key Figures

nordzucKer in europe

northern europe 1,509 Average number of employees for the year 5 2 Sugar Sugar factories refineries

central europe 1,247 Average number of employees for the year

5 2 1 eastern europe Sugar Liquid Bio- factories sugar ethanol 523 factories plant Average number of employees for the year 3 1 Sugar Sugar factories refinery

Beet cultivation anD campaign

2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 Beet farmers 16,292 16,091 15,379 14,981 14,761 Beet cultivation area ha 287,245 254,300 265,947 265,904 241,000 Beet processing t/day 143,392 133,192 143,520 138,797 143,236 Sugar production millions of tonnes 2.87 2.30 2.91 2.80 2.50 Nordzucker Annual Report 2013/2014

Revenues in EUR m

2,443 2,500 2,361 2,250 2,018 2,000 1,806 1,815 1,750 1,500 1,250 1,000 750 500 250 0 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014

net income in EUR m

400 369* 350 300 250 208 209 200 150 100 91 50 0 -50 – 10 -100 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014

* adopted

Dividend per share EUR

2.00 1.80 1.50 1.30 1.00 1.00 0.46 0.50 0.0 0 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 K ey Figures

Nordzucker Annual Report 2013/2014

Nordzucker – Key Figures at a glance

Yield Ratio

2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 Total operating profitability 1 % 9.7 16.6 18.4 24.3 20.0 Return on revenues 2 % – 0.7 4.8 10.1 14.7 8.5 Return on equity 3 % – 1.7 10.6 20.4 27.8 14.5 Redemtion period 4 years 4.0 1.1 0.6 0.1 – 0.1

Cash flow from operating activities per share EUR 6.78 6.49 4.59 6.49 5.90 Earnings (Group) per share 5 EUR – 0.27 1.80 4.22 7.44 4.17 Dividend per share 6 EUR – 0.46 1.00 1.80 1.30 Total dividend EUR m – 22.2 48.3 86.9 62.8

1 EBITDA/Total revenues 4 Net debt/EBITDA 2 Net income/revenues 5 Total income/number of shares 3 Net income/equity 6 Total dividend/number of shares

Key Financial Figures

2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 Revenues EUR m 1,806 1,815 2,018 2,443 2,361 of which abroad % 54 52 54 57 56 EBITDA EUR m 166 283 420 594 473 EBIT EUR m 66 188 315 506 299 Net income EUR m – 10 91 208 369 209 Cash flow for/from operating activities EUR m 328 313 222 313 285 Investment in property, plant and equipment and intangible assets EUR m 62 56 64 74 79

Balence Sheet ratio at the End of the Financial Year

2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 Balence sheet total EUR m 2,456 1,982 2,262 2,403 2,337 Equity EUR m 744 819 999 1,291 1,386 Equity ratio % 30 41 44 54 59 Dept capital EUR m 1,712 1,163 1,263 1,112 951 Financial liabililties EUR m 778 364 256 71 6 Cash and cash equivalents EUR m 114 50 7 11 58 Net dept1 EUR m 664 314 249 59 – 52

1 Cash and cash equivalents – Financial liabililties ANNuAl report 2013/2014 1

sugar has a Future

We are shaping our future with foresight and working with great dedication to become more efficient and to streamline our processes. We give our all for our customers, out of conviction. as a powerful economic factor in our regions, we assume responsibility for the environment and for employment. together with our beet farmers, we aim to sustainably strengthen the position of sugar beet. We attach great importance to a transparent supply chain from the field to the customer, and to the highest quality products. as a strong european sugar company, we are looking to the future with confidence, because sugar has a future! 2 Nordzucker Annual Report 2013/2014 : Sugar has a future

Content

1 Nordzucker At a glance

Key figures 4 48 Sugar has a Future Group management report

5 � Letter from the Executive Board 50 � Nordzucker at a glance 10 � Strategy 54 � Economic environment and market developments 16 � Optimised beet cultivation 57 � Earnings, net assets and financial position 20 � Sugar beet is the future 62 � Employees 26 � Investitions 62 � Opportunities and risks 30 � Production 68 � Supplementary report 36 � Health and nutrition 68 � Forecast 40 � Quality management 44 � Sales sugar has a future : Nordzucker ANNuAl report 2013/2014 3

How much sugar is needed when and where? Nordzucker is thinking in terms of the market.

70 124 consolidated Financial Further inFormation statements 126 � corporate Governance report 72 � consolidated income statement 127 � Statement of compliance with 72 � consolidated statement of comprehensive income german corporate governance code 73 � consolidated cash flow statement 128 � report by the Supervisory Board 74 � consolidated balance sheet 132 � Glossary 76 � consolidated statement of 137 � Financial calendar changes in shareholders’ equity 77 � Notes to the consolidated financial statements 123 � Audit opinion 4 Nordzucker Annual Report 2013/2014 : Executive Board

Dr Michael Noth, Dr Lars Gorissen, Hartwig Fuchs (Chief Executive Officer), Axel Aumüller and Mats Liljestam (left to right) Letter from the Executive Board : Nordzucker Annual Report 2013/2014 5

Dear shareholders

After two excellent financial years with very good earnings, we were again able to close the year 2013/2014 at a level that we can be very pleased with. Nevertheless, over the course of 2013 we experienced some steep price falls for quota and non-quota sugar, which are reflected in both revenues and earnings. Higher sales were able to make up for much of this pricing effect, however.

T o give you the main figures in brief: we reported revenues of EUR 2,360.9 million in total, which was EUR 81.9 million lower than in the previous year. Consolidated net income for the period came to EUR 208.7 million, compared with the adjusted EUR 368.7 million in the previous year.

Part of our strategy and preparation for the era without sugar quotas post-2017 are extensive investments in our plants to boost market and customer focus, improve their efficiency and protect the environment. In the reporting year, they included investments of EUR 78.7 million in property, plant and equipment – over EUR 4 million more than in the previous year. High- lights of this capital expenditure were the first construction phase for the evaporation dryer in Örtofta and the second phase in Nakskov, an 80,000-tonne sugar silo in Uelzen, as well as the completion of the juice purification plant in Clauen and the wastewater treatment plant in Opalenica. Projects to increase energy efficiency and create additional silo capacities will remain the focus of investment in the years ahead. We are planning to increase our investment volume again substantially.

“ Beet farming in our European regions has a future. ”

The previous year’s net debt of EUR 59.4 million has now been paid off in full. As of the reporting date, cash and cash equivalents exceeded financial liabilities by EUR 52.4 million. Equity went up to EUR 1,385.8 million. As total assets remained roughly the same, the equity ratio went up from 53.7 per cent in the previous year to 59.3 per cent. 6 Nordzucker Annual Report 2013/2014 : Letter from the Executive Board

Together with the Supervisory Board, we intend to put forward a proposal at the Annual General M eeting this year to distribute a dividend of EUR 1.30 per share of share capital. This corresponds to a total dividend distribution of EUR 62.8 million. In the outstanding previous year, we distributed EUR 1.80 per share, adding up to a total of EUR 86.9 million. In a long-term comparison, the dividend is still high, however, and allows our shareholders to participate in the company’s strong earnings in the financial year 2013/2014. At the same time, a considerable portion of earnings has been retained to finance future profitable growth within the company.

“ We want to become one European company and, together with our motivated and highly qualified team, are preparing for the post-2017 era. ”

2013/2014 was a successful year. Our wide-ranging programmes to increase efficiency are hav- ing an effect, and this year again made a substantial contribution to earnings. We were able to complete our Profitability plus efficiency programme a year earlier than planned, because we have already reached the target set for 2014/2015. Now, with an eye on 2017, the aim is to set new targets, as improvement is a continuous process. We can be proud of a smooth campaign, a good beet yield – although weather conditions were not optimal everywhere – and a team that is driving forward the company’s continued development in all areas. This annual report is not only intended to provide you with a review of the past year, but above all to show you how Nordzucker staff in specific areas work each and every day to give their best for our customers and our company. They take care of customer requests, ensure compliance with our high quality standards, implement investment projects, improve workflows in our plants and work with our beet farmers to increase their yields. They are a strong team, who have been preparing for the new era for a long time. In particular, we want to highlight the fact that this team works together across national borders, that its members learn from one another and make use of knowledge from other plants. We want to become a European company and prepare ourselves for the time when the quota system expires. It is a time that will bring challenges, but also opportunities. Our thanks go to all our staff for their dedication and their willingness to confront the new challenges. Letter from the Executive Board : Nordzucker Annual Report 2013/2014 7

At the end of September 2017, the sugar market regime will cease to exist in its present form. The market will change and the global market, with its price fluctuations, will exert a much greater influence on the EU sugar market than before. From other markets we know that the phase following deregulation, in which a new market equilibrium is established, is demand- ing. Production volumes will go up, there will be greater competition with isoglucose and the market will consolidate as a result.

In recent years, we have done everything to prepare ourselves well for this situation. We are a strong company built on sound foundations, in terms of both our performance figures and our technical equipment. And we have a strong team with motivated and highly qualified employees. We are convinced that we will also emerge from this downturn all the stronger, especially as we offer our customers reliability and service, as well as a product that is sustainable and regional. Sustainability and social responsibility are our key themes, and we will continue to develop these in the future.

But strength also requires efficiency and foresight. It means thinking from a market perspective. We have to grow, but here in Europe we operate within narrow confines: sugar consumption will not go up and competition law will not really make consolidation in Europe any easier. So for us, the logical consequence can only be to look further afield to growth regions like Africa and Asia, where the market is set to grow, driven by economic expansion and an increasing population.

At the same time, our message is clear: beet farming in our European regions has prospects, and we are confident that you, our shareholders, will stay with us in future and keep Nordzucker strong.

Nordzucker AG The Executive Board

Hartwig Fuchs Axel Aumüller Dr Lars Gorissen

Mats Liljestam Dr Michael Noth 8 Nordzucker ANNuAl report 2013/2014 : sugar has a future

sugar has a Future

8 Future ISSUES Sugar has a future : Nordzucker Annual Report 2013/2014 9

1 2 3

Strategy Optimised beet cultivation Sugar beet is the future THE NEW WORLD 20 TONNES OF SUGAR “SUGAR BEET OF SUGAR PER HECTARE DON’T IS A WINNER

Page 10 JUST FALL FROM THE SKY FOR US” Page16 Page 20

4 5 6

Investments Production Health and nutrition Sustainability Master of Sugar in and profitability a complex the media

hand in hand production Page 36 Page 26 machine Page 30 7 8

Quality management Sales How values Customer become orientation and standards a willingness

Page 40 to talk Page 44 10 Nordzucker ANNuAl report 2013/2014 : sugar has a future

the neW World

o F In 2017 sugar the sugar market regime will expire after more than 45 years.

focussed on the future

The SMR will expire in 2017. But what’s next? We are looking to the future with confidence. Sugar has a future : Nordzucker Annual Report 2013/2014 11

Strategy

Hartwig Fuchs: “ STRENGTHENING NORDZUCKER BY LOOKING TO THE FUTURE”

For decades, the sugar market regime, or SMR, has been the cornerstone of the European Union’s sugar market. At the end of September 2017, the SMR in its current form will expire. T here will then no longer be a quota regulation restricting quantities, no compulsory minimum beet prices nor export restrictions. How will Nordzucker meet these changing market condi- tions? What will the future market look like? And, above all, what will be the opportunities and challenges for Nordzucker?

We asked Hartwig Fuchs, CEO of Nordzucker AG, for his thoughts.

“There will be a number of changes in the European sugar market in the coming years. The com- petition will grow stronger, and the influence of the global market, with its greatly fluctuating sugar prices, will also increase. This scenario translates into the following three developments: Firstly, there will be regions where beet cultivation will not be as profitable in comparison to that of other crops, e.g. wheat, oil seed and maize; secondly, smaller producers will increasingly experience difficulties in investing in their competitiveness. Both trends will mean a decline in sugar production in these areas. Thirdly, it will also result in production increases – particularly in regions where, in Europe, beet cultivation and sugar production is especially competitive. Our competitors will optimise the capacity of their facilities, thereby creating a surplus of sugar on the European market. In addition, the volumes of isoglucose produced will increase in Europe after 2017. Because when the quota for sugar expires, so, too, will the quota for isoglucose. Since isoglucose could be used as a substitute for sugar in a number of products, it will be in competition with sugar for some customers after 2017 and further increase the impending market surplus. At the same time, sugar consumption in Europe is stagnating. The increased F acts and figures production and the availability of isoglucose will affect prices. And we must be prepared for on the sugar market that. As one of the large producers in Europe, however, we are in a strong position, and we will regime use this to our advantage. It will, however, become very difficult for smaller companies, and we will see a new wave of consolidation. > 1968: The sugar market regime comes into force

A STRONG COMPANY MUST GROW > Legal basis: Directive no. 1009/67/EEC The pressure of competition is growing, so, too, the pricing pressure and, at the same time, > Content: Quota regulation our employees expect higher wages and salaries, shareholders an attractive dividend, and beet and minimum beet price suppliers an appropriate price for their beet. Only through growth can we meet all of these > Most recent fundamental challenges and increase company value. For more than 175 years, Nordzucker’s success story reform: 2006 – 2009 has been closely linked to its growth, first in Northern Germany and later in Europe. There > Sugar market regime expires: have always been voices urging caution, and never to spend money. And many people were 30/9/2017 of the same opinion concerning the acquisition of Nordic Sugar. But without risk, we will not > 85  %: Current proportion of sugar be able to grow, and if our predecessors had not taken well-calculated risks, Nordzucker would that the EU supplies for itself probably not exist at all. To emphasise once again, the market in Europe is not expected to 12 Nordzucker Annual Report 2013/2014 : Sugar has a future

Sugar consumption in Asia 2012/2013

77 million tonnes

16 million tonnes At least Sugar consumption 6 – 8 in Africa 2012/2013 prozent cent economic growth for the year

Source: OECD

grow. At the same time, existing sugar consumption will be partly substituted by isoglucose, and growth through takeovers is a difficult enterprise given competition law. The harsh reality is that we will have to extend our sphere of business beyond Europe’s borders and generate part of our revenues from outside Europe in future. That is the logical next step.

A frica, Asia and the Middle East are the growth regions of the future for sugar. With strong population growth, six to eight per cent economic growth per year has been forecast for many countries in these regions. And economic development also always means a higher standard of living, which is reflected first and foremost in eating habits – and this means higher sugar consumption. We need to look ahead here and, while maintaining a sense of the realities, a healthy dose of responsibility courage is required, as the conditions in these countries are very different to those in Europe. Together with our Supervisory Board, we have made a clear deci- sion to closely review growth options outside of Europe, including on the African continent. This is an important and appropriate step for our future.

FOCUS ON REGIONAL MARKETING

We will, however, not be going into other areas to produce sugar for our European market. Our focus has always been on regional marketing and the local production of sugar. We pro- duce locally, near to the consumer. We intend to operate sustainably, monitor the process chain and serve a local market. We will invest with good judgement and observe international corporate social responsibility standards as a matter of course, which means ensuring that our projects are socially anchored in the local community. All our plants, including those in Europe, are in rural areas where we are an important economic factor for communities, for agriculture, for our employees and for supplier farms. This is an important asset for us. Taken 16.9 further, this principle also applies to future activities in Africa or Asia. If we produce sugar from cane in Africa or India in the future, for example, we provide added value for that country, in million tonnes order to meet demand locally, build infrastructure there and take on staff. It is about opening up future sugar markets that have growth potential, and about supplying the customers there Average annual with locally produced sugar. Our activities outside of Europe will definitely not be in competi- quantity of sugar production in the EU tion with beet at home. And yes, of course we want to make money and reinvest these gains, or pass them on to our shareholders. Sugar has a future : Nordzucker Annual Report 2013/2014 13

“ EVEN IF WE SHOULD PRODUCE SUGAR FROM CANE IN AFRICA IN THE FUTURE, OUR STRATEGY CONTINUES TO FOCUS ON PRODUCING LOCALLY AND MARKETING REGIONALLY. ”

Hartwig Fuchs is clearly committed to beet and to the region

ISOGLUCOSE IS NOT AN ALTERNATIVE FOR US At present

A t present, we do not see isoglucose as an alternative to locally produced sugar from beet. As the quota for isoglucose will also be expiring, the volume of isoglucose produced in Europe will rise after 2017. In my view, however, isoglucose has several disadvantages compared with beet sugar, which prevent us from moving into this area. Firstly, isoglucose is ideally based on maize – maize that would be grown in Hungary, Serbia, Romania or Bulgaria. This would mean higher freight costs – either for the raw material or the product – not to mention that the ‘regional approach’ would be missing from the product. This is a principle which we will continue to stand by in the future. Of course, wheat can also be used to produce isoglucose, but I see here a moral problem: can there really be a justification for taking food grain for isoglucose production when it could be raw material for the mills and bakeries of Egypt, Syria, Iraq, or the poorer countries of Africa experiencing chronic malnutrition? On a personal level, too, I just don’t like the taste of isoglucose.

Nordzucker, therefore, currently has no plans to move into this area. In my view, this is absolutely no alternative to sugar in terms of taste, usability and sustainable production. 14 Nordzucker ANNuAl report 2013/2014 : sugar has a future

Streamlined processes and refi ned logistics make Nordzucker ready for the future.

We need to think in terms of the market

to remain competitive in the future, we need to change the way we think within the company. nordzucker will become a company that is oriented towards the market and the customer. to this end, we will turn the process chain on its head and think more in terms of the customer in future. For more than 175 years, our thinking has centred on beet cultivation and production, i.e. how much beet we have, how much plant capacity are we using, and how much sugar can we produce from this? today, the question is how much sugar can we sell for a given price, how much of it can we produce ourselves and how much land do we need for this amount of beet? The customers will expect Nordzucker to be more flexible in meeting their demands, and not just in terms of quantities and prices. We need to offer our customers an additional benefit: reliability, transparency and special service. We are also doing more work on improv- ing efficiency and productivity. our opportunity lies in being faster, more efficient and more productive that our competitors.

sustainaBility and customer loyalty go hand in hand

of course, the expertise that we have continuously developed and promoted over the years also plays a role, such as our comprehensive certification and the practically seamless docu- mentation of our production processes, for example. Particularly at a time when consumers Sugar has a future : Nordzucker Annual Report 2013/2014 15

“ REGIONAL PRODUCTION IS TRADITIONALLY A CORE EXPERTISE AT NORDZUCKER. ”

expect transparency from the field to the chocolate bar, this is an opportunity for Nordzucker to make the most of its talents. Our customers and the consumers expect evidence for the manufacturing conditions, from sowing to finished, locally produced sugar. This is something that we can certainly provide. Producing sugar locally from beet has undoubted advantages in terms of shorter transport routes and therefore a lower environmental impact. Sustainabil- ity, with its environmental and social aspects, is a significant focus of our work. Since 1990, for example, we have significantly reduced our energy consumption and CO2 emissions, and will continue to do so. The, by international comparison, extremely high security, social and environ­mental standards in the EU are, in my view, a real competitive advantage. We are pio- neers in sustainability in the industry and so we should be! Our customers quite rightly expect it of us.

READY FOR THE FUTURE 18 sites We are a European team and our strength lies in our diversity. Together, we have already pre- pared our company very well, and we will not ease off in our efforts to achieve greater prof- itability and further growth. Nordzucker will be systematically aligning itself with the market Nordzucker employees work in in the coming years. We are thinking in terms of the customer and are creating a new, flexible production facilities and refineries in seven European countries and efficient structure. At the same time, we will be putting out our feelers towards the markets hand in hand. outside of the EU, and expanding our core business in promising locations.” 16 Nordzucker Annual Report 2013/2014 : Sugar has a future

20 TONNES OF SUGAR PER HECTARE DON’T JUST FALL FROM THE SKY

Cord-Heinrich Köster sugar has a future : Nordzucker ANNuAl report 2013/2014 17

optimised Beet cultivation creativity reveals hidden resources

one of our most important company goals is strengthening yields in beet cultivation. But where is the potential? How can it be exploited? What has been the experience of our cul- tivation advisers? What trials have been carried out with our farmers and what were the results? To get answers to these questions first-hand, we visited two farmers in Lower Saxony, both committed beet cultivators participating in trials, along with cultivation advisers Axel schönecker and tobias minth.

Wunstorf in calenBerg land, near lake steinhude…

We are on the way to Wunstorf, a town in the region of Hanover. cord-Heinrich köster’s farm lies on the edge of calenberg land, part of the fertile calenberg lössbörde region. he farms 220 hectares on the deep humic luvisol soils typical of the area. he sows 32 hectares of this land with sugar beet. he also works for other farms as a contractor and drills beet for colleagues, and he has been participating in early sowing trials for around seven years now.

“The field must be mature. I don’t work to fixed dates.” cord-Heinrich köster has a clear idea of early sowing. he knows the limits of what his fields can yield, as do his colleagues, he believes, whose knowledge – like his own – has grown over the last ten to fifteen years. cord Köster has been growing his sugar beet for fifteen years entirely by mulch seeding. he does this simply because the ground surface, which in his region is characterised by a scarcity in water, then holds the moisture better. on the question of how much to work the land, he believes less is more. He is pleased to tell us about an extreme case he witnessed some years ago. “one farmer first applied slurry to his fields and then went over it with a grubber and plough. the neighbouring farmer brought out his old grubber and ran it once over the field. that’s all he did.” said cord Köster, with raised eyebrows. “the one who worked his fields so intensively had half of it washed away in a storm. to my surprise, the neighbour’s beet thrived. that made me think.” cord Köster’s farm has been participating in nordzucker’s cultivation advisory early sowing trials for about seven years. he is assisted by the nordstemmen plant. similar trials are being carried out and evaluated at all nordzucker sites, be they in germany, poland or sweden. 18 Nordzucker Annual Report 2013/2014 : Sugar has a future

What’s the benefit of early sowing?

“We have evaluated our early sowing trials. They showed that the difference between early sowing and later sowing dates was 1.5 tonnes sugar yield per hectare. Interpolating this, it can be assumed that for every week that sowing is brought forward, there is an additional yield of one tonne of sugar. There is a natural limit, however: it is not possible to bring it forward right into February. Our findings relate to March.”

Tobias Minth, Nordzucker cultivation adviser (left) talks to Cord-Heinrich Köster

DOMÄNE BAHRDORF, IN HELMSTEDT DISTRICT, RIGHT ON THE BORDER WITH SAXONY-ANHALT …

And on to Bahrdorf, near Helmstedt. Here, we meet Andreas Bertram, the manager of Domäne Bahrdorf. The farm has 360 hectares of cultivated land, of which 60 hectares are used for beet cultivation, 80 hectares for rapeseed, and the rest for wheat. The soils have between 23 and 55 ground points i.e. sandy to sandy-loamy. “ “We have always drilled early”, Andreas Bertram tells us. “Usually in March, as soon as the top- Without soil is dry.” He, too, is convinced of the benefits of early sowing for the yield, but maintains that a catch crop, this is only possible on his farm thanks to a winter catch crop. “That’s particularly important”, we couldn’t he emphasises. “It leads to better soil conditions, erosion protection, better root penetration sow so early. and organic fertilisation, especially on sloping ground. Without the catch crop, we wouldn’t ” be able to sow so early.” It’s no wonder, then, that at 17 per cent, sugar beet is currently a key Andreas Bertram part of Andreas Bertram’s operational planning. Sugar has a future : Nordzucker Annual Report 2013/2014 19

TRIAL FARMS HELP EVERYONE PROGRESS

Axel Schönecker, manager of the Klein Wanzleben beet office, and his team assist Andreas Bertram’s farm. He underlines the fact that in his experience, sowing early by an average of ten days significantly increases beet yield: “By sowing early, the beet yield went up by eight per cent. The result was welcomed by both our 20·20·20 project and our farmers. Today, early sowing has already become standard practice. But it is important to continue trials, because a single trial is not enough. Only as a whole can we get valuable findings of use to every farmer.”

One future topic for beet cultivation is the equal-space narrow-row method. Compared with conventional sowing, this method ensures that the intervals between the seeds both in their rows and between the rows are equal. In other words, in the case of the equal-space narrow-row method – as the same suggests – adjacent plants are separated by an – almost – equal distance of between 30 cm and 33 cm. All plants are therefore exposed to the same amount of water, nutrients, and, above all, light. If a 45 row is drilled, the individual plants are separated from their neighbours in the next row by 45 cm, but only separated by around 21 cm from their neighbours in the same row. The results using the equal-space narrow-row method are promising, but the harvesting technology currently available is not intended for rows of this width. There is a requirement for technical development here.

21 cm 30 – 33 cm

45 cm 30 cm

Conventional sowing Equal-space narrow-row method

The findings of the research project are obvious: according to ARGE Nord, in ten trials at five sites over two years, the sugar yield increased by an average of five per cent. According to current understanding, the increase in yield is solely the result of the higher beet yield, i.e. the sugar content is not affected by the equal-space narrow-row method. The plants are obviously making better use of the surrounding space than with the normal row intervals. The ground and the sun- light are thereby also used better. Gero Schlinker, Managing Director of ARGE Nord, is therefore convinced of the future potential offered by the equal-space narrow-row method: “We can see tangible yield potential with this method. How great this potential is and how it can be exploited, remains the subject of more research over the coming years. Comparability of the two systems to be examined is the decisive criterion in our trials on the equal-space narrow-row method. We are setting out with the same varieties at all trial sites. The drilling machines, sowing and harvest times are also the same, and this allows comparability across the regions.” The results using the FACTS ON THE equal-space narrow-row method are promising, but the harvesting technology currently available 20 • 20 • 20 initiative is not intended for rows of this width. There is a requirement for technical development here. Start: 2011 SIGNIFICANTLY GREATER YIELD WITH MORE INTENSIVE CONSULTATION Aim: In order to achieve 20 tonnes of sugar per hectare among 20 per cent of the highest-perform- 20 per cent of beet farmers ing beet farmers by 2020, regional expertise teams in every country where Nordzucker pro- should be able to harvest 20 tonnes cesses beet are defining the steps, large and small, which are required to reach the target of 20 of sugar per hectare by 2020 tonnes. Taken together, the many different, often small steps eventually lead to success. “On Core areas: the one hand, our cultivation advisers are carrying out their own trials or see numerous differ- Plant strains, cultivation methods, harvesting, storage and ent trials, and on the other, they see many on-farm trials in the course of their daily consulta- cultivation structure tion. They therefore have a very wide view of the cultivation in its natural environment, which they consolidate to a certain extent. And they bring this knowledge back to the land, i.e. to Knowledge exchange: Regional expertise teams in seven the other farmers. This is a very important step on the way to 20 tonnes of sugar per hectare. growing countries Our aim is to drive innovation forward”, says Dr Andreas Windt, Manager Cultivation Advice. 20 Nordzucker ANNuAl report 2013/2014 : sugar has a future

Fredrik Larsson

Joachim in sWeden… Vogel (r.) and In the Southern Swedish province of Johannes Scania, sugar beet feels right at home. Vogel (l.)

in germany…

In the Mittelweser district, sugar beet contributes to the financial success of family businesses with a long heritage.

Daniel Frauenschuh

in slovakia…

Sugar beet grows well in the climatic conditions of Eastern Europe, too. Sugar has a future : Nordzucker Annual Report 2013/2014 21

Sugar beet is the future “ SUGAR BEET IS A WINNER FOR US”

THREE BEET FARMERS TALK ABOUT THEIR EXPERIENCE

We talked to three farmers from three Nordzucker countries – Germany, Sweden and Slovakia – to find out how important sugar beet is for their businesses and how they see its future – also thinking of the post-quota era beginning in 2017. We talked to Daniel Frauenschuh, from Austria. Since 2008, he has been the estate manager responsible for a large agricultural business of 3,500 hectares in Slovakia. Fredrik Larsson is a fourth-generation farmer operating a business of 735 hectares near Skegrie in the South-East of Scania, Sweden, along with a partner and two employees. And finally Joachim Vogel, who, together with his wife, runs a 140-hectare farm in the Mittelweser district that has been in his family for 500 years, as well as a 100-hectare busi- ness in Lage, in the Lippe district.

BEET FARMING UNDER DIFFERENT CONDITIONS

When you look at these three agricultural businesses, it quickly becomes clear how different they are. Daniel Frauenschuh and his 90 employees at six sites in Slovakia farm around 2,000 hectares of arable land as well as 1,500 hectares of grassland and pasture, which are used for intensive livestock and dairy farming. The agribusiness plants 500 hectares with wheat, 200 hectares with winter brewing barley, 100 hectares with summer barley, 115 hectares with beet, 310 hectares with maize and 275 hectares with rapeseed, as well as clover and lucerne. His land is spread across 14 districts. The business used to be a state-owned enterprise, but today it is clearly structured and highly efficient: it makes a profit and acts as a model for Slo- vakian agriculture. Somewhat smaller, but with largely contiguous fields, BryLa jordbruks AB is typical for an agricultural business in Southern Sweden. Fredrik Larsson and his partner culti- vate 92 hectares of beet, 103 hectares of rapeseed, 270 hectares of wheat and 160 hectares of brewing barley, as well as peas and the pasture grasses meadow grass and fescue, alongside the fallow land that is required. The Vogel family farm is also typical for the region around the Weser marshes. The family has been growing beet for 60 years, currently on 15 of its 140 hec- tares of arable land. They also cultivate hybrid rapeseed and seed potatoes, as well potatoes for crisps, asparagus, winter wheat, rye and triticale. 22 Nordzucker ANNuAl report 2013/2014 : sugar has a future

The Vogel family has been growing beet for

60years

“ Beet has a high priority on our farm. ”

What all three farmers have in common is the conviction that beet cultivation fulfils an impor- tant function on their farms. Frauenschuh emphasises: “For me, sugar beet is a) a useful crop for crop rotation, b) an excellent cash crop and c) a very important source of animal feed, thanks to the cossettes we get back from the plant. in addition, beet is a stabilising factor for our financial results. compared with wheat, whose price fluctuates enormously, it provides us with much more predictable earnings.” despite the vast differences in size between the farms, Joachim vogel sees things similarly: “the beet has a high priority on our farm, partly for reasons of crop rotation, but also for the profit margin and distribution of labour.” and in sweden? there, too, the farmer’s position is unequivocal: “We generate around 20 per cent of our revenues with sugar beet”, explains Fredrik Larsson, “although it only accounts for 15 per cent of our total land. So that is obviously cost-effective!”

So it seems that conditions are excellent for the sugar beet’s future career. All three farms are planning a moderate expansion of their beet-growing areas. “Post-2017, we’d like to expand our land under cultivation to 20 hectares. that would fit well with our crop rotation, but of course it also depends on the beet staying competitive,” underlines Joachim vogel. Fredrik larsson, however, emphasises the importance of crop rotation: “the sugar beet will remain an Sugar has a future : Nordzucker Annual Report 2013/2014 23

important arable crop. It’s a good plant for breaking the infection chain in crop rotation and it helps to distribute the work evenly over the course of the year.” For him, too, the economics are paramount, “Beet cultivation has to make financial sense for me as a farmer and for the sugar industry. If it’s not profitable, it won’t get planted, and if it’s not planted, there’s no industry, so if everyone involved does the right thing at all levels, we can create a win-win situation.” Daniel Frauenschuh and Fredrik Larsson have invested in new technology, and thereby in the future of the sugar beet.

“AND SUGAR BEET IS SOMEHOW AN INTERESTING SORT OF CROP.”

On this point they all agree that the services and opportunities offered by the Nordzucker cultivation advisers play an important role. Asked about their experience of the cultivation advisers responsible for their regions, we only get positive answers. None of them would want to do without the experts’ advice. It starts with recommendations on how to effectively combat recurrent rapeseed on the field when rotating from rapeseed to beet, and includes tips for neutralising salt damage due to heavy rainfall immediately after fertilisation with pot- ash, as well as special advice tailored to the climatic conditions for beet in Slovakia. The exper- tise and exchange of information with the cultivation advisers is appreciated everywhere. So Fredrik Larsson is not the only one keen to share in the latest findings from the 20·20·20 project, for instance. Not without self-criticism, he points out that “the more closely you look at the cultivation methods, the more you see that the way we’ve always done things may not always be the best. So it’s worth paying attention and learning from the trials carried out.” And his colleague from Slovakia hits the nail on the head when he declares, “The idea is for us to get better! That is why we are happy to draw on the findings from the cultivation trials.” Charac- teristic of the good farmers is the fact that they get suggestions from other sources available to them, too, in addition to the farmers’ meetings, field days and training courses organised by the Nordzucker cultivation advisers.

Frauenschuh regards the results of the agricultural trials as extremely helpful for his work. If the experience and results of the experiments are positive, then he is one of the first to apply the new knowledge, because this is the only way to achieve the sometimes ambitious goals that farmers like Fredrik Larsson have set themselves. “Our aim is for our farming to be in the top 20 per cent in Sweden in the years ahead. We have good conditions, so we just have to continue the trend of making continuous improvements, keep on eye on the research, make use of new findings and have the confidence to be the best.”

OF SUGAR PER HECTARE BY 2020 IS THE TARGET FOR 20 PER CENT 20 OF FARMERS t onnes 24 Nordzucker Annual Report 2013/2014 : Sugar has a future

“THE MARKET SETS THE PRICE AND QUALITY WINS OUT.”

U nder these circumstances, it may come as no surprise that the farmers are not at all worried by the expiry of the quota in 2017 and its financial effects. “Quota, quota, quota is the worst thing you can do to a market. So for us, it’s good that it’s coming to an end. The market sets the price. And quality wins out. We need professionals who support us, and we have to work professionally ourselves. Hand in hand. I’m not worried about the end of the quota!” Given the size of his business, Daniel Frauenschuh is an advocate of the free market. Some of the farmers are more critical, however. But for Fredrik Larsson, too, the opportunities predominate: “I don’t believe that the abolition of quotas is only negative. It provides great opportunities, because we can grow and produce more. Our consistently high sugar quality and punctual deliveries make us competitive. The industry and the farmers depend on one another. A profitable indus- try in conjunction with profitable farming keeps things moving forwards.” In neither Slovakia, Sweden nor Germany do they see a danger to their own beet farming or to sugar production in Europe. Quite the opposite! “The last few years have shown that beet is sustainable in Ger- many”, says Johannes Vogel. Confidence in the collective expertise of the sugar industry and farmers is so strong that real opportunities for the future are expected.

GPS Precision farming with GPS and GIS is the technology of the future

“ POSITIONING TO THE CENTIMETRE IS WORTHWHILE. ” Sugar has a future : NORDZUCKER ANNUAL REPORT 2013/2014 25

“ I VALUE THE SUGGESTIONS MADE BY MY CULTIVATION ADVISER. IT PAYS OFF. ”

“ADVANCES IN BEET CULTIVATION ARE ALREADY MUCH MORE DYNAMIC THAN FOR OTHER CROPS.”

So the cost-effectiveness of the sugar beet is the be-all and end-all for the era after 2017. That’s something everyone agrees on. And when we ask about what they are doing to increase their yields, we are deluged by the responses: “Firstly, we work very closely with the cultivation adviser at our sugar plant. Secondly, we have bought new technology. Then in Germany, we use special catch crop mixtures”, explains Frauenschuh, “and before we sow the beet we scatter a thousand kilos of lime. We take soil samples to determine the fertiliser. All of these are steps that optimise conditions for the beet. We are not a farm that scrimps and saves. We invest.” For their part, the Vogels think that advances in beet cultivation are already much more dynamic than for other crops, and they are sure that plenty more will be possible in future. “Apart from that, we are now trying to complete the seedbed in one pass. That cuts costs, because we use less fuel, for example, and at the same time it keeps the moisture in the ground, which we need for germination.” And, finally, in Sweden they are betting heavily on the possibilities offered by modern technology: “We have invested in cutting-edge machinery, we use GPS and other technologies and have bought a modern, six-row beet harvester. Our strategy is to use specialised drivers for our machines, in order to exploit their full potential.”

As diverse and individual as the location and size of the farms are also their steps to boost yields. But everyone we asked had the will to ensure that sugar beet remains competitive with other arable crops in the future. 26 Nordzucker ANNuAl report 2013/2014 : sugar has a future

The end of one campaign means looking ahead to the next ... Now it’s time to invest

suSTAINABILITy and ProFITABILITy hand in hand Sugar has a future : Nordzucker Annual Report 2013/2014 27

Investments

Smart investments get plants fit for the future

The future is approaching with great strides. And Nordzucker is responding to the new challenges with a comprehensive range of measures. We also have the end of the quota system in view as pertains the plans for investments in order to continue making our plants ready for the future with intelligent investments. Investments that serve to ensure the long-term sustain­ability and profitability of our production sites. But what areas do they focus on? Where are we making investments and why? We would like to answer these questions by taking our plant in Örtofta in Sweden as an example. We spoke with two of the project managers, Jerker Magnusson and Niklas Hanner.

IN SUGAR PRODUCTION, THE TIME FRAME FOR IMPLEMENTING INVESTMENT PROJECTS IS TIGHT.

Sugar production is a seasonal business: during beet processing – the campaign – sugar is pro- duced around the clock, seven days a week. Due to this special timing, all investments in which new systems are installed or old ones are replaces need to be completed by the beginning of the next campaign. What are the long and short-term priorities for investments in the Örtofta plant? From the project managers in charge, we learn that all investments in Örtofta contribute to reducing costs and thereby increasing profitability, and, at the same time, to signi­ficantly lowering energy consumption. This includes a new evaporation dryer (ED for short) in which beet pulp is dried using the thermal energy from steam, so that it can be processed to the animal feed dried pulp pellets. “We have combined the investment in the ED with a new continuous crystallisation machine in the boiling station. Together, the two systems reduce the total energy consumption of our plant. This is because the ED uses less energy than the old system and it creates steam, which we can use in the evaporation plant to concentrate clari- fied juice,” Jerker Magnusson continues. So both investments will result in substantial energy savings at the plant. In addition, two evaporators will increase the capacity of the heating areas by about a quarter. One of them is new and is being delivered by a Polish supplier, while the other, already part of the inventory, was modernised. Finally, a new molasses tank completes the series of projects in Örtofta and will double storage capacities there to 28,000 tonnes.

THE NEW MOLASSES TANK WILL DOUBLE THE STORAGE CAPACITIES 28,000 FOR MOLASSES IN ÖRTOFTA. tonnes 28 Nordzucker Annual Report 2013/2014 : Sugar has a future

PLANNING, TIMING AND COORDINATION ALL HAVE TO BE PERFECT

Preliminary work for the evaporation dryer and the crystallisation machine, like laying the foundations, was begun after the 2012/2013 campaign. Despite this, keeping all the invest- ment projects exactly on budget and on schedule is a fine art. This requires a well-devised project plan. The plan for the evaporation dryer was drawn up about eighteen months ago and the capital expenditure itself has been planned for as long as six years. The idea of adding a continuous crystallisation machine to supplement the investment in a evaporation dryer and make full use of its capabilities was born in the Energy Focus Group and included in the invest- ment plan three years ago. Just as important as precise planning is excellent cooperation across all departments, plants and countries. And of course the involvement and dedication of all of our colleagues. “Everyone in the plant is working towards a common goal when it comes to the implementation of large investments. Only in that way will we reach our targets in time,” says Niklas Hanner. Investments on this scale have a major influence on the whole plant, of course. Around fifty employees at Örtofta are involved in the investment projects to varying degrees. But that is not all. “Last summer, we had about forty employees from external companies in the plant, who laid the foundations for the evaporation dryer and the crystallisation machine, for example. This summer, we will certainly employ 150 workers from about twenty differ- ent external companies,” Jerker Magnusson explains. “We have coordination meetings each week and are able to represent the other if there are bottle-necks,” Niklas Hanner emphasises.

REDUCING ENERGY COSTS IS A PRIMARY OBJECTIVE

All of the energy produced in the Örtofta plant can be used multiple times. This will reduce the annual power consumption of the sugar plant by about 150,000 MWh. This represents around 30 per cent of its power requirement during the campaign, and is equivalent to the energy

consumed by around 7,500 family houses. Additionally, the CO2 emissions will be decreased by about 32,000 tonnes per year. “These investments represent a great step towards sustain- able production,” Jerker Magnusson sums up, not without pride. And of course they were preceded by intensive knowledge transfer between the sites – both in the preparatory phase and while the project was being executed. “Nearly all our machine operators have had a look at the evaporation dryers in Nakskov and Uelzen, and the future operators of the continuous crystallisation machine were in Klein Wanzleben and Nordstemmen,” recounts Niklas Hanner. He continues, “Seeing how the technology works in full operation is an important experience. It changes people’s attitudes and helps to remove any fear of the new technology.”

THE NEW FACILITIES WILL REDUCE ENERGY CONSUMPTION AT THE ÖRTOFTA PLANT BY 150,000 MWH. THIS CORRESPONDS TO 30 PER CENT OF THE PLANT’S 30 ENERGY NEEDS DURING Per Cent THE CAMPAIGN. Sugar has a future : Nordzucker Annual Report 2013/2014 29

The project managers have got a lot to smile about. With the timely completion of all renovation and expansion measures, they are moving the Örtofta plant further forward: roll on the next campaign!

THE EFFICIENCY PROGRAMME PROFITABILITY PLUS AND THE FUTURE

All the investment projects carried out in Örtofta contribute to the profitability and increase in efficiency. They ensure a profitable use of resources and increase the cost-effectiveness of the plant. And in a way they are a “never-ending story”, just like the whole ‘Profitability plus’ efficiency programme. After all, every efficiency gain at one point in the production process opens up further potential elsewhere. Following the latest investments in Örtofta, the project managers have already discovered the next important starting points. For instance, increasing the efficiency of logistics capacities will soon be on the agenda, i.e. the areas of packaging, silo, storage and unloading. After all, current capacities are based on very different scale of production to that now in place at Örtofta. “One thing just leads to another,” Jerker Magnusson says, smiling. He and his colleagues already know where the next work in progress will be: “The filter station is reaching the limits of its capacity. The plant has outgrown it and can no longer keep up, both in terms of its quality and capacity. Something has to be done.” Just like with the presses for the extracted beet pulp and the automation system. “We have to focus on the future. We have always been good at sav- ing energy and Nordzucker was always a leader in terms of efficiency gains in this area.”

Jerker Magnusson and Niklas Hanner see their plant as a tightly meshed, highly integrated sys- tem of production components, with scope for efficiency gains. With their sharp eyes for future opportunities, they are living and breathing exactly what the ‘Profitability plus’ programme stands for: the drive for greater efficiency and sustainability as a continuous, never-ending process. 30 Nordzucker ANNuAl report 2013/2014 : sugar has a future

master oF a complex production machine

Lothar Steinmann

Patrick Drengemann sugar has a future : Nordzucker ANNuAl report 2013/2014 31

production hoW the proFile oF a master craFtsman evolves

sugar has been produced in nordzucker’s plants for 175 years. our plants are important employers in their regions. How has the work changed in recent years? At the plant in uel- zen, we spoke with two master craftsmen who can look back on very different careers. one of them, in his late 40s, will soon celebrate his 25th anniversary with the company and is con- tinuing a family tradition that goes back for generations. the other, a young father in his early 30s, has been a master craftsman in uelzen for just two years. We accompanied both of them during a working day outside of the campaign to get an idea of what it means to be a master craftsman at nordzucker today.

Lothar Steinmann is celebrating his 25th anniversary with the company this year. He completed his apprenticeship in the Northeim sugar plant and qualified as a master craftsman at the age of 22. He has been foreman at the Uelzen plant’s sugar house for 15 years and during his shift is responsible for the entire production process – in particular for crystallisation and loading the silo. he is a master craftsman in the family tradition … my grandfather and great grandfather both worked in the sugar plant. i’d say we’re not far short of a hundred years altogether”, says lothar steinman with a grin. his smile gets broader as he tells us that his son is starting an apprenticeship as an industrial electronics engineer at the uelzen plant. a proud family tradition, in other words. We ask him about his very first memories of the sugar plant. he laughs. “my first memory of the sugar plant is actually my grandmother. i must have been four or five years old. she brought my grandfather’s lunch to the plant everyday, in a tin box, like people used to do back then.”

LoTHAr STeINmANN HAS BeeN years WorKing as a Foreman in uelzen For 15 32 Nordzucker Annual Report 2013/2014 : Sugar has a future

Lothar Steinmann among his team

EFFICIENT TEAM WORK RATHER THAN STRICT HIERARCHIES …

“The work has changed a lot over the years.” Lothar Steinmann reminisces, “Thirty years ago the master craftsman was more of a taskmaster. Nowadays, I don’t tell people which screw to turn any more. I lead a team of individuals who think for themselves.” He had his first job as a master craftsman in the crushing and extraction section. “There were two of us foremen and we normally had a hundred workers. Another fifty were employed for the campaign. Just for that section. In those days, there was a foremen for one section in one shift. But things are very different today. We work a four-shift system. I have 16 employees in my team. During the campaign, we add another five or six. Everyone pulls in the same direction.” The impor- tance of teamwork becomes clear right at the start of our visit. Every day at 8.20 a.m. there is a meeting of all the foremen, engineers and the plant director. They all report on what needs to be done in their area, so that the cooperation between them all can be optimised. S teinmann relies on the opinion of his staff, too; they’re much closer to the practical side of the work. We go with him to a meeting, where he meets three of his staff to discuss a technical drawing for the construction of a new raw sugar mixer. Overall, the work has become more compressed, Steinmann says later. “Things that a plant manager used to do twenty years ago are now sometimes carried out by an engineer. And a lot of what an engineer used to do is now down to us foremen.” He pauses to sum up, “More responsibility, organising our own group work – today a master craftsman is a functional manager who has to have an overview of everything. Nowadays, everyone associates themselves with what comes out at the end of the day. We talk about entire processes. It certainly is very satisfying!”

An annual average of around RESPONSIBILITY AND PROFESSIONAL TRAINING …

L othar Steinmann lists what has to be done in his section: “There are four shifts to be filled: four plant operators, four foreman’s assistants, four centrifuge operators, four double-refined 250 cookers and four silo loaders. Plus one reserve in case anyone gets ill. Everyone here takes staff an interest in the others’ work; that broadens their horizons and makes them into all-round- work at the plant in Uelzen. ers. That’s the only way we can organise and control the entire production process properly with what is just a handful of people, compared with the old days. Today, there are plenty of Sugar has a future : Nordzucker Annual Report 2013/2014 33

opportunities for professional development, you just have to use them.” Alongside managing a team, planning and carrying out repairs are also his responsibility. Every few weeks, a budget meeting is held to talk about the expenses that have been incurred. In addition, he is also a safety officer and is involved in a Group-wide working group. Asked about how IT and email have changed his job, Steinmann replies, “During the campaign, I can work at night just like in the daytime. If I need a quote I can just send a request in the middle of the night and get the answer back the next day.” And in future, who knows? Steinmann thinks for a moment. “What could a shift system for a foreman look like in future? Does every shift still have to have a foreman? Are the workers not now able to operate their station themselves; is it not enough to have experienced employees as coordinators? We are discussing that at the moment. So there’s a lot of change happening.”

THE END OF ONE CAMPAIGN MEANS LOOKING AHEAD TO THE NEXT …

“ In the old days, when we switched from the campaign to the repair season, we could say, ‘Time to kick back and take a breather’. But it’s not like that anymore. The campaign puts an enormous strain on our machinery. Even while the campaign is under way, we are focused on identifying the parts with potential for wear and tear. When major repairs are required, we have to get three quotations for the work, which is not so easy with our highly specialised equip- ment. Then there is the paperwork to be done for damages covered by insurance, if a machine breaks, for instance, or for investment projects, of course. During the campaign itself, Lothar S teinmann also has an eye out for potential improvements. “I always say, finishing the campaign with no ideas for improvements would be a shame. In our crystallisation section in particular, it’s great fun to keep tweaking the machinery, so that the process always runs a tick better.”

“ THIRTY YEARS AGO THE MASTER CRAFTSMAN WAS MORE OF A TASK­ MASTER. [...] TODAY, I LEAD A TEAM OF INDIVIDUALS WHO THINK FOR THEMSELVES. ” 34 Nordzucker Annual Report 2013/2014 : Sugar has a future

Patrick Drengemann with colleagues in the workshop

Patrick Drengemann is in his early 30s and, for two years, has been a master electrician at the plant in Uelzen, where he completed his apprenticeship. Alongside his work as an electrician and shift leader, he passed the exams to become a certified electrician and is now responsible for the entire energy supply area.

WORKING WITH ENERGY …

“We operate our own power plant here, with two turbines and a total capacity of roughly 26a meg ­watts, and we produce all our own process heat.” Patrick Drengemann is visibly proud of the independent energy supply at the plant in Uelzen. “Twenty-seven transformers supply power to every station here in the plant. So it’s a great responsibility to ensure that everything runs as it should. Particularly when the campaign is under way, absolutely nothing is allowed to go wrong.

THE DAILY ROUTINE OF A YOUNG MASTER CRAFTSMAN …

“My working day generally begins in the office. I check my emails, what are the latest messages? Has the Purchasing department sent me anything or are there any letters or forms for me to sign off on? On Mondays, we coordinate our work in the team, talk about new developments, health and safety issues, etc. After a session of paperwork, I take a walk through the workshop to talk to the colleagues there. If we have ongoing projects, like new investment projects for example, then the next stop is the building sites. When external contractors are involved, I discuss the progress of the work with them. I’m getting the hang of it now after two years. I was a shift leader before, so I’m used to taking responsibility. That also showed me how well people can work together, what good teamwork really is.”

Pt a rick Drengemann has been a master years electrician at the Uelzen plant for 2 Sugar has a future : Nordzucker Annual Report 2013/2014 35

THE TASKS OF THE FUTURE …

Although he has only been a master electrician for two years, Drengemann can look back on a good ten years of professional experience. How does he think his profession will change in future? “There will be more automation, that’s for sure. We will integrate even more functions into the control system. Our youngsters already have a lot of knowledge and are much more aware of the topic than we were at their age. They contribute a lot of new ideas.” He thinks for a moment. “And of course, there is the whole subject of greater efficiency – not least since the energy reform became a priority. We are always on the lookout for where we can save a few kilowatts of power. In future, it will be possible to do even more.”

EDUCATION AND PROFESSIONAL TRAINING …

In Patrick Drengemann’s field of electrical engineering, in-house training also plays an impor- tant role: “Nordzucker offers plenty of training programmes, of course – on the sugar process as a whole, but also on very specific aspects, especially for our younger colleagues. Such as on the control system for example, when we get a new system update. But also on field sys- tems, measurement and microwave technology. Here in the plant, you can never have enough knowledge. So we run training courses all year long, also by colleagues for colleagues. If a larger group is involved, then someone who knows about the subject just gives a presentation to the others. Here, everyone has to know about everything really.” The employees’ commitment can be seen in the fact that in the electronics department, there are four technicians and four master craftsman’s qualifications.

“ Here, everyone has to know about everything really. ”

THE FOREMAN OF TODAY

How has the profile of a foreman in sugar production evolved? They have become real team players. They are managers with a considerably bigger area of responsibility and greater free- dom to make decisions than their fathers and grandfathers. There is no doubt that being a foreman at Nordzucker is more appealing than ever before! 36 Nordzucker ANNuAl report 2013/2014 : sugar has a future

Worried aBout sugar?

It’s part of life and belongs in a balanced diet. What’s important is getting the balance right.

8.26 million

hits when you google ‘sugar’.

sugar in the media Sugar has a future : Nordzucker Annual Report 2013/2014 37

Health and nutrition

HOW SUGAR IS BECOMING A HOT TOPIC ON TV AND IN PRINT

Publishers and TV stations have been making drastic cuts to editorial staff numbers and research budgets for several years now. In these times of cost pressure and rationalisation, it should come as no surprise that they then sometimes fail to do justice to complex issues requiring in-depth research – such as sugar. We set out to gain an overview of current reporting, how nuanced it is, the way in which it handles scientific facts, and its not inconsiderable impact on the general public’s knowledge of sugar and nutrition.

SUGAR IN THE TABLOIDS, ON BREAKFAST TV AND IN NEWS MAGAZINES

Entering ‘Zucker’ (sugar) into the search engine Google gives you 8,260,000 hits. If you com- bine the search terms‘Zucker’ (sugar) and ‘Genuss’ (treats), you get 2,570,000 results. So far, so good. However, if you search for ‘Zucker’ (sugar) along with the word ‘Gift’ (poison), the search engine comes up with no less than 1,340,000 hits. Searching for ‘Zucker’ (sugar) plus ‘Drogen’ (drugs) gives you 141,000 results. The hits include headlines in well-known media outlets. It is a simple test which is easy for anyone to understand, but it leaves you in no doubt as to how sugar is publicly perceived throughout the media. Is it possible to put all this down to the age-old media aphorism that ‘bad news is good news’? Unfortunately, it’s not that simple. On one hand, it seems that sugar is being used to draw viewers and readers – from headlines on the breakfast TV show Morgenmagazin like ‘Sugar, the dangerous mass drug’ to best-selling books such as Hans-Ulrich Grimm’s ‘Health risks guaranteed – how the sugar mafia is making us ill’. On the other hand, sugar production and consumption is such a complex issue that most media coverage fails to examine it from all the relevant angles – and perhaps this is inevitable.

The media reality shows that more information is needed about sugar. It is often misunderstood, but nevertheless vital for life. 38 Nordzucker Annual Report 2013/2014 : Sugar has a future

S ugar as an evolutionary driver

= sugar consumption

The ability to taste sweetness and use it as a way to find high-energy food – something which other species ignored – gave our ancestors a crucial advantage in the battle for superiority.

Even the high-profile World Health Organization (WHO) seems to be taking a one-sided approach in its current guidance when it recommends that people limit their sugar intake to drastic new levels. That is because this draft is based on the scientifically unproven view that obesity and tooth decay are down to one thing alone: sugar. Firstly, improving oral hygiene has led to a significant improvement in dental health, especially among children and young people. Tooth decay is therefore becoming less common. Secondly, unilateral bans are rarely constructive – education is far more valuable. That is something which there is a marked lack of with relation to sugar. As our everyday lives become more and more hectic, we are increas- ingly eating processed food rather than preparing meals ourselves. In the process of this shift, we have lost a great deal of knowledge, including an appreciation of sugar as a natural part of a balanced diet – something our parents and grandparents knew. We need to start by tack- ling this problem.

However, the complexity of this issue always seems to fail in a media landscape which likes easy answers and embraces a culture of ‘he who shouts loudest gets heard’. A good example of this is an article in a popular tabloid newspaper which looked into the sugar content of 55 foods in July 2012 and published a number of surprising results. Like many other articles, this one pointed out that there was nothing wrong with sugar itself and that it plays a natural role in the body as an important energy source. This important scientific fact was more or less an aside which was quickly followed by much more powerful catchphrases like ‘sweet sugar has a future : Nordzucker ANNuAl report 2013/2014 39

poison’ and ‘sugar as a drug’ in the battle for the reader’s attention. these phrases are almost always taken from the same handful of sources. First among them is a series of studies by the us endocrinologist and paediatrician robert lustig from the university of california in san Francisco. But even this hard-line critic of sugar admits that what matters most is how much sugar people eat. mentioned in passing, this fact is true of pretty much everything we eat and drink, which is probably why it is often overlooked in the emotionally charged media debate. a fondness of sWeet things is in our nature our fondness of sweet treats also has another dimension which is often overlooked in media coverage. it also enabled the human race to succeed in its evolutionary ascent. our earliest ancestors instinctively knew how to use the sweet energy in carbohydrates and other food groups to their advantage. they also understood that sweetness is a clear indication that a fruit or berry is not poisonous. in our modern world where people no longer spend all day engaged in energy-intensive hunting, it is important for us to pay close attention to eating a balanced diet and getting enough exercise. With sugar now readily available as a source of fast-release energy for our brains, muscles and organs, we must use our powers of judgement to control our age-old impulses. Average sugar consumption per capita in Germany has remained unchanged for about 40 years – proof that we are successfully doing just this.

Nordzucker is involved in various projects, which aim to improve knowledge about food pro- duction, a balanced diet and healthy living, primarily among children and young people, because one thing above all is clear: a substance alone cannot be made responsible for obesity and diet-related diseases.

35 kilogrammes

Every german consumes an average of 35 kilogrammes of sugar per year. 40 Nordzucker Annual Report 2013/2014 : Sugar has a future

How values become standards

Quality management is teamwork. QM measures are regularly coordinated across countries and sites. sugar has a future : Nordzucker ANNuAl report 2013/2014 41

quality management intelligent guidelines For coNSISTeNT QuALITy

a company like nordzucker lives from the satisfaction of its customers with the quality of its products. in order to ensure that our sugar is of consistently high quality, we need dependable, high-performance quality management, and, of course, clear guidelines on how the planning, management and monitoring of the quality of our products and processes are to be carried out. But how does it all work in practice? How do our values become standards? To find out, we went to see Birgit kerner, quality manager at the plant in Nordstemmen. Then we visited two of her colleagues in poland and sweden to see if and how their work differed. it’s not aBout the standards, it’s aBout the people

We meet in a conference room in Braunschweig, where Birgit kerner has just had a meeting on a different topic. she is a very calm, restrained woman, who speaks with a quiet but very emphatic voice and underlines what she says with brief, precise gestures.

Birgit kerner explains that, generally, there are various different quality management officers. the plant manager determines who is responsible for which area. accordingly, there is an environmental officer, one for health and safety, an energy management officer, one for quality management according to iso standards and one for food safety, among others. this is a standardised structure which applies in all plants. in nordstemmen, the responsibilities are split between two people, the production engineer André Pollex, responsible for environment, health and safety, and Birgit kerner, who is in charge of product safety and quality manage- ment. For both of them, the role involves work in addition to their normal everyday activities. quality, 24 hours a day, seven days a Week

We ask Birgit kerner how the laboratory is staffed. She explains that, during the campaign, there is a lab technician responsible for the inspection of outgoing goods and four employees working a four-shift system, who can be reached 24 hours a day, seven days a week. All the intermediate steps in the production process are sampled and, of course, samples are taken before the sugar finally goes into the silo. These shift samples are taken by the production staff during their eight- hour shift and tested for various parameters: is it basic grade or refined (white sugar 1 or 2)? and does the quality match the internal requirements? at nordzucker, these thresholds are below those required for the corresponding specification. the requirements of the customers, for example, are defined in the specifications, which must be complied with when preparing deliveries. these include guidelines on the grain size, as well as quality parameters such as the moisture content and the colour in solution, along with the colour type, which is used to classify granulated sugar according to colour by means of reflection measurement. if all the results fall within the threshold limits specified, the sugar is sent to the silo and is then approved. of course, deliveries to customers are tested once again before they leave the plant. And they are tested thoroughly, too, with one extract and one reference sample from every container supplied, i.e. for each truckload, each 25 kg or 50 kg sack, each 1 kg bag or each 1,000 kg ‘big bag’. 42 Nordzucker Annual Report 2013/2014 : Sugar has a future

Audit process for customer deliveries:

THE SLIGHTEST INACCURACIES MAKE A BIG DIFFERENCe.

In answer to our question of how much tolerance the customer specifications allow, Birgit Kerner 1 explains that it very much depends on the products that the customer wants to manufacture with our sugar. “For example, we have a customer who wants to package vanilla sugar. If ten grammes have to be filled into the little packet and the grain is too fine and it’s therefore too dusty, then the flap won’t close. But if it’s too coarse, then the packet gets too thick, so when a large quantity of the packets is put in a box, it won’t shut. When we have such very precise specifications, we examine an extra sample in the laboratory and only approve the formula for that one day! With other customers, the tolerances are not quite so strict.”

We can see that all this cannot be managed without very detailed guidelines. Birgit Kerner Does the grain size agrees, “That’s why there are detailed process descriptions on carrying out our outgoing goods correspond to the guidelines? inspection, working in the service centre, complying with regulations, and so on. All that is laid down in our management handbook, which is filed in a public directory as a central doc- ument so that everyone can download the forms, specifications, organisational charts, process descriptions and instructions.” 2 AND IF SOMETHING DOES GO AWRY? We understand that professional quality management isn’t possible without comprehensive documentation. But what if something really does go wrong?

“If something really goes wrong we have to take action! In Nordstemmen, for example, we had a complaint from a big customer. So of course, we fixed the source of the problem straight away and also checked all the other Nordzucker plants to see if the same mistake could happen there.” She pauses briefly and then makes a sweeping gesture, “One other consequence was that since then, a central directive has stipulated that the same procedures apply at all sites on how often, where and how testing is to take place. That’s a product safety topic that concerns Are the colour values correct? the whole Group.”

ON AN EQUAL QUALITY FOOTING ACROSS EUROPE

After the long talk with Birgit Kerner, we were curious about how quality management is lived and breathed at our other sites. So we made an appointment with Hanna Woźniak from 3 Nordzucker Polska who, together with the plant’s own officers, is responsible for QM at the two Polish plants, in Opalenica and Chełmża. With a refreshingly direct manner, she tells us what she particularly wants to see. “Practical relevance!” is her motto. “Don’t produce unnecessary paperwork and bureaucracy. QM is a ongoing process – you have to live and breathe it. Too much bureaucracy is counterproductive. Good, practically relevant QM is mainly about pre- vention!” And it obviously works very well. Not for nothing do our customers in Poland include major international food groups such as Mondelez, Coca Cola and PepsiCo. The last two have Nordzucker Polska’s quality standards and certifications audited once a year by a British com- pany, including inspections of the quality assurance processes and their end-to-end documen-

Does the quality match tation. When you think that the customers’ QM departments generally have ten employees or the specifications? more, the performance of Hanna and her few colleagues cannot be praised enough. Sugar has a future : Nordzucker Annual Report 2013/2014 43

“ Our values – responsibility, dedication, courage and appreciation – remind us of how we want to act. ” Lina Nelander

OUR VALUES ARE THE BACKBONE OF EVERYTHING

Lina Nelander, project manager for quality management at Nordic Sugar in Sweden, is one of three employees in the local QM department. Her office is in Arlöv, but she is also responsible for the two Swedish plants, in Arlöv and Örtofta. We meet her between two other appoint- ments and shortly before the annual, Group-wide QM meeting, where she meets in person all the colleagues from quality management with whom she usually only exchanges phone calls and emails the rest of the year. For Lina Nelander, the four corporate values of responsibility, dedication, courage and appreciation are an important tool for reinforcing quality awareness at all levels of the company and for ensuring that they stay on the agenda, because “they remind us of how we want to act”. “Dedication” is her favourite value, she says with a smile. We believe her without further ado. Anyone who, like her, attends six Reference Group meetings for prod- uct safety a year to coordinate decisions for harmonising the QM processes in the Group, on top of four to six QM project meetings a year, simply has to be putting their heart and soul into the business. Lina Nelander appreciates one aspect of her job above all others, as she freely admits in conclusion: “What I really love about my work is the opportunity to go all over the plant, to see everything that goes on, to get involved in things myself and, at the same time, to talk to lots of different colleagues and to work with them so that we grow together as one big, unified company. That is really great.” And to us it really does seem to be the unifying element that all the quality managers we spoken to have in common. ISO THE SPECIAL QUALITIES OF QUALITY MANAGERS 22000

Not everyone is cut out to be a quality manager. You have to be consistent, send clear messages As an international and, above all, be persistent. You can’t be afraid to say so clearly when something goes wrong. management system for food You need a talent for putting things the right way. And, of course, you have to live and breathe safety, international norm ISO 22000 is intended quality. And that’s where our corporate values come into play again. But above all, of course – to minimise the flood of and we are especially grateful to all our interview partners for this insight – above all, you have individual standards. to have an idea of quality from the outset! 44 Nordzucker ANNuAl report 2013/2014 : sugar has a future

customer orientation ANd A WILLING- Erik ness to talK Bertelsen

Dr Volker Diehl

Ingo Saß Sugar has a future : Nordzucker Annual Report 2013/2014 45

Sales

Why good customer relations are vital for us

O ur business is characterised by a high proportion of custom- Erik Bertelsen: O ur sugar is a very high-quality product ers from the food industry and a smaller share from the retail everywhere, around which we have assembled a whole range sector. What connects us with them? How do we treat them? of services. That is our strength. As far as Northern Europe and And what should a customer relationship look like today to Ireland go, we see a split between industrial and retail con- ensure that both sides benefit from it? sumption in line with the German market i.e. about 80 per cent for industrial customers, whereas in the Baltic states around As no one can judge this better than the sales team, we asked 45 – 60 per cent. The different countries make very different our sales managers for an interview. They replied from first- logistical demands of us. Denmark, for instance, is a small coun- hand experience: Dr Volker Diehl, Erik Bertelsen and Ingo Saß. try with no great distances. In Sweden or Norway, on the other Nordzucker: How would you describe our customers in Cen- hand, we have very long transport routes, which entail a variety tral, Northern and Eastern Europe? Are there differences between of different logistical demands. And of course, there are certain them? differences in customer behaviour. In the Baltic countries and Finland they traditionally pick large quantities of wild berries Dr Volker Diehl: I wouldn’t distinguish between customers that they preserve or turn into jam. Both these methods need from North, South, East or West. We market a product. The large amounts of sugar. So demand for preserving sugar is very overall package has to fit and to be at a consistent level. That high. In Sweden, the bakers and industrial bakeries traditionally is also what the purchasing managers at our key accounts sweeten the bread with syrup. We have adapted to this and say. And it is certainly one of our strengths – not only in East- developed a broad range. We provide our industrial customers ern Europe – that we sell a total package. The proportion with tailor-made solutions and whet our customers’ appetites of industrial and retail customers varies, however: in Eastern for our products with interesting recipes. Europe the ratio is around 60:40. As far as our customers in the food processing industry are concerned, we are seeing Nordzucker: How important is quality for our customers an increase in multinational customers in Eastern Europe who from the food processing industry? also produce here. Especially in Poland. That offers growth Saß: Quality and product safety have a high priority. Our custo­ potential for us. Providing a good product at a competitive mers invest a lot of money in their brands. That means we, in price is still not something everyone can do! The retail sector turn, have to offer the highest possible quality and product safety. in Eastern Europe is still dominated by ordinary sugar, cate- gory 2. In Germany, for example, we mainly sell household Diehl: Absolutely. Stable quality over the year is the key. It caster sugar via food retailers. just has to work. Our customers want just-in-time deliveries, consistent quality according to their individual specifications Ingo Saß: In Germany, industrial users account for around and, of course, cost efficiency. 80 to 85 per cent; the rest goes to retail and therefore to consumer households. Our sugar is basically a high-quality Bertelsen: Quality is very important – not only the consistently product and our assortment is broad and deep. We supply high quality of our products, but also the quality of what we three different market segments: multinational purchasers like add in terms of customer care and services. At the end of the Coca Cola and Ferrero, local food producers and then the day, it is also about inspiring our customers and ensuring that entire retail market, of course. Overall, we have a saturated when it comes to sweetening they call us, acknowledge our market with very stable prices, but it has been flat for years. expertise in refining existing products and developing new ones, and, above all, that they buy our products. 46 Nordzucker Annual Report 2013/2014 : Sugar has a future

Nordzucker: How important are sustainability and trace- Nordzucker: What are the services that set us apart? ability for our customers? Bertelsen: I think the dialogue with the customer is the key Diehl: More and more important. At first glance, we are only to everything. It corresponds to our role as an important player suppliers of a commodity, but what we also sell is a package in the market. No one knows for sure how things will develop of services. Advice, joint process evaluations, sustainability, after 2017. We can envisage scenarios of course, but above all transparency, traceability – we have to deliver all that, too. we have to engage in a dialogue with customers and bring our knowledge and expertise to the table. More than ever, we Saß: Above all, you mustn’t forget that the major global need to think in terms of the market, because it’s about sup- brands in the food industry, in particular, are always in the plying the customer with the right quality of sugar at the right public eye. They have to demonstrate transparency and time. We need to align the entire process chain to require- traceability. With palm oil or cocoa, that is certainly more ments. difficult than with a commodity like our sugar. But even if our raw material is in the lowest risk category for the top brands, Diehl: Right. And we have to adapt to customers’ processes, we still have to make our processes transparent and traceable which are now so lean that it’s practically a just-in-time busi- for our customers. ness. There are plants that process 80,000 tonnes of sugar a year with only minimal storage capacities. We have to Bertelsen: The importance of sustainability has grown sig- calibrate our logistics so precisely that it all works smoothly. nificantly, partly as a result of globalisation, and also due to a Our expertise in transporting sugar of different grain sizes great deal of exposure in the media. Both industrial custom- with pumps, pipes, etc. is also useful for our customers. We ers and those in the retail industry are attaching more and know how to store sugar optimally. In this area, too, we can more importance to these issues. Many companies, for exam- provide support to our customers – as is also the case with ple, have great ambitions in the area of sustainability, and application technology. At a time when big companies are they use these actively both to expand their strong brands thinking about alternatives and reducing calories, we have and for their corporate profile. our work flat out as well: we have expertise in sweetness, we Ultimately, however, it’s the consumer who determines what can estimate how sweeteners will react with one another and is required of food producers and the retail trade. We must what effect that will have on the final product. Think of stevia. maintain an intensive dialogue with all parties affected, in Saß: Correct. Compliance with different quality standards order to continuously refine our systems and processes and such as IFS, halal, accompanying documentation and certifi- thereby respond to changing demands. cates, customised labelling, all that is important. And of course Diehl: Yes, because ultimately the question is: what qualifies we also have to adapt to our customers’ various specifications me as a preferred supplier and not my competitor? All of our key in terms of logistics. You could say that we are a mobile ware- accounts have made public commitments to purchase their raw house for our customers. Cooperation, dialogue, a proactive materials transparently by 2020. That means we have to com- response to our customers’ concerns: that is the right path. municate to our beet farmers that end-to-end documentation of At Nordzucker, we have set off well along this path, but we the entire sugar production chain is in their interest as well. We have to pursue it and develop it. are one of the first in the industry to do so, which means we can differentiate ourselves further from the competition.

IN THE NORTHERN AND EASTERN EUROPE, CENTRAL EUROPE REGIONS, THE FIGURE IS AROUND BUSINESS WITH CUSTOMERS 60 PER CENT. MORE IN THE FOOD INDUSTRY SUGAR IS CONSUMED ACCOUNTS FOR AROUND IN 80 THERE AT HOME. Per Cent Sugar has a future : Nordzucker Annual Report 2013/2014 47

With precisely tuned logistics, we support our customers in optimising their production processes.

Nordzucker: How are we preparing for sales in the post- Diehl: Yes, you can be sure they are already working on strate- 2017 period? gies. Big purchasers are generally trying to reduce the number of their suppliers, too, to concentrate on a few main suppliers, Diehl: By bringing the topics discussed here into the public maybe just two or three. So they are looking very carefully at arena. We have to listen to our customers. And we have to how things develop. What are the supplier’s long-term pros- take seriously what they tell us. We are the ones who gather pects, can I work with them for an extended period? It’s about the information from the market and pass it on to customers, dependability and predictability. integrate it into their processes. Sales certainly has an impor- tant function there. Saß: As Nordzucker AG, we certainly have a strong hand in a market that is set to consolidate. Also and especially after 2017. Saß: We are in the process of developing scenarios and mar- We are a strong number 2. We are a player that will still have a keting strategies for the period after 2017. There are a num- key role in the market in ten years’ time. ber of working groups. We are thinking about new business models and are trying to prepare ourselves as well as possible Bertelsen: There will be a lot of new opportunities for every- across the whole company. Above all, we believe in a free one involved. But what we also have to do is to look at the market, and we are doing everything to position ourselves situation from the customer perspective. To engage in an strongly among the competition. open dialogue with customers. We are the experts. We have our scenarios. But there are so many variables at stake that at Bertelsen: We have to align ourselves even more closely with the moment, neither ourselves nor our customers can provide our customers: what are their concerns with regard to 2017 a reliable forecast of how things will develop post-2017. But and what can our contribution be to that, which package can along with price, dependability, safety and sustainability will we put together for them? remain the criteria by which our customers evaluate and select Nordzucker: What about the customers; are they already their suppliers, even after 2017. And those are areas where we thinking about what happens after 2017? are right at the head of the pack. 48 NORDZUCKER ANNUAL REPORT 2013/2014 : Management report

FACTS anD FIGURES

on the couRse oF the Financial YeaR 2013/2014 Further information : Nordzucker ANNUAL REPORT 2013/2014 137

important dates

F inancial calendar

27 June 2014 Shareholder meeting Union-Zucker Südhannover in Nörten-Hardenberg

9 July 2014 Annual General Meeting Nordzucker Holding AG, City hall Braunschweig

10 July 2014 Annual General Meeting Nordzucker AG, City hall Braunschweig

online publications

The following publications can be downloaded from www.nordzucker.de

> Annual Reports and Interim Reports > Decleration of compliance > Letter to shareholders

Nordzucker has produced this annual report in the interests of sustainable environmental protection. It was printed in a climate-neutral manner in accordance with the Arktik process.

A ll CO2 emissions which occur directly or indirectly during printing were calculated and offset by investments in renowned climate-protection projects.