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

Good morning, ladies and gentlemen, and welcome to the AGRANA Results for the Full Year 2024-2025 Conference Call. I am Yusuf, the Chorus Call operator. [Operator Instructions] This conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Hannes Haider. Please go ahead.

Yes. Good morning, ladies and gentlemen, and welcome to AGRANA's conference call presenting our annual results for the '24-'25 financial year. You already got some insights in our figures when we published a talk announcement on the 25th of March and on the 24th of April. Today, we will provide you with more details on all segments and also the audited financial statements. As announced in our invitation, a presentation is available in reference to this call. You can find the presentation in the IR section of our website. Our CEO, Stephan Buttner, will hold today's presentation. Our Board member, CTO, Norbert Harringer, sends his apologies due to illness. The presentation is divided into 3 parts. We will start with an introduction and a focus on the highlights of '24-'25. Then we will go on with the segment overview and comment on the financial statements. And finally, our CEO will conclude with an outlook for the ongoing business year '25-'26. The presentation will take about 20 minutes. And afterwards, the lines will be opened, and we will be glad to answer your questions. And now I may pass over to our CEO, Stephan, who will start with the presentation.

Thank you, Hannes. Good morning, ladies and gentlemen. Yes, so let's start with the overview of the highlights of the last business year '24-'25. So unfortunately, our business performance and our profitability was not satisfactory. Yes, it's a result of the still quite weak economic activity in Europe and especially the recession in Austria and Germany ongoing. We still are facing high volatility in raw materials and also energy costs. And overall, the market environment is not really predictable. Also impacted by political decisions, also recently with the duties to be imposed potentially, and all these things are having a negative effect on the market. Food segment had a very strong performance in the last business year. This is very important for us, also despite the difficult economic setting. Starch segment was weaker due to the overall economic situation, so especially paper industry is still weak, also construction industry, whereas the food industry is doing better, but price pressure is still heavy, also due to the decrease in energy costs and raw material costs. And, of course, so that the input factors are also down, but the sales prices are not strong enough so that we can improve our results here. And Sugar segment, the biggest challenge for us in the previous year with huge losses having a very negative impact on our overall performance, but we will refer to that later. So our dividend proposal for the last business year is a payout of EUR 0.70 per share. And this also reflects our financial stability, especially including the strong free cash flow generated in '24-'25, EUR 260 million. The outlook for '25-'26 is also quite weak, so we expect a stable EBIT for the full year '25-'26 compared to '24-'25. The key numbers, so revenue decreased by 7.2%, down to EUR 3.5 billion, this especially due to the decrease in sales prices in starch and in sugar. As a consequence, we also have a significant reduction on EBIT level, down to EUR 40.5 million. So this is also heavily impacted by special expenses due to the closure of the sites in Austria and in Czech Republic in our Sugar business and other reorganization and restructuring measures. Yes, free cash flow, as already mentioned, up by 100.5%. So also in combination with the poor EBIT, this is a strong performance here. And so free cash flow amounted to EUR 259.1 million. And, therefore, also our other KPIs, the equity ratio went up by 2.2% to 45.4%. Net debt decreased down to EUR 436.4 million. This is a minus of 31.4%. And, therefore, also the gearing ratio went down to 35.5%, also a significant improvement. Yes, a quick update on our implementation of our next level strategy. So we already reported that the group strategy was decided in the Supervisory Board in November 2024, and right -- we -- then we started with the implementation of the strategy. So, of course, we're transforming our holding in a clear strategic holdings, but there are also with cost reduction programs, also especially in personnel costs. We are also focusing on bringing closer together our operative businesses, Sugar and Starch, to reduce our overhead costs. We are looking for savings in the supply chains, especially logistics. Here, we see also a huge potential for cost reductions and also synergies between our operative businesses in our agricultural commodity area. The cost program that we implemented is going for a reduction or cost saving of at least EUR 80 million, which should become fully effective from the business year '27-'28. So we are on track here. So we already realized EUR 15 million savings. So we already reduced our personnel staff by nearly 100 people. And we're also on a good way with reducing our logistic costs and other things. Restructuring of the Sugar segment is also going on, as already mentioned. So we closed our site in Austria, Leopoldsdorf, and in Czech Republic, our site Hrušovany with immediate effect in March '25. Yes, this means a significant reduction of our sugar production in the future. So we are also in this season going significantly down with the planted acreage from nearly 95,000 hectares down to 65,000 hectares, and the sugar, which will be produced will amount to around 600,000 tonnes. So this is a significant reduction here. But of course, it will help us to be more competitive in the future with our Sugar business. So the decision, of course, was not an easy one, but was absolutely necessary, especially when we look at the very poor performance on the profitability side. Yes. So a quick overview now on the raw materials processed in the last business year. So this was around 9.9 million tonnes. 6.5 million tonnes feed were processed. Then refining of raw sugar, 0.1 million tonnes. We also processed 2.4 million tonnes of grain, so we have wheat, corn, especially, and 0.2 million tonnes of potatoes and 0.7 million tonnes of fruit. Yes, here, it's -- we can mention that in 2024, especially the apple harvest was significantly impacted by a frost in Poland, but also Hungary, leading to a poor harvest and very high raw material prices. In starch, we had the dramatic flood damage in Austria in autumn 2024. So this also led to a stillstand of our factory in Pischelsdorf for more than 1 month with having a negative impact on our profitability of around EUR 8 million in the Starch segment. Yes. And in sugar, of course, we had a significant increase of our planted acreage. We had around 4,000 hectares in Austria. So this was a significant increase versus the year 2023. But unfortunately, we faced a very difficult production season due to the poor sugar content in the beets. Also -- this is also caused by the weather problems that we had, especially the heavy rain and also the beet quality itself was very poor. And so we had very, very poor yields in the production campaign. Sustainability, so we here want to show you our actual sustainability targets of the whole AGRANA Group. I will mention just some of them. So we are -- of course, we are still very dedicated to our ESG roadmap. And here, you can see the goals that we have set. So sustainable sourcing of raw materials, responsible use of water. So here, we want to achieve a reduction of 2% by 2030 in consumption. This is quite heavy -- it sounds quite low, but it's quite difficult. The optimization of waste recovery. So this means 90% waste recovery rate by '26-'27. We also want to reduce our loss time injuries down to 5.6 by '26 -- '27. Equality is a very important target as well. So we want to achieve a 30% share of women in management positions by 2030. Actually, we have 28.4% and also governance, code of conduct, awareness campaign of blue-collar workers with an implementation rate of more than 80% in companies by the end of '26-'27. So, yes, then let me move on with the results by segment and the overall market environment. So the first slide is very impressive. So you can see the dramatic downturn of sugar prices in the last business year. So, of course, we also had the increase from, let's say, '22 to '23, then stable prices for a while in '23. And now in '24, the prices collapsed. Of course, this was a combination of lower demand, yes, and higher sugar production, especially in Europe, a downturn in the world market prices and also a massive increase in imports coming from Ukraine. And all this together putting heavy pressure on the prices. And you can see the results here on the slide. So this is dramatic, prices going down to, let's say, EUR 500, EUR 550 coming from nearly EUR 900. So this had an enormous impact on the profitability of the Sugar business overall. So revenue by segment. So we see that we had an increase of 4.1% in the Fruit segment. So revenues were EUR 1.63 billion here. This is a solid development, I must say also, in this quite difficult market environment. So a positive development. Starch, as I already mentioned, we went down to around EUR 1 billion revenue coming from EUR 1.15 billion. So this is mainly due to the price decreases. We did not lose volumes in the market. But over -- across the whole portfolio, prices went down significantly and also in the ethanol business. In Sugar segment, I already reported the dramatic drop in sugar sales prices. So this is also here reflected in the reduced revenue. So we went down to EUR 870 million coming from nearly EUR 1.1 billion. So this is a dramatic decline. And here, you see the effect on EBIT level. So a very, very good performance, also compared to last year, in the fruit segment. So we had an increase of our EBIT of 65.6%, up to nearly EUR 100 million. So this is the best result that we ever had in Fruit segment after already quite strong operative business in '23-'24. So we here consequently are, let's say, improving our performance. We are gaining market share, and we are also going into other sales channels like food service and ice cream. Also the fruit juice concentrate business went quite well. So overall, we are happy with the business in Fruit in the last business year. In Starch, it's a very challenging situation. We have heavy pressure on the ethanol prices, mainly due to increasing imports coming from the United States. So this is caused by lower raw material prices in America, also significantly lower energy costs, and therefore, they can easily ship their product into the European Union, and this is putting prices under pressure. Now also the weakening, softening of the U.S. dollar also makes the situation more difficult. The other -- the rest of the portfolio, of course, so we kept our volumes, but the price pressure is there due to lower demand and also reflecting, let's say, the expectation of the customers due to the lower raw material prices. But the raw material prices, the physical prices in sourcing, especially in corn are not so much lower as it should be when we look at the market prices. So there is -- let's say, there is a certain spread, and this makes us quite -- it makes it quite difficult for us to bring prices up for starch products, especially. And Sugar, so this is an enormous difference. So we lost. When we compare it to the last business year, we lost EUR 130 million on EBIT level. So yes, this overall reduced our EBIT on group level from EUR 151 million down to EUR 40.5 million once again, so we were not able to compensate at all the dramatic losses in Sugar. And here also are included net exceptional items in the amount of EUR 28.3 million. This is also, of course, mainly covering the impairments -- the asset impairments due to the closure of the sites in Austria and Czech Republic and the temporary shutdown of our refinery -- sugar refinery in Romania. So the financials, once again, group revenue of EUR 3.5 billion, minus 7.2%. The operating profit before exceptional items and results of equity accounted joint venture with EUR 76.5 million, also down by 56.7%, and the EBIT, even more, down by 73.2%. I already mentioned all the negative impacts here. So a very low EBIT margin is the consequence. Net financial items, yes, a significant improvement here. So ending up with 0 result for the -- after tax for the whole period. This is the consolidated income statement. Exceptional items, here, you can see the split. So mainly coming out of the Sugar segment. I already mentioned here the restructuring costs or the impairments for the closure of the sites and the temporary shutdown. Also, we have here restructuring expenses, mainly personnel expenses due to the reduction of employees. Overall, EUR 36.4 million negative impact on our EBIT. Energy costs, getting better, but far away from where we were in 2019-2020, as you can see here, with overall cost of EUR 116 million or EUR 120 million. So still, we have doubled the cost than in those years. So this is a heavy burden for the -- I think, for the whole industry of all industries in Europe. So this is very difficult to pass this on to our clients. So it is getting better from EUR 357 million coming from '22-'23, but still the costs are very high. And so we need a significant reduction in the future to become again competitive, especially when we're talking about exports or also competitive against imports, for example, coming from the U.S. in the ethanol business. The tax rate, so the profit before tax, EUR 3.7 million, and the income tax expense, EUR 3.8 million. This is due to profits that we have in countries where we cannot, let's say, take this into consideration with the losses that we especially also faced in Austria. So, therefore, the tax rate went up to 107%. But overall, the amount is not significant. So I move on to the consolidated cash flow statement. Here, I already mentioned that we had a very good performance with the net cash from operating activities with EUR 361.1 million. This is a plus of 50.3% and also free cash flow with an increase of 100.5% up to EUR 259.1 million. No major changes in the consolidated balance sheet. So the total assets amounting to EUR 2.7 billion. So the KPIs, the equity ratio, I also already mentioned, 45.4%, so up by 2.2%, net debt down by 31.4% to EUR 436.4 million. And the gearing, again, a significant improvement by 15.5 percentage points down to 35.5%. Dividend proposal, also I already mentioned, EUR 0.70 per share for the '24-'25 financial year. This is a reduction versus the year '23-'24, where we had EUR 0.90 per share. But, of course, the performance is significantly weaker, but due to the very positive generated free cash flow and the overall stable balance sheet [Audio Gap].