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

Ladies and gentlemen, welcome to the AGRANA Conference Call on the Q1 Results 2026-27. I am Valentina, the Chorus Call operator. [Operator Instructions] The conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Hannes Haider. Please go ahead.

Good morning, ladies and gentlemen, and welcome to AGRANA's conference call presenting our results for the first quarter '26-'27. You already got some insights last week when we published preliminary results. Today, we will provide you with more details also on the segment. As announced in our conference call invitation, the presentation is available in reference to this call, and you can find this presentation in the IR section of our website. Our CEO, Stephan Buttner, will hold today's presentation, which is divided into 3 parts. We will start with an introduction and we'll focus on the highlights of the first quarter first. And we will go on with a segment overview. And finally, we'll conclude with an outlook for the ongoing '26-'27 financial year. The presentation will last about 20 minutes. After the presentation, the lines will be opened, and we will be glad to answer your questions. And now let me pass over to our CEO, Stephan, who will start with Slide #4.

Thank you, Hannes. Good morning, ladies and gentlemen. Yes, AGRANA had a very solid start into the financial year '26-'27. EBIT was significantly higher than in Q1 previous year, but this is logical because we had extraordinary expenses also in the previous year due to the closure of Leopoldsdorf and Hrušovany. Of course, the markets are still very challenging, especially sugar price pressure is still there. And also in starch, the economy still has not recovered yet substantially. Nevertheless, we could significantly improve our performance in the Sugar business. This is really due to the restructuring measures taken in the last 2.5 years. Geopolitical uncertainties and volatility in energy and commodity prices, of course, remain key factors for the rest of the business year, but we are currently very optimistic that we will be able to keep our performance also in the next quarters. When we look at the key numbers, so we had EUR 855.3 million revenue in the first quarter compared to EUR 880 million in the previous year. This is mainly due to the decrease in revenue in our Sugar business. The operating profit was EUR 33.2 million, significantly above the previous year's performance. Exceptional items, EUR 0.4 million sic [ minus EUR 0.4 million ], and EBIT EUR 35.4 million. Here, we see the very significant improvement versus prior year where we had EUR 5.7 million. AUSTRIA JUICE and Mercator-Emba were 2 projects, acquisition projects. So both, there we are working on the integration. It's also already in progress. Both investments are performing as expected. And this, of course, will help to further strengthen our diversified business model in the Food & Beverage Solutions. The closing of the Mercator-Emba deal took place at the end of March 2026. The initial purchase price was EUR 35 million. This is an EBITDA multiple of 7.6x. And there are 2 potential performance-related adjustments to come in '27 and '28. The maximum of these earn-outs is in total EUR 5 million. And then always the EBITDA multiple and the purchase price will remain below 8x. Of course, we are also continuously working on the implementation of our corporate level strategy. We worked very hard in the last month on our business level strategies. So we are implementing here our vision now with ONE Company, ONE AGRANA, ONE Culture and ONE Brand. When we look at the different business areas in our ACS, Agricultural Commodities & Specialties, here we have our juice commodities business. This is not reported yet in the -- this is still reported in the Solutions segment. We are working on dividing the businesses into the commodities part. This is the fruit juice concentrate production and the added value business, which is flavors and beverage compounds. This added value business earliest from the business year 2027 onwards shall be reported in our Food & Beverage Solutions segment isolated, whereas our commodities business in the AUSTRIA JUICE company, the fruit juice concentrate shall be reported in our ACS strategic business area. As you can see, in juice, in the commodity part, we are also focusing on efficiency improvements. Cost is key here, also the physical footprint. We need to be very close to the raw materials. This is something that we are constantly working on to increase our competitiveness, but also to increase our share in the specialties product portfolio. Same in Starch. So we are really focusing on our strategy, which should increase the share of our specialties. We are now analyzing opportunities in the different products where we will be able also to win in the future. This will be very important to stabilize the profitability in our Starch business in the future. And we are also currently working on the target operating model, how the business shall be then also managed in the future. And in Sugar, we are executing our strategy, local for local, which means we are producing sugar in our production plants for the local markets. So we as we already mentioned several times, we closed 2 factories and are still optimizing here our footprint. The target is, of course, to increase our competitiveness in cost, especially. And on the other side, we are also working on our product portfolio. Here, we want to increase our share, our market share with our brand, Wiener Zucker, in Austria, where we have a very good market position. When we look at the FBS, Food & Beverage Solutions, here, we have, of course, our core business. We have Foodservice and also, as I already mentioned, our added value product portfolio consisting of flavors and beverage compounds. Very clearly, we want to bring all these businesses closer together. We want to create a platform, a recipe, a formulation business for food and beverage. Here, we are on a very good way. You know that this business is very much product development and innovation driven, also co-creation with the customers. Here, we want to increase our portfolio, especially also the flavors competence. We want to increase our in-sourcing volumes, especially also in the Flavors business, and we want to roll out via the physical footprint of our fruit preparations business, our competence in beverage compounds. As I already mentioned, we will also leverage the acquisitions here of Emba, getting much better access, especially in Europe to the food service sector, quick service restaurants, coffee and tea shops. This also gives us access to global customers, and we will not only benefit here in Europe from Emba, but also on a global scale. Yes, the product portfolio, we already mentioned that it's sauces, toppings, syrups, and baking fillings, especially for the out-of-home channels. Let's have a look at the financials, revenue by segment. You see a slight increase in our Solutions business, plus 1%, EUR 448.7 million. In Starch, a slight decline from EUR 257.8 million to EUR 252 million. And you see a further sharp decrease in revenue in Sugar from EUR 170.1 million in the first quarter to EUR 146.1 million. This is mainly due to a further price reduction. It's not due to a volume decrease in sales. This is really here influenced by the still ongoing price pressure in Sugar. And so yes, this is something when we look at the next page, we see the enormous decline in Sugar prices over the last, let's say, 1.5 to 2 years. So this has a massive impact and still there is no relief. Triggers for this is, of course, the duty-free imports over 2 to 3 years coming from Ukraine. We have excess stocks in Europe still. Also, there is an expectation that we will enter the new sugar campaign in September with stocks of 2.6 million to 3 million tonnes in the European Union. A normal stock level is around 1.5 million to 1.6 million tonnes. Here you see an excess of 1 million tonnes also due to a very good crop in the last sugar campaign in 2025. So we saw a further reduction in acreage planted sugar beets for the campaign or the harvest in 2026, but now everything will depend on the weather conditions. So far, we had a very dry June. But this is still not yet decided how the crop will look like. At the end of the day, it really depends on the weather conditions in July and August. One thing is very clear, we need a further reduction in supply. The demand is getting lower due to the consumer habits. And as long as we have a surplus in production, prices will not be able to recover. EBIT by segment. So here, I must say we see a good performance. As already mentioned, fruit juice concentrates are still reported in our Solutions segment. We had a deep frost last year, especially in Hungary. So we lost around 80% to 90% of our production volumes in Hungary. This had a negative impact on our P&L, also on our top line, but also on our bottom line in the Food & Beverage Solutions business. But this could be partly compensated by our formulations business, but not by 100%. So therefore, we had a decline of 7.7% down to EUR 33.6 million, but still a very solid performance for the first quarter. Starch, we have a significant improvement here in EBIT. This is, of course, mainly due to the increase in ethanol prices. This has also to do something with the crisis or the war in Iran. On the other hand, we are facing increasing raw material prices and energy prices. But the price increase in ethanol was able to overcompensate these increases in raw materials and energy. And we are very happy about the improved performance in sugar. You see last year, we had nearly EUR 30 million minus. Now really very -- from our point of view, a very good result with only minus EUR 2.7 million in the first quarter. When we look at our competitors, they are also producing heavy losses in sugar. So here, we can also clearly see the improvement due to the restructuring measures taken during the last 2.5 years and also the closure of Leopoldsdorf and Hrušovany. So these things are paying off already, and we were able to like-for-like significantly improve our performance here. Outlook for '26-'27. So, of course, we expect a very significant increase in EBIT. But as already mentioned, here, we had extraordinary items of more than EUR 70 million in the last business year. We are not expecting this in the actual business year. So therefore, it's quite easy to say that we will be very significantly better off in '26-'27. Revenue, here, we expect a slight growth, but mainly also due to the still decreasing revenues in Sugar. Our savings program is also on a very good way. Our target under the corporate level strategy, AGRANA NEXT LEVEL, is that we are implementing measures with a sustained annual savings impact of up to EUR 110 million in '26-'27. Outlook by segments for '26-'27. In our Food & Beverage Solutions segment, we expect a moderate increase in revenue and a moderate reduction in EBIT. I already mentioned the reasons for that. In ACS Starch, a stable revenue and a significant increase in EBIT and ACS Sugar, a slight reduction in revenue due to still lowering prices and a very significant improvement in EBIT. And finally, our outlook for the second quarter of '26-'27. In '25-'26, EBIT was EUR 22.3 million in the second quarter of the financial year. And actually, in '26-'27, our forecast is that our EBIT shall be significantly higher than the figure for the previous year in the second quarter. Thank you very much for your attention, and I hand back to Hannes Haider for the financial calendar.

Thanks. Before we go on with the Q&A session, I just wanted to remind you that after last week's AGM approval on dividend, the dividend payment date is on the 13th of July. And I would also like to inform you that our financial calendar for the next financial year '27-'28 will be prepared during summer months and will be published in autumn. We will now go on with the Q&A session.

[Operator Instructions] The first question comes from Elias New from ODDO.

I have 3 questions. I'll take them one at a time. Perhaps first, starting with the Sugar business. So in Q1, you saw a decline in revenues here of around 14%. But for the full year, you're guiding only for a slight decline in revenues. So just wondering if you could comment on this and whether you expect prices to improve in coming quarters to sort of meet that full year top line guidance. And then on the profitability within Sugar, congratulations, first of all, on the excellent progress here on the margin. Just wondering if we can expect perhaps a similar margin going forward as we've seen in Q1 or perhaps even better in coming quarters as those restructuring measures continue to gain traction?

So thank you very much for the question. I understood that you are referring, first of all, to our sugar revenue. Yes, we saw -- let me look at the numbers here. Yes. Of course, in the first quarter, we have a more significant reduction in the revenues. This is due to the higher prices in Q1 in '25-'26, whereas we see more stabilization in prices during the rest of the year also compared with the remaining months in the last year. So in total, then we expect only a slight decrease for Sugar. Margins, also, I think this was in combination with our Sugar business. I already mentioned that the prices are still under pressure. I mean, this is a fact. We are currently in the marketing period of our sugar volumes produced in the Campaign '26. We cannot really say what will be the outcome at the end of the day. Still, we have to wait for the weather conditions, especially what will be the production volume in the European Union, what will happen on the world market. So this will also influence our pricing power for sugar for the new production campaign. Yes, if the prices will come under pressure again, and this can theoretically only happen if we will see a bumper crop, which is not expected now, and also the acreage was reduced. Therefore, we do not expect increased price pressure here. But of course, I mean, yes, the situation can also deteriorate a little bit further. It all depends on how we will be able to market the production volumes out of the Campaign '26. It's difficult to say, but we see currently stable market conditions.

Okay. Great. That's really helpful. Very clear. And congratulations again on the great progress there in terms of profitability. Perhaps just 2 quick follow-up questions. The other one would be on the Leopoldsdorf plant sale. I was just wondering what sort of cash flow and P&L impact we should expect to see in the second quarter here and if there's a book value gain or whether it was sold at book value?

Yes. We signed the deal 2 weeks ago. Now we are in the closing period. There are certain conditions that need to be fulfilled before we can close the deal. This will take, I think, around 2 to 3 months. So we do not expect the closing in the second quarter, but maybe more in the third quarter of the business year. Of course, there will be an impact on the P&L and also on the cash flow. But unfortunately, we are not able to give you more details about this now, because we have an agreement with the buyer that we should not talk about the terms and conditions before the closing took place. But it will be a positive impact. This is what I can tell you now.

Okay. Great. That's good to hear. And final one from my side would be just on restructuring expenses, which were significantly lower in Q1. So just sort of wondering what the reasonable run rate would be going forward? I mean, do you expect restructuring expenses to increase again in coming quarters as you perhaps rightsize some more sugar plants, et cetera? Or is it sort of sensible?

Yes. So currently, we do not expect significant extraordinary expenses. In Sugar, I mean, we already had an asset impairment also last business year. I cannot completely rule out now that further structure measures will be taken. But in that case, the extraordinary effect shall be very limited in comparison with the effect last year.