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Thank you and good morning, ladies and gentlemen. We welcome all of you to our conference call this morning. We wish all of you have healthy and successful start into 2021. The underlying presentation for the call has been published this morning at 7:30 a.m. CET on our homepage.Today, we released the statement for the first 9 months of financial year 2020/'21. We're going to present the highlights of this period and revisit our full year guidance that has been published 14th of December 2020. Following the call, we're 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 Südzucker's CFO, Thomas Kolbl.
Thank you, ladies and gentlemen, also a warm welcome from my side and a happy and healthy 2021 for all of you. We all hope to experience a normalization in regard to private and business environment during this year.As mentioned by Nikolai, I would like to give you a brief overview about the business performance in the first 9 months of financial year 2020/'21 and details about the change in our guidance for financial year '20/'21, which has been published on 14th of December. Let me start with the highlights of the first 9 months results on Page 4.First of all, let me point out once again that, unfortunately, the corona pandemic is not over and still shows different issues and dynamics in regions as well as in business areas every day. Since mid of October, with the renewed implementation of lockdown measures, we have to face negative issues again. Therefore, I will repeat again and again that the diversified portfolio supports us with a certain stability.Quarter 3 performance was negatively influenced by the second lockdown from mid of October onwards. Therefore, the earnings improvement in quarter 3 has been below our expectations. The overall development in the first 9 months confirm the general earnings improvement in business year '20/'21, especially in these exceptional times.Group revenues came in on previous year's level. Group EBITDA was up by 22%, totaling EUR 431 million for our non-sugar operations. Group operating result was up by 73%, while the cash flow increased significantly by 34%. EPS came in at minus EUR 0.56 against minus EUR 0.42 the year before. Net financial debt end of November 2020 came in on previous year's level, an adjusted deleverage improvement of over EUR 300 million against last year.Now let's have a first look into the segmental performance on Page 5 before we get into more detail segment by segment. Group revenues came in on previous year's level. Revenues decreased slightly in segment CropEnergies, while segment special products showed a moderate increase. Segment sugar and fruit reached last year's level.Group operating results showed a strong increase. The increase was driven by loss reduction in segment sugar, significant earnings improvement in segment CropEnergies, the moderate earnings increase in segment special products. Segment fruit showed a moderate earnings decrease.Let's continue with segment sugar on Page 7. Let me start with the revisit of our view on the global sugar market. In its latest update beginning of January 2021, F.O. Licht has confirmed its deficit expectation for sugar marketing year 2019/'20 with 5.5 million tonnes, which is still reflecting a massive deficit. This also reflect the corona-driven temporary lower consumption. The stock-to-use ratio is expected to drop from 44% to 41%. It's important to note that it contains the realized switch from ethanol to sugar production in Brazil.For the current sugar marketing year 2020/'21, F.O. Licht has increased its deficit forecast once again from 3.0 million to 3.8 million tonnes, which would lead to another decrease of the stock-to-use ratio down to 38%. This will confirm the generally positive fundamental global market environment for the next 18 months.Let's have a look at the European sugar market environment on Page 8. The European market has changed into a net importer status since campaign 2018, which has already lapped with the time line to first positive price step in October '19. The expectation of a continued net importer status also beyond October '20 has led to a confirmation of the European spot price level despite some temporary softness in light of the corona-driven demand weakness. The increasing market focus on the difficult harvest season 2020 in light of the beet yellow virus and other factors negatively impacting sugar yields in combination with a certain support from a more robust world market pricing has led to a positive European sugar price development most recently.In its December update, the EU has significantly reduced European beet sugar production forecast for campaign 2020 from about 17 million tonnes to only 15.7 million tonnes. This reflects also Südzucker's perspective.Since H1, we have publicly stated such a scenario as a potential risk. Now it is materializing more and more. There are several negative consequences out of this situation that led to the adjusted sugar earnings outlook for fiscal '20/'21. First, much higher idle cost due to lower utilization; second, lower demand due to second lockdown and intensified lockdown measures across Europe; third, less available spot volumes to take benefit from sugar price increase. Originally, we planned to contract 80% in the first place and to leave about 20% open for spot and contracts to be negotiated later on. Fourth, lower sugar production leads to lower sales volume and consequently lower sugar revenues and gross margin contribution. Fifth, higher corona costs linked to measures to secure the health of our employees and to secure a continued production availability.Let me now turn into the complete development in segment sugar in the first 9 months on Page 9. Revenues in segment sugar came in on last year's level. The development is marked by lower sales volumes, mainly due to the drought-driven lower sugar production campaign 2019 and higher sugar sales revenues during the course of the first 9 months of business year '20/'21. We have observed a lower demand from our industrial customers over time in light of the corona pandemic, which is more than offsetting the retail hoarding effect.Operating loss was significantly reduced from minus EUR 146 million to minus EUR 80 million. The improvement is mainly driven by sugar price increases at the beginning of sugar marketing year '19/'20 and '20/'21. So far, these improvements more than compensate for lower sales volumes, higher production costs and lower capacity utilization in light of the increasingly worsening harvest expectation.The currently still running campaign and resulting sugar output is again strongly influenced by the continued drought and additional pest damages. Beet growing area is reduced by 12%. And we expect an average campaign length of about 106 days against 114 days of last year, strongly below our targeted utilization of about 125 days. Therefore, the resulting overall sugar output from beet is expected at 3.5 million tonnes against 4.3 million tonnes 1 year ago. This means another 300,000 tonnes less sugar output against our expectation at the beginning of October 2020.Let me continue with segment special products on Page 10. After a very successful year 2019/'20, our original target was to repeat this success. Following a good start in the business year and the continuation of this performance in quarter 2, we decided to raise the outlook for segment special products.Now in light of the second lockdown resulting in some weakness in quarter 3, we decided to adjust our target again. Let me come back on this at the end of the presentation. Now to the complete performance in quarter 3. The first 9 months, revenues grew by 5%, supported by higher sales volumes following the starch production capacity extension. Effect from the corona pandemic were right in regard to the different product categories and timing during the period.In this slide, operating result decreased by 8% in quarter 3 and increased 8% after 9 months accumulated. The ongoing positive revenue development more than compensated for the cost increase. Positive indication from the ethanol price recovery since the price collapse at the beginning of the year have been realized. But during quarter 3, we had to face a corona-driven burden for product groups and higher margin groups.Let me now turn to segment CropEnergies from Page 11. Revenues were down by 4% following a corona-driven lower demand and a substantial price decline at the beginning of the business year. Ethanol prices significantly recovered in quarter 2. In light of the renewed lockdown situation during quarter 3, ethanol prices decreased again. But on 9-month basis, we're still above last year's average for the same period. This partially compensated for lower sales volumes and lower byproduct sales revenues.In general, the operating result development followed the revenue development over the course of the first 3 quarters. Quarter 2 showed a significant earnings increase, which slowed down in quarter 3. Lower raw material costs partially compensated for lower byproduct sales revenue. The average ethanol market price in the first 9 months was EUR 607 per cubic meter on previous year's level. In quarter 3, EUR 665 versus EUR 603. And in December, the average ethanol price was EUR 519 per cubic meter against EUR 687 per cubic meter in December 2019. In January, we saw a very weak start, but prices have recovered to above EUR 500 per cubic meter.Move on to the segment fruit on Page 12. Revenues came in on previous year's level. Fruit preparation showed an overall stable performance. Fruit juice concentrates came in on above last year's level in light of higher sales revenues despite lower sales volumes. Operating result improved in quarter 3, but is still below last year's level on accumulated 9-month basis.We observed fruit juice concentrate margin decrease in light of higher raw material costs from the 2019 campaign and burden from significantly lower sales volumes in fruit preparation. Slightly lower sales volumes and lower margins have been more than compensated by cost savings.Let me now turn to the main point in the P&L on Pages 14 and 15. We had equity result came in at minus EUR 125 million against minus EUR 58 million 1 year ago. While special products contribution increased from EUR 11 million to EUR 16 million, sugar contribution got worse against last year from minus EUR 69 million to minus EUR 141 million. This is mainly due to the negative contribution from Südzucker's 35% participation in ED&F Man. The quarter 3 numbers reflect ED&F Man's contribution as of business year-end of September 2020.On the one hand, it contains the ongoing profitable trading business. On the other hand, it comprises the overall negative net loss for the year in light of the corona-driven postponement of the targeted implementation of the strategic realignment. Additionally, Südzucker has written down its participation. The new book value of EUR 89 million reflects the Südzucker share of the remaining book value of ED&F Man.The financial result came in at minus EUR 37 million. It contains the net interest expense of minus EUR 18 million and the other financial result of minus EUR 19 million. The increase in the other financial result is mainly marked by depreciation of a minority stake in a French sugar plant in quarter 2.Let's continue on Page 15. Taxes on income increased to EUR 61 million after EUR 47 million in the same period last year. It is again distorted by the development in segment sugar, for which there was no recognition of deferred taxes.Earnings per share came in at minus EUR 0.56 against minus EUR 0.42 in the prior year. As the negative net equity impact is a noncash event, it is worth mentioning that the cash flow per share came in at EUR 1.90 against EUR 1.40 in the prior year.Let me now turn to the cash flow, working capital and investment development on Page 17. Cash flow increased substantially by EUR 95 million to EUR 378 million, representing 7.4% of revenues. Cash inflow of EUR 160 million from decline in working capital was mainly due to the sale of sugar inventories during the first 9 months. Previous year, cash outflow was EUR 41 million. CapEx decreased by 14% after 9 months.Let me now illustrate the main movements in the balance sheet on Page 19. Net financial debt end of November reached as expected prior year's level and is down EUR 210 million against end of February 2020. Total investments and earnings distribution were fully financed from cash flow and the cash inflow due to the reduction of the working capital. The strong reduction of working capital includes the closure of 4 sugar factories after campaign 2019 and will be a sustainable financing advantage. Gearing is at 39%, equity ratio with 43% is still very solid.Let me now turn to the outlook on Pages 21 to 25. Ladies and gentlemen, coming now to the projections for fiscal '20/'21. First of all, let me set the framework for our guidance, which has been adjusted 14th of December. So there's only one quarter to go. It's important to note that in view of the ongoing corona pandemic and the high volatility in all segments, the forecast is still marked by some uncertainty.Having said that, group revenues should now come in at EUR 6.6 billion to EUR 6.8 billion, and operating result should now reach EUR 190 million to EUR 240 million. In segment sugar now, we expect revenues to decline slightly. We were not able to fully achieve the targeted price increase for contracts as well as for open volumes. Following bad harvest in '19 and '20 and overall lower corona-driven demand, we see a sharper-than-expected drop in sales volume. On the one hand, we realized a higher pricing level and got material cost savings out of the restructuring plan. On the other hand, there are higher raw material costs and significantly higher production costs in light of the low factory utilization and another worsening of 2020 harvest expectations.In this light, we have also adapted our operating result outlook. Now we expect an earnings range of minus EUR 150 million to minus EUR 110 million. We continue to expect the second half year result to improve significantly compared to the same period last year. Let me clearly stress that this would still mark a very strong earnings improvement against fiscal 2019/'20.So for about segment sugar. As mentioned earlier, in light of a more difficult quarter 3, special products is now expected to show slightly higher revenues and a slightly lower operating result with an increase in depreciation. Already since mid of October, we have observed negative effects from the renewed lockdowns in Europe. This leaves us also with some uncertainties for the remaining 3 months, especially for the sales, price and raw material development at segment special products.Segment CropEnergies had to adjust its forecast in light of the renewed lockdown in Europe on 14th of December. Revenues are now expected to reach EUR 765 million to EUR 795 million. The operating result is now expected to reach EUR 95 million to EUR 110 million. We still would confirm last year's record earnings level.Also segment fruit outlook had to be adjusted. Revenues are expected now to grow slightly, and operating results came in on last year's level.Let me now turn to Page 22. The EBITDA range of EUR 550 million to EUR 600 million mirrors the strong increase of operating profit. Investments in fixed assets are expected below previous year's level at around EUR 300 million. This slide, we still see the ratio of net financial debt to EBITDA significantly decrease against last year's figure.Let me now turn to Page 24. Let me summarize my presentation highlighting 3 important points. Firstly, diversification strongly helped to successfully weather the corona storm; secondly, we still expect a significant earnings improvement despite the reduced outlook for segment sugar and all uncertainties linked to the corona pandemic; and thirdly, the temporary corona-driven demand dent in segment sugar is bolstered by a strong sugar performance.Let me finish my presentation on Page 25. This last page, I would like to share with you our thoughts about the structural cash flow. Despite all uncertainties, it illustrates, in particular, the expected strong earnings improvement in segment sugar. In this slide, we clearly reiterate that this sets the starting point for deleverage phase in 2021, leading to a significant improvement of respective financial ratios. So the group confirms significant earnings improvement in fiscal 2020/'21. Thank you all for your attention. And we are ready to take your questions.
Thank you, Mr. Kolbl. Thank you for your speech, Mr. Kolbl. I would now hand it back to the operator to open up the floor for your questions.
[Operator Instructions] And the first question is from the line of Oliver Schwarz of Warburg Research.
I've got a couple of questions mostly related to sugar. Firstly, Mr. Kolbl, you stated that production costs were higher compared to 2019/'20. I could very well understand unit costs being higher, but production costs in absolute terms being higher, I don't really understand. You have lower personnel. You have lower raw materials. So the energy consumption should be lower. So what's driving production costs up? Will we do that one by one or should I put all my questions with you first?
First of all, I will quickly answer this question. We are talking about cost per unit. That is the main point.
Okay. Okay. Okay. Second one is regarding sugar. You stated that your sugar volumes fell short of your expectations. If you compare that with your contractual obligations in your annual or multi-annual contracts, will you have enough sugar to fulfill all those contractual obligations until the 1st of October in this year or might you be forced to source sugar from outside vendors to fulfill your contractual obligations?
I can meet it right now. We have no need to further, let me say, source sugar. But clearly, the negative is, as I said in my presentation, that the original plan was to fix 80% and to have 20% open for spot contracts and for peers maybe with higher prices. Now we are more or less in a situation that close to 100% is fixed. But we can, the more important point is that we can deliver all our contracts.
Okay. Very well. And lastly, I wanted to check how much of your current contracts are on an annual basis and how many are multi-annual, so biennial or even longer than that?
You can say, let me say, roughly 90% are annual contracts and 10% are in the area of spot contracts. And important is, in this 90% annual contract, there's still a portion in of long-term contracts which are phasing out in the remaining months of fiscal '20/'21.
The next question is from Alex Sloane of Barclays.
Alex Sloane from Barclays here. I'd just like to ask a question just in terms of the medium-term outlook for sugar profitability and what actions you might need to take that are under kind of your control. I guess when you benchmark your sugar output versus peers, I mean, do you think there's a scope for further rationalization of sites and might that be required to ultimately get sugar profitability back to a level where returns exceed cost of capital?
Yes. Clearly, I think, first of all, fiscal 2020/'21 was for the sugar segment really exceptional year. First of all, we have the negative influences of the corona pandemic in 2 quarters in our fiscal, yes, in the quarter 1 as well as in quarter 4, the first point. The second point, it was also exceptional year due to the, let me say, harvest situation we have to face and that we have -- when we look about a normalization midterm, et cetera, that has to be in mind that are negative factors, which nobody has on their radar screen at the beginning of the calendar year 2020 or also the year before. That is the first point.So from a mid-term profitability view, this is not, let me say, a normal starting point to look forward. And the second point, when you make, let me say, the comparisons with peers, Südzucker is in the execution of our restructuring plan and our administration cost saving plan. And the, let me say, the positive elements of those restructuring measures will kick in or are kicking in now from October 2020 onwards going forward.And that are, let me say, the main points when you look on peers and that we have also to have in mind that every company has different setup in, let me say, raw material pricing, raw material contracts, et cetera. But that only to mention the main points. And that also summing up all these factors together, that we will see a further improvement over time in the profitability of our sugar operations. And clearly, that will also bring a narrowing to peer group.
[Operator Instructions] And we have a follow-up question from Oliver Schwarz.
When turning to the special products segment and looking at profitability levels here with operating margins declining by 8.2%, I'm very well aware that you relate it to COVID-19 effects on earnings and sales. But still trying to grasp the underlying mechanics here. I can very well understand PortionPack not contributing anything to earnings or even a negative number given the circumstances. However, we should have seen higher volumes in starch given the number of Amazon parcels heading out to each and everyone. We should have seen a fair share of earnings from BENEO given that people might be more keen to eat at home and use those products to supplement their food. And especially, Freiberger should have had a run due to the high demand for frozen pizzas. But still, earnings have been trending down in Q3. Could you please elaborate on that development?
I think you have made a great job in elaborating the things we have to change. You are fully right. PortionPack is the division which has clearly the highest problems with its influences from the pandemic with the, let me say, Horeca approach, food service approach. Clearly, it is a highly profitable division in normal year. But in that year, we miss here the profit contribution.Then what you said to Freiberger versus the contrast is yes. Here, we have really a good development, sales volume development. But clearly also here with some extra costs to keep the factories running, et cetera. But here, clearly, a good development. BENEO here in this division, we have a mixed picture about several products. For example, for the high-priced products, we see coming down in volumes, clearly, due to the high pricing of the products. And so here, we have a mixed picture.And for starch, here, the same situation. You mentioned clearly the paper industry, clearly, but there are also other sectors in which our specialty starches are, they are delivering. And there are also sectors which have really clearly or our customer base has negative influences from the corona pandemic. And in starch, we have clearly in mind that a big portion of profitability is linked to the ethanol pricing. And here, we have in quarter 3 and also for the outlook set a more clearly cautious approach going forward.
The next question is from Chris Ryan of Bank of America Securities.
Can you just talk about your target for the ratings given the negative outlooks right now, your longer-term target for the ratings and then also target for deleveraging over the next year?
Clear, our main goal over years, we can say decades, is to keep a solid investment-grade rating. And the company is really doing everything over the last 24 months to keep that situation and also doing everything for the next quarters to come in more safe territory, investment-grade rating. And clearly is, as said, that our clear aim is to bring absolute net debt down, but more important is to improve net debt to EBITDA or net debt to cash flow ratio as we'll deliver clearly in 2020/'21.
[Operator Instructions] And there are no more questions at this time, I hand back to Nikolai for closing comments.
Okay. Thank you for your time today, and thank you for your questions and your participation today in our conference call. We wish you all, as said at the beginning of the call, a very good start into the current year. And as Mr. Kolbl said, hopefully, very quickly, we turn into a more normalized situation across all of our lives. And yes, again, thank you for your time. And if you have additional questions, just don't hesitate to call me or to give us a quick message. Thank you and goodbye.
Thank you. Goodbye.