Südzucker AG (SZU) Earnings Call Transcript & Summary

Thank you, and good afternoon, ladies and gentlemen. Welcome, and thank you for participating in today's audio webcast of Südzucker AG. As mentioned in the invitation, the underlying presentation has been published on our homepage today. You can also follow the slide show via the distributed webcast link. Today, we released the report for the financial year ending 28th of February '25. We're going to explain the highlights of the year and give details about the guidance for the current financial year '25-'26. We're happy to take your questions following the presentation of Niels Pörksen and Stephan Meeder. 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 our CEO, Niels Pörksen. Niels, please go ahead.

Thank you, Nikolai. Good afternoon, ladies and gentlemen. On behalf of the entire Südzucker Executive Board, I'm delighted to welcome you to this year's analyst and investors conference. Let us begin on Page 4. Before going into detail, I would like to take a general look at the past 2024-'25 financial year. This was even more challenging for the group than we had expected at the beginning of the financial year. In our core sugar business, fluctuations are a constant challenge as is well known. The market is structurally very sensitive to factors such as production volumes, demand on the supply situation in Europe and worldwide. Periods of very high sugar prices are often followed by slumps, unfortunately. This was also the case in the 2024-'25 financial year. The price decline was followed by a significant drop in earnings in our sugar segment. The year was more positive for the nonsugar segments. They generated around 60% of consolidated revenues and almost matched the previous year's good earnings level, with an EBITDA of EUR 600 million. This confirms that despite all the influencing factors, our company is now much more resilient than it was a few years ago. We owe this to the broad base of our diverse business areas, which support each other, and to our wide range of strategic measures to tap new markets and optimize and increase efficiency within the group. Despite these turbulent years, we are, therefore, convinced that we have chosen the right path for Südzucker Group with our decisions and strategic orientation, and we are determined to continue along this path. We continue to face a wide range of challenges. These include, for example, higher energy costs and the investments required in the area of sustainability or in agronomy due to increased disease and pest infestation and climate change. And last but not least, we are currently experiencing unprecedented geopolitical changes. We must respond to all of this with measures specific to our company. To this end, we will continue with the measures we have already initiated and also take new ones. We will start by further developing our successfully implemented corporate strategy, Get the Power of Plants, and optimizing structures and processes. In doing so, we will also subject all projects and investment plans to renewed critical review. All measures must contribute to increasing the value of the company. In addition to further expanding our existing business, we are placing particular emphasis on developing our new business areas. I would like to mention the areas of bio-based chemicals, convenience food and proteins as examples. About a year ago, we started construction on the first plant for sustainable air fuel acetate in Europe at our Zeitz site. Last month also saw the groundbreaking ceremony for a plant expansion at the Freiberger site in Berlin, the commissioning of a production expansion at the Stateside in the United Kingdom and the inauguration of a plant for pulse processing at the Offstein site. In other words, despite the challenges in the years 2024-2025, we are not losing sight of shaping our future. Let us now take a brief look at the figures for the 2024-2025 financial year on Page 6. Stephan Meeder will go into the financial details later. With consolidated revenues of EUR 9.7 billion, we have achieved a very respectable figure in absolute terms and also in historical context following the record results of the previous years. Overall, a moderate decline was recorded. While revenues declined in the sugar, special products, CropEnergies and starch segments, they rose in the fruit segment. The group's operating result fell significantly to EUR 350 million. A slight increase in the special products segment and a significant increase in the fruit segment were offset by a significant decline in the sugar, CropEnergies and starch segments. The exceptional development in the sugar segment distracts from the continued success of the nonsugar segments. These were able to confirm the good earnings level of EUR 389 million from the previous year with EUR 363 million in the 2024-'25 financial year. Let us now turn to an overview of the individual nonsugar segments. I would like to start on Page 8 with the special products segment, and let's begin with the BENEO division. BENEO primarily manufactures functional ingredients, has a global presence and is, therefore, also a distribution partner for other Südzucker Group companies. This gives us an excellent starting position for further synergies with the group, which we are continuously expanding. The trend towards health-conscious and plant-based nutrition continues. BENEO is responding to this trend with soluble fibers from chicory, texturizing rice ingredients, functional carbohydrates from sugar and textured plant proteins. These ingredients are obtained from plant-based raw materials and are used in a wide variety of foods such as dairy products, cereals, sport drinks, baby food, confectionery and meat alternatives. At BENEO, we are working on capacity expansion and new construction projects such as aforementioned production facilities for plant-based protein concentrates at our Offstein site, which we recently commissioned. We are also working intensively on expanding our international sales and adapting them to global requirements. On Page 9, we take a look at the Freiberger division, our convenience food specialist. The trends I just mentioned at BENEO are also affecting Freiberger. They are creating new potential, which Freiberger is continuously analyzing and consistently incorporating into its product portfolio. Sustainability aspects are also increasingly being taken into account in the analysis. In addition to product development, Freiberger is further expanding the marketing concept that have already been successfully expanded in recent years. Overall, Freiberger operates from a strong market position. The markets in Europe and North America established and continue to grow. New future markets are being explored, and our aim is to grow faster than the market and further increase profitability. On Page 10, we now come to the smallest unit within the special products segment, the PortionPack Group. PortionPack manufactures portion products for the food and nonfood sectors. Its customers traditionally come from the HoReCa sector. It means hotels, restaurants and catering. This market was hit hardest by the coronavirus pandemic. Today, we are seeing a full recovery of the business. Against this backdrop, PortionPack has continued to invest. The co-packing and the co-manufacturing division is intended to reduce dependencies and generate growth. Sustainability also plays a major role at PortionPack and is taken very seriously by us. Already today, the majority of the packaging used by PortionPack made from recycled or sustainably produced materials. In line with our divisional strategy, PortionPack is expanding its sales activities to existing and new target groups and markets. Let's move on to Page 12 and take a look at the CropEnergies segment. CropEnergies is the leading European manufacturer of renewable ethanol for the fuel sector and thus makes a significant contribution to the necessary reduction of greenhouse gas emissions in road transport. Our subsidiary's product portfolio also includes the production of neutral alcohol, protein-containing food and feed as liquid CO2 and in future bio-based chemicals. CropEnergies was unable to match the results on the 2023-2024 financial year in 2024-'25. This was primarily due to the significant decline in European ethanol prices, which was attributable to high import volumes from the U.S.A. The negative impact of declining prices was far from offset by lower net raw material and energy costs and higher sales volumes. This is another reason why CropEnergies is broadening its base in the future and consistently implementing the expansion of its bio-based chemical business. As already mentioned, the groundbreaking ceremony for the first ethyl acetate plant took place in April 2024. Commissioning is scheduled for summer 2026. We now continue with the starch segment on Page 14. In the starch segment, our Austrian subsidiary, AGRANA produces starches, starch saccharification products, ethanol and byproducts such as gluten from various raw materials, including corn, wheat and potatoes. These are used for various applications in the food and feed sectors, in paper and packaging and as fuel. In the last 2 years, the business segment has been confronted with market weakness, which was partly due to economic factors. In the meantime, a recovery can be observed in some submarkets. The remaining supply surplus led to failing prices. This resulted in a significant decline in earnings. In addition, the flooding in Austria in September 2024 had a negative impact. The Pischelsdorf site was temporarily shut down due to the flooding. On Page 16, I would like to say a few words about the fruit segment. We are very satisfied with the business development in the fruit segment in 2024-'25. Revenues and earnings increased. The very good earnings performance was largely driven by the fruit preparation business. We were able to maintain the good sales level while achieving higher margins. Let us conclude the segment overview with a look at the sugar segment on Page 18. The market downturn was already becoming apparent at the end of the extremely successful previous year. However, the full extent of this was not yet apparent at the time. The very sharp decline in market prices for sugar during the financial year was not expected to be so severe. The main reason for this were improved production prospects in Brazil and Thailand, unexpected export approvals from India and the devaluation of the Brazilian real. At the same time, demand was weak. Around 450,000 tonnes of duty-free sugar imports from Ukraine in the year 2023-2024 sugar marketing year further intensified the price pressure on the EU sugar market. This meant that European sugar producers had to export sugar outside the EU at reduced margins. Sales of quantities from the previous year, which had been produced at high manufacturing costs, mainly due to high energy prices and raw material costs, also weighed on earnings. As a consequence, we had to significantly lower our earnings forecast for the financial year in autumn 2024. We ended the year with a loss in the sugar segment. In contrast to a comparable situation in the past, the response time in the sugar industry value chain to such changes has been significantly reduced. Sugar producers have already significantly reduced the cultivation area in the EU with the spring 2025 sowing. In addition, we have decided to discontinue sugar production at our sites in Leopoldsdorf and Hrušovany. As a result, a significant decline in production volumes is already expected for the 2025 harvest. This also forms the basis for our initial forecast for the current 2025-'26 financial year. We expect to be able to market these volumes from October 2025 onwards as an EU sugar price rise. Ladies and gentlemen, this year, we are, once again, taking a look at the political environment. This is important for Südzucker. Therefore, please turn to Page 20. Political conditions influence our business in many ways. There were notable developments in trade policy in the past fiscal year and especially in recent months. The free trade agreement between the European Union and the South American trade block, Mercosur, was politically agreed on December 6, 2024. Once the agreement enters into force, 190,000 tonnes of sugar and 650,000 tonnes of ethanol could enter the European market duty-free. At the same time, discussions are also underway with Ukraine and duty-free import quotas that would enter the European market. Duty-free imports from non-European countries put our European farmers and producers who are legally and intrinsically committed to high quality and environmental standards under considerable pressure. It is important to maintain a sense of proportion and not lose sight of domestic production. There's also a continued need for political actions in agricultural policy. In sugar beet cultivation, we are still exposed to new pests that also transmit new plant diseases. For example, the reed glasswing cicada transmits pathogens to cause SBR and, since the penultimate campaign, Stolbur. This not only reduces the sugar content of the beet but also makes it normally firm structure rubbery, which makes processing much more difficult. Through joint research efforts by all market participants, we have been able to identify plant protection products that help us combat the spread of this disease. However, this is only part of our solution. At the same time, we are promoting agricultural measures and further research and are committed to the application of new breeding methods. We are, thus, stepping up our efforts to protect domestic sugar beet cultivation. We are closely monitoring the latest developments and the upcoming trial at European level regarding the creation of a modern legal framework for new breeding techniques. With regard to food policy, we know that the new federal government emphasizes self-determined consumer behavior in its coalition agreement. Consumers are to be supported through strong rights, transparency, information, advice, education, protection and precaution. Consumer education in the area of nutrition is to be strengthened. In addition, exercise and healthy eating, especially among children and young people, are to be promoted more strongly. We expressly welcome this. After all, it is not individual nutrients or foods that cause obesity in humans but an unbalanced calorie intake. Energy policy, both in Germany and in Europe, also has a significant impact on our company. Our long-term goal is to contribute to the desired climate neutrality of the economy through climate-neutral production. One promising approach is to produce biogas from beet pulp. However, we need a suitable political framework for this. The EU has laid the foundation for this with the Renewable Energy Directive III. For the use of biogas to supply our factories, it is now crucial that the national implementation of this directive offers the same opportunities for the economy as the European guidelines. We are, therefore, eagerly awaiting its transposition into national law and hope for support for our contribution to achieving climate neutrality. Ladies and gentlemen, I would now like to conclude on Page 22 by returning to the beginning of my presentation. As I mentioned at the outset, we are facing a number of challenges, some of which will have a lasting impact on us. For example, we expect to have to adjust to higher average price levels for various key cost categories in the future, particularly for energy, but also for investments and personnel. It, therefore, remains our task to establish appropriate measures to counteract these effects, and we will do so with the necessary sense of proportion. Our fundamental focus areas and priorities, which are also derived from our strategy, remain unchanged. We will continue to pursue them with determination and support them with additional measures where necessary. We have set ourselves a savings target, an approximately EUR 200 million for the Südzucker Group for the coming years. I would like to highlight 2 projects by way of example. The first is AGRANA's NEXT LEVEL project, which is expected to generate annual savings of EUR 80 million to EUR 100 million from the 2027-'28 financial year onwards. We have also launched the OPTIMUM project within the group. By improving production performance, we aim to achieve total annual cost savings of more than EUR 100 million over the next 3 years. We are also working hard to harmonize the naturally competing focus areas. The overriding priority is that all measures contribute to increase the value of the company. Against this backdrop, we see our focus in 2025-2026 on taking or continuing all necessary measures that will help us make Südzucker Group even more efficient and future proof. I would like to thank you very much for your attention. We will be available to answer your questions you might have afterwards. And now I will hand over to my fellow Board member, Stephan Meeder.

Thank you, Niels. Ladies and gentlemen, also from my side, welcome to our -- this year's annual analyst and investors conference, and thank you very much for your interest in Südzucker. In the following, I will focus primarily on the main points from a financial perspective, and you can find the detailed additional information in the presentation that has been compiled for you in the appendix. Let's move on to Page 24. Here on Page 24, you can see that we have achieved all of our financial targets for fiscal '24-'25. But yes, it should be noted, however, that we have significantly lowered our original targets in September '24 due to the developments in the sugar segment as Niels Pörksen has already explained. Thus, it is important to take a differentiated view on our performance and always also keep in mind that we are coming off a record year in fiscal '23-'24. We were well aware at the beginning of this financial year that there would be a significant decline in earnings, and we also communicated this transparently. Let's move on to Page 25. Here, you can find some additional key figures for fiscal '24-'25. The results just mentioned also are reflected in the key figures, are here presented also on Page 25. You can see starting with cash flow. So as cash flow has halved and investments remained high, net financial debt could only be reduced slightly. The successful implementation of the factoring program also helped here. As the decline in cash was greater than the decline in net financial debt, the ratio deteriorated accordingly from 1.7 to 3.2 net financial debt over cash flow. The return on capital employed was also lower as the decline in earnings was greater than the decline in capital employed. Positively to be mentioned, the equity ratio remained stable at a high level with 42%. Let's move on to the next page. It's Page 26. Here, we place the decline in sales and earnings in the historical context. The expected earnings decline in the sugar segment is offset by our now very large, stable and successful earnings anchor in the nonsugar segment. The nonsugar businesses now account for a significant EBITDA level of around EUR 600 million with further growth potential. Let's move on to Page 27. You can see the diversification of the group. So following from what has just been mentioned, you can see that the broad diversification of earnings within the entire group and the nonsugar segments. From a historical perspective, the temporarily sharp decline in cash flow is still representing a good level. In addition to the aforementioned reduction in net financial debt, it should not go unmentioned that our liquidity position remains exceptionally strong in these challenging times. You can see that our liquidity position amounts to EUR 2.8 billion. Also positively to be noted that in January '25 this year, the capital market once again placed a high level of trust in us. The extremely successful placement of the EUR 500 million bond to replace the EUR 500 million bond maturing in November '25 was oversubscribed 6x. Coming to our dividend proposal, this reduced dividend proposal to EUR 0.20 coming from EUR 0.90 per share reflects the development in '24-'25. Let's move on to Page 29. Here, I will come to the outlook for the new fiscal. So on Page 29, you can see the outlook for '25-'26, and this outlook was first published in its core on February 11, '25. You can see here that the expected EBITDA range is from EUR 525 million to EUR 675 million. It should be noted that depreciation and amortization are expected to remain at previous year's level and a decline in investment is anticipated. Moving on to Page 30 with additional key figures for fiscal '25-'26. And here, I would like briefly to discuss the other key figures. You can see based on stable capital employed and taking into consideration the decline in earnings, there will be a significant decline in return on capital employed, ROCE. And despite the decline in earnings, we will continue to work on further reducing our net financial debt. We also expect the cash flow-to-revenue ratio to remain above the 5% mark in fiscal '25-'26. And same as for last year, positively to be noted, the equity ratio is expected to remain at a stable high level. On Page 31, so at the end of our overall presentation, I would like to discuss the group forecast with regard to revenue and earnings development, first, on group level and then going into the details of the segments. So firstly, on group level. In relation to this forecast for '25-'26 fiscal year, it should also be noted that further effects from the ongoing war in Ukraine and the resulting continued fundamental increase in already high volatility on the sales and procurement models are still to be expected. This applies in particular to the further development of duty-free Ukrainian agriculture imports, e.g., sugar or grain. And in addition, also the economic and financial effects and the duration of the global health policy upheavals are difficult to assess. As mentioned, we also provided our -- in our initial outlook for '25-'26 fiscal on February 11, which remains unchanged as of today. We expect consolidated group revenues. You will find this at the bottom of the graph. So we expect consolidated group levels of Südzucker Group between EUR 8.7 billion and EUR 9.2 billion and consolidated operating result between EUR 150 million to EUR 300 million. So let's have a deeper look on the segmental level and starting with sugar. So for sugar, we expect operating result to be between minus EUR 100 million and minus EUR 200 million. So the sharp drop in sugar prices will lead to a significant increase in operating losses in the first half of fiscal '25-'26 despite lower production costs. We do not expect to return to positive results until the second half of the financial year when sugar prices are expected to recover. Let's move on to the second, special products segment. Here, we do not expect to be able to maintain the very good earnings level of previous year. We currently anticipate the planned increase in sales will not be sufficient to fully offset the expected cost increases so that the operating result will decline moderately, but also positively to be noted, remains at a high level. In the CropEnergies segment, we expect a significant increase in the operating result due to higher sales despite rising costs. In the starch segment, we assume that the expected increase in raw material costs will almost entirely offset the increase in sales so that the operating results should remain at previous year's level. Last but not least, the fruit segment. Here, we do not expect to be able to maintain the very good earnings level of the -- we currently do not expect to be able to pass on the higher costs in full to the market and, therefore, anticipate a significant decline in earnings in both the division fruit preparations and the division fruit juice concentrates. But as in the special products segment, however, earnings will still remain at a very good level. So ladies and gentlemen, coming to the end of this presentation and as Niels Pörksen has already clearly defined the focus for '25-'26 and has set the course for the coming years, it means despite the financial challenges and the resulting limited scope for action, we will not stop investing in order to fulfill our vision of value-enhancing growth. Yes, we do see an increase of numerous challenges, but we see this also as an opportunity to tackle the measures mentioned with even greater vigor and thus enter the next phase in a stronger position. In this period, we can also be seen as a transition year. We must continue to do our homework and seize the opportunities that arise, and we will do that also with a certain great amount of optimism, as you know us. We would like to take the opportunity to thank you very much for your interest and your attention, and we are now looking forward to your questions. Thank you so far.

[Operator Instructions] The first question from today's call comes from Setu Sharda from Barclays.

I have 3 questions. The first one is on the sugar guidance. What is your base case on the per tonne recovery with pricing round in the summer? And how much of the last year decline can you reverse? Second question is on the -- aside from the better prices in sugar, like what cost actions can you take in sugar to structurally improve profitability and returns? And third is about ethanol. Like, how much of the EU ethanol industry is currently U.S. imports? If they were restricted, what impact could it have on price? Is this likely as a result of tariff standoff? And could increased Brazil supply under Mercosur offset this benefit?

Thank you, Setu. I can start with your question on the sugar prices. And for sugar prices, we always have to keep in mind that sugar marketing year and our fiscal are not the same. So we always have the effect that 1 sugar marketing year affects 2 financial years with 5 and 7 months, respectively, because sugar market year runs from 1st of October to 30th of September and our financial year from 1st of March to end of Feb. And if you look at the different sugar marketing years and financial years, so for sugar marketing year '24-'25, we had to accept a price decline at about -- I cannot give broad figures, but roughly, it is EUR 200 per tonne. For sugar market year '25-'26, we do foresee positively a recovery of the EU sugar prices as from October onwards, yes, so October '25. And translating this into fiscal -- for fiscal '24-'25, on average, we have to face a significant decline in prices by more than EUR 150 per tonne. And for fiscal '25-'26, we expect, on average, a price decline of more than EUR 100 per tonne. But also this already includes the assumption of a price increase from October '25 onwards. Can you repeat your second question? I didn't fully get it.

There was a structural improve. What can you do to improve the structure? And I can probably take these, but I haven't really got the last question. So structurally, improvements, what can you do in the sugar business on a short notice? It's always very difficult to go on the short notice to have big impacts. What you always can do, and this is what we are going to do, and we have initiated this already 1.5 years ago or about a year ago. This is reducing your cost and improving your efficiency. So we have looked into our factories, and we went through all the different processes in the factory, and we have initiated to reduce cost and being more efficient with less. And this, as we said, has given us a chance to improve our profitability on this side. We call it operational excellence, and this is, as we talked about, an improvement, which gives us a high amount of millions, better results in the process of producing sugar out of sugar beets over the next years. The other thing is more on long shot where you have to balance out the production volumes towards the consumption. And this is also what we have already started last year in negotiating with our farmers that we need less sugar beets for less sugar, and this has led into a reduction of planting sugar beets this planting season, which means less sugar in the next sugar season, which starts from October onwards. So -- and we have heard some statistics from the official authorities that this is something we will see in entire Europe, which will give us the confidence that we might have less sugar, substantially less sugar in Europe over the next years and specifically on the next sugar season. On top of this, we are also seeing that there is less sugar coming from other countries, specifically from Ukraine, where we had this agreement where they can import sugar to -- or export sugar to Europe with no tariffs. This has changed. This has changed already in the first half year of 2025, and this might be being more restrictive for the end of this year, which also helps us to bring us into a better position to match the production and the consumption. Okay. So in 2025-2026, just for you to know, we will have already a double-digit of savings put in our results. The last question, I have not really got completely. I don't know if -- to my point -- can you just repeat...

Yes. So how much of the EU ethanol industry is currently U.S. imports? And if these U.S. imports were restricted, what impact could it have on sales? And also like would increased Brazil supply under Mercosur offset this impact?

Is your question on ethanol that I get it? Because the line is not very clear. Did you ask for the imports of ethanol into the EU from U.S.?

Yes.

Okay. So just recently, there was the communication, it was last Thursday, of apparently deal between the U.K. and U.S. government for a tax-free trade agreement. In this context, it was announced that U.S. ethanol could enter into the U.K. market on a duty-free basis. So as of today, the U.K. imports, they are the most important imports into the U.K. and EU market. But so far, there is a tax on it, roughly EUR 100 per tonne. So what we typically see over the last month was a price differentiation between U.S. ethanol for Houston and the European ethanol prices on a plus basis, with a differentiator of EUR 200 per cubic meter. So that means if we assume roughly EUR 100 of duty and EUR 100 of [indiscernible], freight and cost for meeting the EU specifications, it means that a reduced duty could lead to significant pressure on the U.K. market because as also from official news from ABF on Vivergo, there's a loss situation in the U.K. And for sure, that was also already declared by the production companies in U.K. to the Prime Minister of Great Britain that this could significantly harm the U.K. production of ethanol. When it comes to the price reaction on Thursday, Friday, the price reaction on spot markets was negatively. That means affecting negatively the EU price level. But since then, it turned back to the positive because something -- based on what is communicated on price regard that this could mean that more U.S. ethanol is going to U.K., but less to Europe, Continental Europe. So in the last 2, 3 days, the ethanol prices on the European continental market strongly increased again. So it's -- I say this in all detail to make clear, there's a high volatility to be expected on ethanol prices. There could be a counterreaction of the European Commission saying, okay, if EU imports to the U.S. might lead to duties, there could be a counter duty on ethanol, but it's really unclear the situation. But what is clear, we need to be prepared for a high volatility.

The next question comes from Oliver Schwarz, Warburg Research.

I've got a couple of them. Maybe we'll take 2 turns so that it doesn't spread out too much. First one, you already alluded to AGRANA and their savings targets that they set themselves. They do so partly by trying to increase the efficiency of their production facilities, same as you do. But on the other hand, they are also implementing, let's say, a more holistic management structure, meaning that on top of the segment reporting that they have, they introduced internally at least 2 strategic divisions, Agricultural Commodities & Specialities as well as Food and Beverage Solutions. And part of the savings, at least they claim, comes from the more flexible management that this structure is going to allow AGRANA in the future so they can react more flexible to customers' demands and so on and so forth. So I'm wondering if beyond what you already planned regarding the raising efficiency at the various plants you operate, do you at least mull changing the management structure also of Südzucker Group in accordance to what AGRANA is doing? Or is that isolated only to AGRANA? And if so, why? That would be my first question. Should I -- do you want me to lump all the questions together? Or do you want to answer them one by one?

Depends how many questions you have. So 1 or 2 more and then we will try to answer.

Yes, that makes sense. When it comes to -- you already stated that you want to cut down on sugar beet acreage, partly due to the scrapping of 2 plants, sugar plants by AGRANA, but also in other regions due to the lower sugar price. And obviously, you intend to raise the sugar price and, hence, restrict supply. On top of that, it seems like the weather is not in favor of sugar beet at the moment. Normally, what you should have in the sugar year is a rather wet spring and a rather dry autumn. It seems like we've got the opposite right now. Spring, at least up to this point, was rather dry. Obviously, we don't know what the weather in autumn will be. But at least for the time being, it seems like the dry weather is here to stay in Central Europe. Would that exacerbate the, let's say, the reduction of sugar production if the weather stays like it is today or at the moment and getting even harsher in the summer? And would that essentially be positive or negative for you? Because obviously, the campaign length would decline if the yield on the sugar beet acreage is declining. And hence, is there, let's say, a threshold when this trend becomes negative because unit costs would go up too much? That would be my second question. And last but not least, in Q4, the sugar operating result increased quite dramatically when compared to the previous quarters and also to oncoming quarters based on your guidance. And it seems like this was triggered by the divestment of CO2 emission certificates to the amount of EUR 64 million. Could you elaborate what's behind that? I've got a couple of more detailed questions about that, but I would rather have you basically elaborate on that, and I will try to ask for the gaps that might still be in that if there are any. That would be, I think, the best way to do that.

Thank you. I'll start with the first 2. The third one is taken over by Stephan, and please colleagues, put something on top if I'm missing some of the answers. So the AGRANA savings and the restructuring at AGRANA is, in the first instance, a specific thing for AGRANA because AGRANA had to react to the results AGRANA has proven over the last years. And even in the good financial situation of sugar last year or the year before last year, there was a difference in profitability of sugar in Südzucker and AGRANA. So therefore, there was a specific need at AGRANA's level to do something. And this led to the closing of 2 factories, and we also stopped refining sugar in the AGRANA territory. So therefore, we are really reducing our costs substantially over there. This is good, and you might remember that Südzucker did something some years ago. It doesn't say that we have no potential in doing more, and this is why we have also started our program. And we also have not just started to the program of operational excellence and improving our profitability in doing better with less. We also have started our initiative in our headquarters, in our administration areas where we have also started a process, which will come to an end pretty soon, where all these administration, organizations have to be more efficient in what they are doing, that they have to come up with ideas how we can increase efficiency so that we, at the end, can do with the same more or the same with less again. So therefore, there's something on our side as well. And this leads to the EUR 200 million of savings over the next 2 to 3 years. And we will see if there is more we can do to improve our profitability. Sugar beet acreage perspectives of AGRANA, yes, this is one of the reasons why we have reduced our hectares in growing sugar beets. But as I said before, it's not just AGRANA, it's not just Südzucker. What we see from the statistics, it seems to be something which we are doing across the board in Europe. Is the sugar -- let me say, is the weather counteracting to what we have done with the reduction of hectares? I can't really answer. So at the moment, yes, the sugar beets are growing well, but this is what the sugar beets at this time normally doing because they don't need so much support from rainfalls or others. But now it starts to become important how the weather conditions are to grow the beets further. On top of this, we have diseases, we have insects, we have other things which can harm the sugar beet in further growing. On top of this, it's not just the volumes of sugar beet. It's also the sugar content in the sugar beet, which will be mainly determined at the end of the growing period. So this is what we cannot influence. We just have to react, but I have to say what we could influence is the theoretical amount of sugar to be reduced by reducing the growing area of sugar beets. And therefore, we are very confident that at the end of the year, we will have less sugar available in Europe than we had before. And it's always what we are going to explain everybody. We are not going for the highest volume. We are really going for the highest profit and profitability. And therefore, we try to match the production with the demand. But sorry, I cannot really answer the question what will be the result out of the sugar beet growing season because it's very, very early in the season to make there -- very serious comment to it.

Coming thirdly to your question on Q4 operating profit in the sugar division, yes, Q4 benefited from the sale of CO2 emission allowances, and this decision was based on our provision of a reduction in production and reduction in production of CO2. The reduction in forecast for production is linked to 2 facts. One is the factory closures we just mentioned, so 2 factories closed in Austria and Hungary. And there's a third factory, Buzau, in Romania, which is in temporary standstill. So we do not foresee to do refining this year. That means that is one aspect of a lower production, thus lower need for CO2 certificates. And the second is what we just explained, the decrease in acreage. So given lower deduction, we used some of the allowance of our surplus situation. And on top of that, we do foresee a lot of investments, for example, in our other sugar factories like Zeitz, where we strive to change the production to climate-neutral production. That means less CO2 emissions from the remaining sites. And so this led to the situation that we need less CO2 certificates. But going forward, it is not planned to do further sales of CO2 allowances. And also the other way is possible if prices continue to drop as we've seen recently, there might be also the opportunity to buy back or to buy additional CO2 certificates.

Okay. So we wait for the next one for the upcoming questions and give you a second round, Oliver, after that.

[Operator Instructions] The next question comes from Hartmut Moers from MATELAN.

I would like to follow up on the sugar segment. If you look at Q4 sales, you came to roughly EUR 770 million. That's about EUR 200 million less than the previous quarter. I mean there was the January renewal of contracts, and you had the issues at AGRANA. Could you rough -- or give a broad indication of how the EUR 200 million that are missing quarter-on-quarter are split up? So what comes from what effect? That would be the first question. And this obviously leads to the point where I would like to have an indication on how we have to look at this going forward. So we've talked about a reduction of acreage, but this is for the upcoming sugar year. If we look at the current sugar year, how shall we look at volume production and volume sales? Are we looking at a significant decline already this year or only at the upcoming sugar or financial year?

I wouldn't overstress quarter-by-quarter differentiation because there always can be some fluctuations quarter-by-quarter. If I take the 12 months for fiscal '24-'25, we have been very successful in the sugar segment on the sales side. So we really significantly increased the sales, so this -- I wouldn't overstress quarter-by-quarter comparisons. But in total, we significantly increased sales on financial year. When it comes to the outlook, given that we do foresee a significant reduction in production this year, so for sure, there is a corresponding decline in sales foreseen for fiscal '25-'26, leading -- just on the basis of the lower production.

Are you willing to give an indication of how much production could go down in the current year?

I mean what we indicated from the acreage, so the acreage on Südzucker Group, this is a roughly 15% reduction in acreage and take this as correspondingly approximately for sales. But sales contracts are still to be made, but it's clear we are not forced to go into early contracts. And given the lower volumes to be marketed, we do not see a selling pressure.

Okay. Fine. And then I have just a couple of smaller things on CropEnergies. I've seen you've taken another charge of EUR 28 million in terms of special items. What were they for?

Yes, it was the special items on CropEnergies. Most part of it was booked in Q3, and that was just the remaining part. So it was based on the decision to stop the projects. And then in Q4, the remainder was to write down the net assets entirely from the plant.

Okay. So we're talking -- okay. So it's not Ensus. It's a write-down. Sorry, it's not EnPro. It's a write-down.

It's the plant, yes. The net book -- net assets in the plant.

Okay. Fine. And I was a bit wondering about your guidance on crop. You were saying you expect an increase in sales. If I look at current forward pricing, I mean, ethanol is trading around, yes, EUR 600. And also throughout your financial year, that's even a bit lower than what you had last year. So I would assume that you anticipate an increase in ethanol prices from the current level because I would not assume that you expect a material increase in production? Or what is the reason behind your optimistic forecast?

Yes. I mean it's the same story every year. Ethanol prices are difficult to predict. And this year, we -- in our forecast, we do foresee an increase in ethanol prices. This is linked on our analysis on supply and demand in Europe. If you look into the figures, you can see that -- when it comes to the consumption of ethanol in the EU, this is still growing. So that is also the discussion that we have year-by-year. E-mobility is not ramping up. We see a shift in the sector from diesel to gasoline cars. So there's still a trend of increase of gasoline take-up in the EU, and there is still an increase of blending of biofuels. So we do foresee an increase on the supply and demand on the ethanol uptake in the EU. And as we are dependent -- so we are in a deficit situation, and there's always a discussion when and when are coming the imports. As I explained just a couple of minutes ago, when the news came in of this U.K.-U.S. trade deal that the prices went significantly down, they're below EUR 600. But in 4 days, the ethanol price got up more than EUR 50 back up again. So we believe this trend, step by step, to be continued, and the current spot levels are in the area of EUR 610, EUR 620, but we assume this trend to -- over the year, to continue.

Okay. And last one, I know you don't like to talk about individual plants, but Wilton probably is a special item here. Where are we standing there? I mean you've mentioned the U.S.-U.K. deal. You have basically stopped the EnPro investment, which was one of the measures that were aimed at keeping Wilton or bringing Wilton back to profitability. So where are we standing here? And how should we look at the situation going forward?

Just to explain, the ethanol production situation in the U.K. in general is difficult. We have seen also the public announcement of ABF concerning Vivergo, that Vivergo is in a loss situation that ABF is evaluating every option for this plant, too. That means be it mothballing, closure or sale. The same is true for us for Ensus. We do evaluate. We are in a loss situation. We are not happy with the situation. It's difficult, and the new decisions between U.K. and U.S. on trade deals doesn't ease the situation. So we evaluate all options for Ensus.

The next question is a follow-up question from Oliver Schwarz, Warburg Research.

It's me again. Just a quick follow-up on Ensus you just discussed. So basically, given the agreements -- trade agreements of the U.K. with the U.S. and the respective impact on cheap bioethanol imports into the U.K. by U.S. exporters, that seems to be putting additional pressure on Ensus. And basically, you already alluded that given that the, let's say, profitability improvement following the EnPro investment is off the table, basically has been stopped, and so Ensus is basically there having to fend -- fight for its own. And that's getting increasingly difficult given the market environment in the U.K. Obviously, your guidance doesn't take into account any temporary closure or even a mothballing of the plant for a longer duration of time. Obviously, also the guidance was put together, let's say, substantially earlier than today. So you obviously weren't aware of the movement. And hence, my question is, how -- when it comes to the CropEnergies guidance, how would you assess that from -- with the knowledge you have now? Would you still stick to that? Or would you say that might be under considerations given the change in market conditions and so on and so forth?

So far, there's no change. I mean the decision, U.S.-U.K. trade deal announcement that was last Thursday. It's too early to really to foresee what really would come up at the end because we are not -- I mean you can see it. I think it also made it on the first page of The Times. So the -- both Vivergo and Ensus have reacted and have written a letter, open letter to the U.K. Prime Minister, indicating what this decision could mean. And that means if there would not be any U.K. product of ethanol, there would be co-products missing for feeding, there would be much less uptake of U.K. domestic-produced grains, which is significant. There would be a significant loss or reduce -- reduction in availability of CO2. We are not fully sure whether U.K. government has really foreseen all of that, and maybe there might be a change in the final negotiation of those deals. So you have seen every day in the newspaper, you can read any new aspect in this deal agreement. So we have to be looking step by step. This is a very new information. So, so far, we fully stick to the CropEnergies guidance within our Südzucker guidance. And we do, nevertheless, given really, as I just explained, given on the supply and demand side, we do foresee an increase in ethanol prices.

Very clear. My second question is trying to fill the gaps in my knowledge regarding your EUR 64 million divestment of CO2 emission rights. Firstly, I'm not sure why EUR 20 million of that is attributable to AGRANA, which is basically the one that closed the 2 plants, the one in the Czech Republic and the other one in Austria, and is probably also responsible for running the Romania plant. And they only booked, if I'm not mistaken, EUR 20 million of the EUR 64 million. So EUR 44 million of that is attributable to Südzucker AG. And the -- what you said is mostly that it is the volatility in Südzucker's sugar production that is a reason for that.

In the investments, yes, in CO2 reduction.

Yes. My point is EUR 64 million, that's based on last year's prices of CO2 certificates. That is, let's say, equal to, give or take, a bit more of 1 million tonnes of CO2 emission rights. And this seems to be a bit excessive given that you had Scope 1 and 2 emissions in the amount of 3 million tonnes last fiscal year and AGRANA who closed the plants basically and said, okay, EUR 20 million of those EUR 64 million is attributable to us. They only had Scope 1 and 2 emissions of 1 million tonnes. So out of your 3 million tonnes, 1 million tonnes is AGRANA, and the other 2 million tonnes is attributable to Südzucker, but you decided to sell 1 million tonnes. I mean those are 3 plants that you are closing in the sugar segment. You've got 23 plants, if I'm not mistaken, overall, and obviously, have CO2 production in the other segments as well. So I'm not sure why 1 million tonnes of CO2 certificates can be justified by closing 2 plants and having, let's say, an area reduction in sugar that might bring sugar production down by perhaps 500,000 tonnes, so 10%, 15% perhaps of what you had last year. So the size of this divestment seems to be larger than justified by the factors you mentioned. Hence, I'm keen on the reason for that. And lastly, I'm not sure why I see this in the operating result and not in the EBIT. Isn't that, let's say, when it's -- the reason -- due to -- the reason of the sale is the closure of plants. Shouldn't I see that as a one-off gain attributable to, let's say, the closure of this plant because I saw the costs that came with the closure of those plants also as a one-off and not in the operational results, but in the EBIT, where you book one-off gains and losses. So why is that an operational gain from your point of view?

Okay. Thank you for precising your question. The split is right. The EUR 60 million is split between EUR 20 million to AGRANA, EUR 40 million to Südzucker. But the explanation or the analysis that you made, that is too narrow. So it's not only linked to those particular sites. It is also linked -- as I said, this is one element, but there are also other elements. The other elements are the investments that we are planning in reducing the CO2 reduction in -- not only in Zeitz, but also in other plants. So it's a bunch of arguments, and it's not only nailed down to 1 or 2. It's also part of our hedging and arbitrage strategy. We have seen quite some very high CO2 prices, and we also took into consideration that there is a strong discussion in Europe of energy-intensive industries who think about relocating their production out of Europe. That means we do foresee as we are in a surplus situation of CO2 emissions, other companies are too. And we did foresee also that there is an additional price pressure on CO2 certificates. So it's also part of our energy hedging and safeguarding measures. And so you cannot just narrowly down to 1 or 2 plants. So for us, this is completely part of operational business and hedging.

Okay. And why is that not a one-off?

As you said, it's -- for us, it's an ordinary course of business as we do hedging for energy, we do hedging for grains, part of our pricing strategies.

The next question comes from Alex Sloane, Barclays.

The first one, just on ethanol. I'd love to get a bit more context in terms of what you're expecting as a base case there for the year ahead. I mean I think you've talked about the pressures on the U.K. business from the trade deal and U.S. exports. How about in Europe? Are you assuming any change in U.S. exports to Europe? I'd be interested how big that is as a percentage of the European market today. And if that does change, is that likely to be a kind of a strong benefit to price? Or could that be offset by the Mercosur deal, with Brazil exports kind of taking up maybe some of that slack? So yes, love some more color around that. And then just secondly, just in terms of the guidance on sugar, obviously, expecting a better second half, better pricing. I mean, I think prices came down by around EUR 200 per tonne from the last pricing round. Can you help us sort of, in that context, frame how much you expect to be recovered? I mean you presumably won't recover all of that, but would recovering half of that be a realistic ambition? And is that what's embedded in your guidance?

Yes, when it comes to the ethanol situation, there's not much that I can add. I just already explained everything. So it is true, the supply and demand in Continental Europe and U.K. as a total, the demand is increasing. The U.K. ethanol -- the European ethanol production is roughly at its limits. There haven't been any additional investments over the last years. So production of ethanol in Continental Europe and U.K. is roughly -- rather stable. The same we did assume in our forecast for CropEnergies as the situation of the -- we have not taken any decision on Ensus in our planning, we do foresee a production of Ensus in our current forecast. When it comes to the pricing, this is linked to the fact that ethanol uptake is increasing. And there might be countermeasures Continental EU to -- if EU components delivered to the U.S. might be taxed more significantly, there could be an option to tax ethanol the other way around. But it's very early to say. We are in the beginning of the year. I just stated over the last 2 days, the ethanol price ramped up roughly EUR 50 to EUR 60 after having -- in the first reaction on Thursday have declined. So -- but based on supply and demand, we do foresee an increase of ethanol prices going upwards from today's spot level. And your question on sugar prices, I also already explained what I can explain. Due to confidentiality, so I cannot disclose any precise sugar prices going forward. We do foresee, as of 1st of October, an increase in prices, but I'm not in a position to say, for confidentiality reasons, what special price level we strive for, but we do foresee increasing prices.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Nikolai for any closing remarks.

Thank you, ladies and gentlemen, for your -- attending today's conference and your interest in Südzucker again. And as always, don't hesitate calling me for additional questions. Thank you, and good afternoon.