Südzucker AG (SZU) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. We welcome all of you to our conference call this morning. The underlying presentation for the call has been published this morning on our website. Today, we released the statement for the first 3 months of the financial year 2025-'26. We are going to present the highlights of this period, and we will also revisit our full year group earnings guidance for the business year 2025, '26, which is unchanged. Following the presentation, we are going to answer your questions. A recording of this call will be available on our homepage shortly after the call. Now let me hand over to our CFO, Dr. Stephan Meeder.

Thank you, Nathild and Andreas for the introduction. So ladies and gentlemen, also a warm welcome to all of you from my side, and thank you very much for your interest in Südzucker. First of all, please let me give you a brief update on some personal and organizational changes within Südzucker. Starting end of June, we have a new corporate structure, and this led to some personal changes. And that's what I would like to introduce to you, Andreas Rothe, which is our new Head of Investor Relations. And we have [indiscernible] merged the 2 functions, Finance and Investor Relations under the lead of [indiscernible] Corporate Director Finance and IR and our colleague, Nikolai Baltruschat, which we have known or know for years, and which did a tremendous job here in Investor Relations, has moved over to another very important function, which is being Corporate Director for Strategy and M&A. And so in this transition phase, Nikolai and his team are also helping in the background to guarantee and organize a good transition to the new team. And we are very much looking forward to do this together with the same quality that we have in the past. And so there's no material change, just the person have changed, but there will be the same approach to Investor Relations as we have done successfully with Nikolai and team over the years. And I want also to express my gratitude to Nikolai and his team for this tremendous work in Investor Relations over the last years. So going forward, as mentioned, I would like to give you a brief overview about the business performance in the first 3 months of fiscal '25-'26 and the details about our confirmed earnings guidance for fiscal -- for the full year '25-'26. So let's start on Page 5, please. Here, you can see that the Q1 performance was weak. We have to admit that. So it was already communicated on the 11th of April that Q1 performance was not able or was expected not to be able to match with the previous year's numbers, and this has been confirmed in line with our expectations. So after 3 months, we have reached the following numbers. You can see on top of the slide, group revenues came in at EUR 2.2 billion, significantly below previous year's levels. When it comes to EBITDA, also group EBITDA was significantly down by 58% to EUR 96 million and group operating results only reached EUR 22 million versus EUR 155 million in Q1 of '24-'25 fiscal year. Unfortunately, also cash flow decreased from EUR 178 million to EUR 36 million. And so finally, we came out with an EPS after 3 months at minus EUR 0.18 against plus EUR 0.36 last year. Net financial debt at end of May, so end of Q1 came in at EUR 116 million above prior year's level and EUR 101 million against the end of financial year '24-'25, which, as you know, is end of '25. So now let's have a look on the segmental business performance on Page 6. And here, I would like to start with the group revenues already mentioned. So group revenues came in significantly below previous year's levels. As you can see in the segmental split, the revenues have declined in the Sugar segment, in special products segment, in CropEnergies segment and starch segment in 4 out of 5 segments. But also to note positively, it has grown moderately in the fruit segment. When it comes to the operating profit, you can see the operating group result decreased was mainly driven by the sugar, but also was below prior year in special products for [ CropEnergies ] and starch segment. And you can see in the figures that even in sugar and CropEnergies segment, we are even in a loss situation in the first 3 months of this fiscal. Positively to note the fruit segment had a good development and has shown an increase in operating profit. So let's move on within the segmental information to segment sugar. You can find that on Page 8. And first of all, let me please revisit the view on the global sugar market because this is important for the price development. And here, most recently in its July '25 estimate of the global sugar balance for the '24-'25 sugar marketing year, S&P Global Commodity Insights forecast a deficit of 4.7 million tonnes. So this is positive, should be supported for the price development. And just as a remainder, the sugar marketing here, when I talk about sugar marketing here, this is always the period starting 1st of October ending end of September. So we just discussed the sugar marketing year '24-'25. So this is the period between 1st of October '24 until 30th of September '25. So this deficit is driven by declining production, in particular in India and Brazil and a rising consumption. So this is also positive if you have a short look on the gray bars, you will see that over the years, sugar consumption worldwide is still slightly growing with a CAGR of approximately [ 1.6% ]. For the upcoming sugar marketing year starting 1st of October '25, the sugar marketing year '25-'26, S&P Global projects a surplus of 2.9 million tonnes based on increased production mainly in India and Thailand and also a continued growth consumption. So for sure, this is a prediction of a surplus is not positive for the price development. But nevertheless, it's important to note that for '25-'26, there is still time to go. It's weather market, a lot of things can change. But for the time being, for the upcoming '25-'26 sugar marketing year, is predicted a surplus of 2.1 million tonnes. So this has effects on the world market prices. So if we have the world market prices for sugar was around EUR 500 per tonne at the beginning of our '25-'26 fiscal year, then it initially rose to approximately EUR 520. So this positive upward trend was fully in line with our expectations. But then this was against our initial expectations. The sugar world market price declined in the meantime to about EUR 420 per tonne. And at the end of May '25, the world market price stood at EUR 422 per tonne. So this starts from the world sugar market. Let's have a look on the EU market. You will find this on Page 9. Here, for the upcoming sugar marketing year '25-'26, starting 1st of October, the EU Commission and a significant decline in cultivation area. So this should be supportive for the prices. And based on this production, including inventory growth is forecast to decrease to 15.7 million after 17.1 million tonnes in prior sugar marketing year. So this decrease in production forecast should be supported for prices. And as a result of this balance, the EU is expected to become in return a net importer of sugar. An important issue is for us always to monitor closely the situation on Ukraine because as we have discussed over the last conference calls, the significant price decrease that we have seen over the last fiscal, that was also mainly due to the imports from Ukraine and what is the current situation. Here in early June '25, the quota for duty-free sugar imports from Ukraine was reduced to the original level that in the 2014 association agreement that means to around 20,000 tonnes per year. And this regulation will remain in place until a new agreement is reached. So that means specifically for the period between June 5, '25 and December 31,'25, Ukraine can only export [indiscernible] 700 tonnes of sugar duty-free to the EU. So this is not significant in volume. So this is a positive news for the rest of this calendar year. But discussions with Ukraine are ongoing and recent news that we have seen or that you could also read in the press that there's a new agreement under discussion. And here for this new agreement, which will start 1st of Jan '26. Here, the EU Commission has proposed a quote of 100,000 tonnes per year to the Ukraine, so 5x the current volumes. And as you can understand, we are opposed to this proposal. It's not be [indiscernible] solidary with Ukraine, but this is additional volumes that are not needed for the European market and Ukraine has always been traditionally exporting their volumes to, let's say, Africa and other countries like Asia and some Arab countries. So we should support Ukraine in doing those exports, but those Ukraine volumes are not on the European market. But the further development has to be monitored closely to what extent this will influence the EU market, and the respective pricing has to be seen. So let's continue with the numbers in the sugar segment. You can find that on Page 10. So here is the overview of revenues, EBITDA equation operating results. So after 3 months, revenues in the sugar segment came in significantly below previous year's level. Prices in EU fell more and more sharply over the course of the previous fiscal year, which we have already discussed, and they continued to drop slightly further at the beginning of the new fiscal '25-'26. We expect sugar prices to increase. As I just said, this is linked to the fact with the reduced acreage and the harvesting prospects, and we expect prices to increase in the new sugar marketing year starting October -- 1st of October 2025. When it comes to operating results, you see a loss of EUR 56 million. So the operating profit or the operating result [indiscernible] negative, it shows a strong decline. So during the first quarter of '25-'26 fiscal, the sugar segment recorded an operating loss of EUR 56 million compared to a positive of EUR 59 million in the corresponding prior period. And the significant decline in results was mainly caused by the sharp downturn in prices, which could not be absorbed by lower manufacturing costs in the '24 campaign. So let's move on to Page 11. Here, you can find an overview on the segment special products. Also here in the table, you can find revenues, EBITDA, depreciation, operating result of the first 2 months. You can see that after 3 months, revenues in the special products segment decreased moderately. This was mainly due to the disposal of the dressings and sauces business in the U.S., which was sold by Freiberger in Q2 of the prior year fiscal '24-'25. And you can also see a decline in operating results. Here, the operating result decreased significantly. This development is due to rising production costs, which we could not fully pass on to our customers fully. Following special products segment, let's move on to CropEnergies segment, which you can find on Page 12. You can see after 3 months, revenues in CropEnergies segment were down significantly also. The decrease is due to significantly lower prices for ethanol as well as the co-products for food and animal feed products. Volumes also decreased compared to prior year's level due to scheduled maintenance. Coming to operating results, you can see here, unfortunately, CropEnergies had to account for a loss in the first 3 months. So operating result was also significantly lower than last year. And the key factors here for the decrease in results are the already mentioned sales price volumes going down, which were both lower than the previous year. In addition to, we had higher net raw material costs, which led to a negative operating result in the first quarter of '25-'26 [indiscernible] you can see here minus EUR 5 million. And looking ahead, maintenance shutdowns are expected to weigh on operating earnings until mid of July '25. After CropEnergies segment, let's move on to the starch segment, and you will find it on Page 13. And here, you can see that after 3 months, revenues in starch segment also declined this time slightly to EUR 245 million due to slightly lower prices and volumes. And those slightly lower prices and volumes also led to a decrease in the operating result. You can see that starch segment finally turned out with an operating profit of EUR 3 million in the first 3 months. And this was, as I said, due to slightly lower prices and volumes as well as to higher raw material costs. On the positive side, here in this reporting period, we benefited from an insurance compensation related to the flood damage in Pischelsdorf, Austria in autumn '24. You remember for sure the really strong negative figures of this tremendous flooding that we had in Pischelsdorf with the tremendous work of the team to get the plants back on track. And in Q1 this year, we received this insurance compensation. Let's move on finally to the fruit segment. You will find the fruit segment on Page 14. So this is the positive development in Q1 of this year, you can see that both on the revenue side and also in operating profit, we see here an increase. When it comes first with revenues, you can see that we have here a moderate increase from EUR 415 million to EUR 444 million in the current year. And this development is particularly due to good volumes and prices in both fruit preparation and fruit juice concentrates divisions. Operating result came out at EUR 36 million after EUR 27 million. So here is an increase and the margin of fruit prep was substantially increased, as I said, due to good volumes and pricing. The earnings contribution from fruit juice concentrates also improved due to a higher margin. Let's move on after operating profit and view on the 5 segments, what is the remainder of the profit and loss. You will find this on Page 16 and 17. I start on Page 16. Here, you can see that after 3 months, the result from restructuring and special items amounted to minus EUR 23 million versus EUR 2 million in previous year's period, and this was largely attributed to the sugar segment in the context of the closure of the plants in [ Bienenbüttel ] and Pischelsdorf. The result from company's consolidated equity was derived from starch segment in total to minus EUR 6 million. And looking to the financial result, you can see minus EUR 32 million above prior year period. And so in this EUR 32 net financial result negative is -- the major part is the net interest expense amounting to EUR 27 million and the remainder is the other financial result of minus EUR 5 million linked to exchange rate changes in context of the foreign currency loans of non-Euro companies. Let's continue on Page 17. Here, we can have a look on taxes on income and earnings per share. Taxes on income came in at plus EUR 4 million compared to minus EUR 38 million in the same period last year. This is based on earnings before taxes of minus EUR 39 million versus EUR 132 million positive in Q1 '24-'25. So finally, as already stated, earnings per share came in at minus EUR 0.18 against plus EUR 0.36 in the prior year period. Let's continue with the balance sheet items and the other KPIs. So starting with cash flow, working capital and investments. You will find this on Page 19. On Page 19, we start with the cash flow statement. You can see top of the list that due to the decline in operating profit, cash flow decreased also significantly in the reporting period to EUR 36 million after EUR 178 million in the prior year period. When it comes to working capital, we see here an increase. So this increased by EUR 44 million after EUR 114 million inflow in Q1 of last year, and this development was due in particular to the sale of sugar inventories and the offsetting beet payments. Investments are pretty stable in the first 3 months, have reached EUR 150 million in investments in CapEx against EUR 130 million last year. Having a look on the financing side, in May '25, Südzucker, we have successfully issued a new EUR 700 million hybrid bond via our Dutch subsidiary, Südzucker International Finance DV to refinance the existing hybrid bond also worth EUR 700 million, which was issued 20 years ago in summer of 2005. And this issue is reflected here in the increase and decrease in stakes held by subsidiaries of respectively capital buyback. So this effect is in here. When it comes to the increase, so the increase is minus EUR 277 million, and this is due to the pro rata repayment of the 2005 hybrid bond as part of the buyback offer. Which serves as a component of equity and full repayment of the old bond was made on June 30, '25 as part of the notice of termination. The decrease that you can see of plus EUR 693 million was attributed to the new bond, as just explained in May '25 issue. So the decrease is issued to that after deduction of the cost with a nominal of EUR 700 million. Coming to the balance sheet, you will find that on Page 21. No significant changes. So I'm pretty short on that. So key issue is net financial debt came out at EUR 1.755 billion and equity ratio is pretty stable and at a good level still at 43%. So coming to the outlook for fiscal '25-'26, you will find this on Pages 23 through 25. I start on Page 23. Here, you can see the group guidance and the segmental information. So for fiscal '25-'26, we expect group revenues to come in between EUR 8.7 billion and EUR 9.2 billion. So this is unchanged. Also operating profit on a group level is unchanged at EUR 150 million to EUR 300 million operating profit. So let's have a look on the development. So in view of the full '25-'26 financial year, we have already anticipated that the first quarter would be comparatively weak. So this is confirmed as of today, but fully in line with our view on this quarter and the months before. So therefore, our outlook for the operating result remains unchanged within the previously communicated range of EUR 150 million to EUR 300 million. So this is unchanged. Yesterday, we communicated to the capital market through an ad hoc announcement that our expectations for the second quarter are lower than in Q2 of last year. However, we still confirm our full year outlook remains unchanged. So coming to the full year outlook in the segmental information, starting with sugar. So for sugar, we see operating result in a range between minus EUR 100 million to minus EUR 200 million. In the segment special products here, the operating result is expected to come in moderately below the previous year's level. And as I said, we had some changes in the segmental information. So there's a change in prospects for CropEnergies segment. So due to weaker revenues and shutdown-related costs in the segment of CropEnergies, the operating result is now expected to come in significantly below prior year level and a significant decline in operating is also anticipated is [indiscernible] for the starch segment. So for both CropEnergies and starch, this is below our initial guidance. On the contrast on the positive side, there is a better view on the fruit segment. So after a very strong performance of the fruit segment in '24-'25, we expect that despite rising costs, the operating result remains stable in the fruit segment, which we previously forecasted to be significantly below the prior year. So in a nutshell, we see we confirm our full year guidance with operating profit for the group between EUR 150 million and EUR 300 million. This view is unchanged for sugar. And we see a not so strong development in CropEnergies and starch segment, but a better development in fruit as previously forecasted, and that means after this intersegmental changes, all in all, our group guidance remains unchanged. On Page 24, let's have a look on the remainder of our financial KPIs within our outlook for '25-'26. You can see all of this is unchanged, but you can see on this slide. So for EBITDA, we expect EBITDA to come in between EUR 525 million and EUR 675 million. For depreciation, we foresee that is on previous year's level. CapEx is to be expected to be below prior year's level. And all of this, as I said, is unchanged to our initial full year guidance. Same is true for the remainder of our KPIs. When it comes to capital employed, this is still expected to remain on the same level as in prior years, whereas on ROCE, given the decrease in operating profit, we foresee a ROCE significantly below prior year. Net financial debt should develop positively for the remainder of '25-'26 fiscal and is expected to come in below '24-'25 number. The ratio of net financial debt to cash flow as well our equity ratio expected to remain stable. And all of this is also unchanged compared to our initial guidance. So ladies and gentlemen, coming to an end, you have seen and, you know us for years. So volatility is a key element of our business. We know that, and it is an ongoing challenge for sure, especially in our core sugar business. And what we see, and we have also seen this over the last period, the market reacts very sensitively to factors such as production levels or demand and the supply situation in Europe and the weather conditions, harvesting conditions. And unfortunately, this was the case in the previous financial year, where the decline in prices was followed by a significant drop in earnings in our sugar segment. Unfortunately, this development has continued into the first quarter as well as to the second quarter as we have announced yesterday. And so -- but positively to be noted that our non-sugar business continues to be a stabilizing factor and generates in total around 60% of our group's revenue and demonstrates that despite various external factors and the volatility that we cannot exclude, our company is now significantly more resilient and better positioned than it was just some years ago. And we are in a transformation process. We want to strengthen all of our strategy [indiscernible] we are in a transformation process positively. And it's clear this requires also strong leadership. And in this context, I'm very pleased or we are very pleased to announce the appointment of Dr. Theresa von Fugler to the Executive Board. You have already read this in our press release. This is dated July 3, and we have communicated that Theresa is joining Südzucker and with her commitment to sustainability and transformation also with a strong expertise in consumer markets and leadership experience, we will greatly enrich our company. This having said, we also have a look what we have done recently on the refinancing schedule. You will have seen that in January, we have successfully placed a EUR 500 million corporate bond refinancing the bond maturing in November '25. As -- or as we have seen in the cash flow statement, we have in May this year, took further steps to modernize our financing structure with the refinancing of the EUR 700 million hybrid bond. And what we also did successfully is we increased our syndicated loan with 12 of our core banks, summing up to EUR 800 million. So this strong shows a strong commitment and the confidence from the capital markets. In total, we have successfully refinanced a total of EUR 2 billion, ensuring a solid financing structure of Südzucker going forward. As such, we consider ourselves being well prepared for the challenges ahead and remain confident in our ability to proactively shape the future. Thank you very much to all of you for your attention. And together with Andreas, I'm now happy to take your questions. Thank you so far.

[Operator Instructions] The first question comes from the line of Daniel Baum from HSBC.

Would you be able to provide a bit of an update as to how the weaker dollar is impacting your group revenues? Secondly, could you provide a bit more context as to the market tightening thesis because there's conflicting sources out there. And based on some of the analysis I've done, it seems unlikely that there's going to be the material tightening and some of the guidance you provided does look a little bit towards the optimistic point even at the sort of mid to lower range of the EBITDA range. And then thirdly, are you fully committed to paying the current expected dividend as per consensus, just given that you're -- even with the working capital inflow you're expecting, you're probably going to be burning a couple of hundred million euros of cash this year?

I can start with the -- I didn't fully get the second question. So I will come back to. I can start with the weaker U.S. dollar. So the main effect of the weaker dollar makes for some import pressure on the ethanol side. So ethanol is predominantly -- the main currency for ethanol is the U.S. dollar. That means the U.S. dollar makes translated to you the imports more attractive. So this is a negatively weighing factor on the import side. The second question, I didn't fully get. Andreas, you get the question?

I think it was related to the expected quantities for the sugar market. Is that correct?

You said something about tightening, but I really didn't fully get the question. Yes. Please repeat the second question, please.

I've done a fair bit of work on the sugar cycle, and I can't really get to some of the tightening thesis that you seem to be presenting. And as such, it feels like the EBIT -- sorry, the guidance for EBITDA is still too high. Can you maybe tell me what I might be missing because it seems to be delayed quarter-on-quarter. And again, I just -- I don't really get the acreage math to map up with what you're saying.

I can do that. But again, the question, what do you mean by tightening? You mean reduced sugar prices or the negative sentiment on the sugar prices? That's the background of your question.

Lower supply, higher price...

Lower supply. Okay. Okay. The lower supply, this is linked -- this is an issue for Europe. So in Europe, we at Südzucker, we have decreased the acreage. That means the planting, which starts in March has been reduced significantly. So there are less -- in Europe, there are less sugar beets being [indiscernible] in March. And that means just given this lower acreage, which is for the Südzucker, approximately, we have decreased acreage by 15%. And if you look into official figures from Standard & Poor's, for example, when it comes to the cultivation area of sugar beets in Europe for this campaign, which will start in September, the average is minus 10% in Europe. That means if there are 2 ways going forward. So what we already know is a decreased acreage that going forward, that means if the yields on these acreages are on average like last year, then the availability of sugar is roughly 10% lower. If in addition, and this is base case for our assumptions for the pricing, if there will be droughts in a really very hot summer going over the next 2 months. And this is if you look into the metrology artificial AI systems or the predictions, so 75% probability is for very hot and dry summer. And this would mean that the years of sugar beets and that they could suffer from this drought and this would lead given the, let's say, roughly 10% decrease in acreage on top of a difficult harvest or cultivation situation for the next, let's say, 2 months going forward, this would lead to a lower -- much lower availability of sugar in Europe, and this should be supported for the price, and that is what we have factored in our forecast for sugar. For sure, if there will be massive rainfalls or always the change between good rainfalls, good sunny days, cold evenings or cold nights and also the beet can develop positively, but this is not our base case assumptions. We foresee rather a difficult summer weather conditions, but there's no guarantee on that. I just explained, this is our base case assumptions. We will have to see by the end of August, starting of September, how finally this 2 months to come will have been being and then we can have a clearer look on the harvesting situation, that means the availability of sugar. But in our base case scenario, we foresee a difficult supply situation for sugar for this campaign 2025.

And then just third question...

Dividend? So our dividend proposal, we will have our general assembly next week. So the dividend proposal is EUR 0.20. So this is clearly below prior year's number, which was at EUR 0.90. And this takes into consideration the overall framework that we are. We have an increase of net financial debt. The prospects for our forecast are let's say, moderate. In this context, we also decreased the dividend because we have so many measures in the group [indiscernible], we need to be prudent, and we need to be conservative, and that's also why we have proposed to the general assembly a dividend of, let's say, only EUR 0.20.

The next question comes from the line of Karine Elias from Barclays.

A few have been answered already, but just going back to your guidance, obviously, yesterday, you mentioned that Q2 would be significantly lower year-on-year. Just wondering whether this has been in line with what you had expected in terms of the shape of the overall earnings progression for the year. And then secondly, obviously, given the weaker Q2, have you identified any further cost cutting? I know you've mentioned comments on costs being lower in Q1, but just wondering if there's any new initiatives that you're thinking of rolling out given obviously the weaker H1.

Yes. All in all, yesterday's announcement was fully in line with our full year guidance, which we have seen from the very beginning. From the very beginning, we had been clear that Q1 and Q2 should be difficult or let's say, challenging compared to prior year, clearly below. We foresee an increase or a turning point in Q3 and Q4. So Q2, this announcement yesterday is a little bit mathematically given the development of Q1 and Q2 last year and our full year guidance with an increase that we see in the second half of the year. So it was for us not new, but it's the [ MAR ] regulation that we have to respect so as you are aware that Q2, we also to compare quarter-to-quarter, and that's the background of this announcement yesterday, but it was fully in line with our full year expectation. And this is also meaning the measures that we have put into place, they are in execution. There's nothing additional or special. So we are -- let's say, we are fully in line with what was our expectation for this year. So the overall trend is Q1 and Q2 and a turning point in Q3 and Q4. For the initiatives that we started, we are fully in line. We are in the midst of executing those initiatives. And for the full year, we anticipate measures to account for a high double-digit million amount. This is approximately 50% within [indiscernible] 50% within Südzucker. So we are fully on track on the measures.

We now have a question from the line of Oliver Schwarz from Warburg Research.

Sorry for that. A couple of things to unpack here. Firstly, Mr. Meeder, you said you are not in favor of the planned new agreement with Ukraine. You said those 100,000 tonnes are not needed in the European market. However, on the other side, your slide on Page 9 clearly implies that the EU will become an import market this fiscal year and imports are needed. So basically, what you're saying is imports are needed, but not from Ukraine because, I guess, of the lower price points they have. But overall, imports are required. Would that be a fair assessment?

Yes. Oliver, that's a fair point. Maybe I have been fully clear on that. So my major concern is [indiscernible] what we need import and it's clear if we have a deficit situation, we need imports, that's clear. But we also we strive for we need a level playing field for competition. And when imports are to be allowed or to come into the EU, we require that those imports respect the same sustainability criteria that we do. As I said also with interviews, really, we have many, many, many restrictions for sustainability when it comes to the usage of plant protection when it comes to -- I don't know [indiscernible] means additional measures to increase the quality of the soils and the insects' protections. And we do all of that. I do not want to be misunderstood. I'm also fully in favor of sustainable farming and sustainable European farming and agriculture, respecting biodiversity and water and fertilizers. That is fully clear. But this means if we then on the contrast, allow imports to come into the EU, I really urge politicians to care for that this is on the same level playing field, and we cannot accept that agriculture imports come to the EU, which do not really respect those restrictions, but they are positive than we do in European agriculture products, they have a much better, let's say, sustainability quality than a lot of the imports, and that's what are in the past. It's better to say that this is not particular Ukraine. It is this level playing field that we need and this fair competition when it comes to sustainability criteria of agricultural products being imported into the EU. Thank you for this question. This needed to be clarified.

Fair enough. Very clear. Second question is on CropEnergies. And as you're an intimate, let's say, view of that situation, obviously, with your background within Südzucker and especially within CropEnergies. Can you help me out with what's happening there, especially in the U.K. I mean we heard that the U.K. struck an agreement with the U.S. that allows for the tariff-free or next to tariff-free import of U.S. ethanol into the U.K. market, which basically may or may not wipe out the U.K. bioethanol production due to the much lower prices the U.S. can offer than the domestic production in the U.K. Is there a mechanism that would enable those volumes also to be transferred at low prices to the EU? Or is there a trade barrier in place that would prevent those volumes that are imported in the U.K. just to use the U.K. as a transfer point and then find their way into the EU and disrupt the EU market as well? That would be my second question.

Fair question. This agreement is still not yet ratified. So it's still under discussions, but the outline that's known so far is exactly as we have said, is 1.4 billion cubic meters of duty-free import to the U.K. related to -- we will have a negative impact as we have already communicated to the entire U.K. ethanol industry, that's clear. When it comes to your particular question whether these volumes may be rediverted or reexported to the EU, no, this is not possible. So because we have clearly [indiscernible] country's origin rules, and this would mean it's not possible to redispatch those volumes duty-free to the EU. This is not the case. But at the end, nevertheless, it is this agreement per such is also weighing, let's say, on the sentiment because now people see there could be a risk of U.S. ethanol coming in duty-free. To my mind and to my knowledge, it is absolutely not the case, but the EU Commission has communicated so far that they want to do the opposite. So they have indicated that if there would not be a sound trade deal or agreement with the U.S., they would be ready to increase the duties on ethanol from the U.S. Whether this will be true, we will have to see. I mean, I read this morning that there is a 50% duty on Brazil. So it's really, really very, very volatile, all of the duty discussions, and we have to see day by day what will really finally come into place. But let's say, all these discussions per se, they are weighing on the sentiment because we really do not know what at the end of the day will be decided effective what [indiscernible] with sometimes even things that are discussed, they are taken back. So there is -- it is -- we are in a really uncertainty situation when it comes to all of these tariff regimes and duty-free regimes. But in a nutshell, to answer your question, no, U.K. -- U.S. duty-free ethanol to the U.K. cannot be redispatched to Europe without duty.

And my third question would be on specialties. You stated that price -- so production price increases, input cost increases that were yet not passed on to customers. Can you elaborate on what is causing those delays, whether you feel comfortable that you will achieve a full passing on of the related higher costs? Or will you have to digest some of that cost because your customers are unwilling to take them on? And if so, is that a structural problem you face as you deliver your goods to a highly consolidated industry? Or is there another thing a miss that prevents you from, let's say, being more in form of a price setter than a price taker? Third question.

I mean, in a summary, there is nothing extraordinary in this. So it's normal cycles. It's depending -- the discussions with our customers are ongoing and its normal purchasing selling discussions with customers. We, on our side, we have increase in costs, yes. And we discuss with customers that we need to increase prices. And then it depends on particular markets. And in some cases, you are able to pass on the higher cost via the prices. In some other competitive situations, you are not. So there's nothing special. I would say this is normal cycles when it comes to cost increases, price pressures. We have still in Europe, let's say, a little bit a recessive moment. So also when you talk to customers, everybody is fighting for price decreases. And so it's normal course of business. But in a nutshell, for the specialty segment, we see the -- on the one side, the cost increases that we have on the other side, we do not see ourselves fully able to pass this on to customers. And that's why operating profit should increase in the segment as a whole, but there is differences between the different product categories.

We now have a question from the line of Hartmut Moers from MATELAN Research.

I would start with the outlook. And looking at your sales guidance for the individual divisions, you have decreased, as you said, your guidance for CropEnergies and also for starch. And remaining within your framework and the percentage changes that you have dedicated to the words moderate and so on, I would come to some, let's say, EUR 90 million reduction in your CropEnergies sales expectations, some EUR 60 million, EUR 70 million on the starch side. So we're looking at a level of EUR 150 million reduction. And here in contrast to operating profit, your fruit expectation has not increased. So assuming that so far, your expectation was about the midpoint of your sales of your group sales guidance. Would that imply that given those changes in crop and starch, we are now looking at the low side of your guidance. So we're rather looking at the EUR 8.7 million, EUR 8.8 million rather than the midpoint or even the high side. Is that the right way of viewing it?

No, I cannot confirm. I mean we do not open up individually all those 5 segments. We do that for sure because it's the most important one. For the other ones, there are some fluctuations, but your calculation of around EUR 100 million reduction, I cannot confirm. So we are still around midpoint. We can say we are, let's say, slightly below midpoint, but around midpoint, yes. But it's clearly -- I mean, if we would lose midpoint, it would be the need for changing the EUR 150 million to EUR 300 million guidance range. So we are slightly below midpoint.

Okay. But what would be then -- I mean, you haven't changed the indications for the other segments. But if you lower to some extent, not talking numbers now, but you've lowered to some extent, crop and starch, what would be the segments that you see a little bit better in order to compensate for those negative changes. So what do you see? So probably fruit could be better than you have expected, but probably not as much better to increase your guidance here?

Yes. Hartmut, I cannot be more precise than that. So we see a weaker development in CropEnergies and starch and better development in fruit and all this leads to the fact that from the group guidance, this can be maintained unchanged, being slightly below midpoint.

Okay. And the same also holds true for the operating side. Here, you're saying the increase in fruit compensate the decrease in special products and CropEnergies. Is that also, correct? And that would imply because the increase in fruit on a million-euro basis is not that extraordinary high. That would imply that you -- though you're expecting a decrease in CropEnergies and starch, you're not expecting any of the 2 divisions to fall into the red for the full year. That also -- can you confirm that?

Yes, we can confirm.

Okay. Perfect. The second thing would be on sugar, and I'm pretty much aware that already 2 of my colleagues have already asked a bit into the same direction. But I would also come back to the point of your reasoning for the price increase. I've understood the argument of the decrease in acreage. I've understood the argument of a potential dry summer. But what is the reason that you've shown us that on the world market, it is currently expected that we have an oversupply situation. And you have also shown us for the European Union that imports are needed. And looking at the chart you've presented, there's even, the amount of imports plus the production are superior than the consumption. What is the reason that not too much imports could come into the European market. And I'm not talking about quality here. It just -- it could be a volume effect that too much of the worldwide overproduction could come into the European Union and prevent that base case in your calculation of a material price increase in October.

Yes. I mean not has already been said. So I will be short on that. So according for the sugar prices, the main effect are this reduction in acreage. The deficit situation in the circle right now, we are in a deficit situation, both on the world market and on European market. Also, our base case assumption, as I explained, is to foresee a dry and hot summer. And there is -- what we have not yet discussed, there is the risk of the diseases from the [indiscernible] and others. When it comes to the key issue, that's what we have not yet discussed, the key issue is to what extent imports are needed. If only low volumes of imports are needed, they can come in via duty-free regimes with some LDC countries who have the right to import on a duty-free level into the EU. But this is limited in volumes. If this volume is not -- if there's an additional need for imports, then the CXL quota numbers come in or imports. This goes approximately to up to -- and this is EUR 100 per tonne import. So that it's market price plus EUR 100 million per tonne duty. And if this contingent with volumes, they are also limited in number. If additional volumes would be needed on the European market, then they have to bear the full duty. And the full duty is at EUR 400 per tonne roughly. And that means if we are really -- the question is whether we are in a, let's say, low deficit situation, then this would not have a material impact on prices. But if we would be in a significant deficit situation, then full duty kicks in, would lead to really strongly and [indiscernible] quickly increasing prices. And this is what we assume for Q3, Q4. But still to be seen. As I said, this is our assumptions. We need to see how really at the end of the day, the weather conditions will be in July and August. This is the key element for the volumes, the harvesting situation, the volumes and then the pricing.

Okay. That was a very important clarification. And last point would be on crop. And I don't know whether you have done the calculation, but what you were saying was that the results in the first quarter were negatively impacted by the scheduled maintenance, but also by a number of technical issues. What I -- and this is also going to last into the second quarter. What I see is that with ethanol price at around EUR 600 and -- but wheat prices falling below EUR 200, there should be a positive development. So my question would be, first of all, are you in a position that you benefit from the price decrease on the wheat side? And so that you should have on an underlying basis, a positive trend here also in the first quarter, my calculation would be that it should have been positive, excluding those factors. And can you give us an indication of what those extraordinary factors, so the maintenance not being extraordinary, but only happening usually in 1 quarter and the technical issues, how much that would have caused if you would have been positive if you had a normal quarter, which one would expect at least in the third or fourth quarter then?

Yes. So for CropEnergies, my view on that has not changed. So the overall picture for CropEnergies is the [indiscernible] market dimensions or the market factors, they are fully in line. There is a strong need for biofuels. We won't be able to meet the CO2 reduction targets in transport without biofuels. So this is fully in line. It's also what we can see if you look into the numbers of consumption of ethanol. This increases year-by-year. So I have the numbers in front of me in '23, the consumption was 10.5 million cubic meters, '24, 10.9 million, 11.1 million in '25. And this is expected to grow to 11.4 million cubic meters in the EU in 2026. So the market dynamics there are fully okay. And this is also what I've been stating here for since, let's say, 10 years, electromobility will not ramp up. And I said this 10 years ago, and I continue to say that we need really for the existing car fleet, we need biofuels, and this is fully in line. So the demand side is pretty okay. When it comes to your question, you are right, we -- prices are going down. So there's a good harvesting conditions. There also has been less volatility on the grain prices in the current fiscal and the trend is downwards. And also, we believe this trend to be continued. And as we do our normal hedging procedures within CropEnergies, so the overall approach to hedging and risk benefit has not changed. So we do step-by-step hedging the grain volumes, but there is still a significant volume of grains not yet hedged. So in this context, yes, CropEnergies benefits from lower grain prices going forward and roughly 1/3 is still open. So there will be a positive effect being -- what we have not yet so far seen in the initial guidance, this partly compensates for the lower prices that we have seen so far. So this is a mitigating factor, you're fully right.

Okay. And you would prefer not to relate to the impact of the maintenance and the technical issues.

Do we have maintenance? Yes. And this maintenance led to that we have had a lower production and lower sales volumes correspondingly because also typically what we produce, we also sell. So if there's lower production, there's low sales. And -- but it's not the main factor. So there has been maintenance. There's a slow reduction in sales in Q1, but we are looking to a steady development going forward through Q3, Q4.

The question was, would you be prepared to give a very rough indication, would you have been to produce a positive result if you didn't have the technical issues and the maintenance in that quarter? That would be the question.

Yes. Maybe we will be close to 0, but the main effect is the prices.

The next question comes from the line of Lance Jonathan from [ Verizon Fund ].

I think that was for me, Jonathan L.

Can you talk a little bit loud. We cannot hear you fully. Sorry, we cannot hear you.

Yes, sure. Is that better?

Yes. Better.

Yes, obviously, a lot of tough questions this morning. Thank you for attempting to answer them as best as you can. And I appreciate that the key takeaway here is that it's an extremely volatile cycle. And currently, it's a down cycle. So obviously doing your best to manage that. The question, I guess, is with regards to the international sugar prices and dollar is my first question. So what is the impact of the weaker dollar? What is the proportion of revenues which are coming from -- which are linked to the international sugar prices? And then just looking at the charts on world prices, basically, it seems that the international sugar price is a leading indicator. I appreciate you touched on tariffs for the excess supply coming into the EU just now. I just want to clarify that point. But there's basically 3 questions is -- or a 2-part question. One, given the international sugar prices are clearly a leading indicator for EU prices and they've continued to decline, what gives you the confidence again that the prices will rebound in the EU, especially when you mentioned around the uncertainty around the Ukraine supply, which you just kind of reclarified. That will be -- we can go with that to begin with, let's keep it a one-part question, keep it simple.

Maybe I have not fully understood all of your questions, and a lot has already been said, but I will try and if there's additional need for information, please come back. You said it's a volatile cycle, yes. You asked on the impact of U.S. dollar. So as such, we are not too much exposed to sales to the U.S. For sure, we have inbound business. For example, at Freiberger, we have a pizza business, which is producing in the U.S. for the U.S. There are some imports -- but as such, we are not -- as a group, we are not so dependent on U.S. It's an important business, but it's not significant for the entire group. The weaker dollar affects us when it comes to the import pressure and the pricing into the EU, particularly in our ethanol because given the [indiscernible] quotation translated into euro, this is much weaker. So this is an effect, but I have already explained that. The tariff situation, as I said, this is changing day by day. so far, we are not much exposed to that besides U.S.-U.K. deal. So there are, for example, in the food segment, some deliveries of food preparation from Mexico to the U.S., but the teams have done a tremendous job. So a lot of volumes needed, they have been imported into the U.S. prior to the tax regime being set up. And that means at the time being, we do not see ourselves too much concerned besides this U.S.-U.K. deal on ethanol. And on Ukraine, so the pre-war quarter was 20,000 tonnes. So this is close to not being significant. This 20,000 is allowed 7 out of 12 months from July to December this year. And the discussion for 1st of October '26 is 100,000 tonnes and here, we are opposed. But as we discussed, it's yes, on the volume side, but also on the level playing field.

And just to clarify, so the EU sugar price as of reference price as of May was around EUR 540 per tonne, which is kind of close to your -- which you've used as an input, but the international price is closer to EUR 300 per tonne.

The world market is roughly EUR 410 or EUR 420 per tonne currently. That's the world market price translates into Europe. White sugar...

European...

Maybe on -- so the difference between raw sugar and white sugar is approximately EUR 100 per tonne, because you need the refining cost. So the differentiator between raw sugar and white sugar is roughly EUR 100.

Got it. Okay. And then just lastly to clarify, basically, we're betting on a -- I just want to make sure I understood that. So we're betting on or we're hoping on according to your AI intelligence basically that we're going to have a very hot summer and that yields will be lower, basically reducing the supply in addition to the reduced acreage that you guys have done and hoping for prices to recover next year.

Yes.

We now have a question from the line of [ Ben Sahir ] from [indiscernible] Fund.

My question is around for the second half of the year, do you see pricing -- customer pricing in your special projects business to kind of flow through to the financials? Or when do you see this flowing this into your numbers going forward?

This is linear over the entire year. So the many discussions with customers are right now. So this will kick in the course of the year.

Okay. And your second -- my second question is around your cost-cutting program. I believe it's around EUR 200 million. When do you see that ramping up? Again, do you see some impact this year? Or is it going to be more next year? And are there any upfront costs associated with that?

Yes. So Südzucker Group, we have, as you said, and what we already discussed last time, so we started a couple of substantial cost-saving initiatives. And those measures, they will start materialize in '25-'26. So for '25-'26 fiscal, we assume a high double million-euro amount, which is half at Südzucker, half at AKRANA. So -- and then what we did last year, we closed 2 factories in Austria, Czech Republic and refinery at AKRANA. And the programs that we have for Südzucker, we call this program OPTIMUM and for AKRANA, program is called [indiscernible] program, part of the strategy. And over the next, let's say, 3 to 4 years, we start with a double-digit million-euro savings this year, and this should amount up to EUR 200 million over the next 3 to 4 years fully right. That's what you have asked is I can confirm.

We have a follow-up question from the line of Oliver Schwarz from Warburg Research.

Firstly, on CropEnergies, I think a lot of your current CapEx is earmarked for the, let's say, prolonging the value chain of CropEnergies. Meaning that you want to enter the market of chemical compounds based on the bioethanol production. Could you give us an update how -- is that up to schedule at the moment? When will production start? Are there the respective contracts of customers in place? Or are they still in negotiation, especially in the light of the decline in the oil price from -- especially compared to when you announced the project to now? That would be my first question. Second question, is a bit more, let's say, theoretical, I guess. I mean, a lot of -- your fluctuations in earnings over the last 10 years were due to the volatile price of sugar, obviously. However, your problem from my perspective, at least is that in -- when sugar price was high and earnings were high, they were not high enough to compensate for the trough parts of the cycle. So over the cycle, you didn't earn, let's say, that much money or a decent return on investment or on equity. When you -- is that to continue even in the light of your restructuring program? Or will you need some structural changes in the market as well? So let's say, in the blue-sky scenario, what would you be wishing for, for changes in regulation, for changes in market consolidation or from some other sources that would help you achieve over the cycle a higher return? That would be my second question.

Okay. I'll start with CropEnergies. So here, when it comes to the ramping up of the plant at site location for ethyl acetate, and here, we are fully in line. So there's no change to our prior communication. So the start of operation is planned for summer '26 and CapEx is around EUR 160 million. We are still in customer talks and -- but the feedback still is very, very positive. There is a need for clean products, which are fossil-free. And as I communicated also last time, ethyl acetate is a product for those who do not know this, I'm a little bit more exhaustive on that. This is a liquid. This is going into nail polish, nail [indiscernible] nail polish. It is really -- it goes into painting into many, many applications. And so far, this product is only available [indiscernible]. And we are in talks with many customers said, yes, this is exactly what we need. We are committed to sustainability. We want to have a green product. We want a CO2-friendly product. And so there is no change. We are optimistically looking to closing the construction of the site and then starting. That's nothing new, and I'm fully convinced we need green carbon hydrates. We need green bio-based chemicals. And we have a long-term perspective. Even if right now, there are some discussions on reducing target sustainability, it started with the Trump administration. For me, this is a short-term downtick, the overall trend, the need for CO2-friendly products is there, will be there, and we are committed to that, and we will continue to do as planned, and we are not going below our ambitions. When it comes to the quarterly development, what you asked and you said from your point of view, our problems would be these developments. I would say we do not have problems for us it's really challenges. And the challenges is volatility of the business and -- but we know this, and we have the volatility in sugar, which is our key topic today. So our focus is to get a speedy return to the positive within sugar segment. One key element is pricing. And the other one is really those cost measures. And then what is really positive this time, we have really a speedy reaction within the group, for example, when it came to the reduction of our acreage. So all the measures are fully clear. We are in execution. As I said, it's not a general problem. It's a challenge, and we need to do our homework and then it will be better next year.

Yes. But I mean, if you look back, let's say, for the last 10 years, I think the high of your sugar result was close to EUR 1 billion and the low point was minus EUR 300 million. You can't really meant that by, let's say, EUR 100 million of cost cutting. That obviously, that improves your cost situation. But nevertheless, that will only help to dampen a bit the volatility. What you need perhaps is, let's say, on average, a higher price of sugar over the cycle to help you earn a lot of money in the up-cycle times and not to lose as much as in the past in the trough cycle part. I think that's the key here. And what will be needed to achieve that?

I mean, yes, you're fully right. I mean the bigger leverage is the pricing. Nevertheless, we need to work on our cost basis. That's clear. But it's clear the main factor is the pricing. And to have solid prices in the EU, we need to manage volume, and we cannot be in a surface situation in Europe, but this is the volatility and the [indiscernible] of nature, we will have to see the harvesting conditions. But you're fully right, the key issue is pricing. But nevertheless, we need to do our homework at the same time and speedy.

[Operator Instructions] We now have a question from the line of Setu Sharda from Barclays.

It seems not. But if you have additional questions, you can hand them all by writing. You have our contact address to Andreas, and we are also -- it's a technical issue, you can hand it also by writing.

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

Thank you very much, Nathild. I'd also like to thank everyone for participating in this call and for your questions. Of course, we hope you will always also be joining our virtual Annual Shareholder Meeting next week, July 17 on Thursday. And we wish you a great rest of the day. Stay safe and see you soon. Thank you very much. Thank you very much. Goodbye.