up to EUR 1.3 billion total revenue. Also here mainly price-driven, in the main products we had a decrease in sales volume of around 10%. In sugar, also a significant increase in revenue of 34.6%, up to EUR 860 million revenue. And here, this was also driven by price increases with a slight decrease in sales volume of around 2% of sugar at around 1 million tonne sales volume in total. EBIT, so you can see that overall, we had a total EBITDA of EUR 88.3 million, a very significant increase versus prior year, where we had EUR 24.7 million. So main drivers here in starch, we had EUR 80.2 million, EBIT with an EBIT margin of 6.2%. As already mentioned, price increases and therefore, also margin increases were the main factors here in starch. In sugar, this is a big turnaround, so we could realize a EBIT of EUR 46.6 million in the segment sugar. So this is a significant improvement there and overall, an EBIT margin of 5.4%. And in fruit on operative level, the operative result was comparable with the last year of a little bit more than EUR 50 million. Here, the -- let's say, the lower results in the food preparations business were compensated more or less by the better results in the fruit juice concentrate business. So -- and what we also had to take into account of the write-off of the goodwill for the impairment of around EUR 90 million. And therefore, we had overall a negative EBIT in the fruit segment of minus EUR 38.5 million. When we look at the consolidated income statement, again here as a summary, revenue of EUR 3.6 billion. EBITDA, EUR 277.1 million, 34.1% increase versus prior year. So therefore, quite a good operating profit of EUR 158.4 million, also a very significant increase of 83.1%. Exceptional items, mainly here driven by the write-off of goodwill. So the impairments and therefore, the EBIT with the EUR 88.3 million. EBIT margin, 2.4%. And net financial items amounted to minus EUR 26.5 million. So there were around EUR 10 million more than in the prior year. This was driven by FX effect on one hand, and on the other hand, higher interest expenses driven by higher gross financial debts as well as a higher average interest rate. The profit for the period after tax EUR 24.7 million, there we had a loss in the prior year, so also a very significant improvement in the earnings per share of EUR 0.25. Exceptional items once again here, so you see in the Fruit segment, the EUR 91.1 million write-down. And the slight positive effect in the concentrate business so that we had a release of a provision which was built in the prior year due to the war -- the outbreak of the war in Ukraine, so mainly let's say, about receivables, which we were assuming that they will not be paid, but which did not happen. Finally, so we could release this provision. And so, this is the overview. Next is the goodwill impairment again. So this was driven by 2 factors. On one hand, we had to adjust our expectations due to the risk factors coming out of the Ukrainian war, in the fruit preparations business, especially on the other hand, we had a significant increase of the weighted average capital cost. So we had to write down the goodwill at the first -- at the end of the first half year '22-'23. This was the impairment, so -- and more or less the exceptional items. Energy costs saw a significant increase of more than 66% versus prior year, up to EUR 357 million. So mainly impacted here the sugar's business and the starch business, very energy-intensive businesses. Also, of course, EUR 10 million up in the Fruit segment, saw a significant increase. And on the right-hand side, you can see the energy mix. So our main factors, input factors here is natural gas on one hand and electricity on the other hand. The net financial items, minus EUR 26.5 million. I already commented on that. So then move on to the tax rate. You see tax rate reported 60%. Of course, this is a very high percentage and mainly due to the write-off of the goodwill of EUR 90 million. When you look at the adjusted tax rate, then we have a comparable tax rate with the prior year on an adjusted basis of 25.9%. Main drivers here, of course, the goodwill impairment of EUR 88.3 million and the result coming from the equity joint [indiscernible] companies, which are not taxable and therefore, the adjusted tax rate is 25.9%. The cash flow statement on a consolidated basis. So we see a very good operating cash flow before changes in working capital of EUR 282.3 million, going up 36.2% versus prior year. Then of course, the changes in working capital with a very heavy impact on the net cash from operating activities with minus EUR 259.2 million. So therefore, the net cash from operating activities resulted in EUR 1.9 million. And after our activities -- investing activities, we end up with a negative free cash flow of minus EUR 87.1 million. But as already mentioned, this is mainly driven by the changes in working capital. And therefore, we look at this as a temporary issue. The consolidated balance sheet also an increase of 13.6% in total assets, up to EUR 3 billion. Leading also to the KPIs equity ratio 41.8% still solid, but of course, going down by 6.7% versus prior year, driven on one hand by the write-off of the goodwill of EUR 90 million. And on the other hand, by the increase of the total assets. The net debt amounting to EUR 684.9 million, also a significant increase of around 30% mainly driven by higher raw material and energy prices and therefore, resulting in higher inventories in the working capital. Therefore, the gearing with the 54.5%, of course, an increase of 13%. I would say, still in an acceptable range. But of course, we also need to focus on that in the short-term future to bring the ratio down. The dividend proposal already mentioned, so we will propose dividend payout in the amount of EUR 0.90 per share for the '22-'23 financial year. So as already mentioned -- I mean we are committed to a stable dividend payout as AGRANA and we are convinced that the overall result and also the cash flow justify this dividend payout. On the next page, you can see our earnings per share on an adjusted level with EUR 1.69 per share. And if we take this EUR 0.90 per share, then it's a little bit more than 50% payout for the last business year. So then finally, let's come to the financial outlook. So as we already published. So we expect on EBIT level, a very significant increase versus the business year '22-'23 which means more than 50% increase on the revenue level, we expect a significant increase, which means at least a little bit more than 10%. When we have a look at the different segments, then in fruit, moderate increase in revenue and a very significant increase on EBIT level. Starch, also here an increase in revenue, but a decrease on EBIT level and in sugar, significant increase in revenue and on EBIT level. The outlook for Q1. So in Q1 last year, we reported an EBIT of EUR 51.6 million and our guidance for the Q1 '22 -- '23-'24, sorry, is a significant increase which means at least plus 10%. So thank you, ladies and gentlemen, and I hand over to Mr. Haider for the financial calendar.

Before we go on with the Q&A session, I just wanted to remind you that today in the morning, we published our annual result -- annual report. And we would like to invite you also to visit our digital report on reports.agrana.com. Having a quick look on the financial calendar. I just wanted to highlight that our Annual General Meeting will take place on the 17th of July. And as the CEO mentioned, during this event, also the new -- the core elements of the new strategy will be presented. We will now start with the Q&A session.

[Operator Instructions] Our first question comes from the line of Anton Brink with Antaurus.

I will have 3 questions. First question would be -- could you help us a bit in understanding the financial guidance? Because obviously, given the significant goodwill impairment, EBIT is a difficult metric to understand year-over-year operational performance. Then secondly, I would have a question on your guidance. for the next fiscal year, specifically when we speak about the sugar segment. Well, as mentioned also in this call, the European sugar dynamics appear to be highly favorable for producers and in the context of a deficit situation, European spot prices reaching, I think, EUR 1,200 per tonne levels nowadays. So implicitly, yes, what to expect from sugar and on an operating profit basis? And then lastly, I would like to understand the Q1 guidance a bit better. How to think of the different segments on an operating profit basis. Thank you.

Yes. Thank you very much for the questions. So first of all, I fully understand your question regarding the financial guidance for the full business year '23-'24. I mean it's correct that we had this write-off or this exceptional result of nearly EUR 90 million in the business year '22-'23. And if we take this out, of course, then it's -- yes, if we say more than 50% increase, this means plus EUR 45 million. So on EBIT level, when we look at the operative performance, we had an operating result of EUR 158 million. But as you know, we are not guiding operative results. But of course, we have a qualitative guidance, which means if we talk about significant increase, then we talk at a range of plus 10% to 50% versus prior year. If we stay very significant, it's more than 50% plus. So on EBIT level, of course, we are committed to the more of 50% plus if we talk about operative results, then it's more likely to be in the range of plus 10% to plus 50%. I think then the second question was concerning the sugar business. As you saw, we could manage to get this turnaround in the prior year, of course, driven by favorable sales prices. The sales prices from our perspective are quite stable so far. So our expectation in terms of processing volumes is also better. The outlook is better than the prior year, which would mean that we have a better -- should have a better utilization rate of our factories. But of course, there are still some factors which can have an influence on that like the weather and then other things. So -- but overall, we think that this is a positive factor. On the other hand, we also saw energy prices are a bit coming down. So -- and then maybe with stable sales prices and the good production volume, we expect further improvement of our profitability. But of course, the uncertainty always comes with the second half of the business year because there is new sugar marketing year is starting, so we cannot be sure how prices will develop for the new sugar marketing year. On one hand, this is a question also of supply and demand. What will be the production volume, what will happen on the world market, so many factors of uncertainty, but for the first half of the business year, we are very confident that we will be able to keep our profitability of the last month in sugar. And this leads me already then to your final question, with the Q1 guidance. So in total, the Q1 in the last business year was already a quite good performance, but we are -- our guidance is already, of course, based on the first 1 or 2 months of the actual business year. So therefore, we have a quite good view on that. And what I can say so far is that in all the segments, we have a better performance than in the first 1 or 2 months prior year. And therefore, also, we expect this for the Q1 in total. So as I already mentioned, if we say significantly better, then we talk about at least plus 10%. And our expectation is that it will not significantly exceed this plus 10%.

And if we -- I mean if we do a bit of a deep dive into the sugar segment year-over-year because you did EUR 12 million EBIT in Q4 there. I know that fixed cost coverage is always quite difficult in Q4. As you mentioned, energy prices have come down and sales prices have -- or should have risen quite a bit. So basically, if I give you a ballpark figure of EUR 40 million sugar EBIT in first quarter? Is it completely off? Or could that be realistic in the context of the dynamics that I mentioned.

No, this is from our current expectation completely off -- Let's talk about not even half of this.

Not even half of that.

For the first quarter, only sugar.

Yes. Okay.

For sure, not. I mean this is -- our volumes are not that big. So we go for, on a normalized basis, around 90,000 tonnes sales volume per month, yes. But what we also need to see is that, of course, there is a slowdown on the sales volume side, so we are lagging behind these budgeted volumes. So therefore, we will have a negative impact on the volume side in the first quarter. This is what we already can say. On the other hand, of course, sales prices are stable. And therefore, we expect a good result, but as already mentioned, not to this extent or amount that you mentioned here.

The next question comes from the line of Vladimira Urbankova with Erste Bank.

Yes. So I would have a few questions that are general ones. One would be related to your energy costs. We have seen energy prices [indiscernible]. What is then your estimate for the full year '23-'24 in terms of energy cost. And also in terms of the energy mix, if we should anticipate some more changes. Do you use any hedging by the way? And then the next question would be also related to inflationary pressures in the area of personnel costs. If you could share with us how much you think personnel costs will increase for the fiscal year '23-'24. And yes, then maybe also a little bit if you could spend more on the first Q '23-'24 guidance, various 3 major tailwinds and major headwinds. If you could little bit elaborate what is about the performance segment.

Thank you, Mrs. Urbankova sorry. Maybe then you can repeat your second question. I didn't really get it, but let's start with your first question. I think it was about the energy cost. So we reported for the last business year, total cost of, I think, EUR 357 million. Now we have 2 factors. On one hand, it's a matter of consumption that we have. So if we process more volume, for example, in sugar, then we, of course, have higher energy consumption and, therefore, also higher energy cost in total, yes. So this might be one factor. On the other hand, we are let's say, somehow convinced that we already saw the peak in energy prices from our perspective. So we already saw that the prices were coming down in the recent weeks in gas as well as in electricity. So of course, we hedged already a certain percentage of around 70%. With the other volumes, we are still in the spot market, so we can benefit from that. Therefore, we can already say that we are quite safe with our -- yes, with the energy prices for the actual business year, which also means for the campaigns, I mean, we also bought heating oil for our campaigns, for example, in sugar. So there we are safe on one hand from the supply side, but also price-wise. So I personally expect a further increase in total energy costs of around -- so between 5% to 10% for the business year '23-'24 compared with '22-'23? So the second question, sorry, maybe you can repeat this.

Yes. If you expect any changes in the energy mix.

Yes. We -- of course, I mean, we will see a little bit shift from gas to heating oil, yes. So which means that we will go down from gas with a percentage of -- with a share of 50% down -- 58% down to 50% and heating oil will then amount to 8%, where we had only 1% in the previous business year, so there is a shift. Other factors are stable. So we have 12% -- we expect 12% in electricity where we had 10% in the prior year. Okay?

Okay, okay. Then, there was a personnel cost issue, if you can maybe share a bit more information about it.

What? Sorry, I didn't understand it, sorry?

Personnel cost issue, if you can share a bit more about the personnel cost increase in fiscal year '23-'24.

Yes, sorry, sorry. Yes, I mean, well, you are completely right. I mean this is a very important factor that we have -- to have an eye on, yes. So inflation, of course, is a very important factor. So of course, we also expect a significant increase in personnel costs for the actual business year and also here would expect an increase between 5% and 10% in total. So this is something we need to manage in the future in light of potentially prices, sales prices are coming down again, then we need to be very careful that we will be able also in the future to pass these increased costs on to the market.

Next question comes from the line of [ Oliver Schatz with ] [indiscernible]

Good morning, gentlemen. Congratulations to the good results. I also have a couple of questions, please. Firstly, in regards to CapEx investments, you fleshed out that 16% of the coming 2023-2024 CapEx is for the ESG measures. Can you flesh out what the remaining 86% are for? And secondly, based on the chart you provided in your presentation, is that basically the start of another super cycle of investments above depreciation for the next, I don't know, 5 to 10 years. Or is that, let's say, a more compressed period of time that you might be willing to invest above your depreciation levels depending obviously on the performance of your businesses? That would be my first question. Second, just to chime in on hedging. You basically just said that 70% of energy requirements are already hedged. Could you do the same fleet for raw materials, especially for the grain part of the business? And last but not least, I'd like to implore on the financial result in 2023-2024. What movements are to be expected there?

Okay. For first question, investment besides our investments into Climate Strategy we will do in this year for a major part, an investment in our wastewater treatment plants all over the world. Renewing these plants, getting the chance to produce biogas out of the remaining matter. For instance, we will do a renewal of several parts in our factories, which getting old and have to be renewed. And we will do some maintenance investments also all over the world. That means, no. To answer your second question, no, we do not intend to make a new super cycle investments. We will do according to our new strategy, several investments in the expansion of very specific parts of our production facilities.

So sorry, the final question from your side was about the financial results for '23-'24. So I would expect a further, let's say, increase of the net financial result of I would say also between 5% to 10%. So we had EUR 26 million -- EUR 26.5 million in '22-'23, so up 5% to 10%.

And can you give, let's say, a percentage of raw materials hedge?

Our hedging in raw materials, the percentage nowadays will be between 15% to 20% mostly in the Starch segment. Yes, grain only, wheat and Corn.

Next question comes from [ Sebastian Marti with ] [indiscernible] Bank International.

Hello, everyone. First of all, thanks for the question. Unfortunately, I have got returned to the queue twice, please apologize if the question has already been answered. The first one is regarding the sugar price developments. What were the main drivers from your point of view? And do you regard the levels are sustainable. And furthermore, what sugar price do you assume in your revenue guidance? The second question would be about the inventory increase, could you please share to which extent that was volume driven and which impacts the valuation effects? And furthermore, how do you expect future development?

Thank you. So I mean, we can now not talk about prices in detail. What we can say regarding the sugar prices that we expect stable pricing compared to the actual price level. So we do not expect a drop in prices right now for the new sugar marketing year. This is mainly driven by supply and demand, yes. So we do not expect a surplus, a big surplus on the production side versus demand. So sugar prices on the world market are still high. Therefore, currently, we do not expect a drop in sugar prices, which, of course, then leads me to your second question. I mean inventories, of course, there is a significant increase, and this is mainly driven by raw material prices and energy prices. Main driver here, of course, is also the sugar segment. As you know, the beet prices are, let's say, influenced by the sugar prices and also the expected sugar prices that we can see out of our contracts with the customers. And then, of course, the sugar that we have produced and which is on stock are evaluated with the raw material prices, which derived from the expected sales prices. So therefore, there, we have a significant increase. And the other increase comes from also the starch business, where we also have higher evaluated stock. So it's also here somehow a volume issue, yes, but on the other hand, also mainly price-driven and also driven by the higher prices for raw materials, especially corn and wheat, but also energy prices. Our expectation for the future is that these things in starch might go down as we see a decrease in raw material prices. And in sugar, of course, we should expect a stable, at least stable level for the coming months or let's say, also the business year, but this is, of course, influenced by the stable sugar prices and also by the bigger production campaigns that we expect.

The next question comes from the line of Baptiste de Leudeville with Kepler Cheuvreux.

Yes. My first question is on the Food segment. Can you make the split between fruit preparation and juice concentrates for last year results. Well, it's clear that -- your message that fruit preparation is facing difficulties, whether it was a pretty good year for juice concentrates. So just hard for me to have an idea of -- if the fruit preparation business is doing profit and compare also to last year and have more color on this. The second question. I know you will address it more in detail in August, but can you share with us some tangible actions you have been undertaken regarding your strategy to add value to your products, especially in starch and fruit with your own recipes, et cetera? Or is it something that you will prefer to wait to communicate on. Also, third question about the current momentum. I used -- you said that the prices -- there is some area of cost that we're relaxing freight, energy, raw materials. Do you still, at this point asking for negotiations -- renegotiating contracts with customers or regarding the recent development of price, you're not doing it anymore.

Thank you. So let me quickly answer your first question. So the split on the operating results between the preparations and the juice businesses. So we had around EUR 32 million result operating basis in fruit prep and around EUR 20 million on juice. For now, I will hand over.

Yes. Thanks. Look, on strategy, as you said, we'll talk more about it in July. But you were asking for a couple of examples out of fruit and starch and there's a few I can share with you that we're already working on and that might exemplify some of the thinking that we're doing. So starting with Starch. You may have seen in the past week or 2 press release around an investment in our Starch factory in Gmünd, and that investment is related to the opportunities, the continued growth opportunities that we see in specialty starches, and in particular, for example, in an area of what we call bio-based materials. And so if you think more broadly and look at the green trends and the opportunities created by increased regulation where customers are looking for ways also in the nonfood area, so in the technical area, applications to replace fossil-based raw materials with renewable materials. There's a whole range of opportunities that we see. We already have a leading market position for example, in specialty starches that go into the construction industry. And so we see a lot more opportunity there. And so that investment that we announced in Gmünd, you should see in the context of that. A second example I can give you is that in our fruit juice concentrate business, there's an area which we call the added value business. And that includes both flavor solutions as well as compounds, these are more complex type of products. And that's an area where we have added some capabilities and some competencies. And we also see a lot more growth in those areas. And that's also where we can leverage the synergies and the competencies that we have across multiple AGRANA business areas. So that's something, again, you can probably take this indication that we'll speak more to in July. A third example I can give you is from fruit preparations where, of course, working closely with our customers and also reflecting sort of what I talked about being much more customer and market driven. One of the big trends, especially in sort of the -- for the dairy-based customers actually is nondairy alternatives, plant-based alternatives. And so we've been working on innovations for our customers for plant-based dairy alternative products and offering there a whole range of solutions. So these are things that we're already doing and have done in our past year. And again, you can take that as an indication that we see quite a lot of opportunity there, and we'll talk more about that in July, but maybe that gives you a few hints of some of the things that we're thinking about.

We have a follow-up question from [indiscernible]

Sorry to [ pester you ] once again, gentlemen. I've got 2 remaining questions, if I may. Firstly, you stated that working capital, obviously driven by higher costs has gone up quite substantially, but that is unlikely to be sustainability to the decline in energy costs. On the other hand, you are planning for higher sugar volumes, I presume. And hence, given the higher energy, let's say, structurally higher energy prices in Europe due to the fact that Russia is unlikely to at some point of time, continue its supply of cheap gas into Europe and also the changes in your energy mix. Is there a target working capital ratio that you could share with us that you're aiming for?

A target working capital ratio. So of course, we have target ratios let's say, working capital to revenue. And there, we should go in the direction of, I would say, of maximum 25%. So as you see in history, our working capital usually amounted to around EUR 650 million. Actually, it's exceeding EUR 1 billion. So I mean, if we -- on one hand, we have, of course, end-to-end in the whole value chain. We see some room for improvement here. Yes, I would estimate if we talk about EUR 1 billion working capital, then we should be able via excellence programs to bring this down by approximately 10%. And on the other hand, things are price-driven, of course. So -- and therefore, I mean, we should go back to around 25% in terms of revenue. I think this will be a good target.

My second question would be on the dividend policy you have. On Slide 33 of your current presentation, you state that AGRANA likes to have a predictable, reliable and transparent dividend policy. And the distributions are not only to be based on group's profit but also on cash flow and the debt situation. Now basically, looking on 2022-'23 numbers, what we have seen is that yes, EPS went up significantly, both in regards to, let's say, the adjusted and the reported value or number. But on the other hand, what we've seen is that both net debts went up and free cash flow became negative. And despite that, dividend increased by 20%. So I am -- if I want to, let's say, predict the dividends of future years, which should be according to you be rather easy because they have a predictable, reliable and transparent dividend policy, how should I, let's say, model that for future years?

This is very simple. I mean our policy is that we want to have a payout ratio of around 50% of our profit after tax in the future. So if our plans materialize, I would say, also according to our strategic plans, then we should be able to have a stable dividend in the range that we currently have, plus 10%, 20% whatsoever. So this is our target midterm.

Yes, but that would basically exclude any, let's say, interference from debt situation from cash flow fluctuations and so on. So...

Okay, because -- this is because -- then this is already how shall I say? This is a range where we think that this is a good range for our shareholders, yes. So -- and we do not plan to have exceptional items. So if we have a write-off of goodwill, yes, which is not cash effective of EUR 90 million, then we have to take this into account. This is simply the answer, I think, to your question, yes. So we are not expecting this in the midterm -- in our midterm plan. But if something like this would happen, and we can never exclude these things from happening because we don't know what will happen to the weighted average cost of capital, for example, yes. So things are very volatile. You know this. We still have a goodwill of around EUR 90 million -- EUR 97 million in our books. So -- but this is not cash effective, and as already mentioned. So we see room for improvement in working capital coming down again. And if we will be able to keep our profitability and further increase it, then we think that we will go in the direction of EUR 1 dividend is an example now, yes, approximately per share, and this should then amount to, let's say, yes, around 50% of our profit after tax, yes, this is our midterm target.

There are no further questions at this point. I hand back at Hannes Haider for closing comments.

Yes. Thanks a lot for your participation in the call and all the questions. If you have additional questions, please contact the IR department later on or in the afternoon. Thanks. Have a nice day and goodbye.