Südzucker AG (SZU) Earnings Call Transcript & Summary

Thank you, and good afternoon, ladies and gentlemen. Welcome, and thank you for your participation in today's conference call of Südzucker AG. As mentioned in the invitation, the underlying presentation has been published this afternoon on our homepage. Mr. Porksen and Mr. Kolbi will make reference to the respective pages of this presentation. Today, we released a report for the financial year ending 28th of February 2021. We're going to explain the highlights of this year and give details about the guidance for the current financial year '21, '22. We're happy to take your questions following the presentation of our CEO and CFO. A recording of this call will be available on our homepage for those who are not able to participate. Now I would like to hand over to Mr. Porksen. Please go ahead, sir.

Thank you very much. Ladies and gentlemen, it's my pleasure to welcome all of you to our analyst conference 2021. Due to the corona pandemic, we have to perform this meeting virtually again, sorry for that. On Page 3, let me quickly put some light on key topics that have or will keep us busy. 2020 and 2021 was an interesting, exciting, but also a challenging year. Despite the corona pandemic, I had the chance to gather a very good company insight. Additionally, I was glad to conduct many conversations with our employees that helped me to get a good understanding about their needs and ideas. Our intense discussion within the framework of Strategy 2026 Plus significantly contributed in this regard as well. As already announced in last year's meeting, in the meanwhile, we have adapted our group strategy, although the strategy process is not yet fully concluded. Later on, I will provide you with some insight in the results achieved so far. This is also true for the topic of sustainability, which is closely linked to it. Digitalization is another important topic for Südzucker. It is a challenge, as well as an opportunity at the same time for us. In the future, even more, it will become a major focus topic. Therefore, we are very glad to have Helen Arnold on board, our new Executive Board member. She joined Südzucker at beginning of May after 25 years of SAP experience. She will be responsible for it, digitalization and for the newly created cluster of consumer market, consisting of Freiberger, Beneo and PortionPack euro. At this point, let me stress, we, as an executive Board, are very proud about what has been achieved, especially together with the high commitment of our employees in these very difficult corona pandemic times. At any point in time, we have been able to fulfill our important duty as food supplier to customer and end consumers. We are well aware about the individually very high burden over this period, which is not yet over. In this situation, our employees had to cope with both professional and private challenges which they managed extremely well. The balancing between job and family led many to their stress limits. Therefore, we want to say thanks for your commitment, for the commitment of our employees in these difficult times. Okay, so now let's move to Slide #5 and focus on the business year 2020, 2021 with a short overview. In this presentation, Mr. Kolbl, as always, will talk about respective details afterwards. Group revenue reached EUR 6.7 billion and came in on last year's level. Revenue and segment CropEnergies decreased moderately and in segment Fruit slightly. Segment Sugar showed revenues on last year level and segment Specialty Products came in slightly above previous year's level. I want to emphasize, especially the segment Sugar significantly reduced losses. In this light, operating group results significantly increased to EUR 236 million. And moderate operating results decrease, and segment Fruit was more than compensated by slight earnings improvement in segment Specialty Products and CropEnergies. As already mentioned, Mr. Kolbl will elaborate more in detail afterwards. Let's go to the segments, and start with Page #8 and the segment Sugar. One of the main target of the 2019 restructuring plan was to focus on the European sugar market. Therefore, an adjustment of our factory and administrative structure was necessary. On the one hand, the structural EU sugar market surplus has been reduced. On the other hand, our cost structure has been improved. As of now, the restructuring plan was successfully executed. Additionally, we have identified further optimization opportunities. They are already partially in execution, leading to further improvements. Original and additional measures, as well as our group strategy, are building on each other. Besides this, we have been confronted with additional charges. For example, a corona-driven lower sugar demand in light of canceled events, holidays, as well as lower factory utilization due to harvest failures. Especially the ongoing drought and the increasing pest infestation were challenges to our farmers. These factors stood against the improved EU and world sugar market environment, marked by an ongoing deficit situation. In this context, including the Executive Board intention, we take this into account and position ourselves in sugar even more powerful. Due to a leaner structure and processes the new division sugar will act even more efficient and therefore, will help to reach earning improvements even quicker. Let's move to the segment Special Products, starting with BENEO on Page 10. BENEO creates functional food solutions. Due to this global reach, it is sales partner of many Südzucker divisions an excellent starting position to raise further group synergies. 2020 and 2021 showed a continued trend towards healthy nutrition. BENEO serves this trend, for example, via chicory-based fibers, probiotic, rice starches and plant-based proteins. Based on organic raw material, those ingredients are used in a wide range of food products, such as dairy products, cereals, bakery products or baby food and bread spreads. We are convinced that the underlying positive demand situation at BENEO is only temporarily showing some difficulties for some parts of the business. Therefore, we will stick to the pre-corona decision to invest into the capacity expansion in the next couple of years, for example, at our German site in Offstein. On Page 11, I will elaborate on our successful Pizza business. Following another successful year, we move forward in integrating Richelieu sites in the U.S. identified and executed optimization measures to support the positive business development in this market. It was possible to increase sales volume in all markets but partially pandemic driven. The ongoing positive volume development in the EU and U.S.A. confirm our chosen route to continue the initiated capacity expansion. Besides this, we have worked on the assortment mix and pushed new distribution channels. Let's continue with division Starch on Page 12. Based on different raw material sources, we produce starches, sacrification products, ethanol as well as respective byproducts. These are used for different technical appliances, food and feed products. Also, the corona pandemic had the partially negative influence, especially on native and modified starches. Overall, we were able to achieve a sales volume increase in the main product categories. Additionally, we are pleased about the overall production increase for starches and sacrification products. And step-by-step, we are able to improve utilization rates of newly built capacities, CapEx of EUR 400 million between 200 -- 2013 and 2019 secured sustainable growth in the upcoming years. On Page 13, we come to the last division within this segment Special Products, PortionPack. PortionPack is focused on the core -- so-called Horeca area comprising hotels, restaurants and catering. As they are strongly influenced by the corona pandemic, PortionPack had to face an environment which was hit the most. The strongly burned out-of-the-home business showed a significant decrease in sales volumes. Against this background, there was a strong focus on cost management. Besides this, the portfolio enlargement on the access to new customer groups were forced. We have learned over the period of several lockdowns that on the one hand, portion articles were strongly hit in the solution -- in the shutdown phases, but recovery strongly thereafter in times of easing restrictions. Continuing on Page 15, as a leading European producer of renewable ethanol for the fuel sector, CropEnergies strongly contributes to a greenhouse gas reduction in the transportation sector mainly. Additional products of our subsidiary of the production of neutral alcohol, high-protein food and feed products as well as the liquification of CO2. In 2020, 2021, CropEnergy's partially dedicated its neutral arco production for the disinfection market. This was an important contribution to help in the corona pandemic. Also, the corona pandemic dominated almost all topics in the public debate. Discussions about climate were reinforced over the course of the last 12 months. This development was fueled by the return of the U.S.A. to the Paris Climate Agreement. In this context, we see a strong increase in demand of CO2 reduced fuels that significantly contribute to EU and U.K. climate targets. In parallel, to last year's development, it seems as the announced easing of travel restrictions lead to step-by-step easing of the overall mobility restrictions over the course of the year. We think that this will lead to a significant increase in demand for ethanol as a blend to fossil fuel. Let me conclude the segmental overview talking about the segment Fruit on Page 17. Target markets for fruit preparations are especially dairy products, ice cream, baked goods and food services. These are still marked by several main consumer trends, mainly naturalness, healthy, indulgence and convenience. Additionally, growth opportunities are indicated by trend towards plant-based products in the non-dairy sector we target to exploit too. In the more trading-oriented and therefore, more volatile fruit juice concentrates business, especially in regard to apple juice concentrates, we had to face a sales volume decrease. This was mainly due to the hesitant signing of fruit juice concentrates customer contracts in autumn 2020 alongside the renewed lockdown phase. The started cost-cutting program will be continued and helps to address the reduced earning levels. Ladies and gentlemen, unfortunately, the corona pandemic keeps us busy in 2021 and 2022 as well. Also, we are convinced about the reduced relevance over the course of the year. I would like to take the opportunity to stress that priority #1 is and will stay the health of our employees. Early and extensive measures introduced by the Executive Board have proven throughout the entire year. And hence, we were in a position at any time to protect our employees' health. Beside this, we, as part of the critical infrastructure were able to fulfill our social responsibility. Since the start of corona pandemic, Südzucker has been functional and able to constantly deliver needed products. Again, we want to say thanks to our employees. They were ready to run additional shifts to cover the additional demand for pizza, sugar or ethanol for disinfection purposes. Additionally, a high degree of compliance to our protection measures such as hygienic and distance rules has been adhered. And practical implementation, we observed in many cases of extraordinary creativity. On Page 21, we will focus on some selected topics within the political frame with importance to Südzucker. As a company, the political framework in the markets in which we are present has a certain influence. This is especially true for politics in the areas of nutrition and agriculture. These framework conditions in different magnitude have a direct impact on the market environment for segment Sugar, Special Products, Crop Energies and fruit. Especially in the areas of nutrition and agriculture, there are currently efforts to further increase the regulatory density. In light of the green deal and according to the common agriculture politics from 2022 onwards, the newly elected EU Commission has given direction about the usage of fertilizers and crop protection. Furthermore, it addresses organic farming and future distribution of agricultural payments. As processor of agricultural raw materials, our competitiveness is strongly linked to the upstream value chain. We support a further development towards an even more sustainable agriculture. But having said that we asked for a sense of proportion in order to keep the plan measures implementable and the farmers competitive at least within the EU. The sustainability term according to the EU does not only comprise pure ecological agriculture topics. It also addresses in the green deal framework the farm to fork strategy that highlights aspects of nutrition politics, such as rules for food labeling, plans to fight food waste and food advertisement, as well as establishment of nutritional profile maximum limits for single ingredients. Thereby, it is clear to us and scientists, there is no good or bad food but healthy and unhealthy nutrition. Only combined with sufficient exercise, it is key to prevent illnesses. Stigmatization of single ingredients, such as sugar does not help at all. What we need as a society is a holistic approach instead of simple sounding solutions. Suitable to this issue, in the past years, several EU countries have introduced taxes or leeways for manufacturers and sugar beverages. Globally, many countries introduced sugar taxes, leading to lower sales of tax products. However, there are no studies to prove respective reduction in obesity. It attentively monitor these various nutritional policy developments. They are considered in our business decisions. Good. Ladies and gentlemen, starting with Page 23, I will now show you one of the most important topics that will point the way into the Südzucker future, the Strategy 2026 Plus and the closely connected topic sustainability. We present our vision for the future group Strategy 2026 Plus, which builds on our strength as a diversified group of companies on our employees' expertise and experience. With this program, Südzucker Group has set some ambitious goals and launched a progressive transformation process. Our strategies time horizon emphasizes the forward looking, long-term approach to thinking and acting. We want to change Südzucker Group from a large-scale agricultural processor to a leading partner of plant-based solutions for enjoyable, healthy and sustainable world. You will find the identified core elements on Page 24. They contain 5 strategic directions. Before getting to the content, I will give you an idea about where we are in the overall process. One year ago, I announced the group strategic review. This process has been started mid of 2020, following the process preparation and drafting work implementation has been started. The embedding and necessary transformation will be executed in the course of financial year 2021, 2022. Therefore, already at this point, I would like to ask for your understanding and patience. It is too early at the current stage to talk about detailed numbers. But I can promise you that we will see already in financial year 2021, 2022, first positive impulses from the strategy process. Let me refer to additional detailed information and presentation of this topic in our annual report, as I will not be able to go into it due to time restrictions. Our new guiding principle forms the basis of our strategy and defines the framework for Südzucker Group's further development. We will be more customer focused, more innovative, more sustainable and even more consistently geared towards profitable growth. The 5 defined strategic directions have been underpinned by respective strategic targets. They show the way how we want to achieve the addressed transformation from the large-scale agriculture processor to a leading partner of plant-based solutions for a livable, healthy and sustainable world. These 5 strategic directions have been underpinned by concrete focus initiatives, which I'm going to show you right now on Page 25. The initiatives include a consistent alignment of activities in regard to customers and target markets, and one of the outcome here is also the new setup of our Board divisions. It includes an improved competitiveness and customer benefit via usage of segmental synergies on group level. The full usage of all group purchase offices from 1 source. A better knowhow transfer via installation of unit business excellence, the implementation of a group-wide innovation strategy support by unit new business development, a consistent sustainability strategy, the strengthening of our HR strategy with important topics like diversity, and last but not least, via reinforcement of the IT and digitalization transformation that has been strongly emphasized with executive Board enlargement and appointment of Mrs. Arnold. Let's take it a step further on Page 26 and have a look into the Südzucker engine room. Proteins are a future mega trend with no doubt, and it will create numerous blockbuster products. A growing world population asked for more proteins and over nutrition. Sources are limited, especially for animal-based proteins. Alternative plant-based protein sources are an attractive growth area. Consumer poll shows a majority of 56% accepts plant-based proteins. There is a high motivation based on sustainability, animal welfare and conservation of resources. Another future mega trend can be observed on Page 27, the so-called bio-based chemicals. Opportunities for bio-based chemicals and products have increased significantly, especially through external factors like climate change and stronger focus on sustainability issues. Corresponding measures have been taken by politics, for example, climate protection law or the EU Green deal. Decarbonization has been already started in the energy and transportation sector by extension of renewable energy usage. Also in material use, there is the necessity to switch from fossil to renewable raw material sources. But the decarbonization is hardly possible as the majority of chemical products is carbon based. There is no sustainable chemical industry without switching to renewable carbon as raw material. As processor of renewable raw materials such as sugar beets, chicory, rice, corn, potatoes and wheat, Südzucker is as close as possible to a wide variety of carbon sources. To produce bio-based chemicals, we use carbon tied up in plants as CO2, or from fermentation from established processes, for example, ethanol production. At the same time, we ensure a further long-term tie up of greenhouse gas CO2. Additionally, Südzucker does understand about biotechnological production procedures, procedures of enzymatic and chemical catalysts and procedures of technical chemistry to produce chemical-based material and bio polymer. Now I'm going to explain to you our key pillars of our digitalization strategy on Page 28. As an overall strategy approach, customers, processes, and our corporate culture is on -- in the center. To be prepared for the future, we need highly efficient business processes. These have to be lean, quick and simple. Already today, Südzucker act very efficient and flexible. For years, Südzucker uses a flexible and efficient production, connected production sites or digital production processes. Another example is our connected logistic network. We use our beet-to-go platform within a smart and connected ecosystem to get the sugar beet into the factory under real-time control. Besides this market and customer-based innovations offer an enormous potential for value creation on consumer and customer level. We want to take decisions much closer to a quickly changing market environment to exploit new products and business areas together with our business partners. In this regard, it is essential to use a sustainable innovation process via digital tools and data to obtain a better view about customer and market trends. We will support an even stronger culture of collaboration amongst our employees. Digital tools are indispensable to achieve this goal. Our Südzucker Catalyst program will help, and it will strengthen the cooperation across all business units in a systematic way, leading to a more open and more flexible cooperation culture. In short, our focus on digitalization will secure a successful Südzucker future development. And 2021 is of special importance as it will serve the new Strategy 2026 Plus with the technology base. This is how Südzucker will become more agile and more sustainable. And this is a good segue to the last slide I want to show on Page 29. It shows a theme that is closely linked to Strategy 2026 Plus, it is sustainability. Since the beginning, sustainability is part of the Südzucker DNA having said that we are convinced that we can and want to do more about it and communicate proactively we claim not just to fulfill further growing requirements of all stakeholders besides legal obligations, but to formulate our own targets and aspirations. This is the reason why we have put special emphasis on focus the team sustainability. The initiated strategy process behind the targeted sustainability initiative is scheduled for completion by mid-2021. The process aims to create concrete objectives for the individual group strategy, action items, which are intended to serve as a basis for further work on sustainability, both at the group level, as well as within the various divisions. And to integrate sustainability criteria into decision-making processes, also leading to continuously improving on sustainability ratings. The next step will be to utilize these objectives to outline concrete actions and initiatives, which will then be integrated into Südzucker sustainability roadmap and published within the next 12 months. One of those will be focused then the topic of EU taxonomy regulations. At this point, I would like to thank you and for your attention and hand over to my colleague, Thomas Kolbl.

Thank you, Neil. Ladies and gentlemen, also from my side, a warm welcome to all of you. As to reserve enough time for the following Q&A session, I will refer only to selected pages of the presentation, but will guide you through marking of the page number where I'm talking about. We start with the executive summary on Page 31. As you can see on this slide, we have reached all of our communicated targets for business year 2021. But it's also fair to say that we had to adjust in December 2020, our original targets. Set on a breaker run-up basis in April 2020. Let's move on to Page 32. Business year 2021 marks the expected turning point in regard to financial ratios, especially the leverage position. EBITDA has been significantly improved to around EUR 600 million, whilst CapEx spending was reduced. As a result, structural cash flow was boosted from EUR 143 million to over EUR 300 million. The overall improvement was led by segment Sugar, the initiated turnaround bidding back into positive EBITDA territory after 2 very difficult years. Our non-sugar activities showed an enormous recessions in a strongly challenging corona pandemic environment, confirming the high EBITDA pre-year level. Finally, as mentioned by Niels Porksen, on the 1 hand, the original restructuring Plan 2019 was successfully executed. On the other hand, we continue identifying and executing on additional measures. We're also happy with our solid and very sound debt maturity profile. Let's move on to Page 33 in the outlook. As in fiscal '21, '22, we continue to build on a strong profitable non-sugar business as reliable fundament. In addition to this, segment sugar will continue its turnaround with an expected operating profit delta of more than EUR 150 million, leading the group result into an expected range of EUR 300 million to EUR 400 million. As of now, despite the corona driven high volatility, we are satisfied about a solid start into the new business year. Over the course of the year, we expect a normalization of sales volumes. Last year, we steadily announced the leverage phase. In '21, '22 we will continue this path and reaffirm it. Net financial debt is expected to drop significantly. Consequently, all financial ratios, especially those relevant for defining the credit rating will improve further, supporting our investment-grade rating. Let's move on to Page 35 and the segmental overview for business year 2021. As already mentioned, turnaround in segment Sugar has been started, helped by higher sugar prices from October '20 onwards. On nonsugar activities had another very successful year, confirming the already very good earnings level, especially special product in CropEnergies. 2020/'21 was another year in which our diversification strategy paid off. Let's move on to Page 37. The result from restructuring and special items was mainly driven by expenses from the follow-up effects of the sugar segment's plant closures decided at the end of the fiscal '18/'19 and from the adjustments of administrative structure. Also included are expenses related to regional restructuring from ongoing cost savings program in the Fruit segment. The equity result was mainly driven by the negative contribution from the ED&F Man participation. Also, ED&F Man continue to report a profitable trading business. Charges related to the delayed strategic realignment caused by the corona pandemic led to a net loss. The equity result comprises, especially the net loss for the year attributable to Südzucker and the complete write-off of the goodwill. As stated in our top release in November 20 and explained the quarter 3 report, the carrying amount of the shares at ED&F Man of EUR 224 million dropped to EUR 82 million. Let's take the next topic on Page 38. The increase of the negative overall financial result is mainly driven by a complete write-down of a minority interest in a French sugar factory in H1, which was subsequently sold before the end of the fiscal year. The taxes paid relate mainly to the taxation of the positive result contribution of the nonsugar segment, whereas deferred taxes were not capitalized for the losses in the sugar segment. Let's continue on Page 49. The segment Special Products. Revenues grew by 3%, supported by an overall positive sales volume development and overall higher sales prices. Also already on a high level, it was possible to slightly increase operating results. Individual products, such as frozen pizza in particular, benefited from the measures taken to contain the spread of the coronavirus, while other product groups, such as PortionPack for Horeca, were significantly impacted. Let's continue on Page 50. Financial year '21, '22, we see a continuation of the positive sales development, leading to moderately higher revenues. Earnings are expected to decrease moderately. This is due to partially lower sales revenues, higher costs and lower contribution from ethanol in light of lifted grain prices. Let's continue with segment CropEnergies on Page 52. In fiscal 2021, segment CropEnergies had to face a moderate decrease in revenues due to lower production sales volumes despite higher ethanol prices. Higher ethanol sales prices were not enough to lift the revenues, but not enough to slightly exceed the already high pre-year earnings level. The result was achieved against negative impact from lower sales volume and higher net raw material costs. Let's continue on Page 53. On this graph, we illustrate 2 things: first, the continuous positive underlying upward trend in ethanol pricing over time, and second, the enormous distortion and increase in price volatility in the corona pandemic environment. We clearly see the price distortion as temporary. The underlying fundamentals, like the reaffirmed climate debate have not changed at all. Also, you can see that the second price drop was not as strong as the first one within the corona pandemic. The recovery since then has been pronounced and spread a lot of optimism for further positive development throughout business year '21, '22. Especially the increased momentum in vaccination growth has already lead to regional re-openings, combined with the easing of current mobility restrictions. Let's continue on Page 54 over the outlook for '21, '22. For the current fiscal, we see higher revenues in light of an expected high capacity utilization. Earnings are expected to decrease, prudent about ethanol pricing, mainly expecting significantly higher net raw material costs, putting some pressure on the higher-margin level. Let's continue on Page 56. Segment Fruit realized only a slight decrease in revenues despite the challenging corona pandemic environment. This was helped by overall higher sales prices but burdened by overall lower sales volumes. The earnings decrease was mainly caused by division fruit juice concentrates, while division fruit preparations showed a profit increase mainly driven by cost savings. Let's continue on Page 57. Financial year '21, '22, we see for the fruit segment and moderate revenues and earnings increase. This should be achieved by a volume increase and further cost decrease in division fruit preparations and stable revenues and higher-margin in divisional fruit juice concentrate. Let's continue with segment Sugar on page 60. Revenues in last fiscal in segment sugar came in on previous level. Sugar sales revenues were higher, but volumes were substantially lower due in prior to sugar production during the 2019 and 2020 campaign. In 2019, sugar production was down due to less cultivation and lower yields. In 2020, sugar production fell again following the factory shutdowns after the 2019 campaign with big yields again weak. In addition, lower demand from the sugar processing industry due to the corona pandemic containment measures had a significantly greater impact than the short-term positive effect of re-hoarding in the retail sector at the beginning of the fiscal year in spring 2020. Operating loss was substantially reduced. Improvement was driven mainly by higher sugar sales revenues due to price increases at the beginning of the 2019, '20 and 2021 sugar marketing years, which more than offset lower sales volumes higher production costs and lower capacity utilization as a result, the smaller cultivation areas and below average beet deals during the 2020 campaign. Continue on Page 61. Let me revisit our view on the global sugar market. The latest update in March 2021 and AHS market, formerly for lease, has increased its deficit outlook for running sugar margin year 2021 from 3.8 million tonne to 4.3 million tonnes, which confirms another deficit year. The stock to use ratio is expected to drop from 40.5% to 38.0%. For next sugar marketing year, '21, '22, the forecast shows a balanced market with another drop of the stock to use ratio down to 37.4%. This, ladies and gentlemen, confirms a positive fundamental market environment for at least the next 18 months. Let's take a look at the European sugar market environment on Page 62. You have change into a net importer status since campaign 2018, which has led already to 2 steps of price increases in the last 2 sugar marketing years. There are several reasons for the most recent positive European spot price development. First, the world market price, as the fundamental pricing starting point has increased significantly in the last couple of months. Second, despite a moderate EU average decrease, sugar production is expected to modestly increase, maintaining the European as a net importer status. Third, also in this spring sugar sowing season, there have been disruptions. As I said, we have frost damages, which raised some question marks about the original EU expectations. In this environment, up to 100% of our sales volume of the campaign 2021 is up for negotiation. Let's take a look at the sugar outlook for '21, '22 on Page 63. We are optimistic to continue the started turnaround of segment sugar in financial year '21, '22. We see a significant revenue and earnings increase. The revenue increase should be fueled by the explained positive market environment helped by higher production, higher sales volumes and higher prices. EBITDA already turned into black figures in 2021. Operating result is expected to follow into positive territory in '21, '22 as well. However, we continue to expect low losses for the first half year of '21, '22 as higher prices since October 2020 will be offset, among other things, by higher raw material costs. From October 2021, we expect rising sales revenues in a broadening market environment and further material cost savings from the restructuring completed to date. As well as associated follow-up measures and projects. This should then lead to positive operating earnings both in the second half and for full fiscal year '21, '22 as a whole despite steadily increasing raw material costs. Let me now summarize the overall group outlook and the presentation in the following pages, starting to Page 65. Group revenues came in at EUR 7.0 billion to EUR 7.2 billion and operating resale in a range between EUR 300 million to EUR 400 million. We want to stress again that vaccination rates against COVID-19 are expected to increase steadily worldwide with wide regional disparities. The economic impact of the virus is plus expected to reign over time, notwithstanding the positive outlook that will continue to be corona pandemic related risks in fiscal '21, '22. And the economic and financial impact and duration of this disease are difficult to assess. Let me also repeat that we have seen a solid start into business year '21, '22. Over the course of the year, with the easing of restrictions, we expect a normalization of sales volumes. Now to the segments, in particular. Segment sugar should see a slightly negative H1 and a positive H2 operating performance. On a full year basis, we expect an earnings range between 0 to EUR 100 million. Segment Special Products operating result is expected to come in moderately below the high pre-year level. Segment CropEnergies operating result is expected to range between EUR 50 million to EUR 80 million. Segment Fruit should be able to see a moderate earnings increase. Let me continue with Page 66. Group EBITDA should follow the positive operating result development. CapEx with EUR 330 million should stay on Moody's level. Net financial debt is expected to be significantly reduced. Let me summarize the overall outlook and the presentation on Pages 68 and 69. Ladies and gentlemen, I would like to summarize my presentation with 3 statements also in regard to the midterm development. First, turnaround sugar is due to continue driving group earnings improvement; second, started deleverage phase gains further momentum; third, Strategy 2026 Plus sets the base for sustainable successful group development. On Page 69, last page of the presentation, we would like to visualize the most important key driver with structural cash flow. The development confirms the expected enlargement of Südzucker's room to maneuver. It secures the way to actively shape Südzucker's future, especially in conjunction with Strategy 2026 Plus. Thank you all for your attention.

Ladies and gentlemen, thank you for your patience. Let me hand back to the operator to open up the floor for your questions.

[Operator Instructions] The first question is from the line of Alex Sloane, Barclays. .

I've got 2, please. The first one, just on the 2026 strategy, Dr. Porksen. I note in the annual report, you break down how the strategy plays out to all existing segment and sort of business unit levels. I was wondering, can we infer from this that you see the whole of Südzucker's portfolio today as core to delivering the strategy? Or are there any business units that perhaps don't fit so naturally with a plant-based solutions focus and might have more natural owners? That's the first question. And then just on the second one, again, kind of on the strategy, and I appreciate you don't want to give long-term targets at this point, but I wondered if you could confirm whether, in your view, it's realistic to assume that the sugar business with the further efficiency measures that you've alluded to, whether that business can sustainably generate return on capital employed ahead of cost of capital in the current EU regulatory sugar market structure and based on your view of the long-term sugar supply and demand situation?

Yes, thanks for the question. Let me start with the different business units. I think it's a very fair question, and we had a look, and this was one of the parts we brought together and saying, where is the common sense? Where is everything which fits together? And I have to say that within this strategy, all our main and core businesses are really fitting into what we are talking and what the strategy is. But there are some smaller business, some adjacent business, some shareholding from our site where we really have to think if this still fits long-term to what we want to achieve. So therefore, there will be a cleanup of our portfolio. But not on the core parts, but more on the smaller side parts where we really have a second look, and we will make this decision pretty soon. I think on top of that, we also will have a broader look outside. You have not asked this question, but we will also have a broader look outside with the figures mentioned by Thomas Kolbl. I think it will give us the headroom also to look for some investments, which are supporting in further this new market segments we are looking at. So there will be a cleanup. Long-term targets, sugar business. Can sugar business bring the capital employed? And I can also easily hand it over to Thomas Kolbl, and he will give you the answer. But I would say it is our target to get there. For sure, it is. And we have -- takes a lot of measures in the past. We have made this restructuring, we have slim like our administrative cost center. And we are working hard on doing even better in our commercial parts that we are getting to the profitability we need. It is not an easy task to get there, but we are working hard to have also sugar delivering their capital costs for sure. But I can just hand over to Thomas.

I can fully confirm that what Neil said. We're Convinced with the current setup, with the current measurements we set, and after the corona pandemic with higher volatility, that midterm, the sugar operations are able to cover capital costs.

[Operator Instructions] The next question is from the line of Oliver Schwarz, Warburg Research.

I will then ask them one by one. Firstly, you alluded to additional cost-saving measures that are currently implemented. And will likely already result in a positive earnings contribution or lower costs that is made in the current fiscal year. Could you please quantify the magnitude of those additional measures, the timing and the related costs? That will be my first question.

To your question, we announced the cost-saving program for our factory closures. Two years ago with this EUR 100 million, and from the phasing of that cost savings, we can say that 1/3 kicked in 2020, '21 fiscal year. And 2/3 will phase in, in '21/'22, roughly. And in addition, we foresee additional EUR 30 million measurements, which will kick in in the next 2 years up to '22/'23.

Secondly, if I take your cost savings, the number of EUR 70 million from past restructuring measures, Mr. Kolbl, and add that to the results of the past fiscal year, I'm already at the lower end of your guidance range despite you looking for significant increase in profitability of segment Sugar. So basically, a return to profitability also on the EBIT level. I know that you also hinted at or pointed us at lower earnings of the specialties part of the business. But that seems to be more than offset by the increase in sugar. So can you explain why at least the lower end of the guidance range seems to be, or let's say, not taking into account any operational improvement apart from the positive effect of the savings.

First of all, to clarify the EUR 70 million you mentioned here, you put that on which fiscal?

The past fiscal year, so 2021.

Yes, but as I explained, I said 1/3 of the cost savings of EUR 90 million to EUR 100 million, we reached in 2021. Yes, and 2/3 in the tranche fiscal '21/'22 as a starting point.

Yes, but the overall number was 100 and 2/3 of that is EUR 66 million. Isn't that correct?

Roughly, yes, for the current fiscal.

Yes, exactly. Yes, yes, if I use the EBIT of the past fiscal year and put that -- okay, I said 70 but it seems to be more likely to be EUR 66 million. If I just add that to the EBIT of last year, compare that with the lower end of the guidance range, which is EUR 300 million to EUR 400 million, I am already very close to the lower end of the guidance range. And the other question is with sugar, more than offset -- positive sugar results more than offsetting the decline in most likely CropEnergies and the specialty operation, why is the lower end of the guidance range rather low? Is that conservatism? Or am I missing something here?

No, it's absolutely, absolutely right. What you mentioned here. For the guidance 2021. We set a realistic, let me say, starting point with the midpoint of EUR 350 million. And clearly, we have certainly some influence from the pandemic, especially the first months of '21/'22. We expect that these effects will phase out during the year, leading to normalization also of volumes, especially in sugar, in the starch business, et cetera. And so the current midpoint of EUR 350 million is clearly a realistic one. And clearly, to reach that midpoint, one of the main assumptions in the guidance is that we reach the underlying price assumption in our sugar segment starting for the next contract round on October 1, 2021 onwards.

And my last question for the time being would be you just mentioned the annual contracts. Currently, the majority -- the vast majority of your shipper volumes are locked in on contracts that are about to be renegotiation -- renegotiated, sorry, by midyear, by mid -- and hence, the impact of those price increases will be only felt in the second half of your fiscal year and not in the, let's say, even less than half of your fiscal year? Am I right to assume that you are going for very significant price increases to achieve that operating increase in operating results in the sugar segment? Or is that mostly the -- what you expect as an increase in earnings? Is that mostly attributable to the savings you just discussed.

Yes, let me say several points. First of all, the cost savings we explained. Frankly, we assume a normal campaign, no idle costs for campaign '21. And third point, not a significant price increase. We said in the, let me say, guidance for sugar a moderate price increase comparing sugar market in year '21, '22, against sugar market in year 2021, a moderate one.

[Operator Instructions]

That seems not to be the case. So we thank all of you. It seems we had a full set of information here for you guys. There's one last -- one coming in maybe further, but -- Michael, please go ahead.

And apologize if it has been asked and answered already. But just picking up on what you said, Mr. Kolbl, on your underlying assumptions heading into the next fiscal year or sugar marketing year that you are assuming normal campaign conditions. So I wonder whether you can update us on, let's say, the current planting conditions out there. I mean, we had a very challenging start into the growing season with a lot of reseeding potentially in the -- primarily in France, but also some other regions in Germany have been affected. So how can you assure basically that this all turns out as a normal, let's say, a normal season with the normal campaign links. And if my memory is correct, I mean, normal campaign lengths these days is 120 days for you. So this kind of underlying assumption. So what's needed in order to make it?

Let me try to answer your question. So I think it's right what you have said, so there was a lot of up cycles for the farmers. There was frost, they had to re-sow certain areas. The main effect of this was in France, and it was in parts of France where it was not affecting Südzucker too much. It's a bit of affecting us, but really in a range, which we always have to deal with year-by-year of around overall, including Germany and others of about 3%. So that's not too much. France was a bit more. It was about 5%, probably. But in general, not really a big thing. So we see at the moment, the beets are growing pretty well. We have more or less the same amount of hectares than we had last year. Last year was affected by drought, pests, insects and which didn't allow our farmers to have the reasonable yield. It was more an underperforming year. So we are calculating just as an average one this time. So this altogether gives us the confidence that we will increase our amount of beets and then with our experience also increased the amount of sugar out of these beets compared to what we had last year. But your assumption is right, but the effect to Südzucker is limited this time.

The next question is from the line of Sonal Sodhi, MS.

Sonal Sodhi from Morgan Stanley. I just had a question on your credit ratings, the investment-grade rating. It's very close to the edge in terms of whether being IG or high yield. So just wanted to get your sense, is there anything that you would do proactively if required to maintain that investment grade ratings? Or you have had any conversations with agencies given the outlook that you have provided today for the current fiscal year?

Yes, clearly, the whole company is committed to keep the investment-grade rating. We are at this level over the last 2 years. At Standard & Poor's and Moody's. Let me say, support from, let me say, improved financial ratios for 2021. And a positive outlook for '21, '22 with a strong increase in profitability in all cash flow relevant ratios. We see, let me say, the account setup for our investment rating in a more safe haven than the last 2 years. So the peak is behind us. And we foresee, let me say, a more positive momentum over the next quarters.

We have a follow-up question from the line of Alex Sloane Barclays.

Just 2 quick ones, hopefully. Just the first one on CapEx. Obviously, a relatively constrained level in the year just gone. I just wondered, as we think about the kind of the strategy period out to 2026, is that sort of a level of CapEx sustainable? Or to achieve some of the ambitions that you have particularly around like digitalization? Is there going to be requirement for some step-up on investment on that front? And then just secondly, I mean, I appreciate fully that your comments at the start of the presentation that the strategy hadn't, yes, sort of been kind of fully concluded, so you don't want to give targets at this point. But would it be realistic to assume over the next 12 months that you might be in a position to give kind of longer-term targets in terms of the financial ambitions from this strategy?

Yes, thanks again. Starting with the last one. I have to admit, yes, this is something we should do. And I can confirm that we have discussed, and we are still in discussion and confirmation with our different divisions, what kind of growth we see out of this strategy. Of course, it's a growth strategy. I think this is what we can confirm. It's really coming on top of what we have planned so far. So therefore, we see the growth and the different divisions are in the process to confirm how much it is. And therefore, I think it's a realistic time frame to say in the next 12 months, we should come with more concrete and clear views forward also with this financial impacts. CapEx, yes, I think we mentioned it already a bit, but let me reconfirm with the headroom we are getting now because of this improvement of our business, we have much more flexibility to go for investments. This might have an impact on CapEx because we are investing in either in capacity or in new investments for these new markets. And therefore, I think this current CapEx is based on what we believe is needed for the normal growth. But whatever comes on top, we have to decide how much we can put into the revised CapEx. On the other side, I have to say there is certain things we can just do with our current setup. So it's not that we always have to invest to do what we want to do. There are certain things we have already. We can just utilize it slightly different, or we can just extend it to one step further down the chain, and then we are getting there. So therefore, not everything we are doing needs a lot of additional CapEx.

We have a follow-up question of Oliver Schwarz, Warburg.

First one would be on raw materials. Sugar beet farmers received in the past, top-up payments, basically 2 key them happy with their income from sugar beet farming despite the low sugar prices that normally also translate in unattractive sugar beet prices. With prices rising both in the past fiscal year and in the current FY '21, '22, prices increased or are expected to increase. Will we see a reduction in those top-up payments? Or are they basically from now on a part of what the sugar beet farmers will receive no matter where the price of sugar and hence, profitability is? That will be my first question.

You're fully right, in the last 2 difficult years in the extreme low sugar prices. We had to offer top-up to secure the beet deliveries to utilize our capacities. With the price increases over the last 2 sugar marketing years and our forecast for October 2021, clearly, sugar prices are going up. And via our formula also, our prices will increase, first point. But sugar sales price is the 1 side of the coin. The other side of the coin are the alternative raw material prices like corn, like wheat, et cetera. And therefore, we have, as all other sugar factories, some pressure from that side to make the beets more attractive. But to do that, let me say, the absolute numbers are clearly not so high. We assume that numbers we had to pay in the past. But clearly, there is some risk when we are looking on the alternative routes.

Second question would be more of the same in regards to the starch business. It seems like part of the expectation of reduced margin in the specialties business is reduced margin. Starch, which was basically triggered by higher selling prices of corn and wheat. Can you give us a bit more insight in how prices in starch are basically negotiated? Is that similar to what we have in sugar when there's, let's say, a fixed timing for new contracts to kick in and the mass majority of the contracts being on an annual basis? Or is there more or less flexibility in starch? How does that business basically work because it is not a campaign business as sugar is. So there should be some, let's say, some differences between the 2 businesses. So I'm basically heading to when will you be able pass on higher or rising raw material costs on to the respective customers?

Clearly, the time lag is not so big like in sugar, where we normally have this 1 year or a multiyear contract in starch. We can say a big portion of contracts is made quarterly. So the time lag is not so big in the starch business.

Okay, great. And lastly, I'd like to delve on the tax issue, you said you didn't capitalize the deferred taxes -- tax assets that resulted from the loss in the sugar activities so far, Mr. Kolbl. I'm guessing once we go back and to have more, let's say, a higher profitability level where you make a positive income on an EBIT basis, obviously, tax segments for sugar also will kick in. Will they be reduced for deferred tax losses, of the past once they kick in the positive results? Or will there be a delay and some negotiation with the auditors when -- if that's a sustainable situation and from when on those assets can be used to reduce the tax toll?

Clearly, when we are in the -- when we are confident, let me say that, then we are confident as management that we will have going forward, let me say, robust black profits in the sugar operations, then clearly, we will account for this tax losses carryforward.

So it's basically a management decision when you start saving on that?

Yes. Looking on the midterm planning, et cetera. And clearly, we will have at the end of the day, also discussions with the accountants clearly. But the first step is the management decision.

There are no further questions at this time. I hand back to Nikolai Baltruschat for closing comments.

Thank you all for your questions and for participating in today's call. And we hope to see you soon, not just to hear, but also to see you soon. And if you have additional questions, just don't hesitate calling us. And so thank you. Goodbye, and stay well. Bye-bye.