Living Our Values. Creating Growth

Living our values. Creating growth.

Annual Report 2012/2013

Hartwig Fuchs, Chief Executive Officer, Nordzucker AG Annual Report Nordzucker 2012/2013

Contents

Mission statement 1 Key figures 2 175 years of sugar production 4 Living our values. Creating growth. 6 Letter from the Executive Board 8 Four values – growing together 10 Responsibility 12 Dedication 20 Courage 26 Appreciation 32 Trends in agribusiness 38

Group management report 48 Nordzucker at a glance 50 Economic environment and market developments 53 Earnings, net assets and financial position 56 Employees 61 Opportunities and risks 61 Supplementary report 66 Forecast 66

Consolidated financial statements 68 Consolidated income statement 68 Statement of comprehensive income 68 Consolidated cash flow statement 69 Consolidated balance sheet 70 Consolidated statement of changes in shareholders’ equity 72

Notes to the consolidated financial statements 73 General remarks 73 Notes to the consolidated income statement 82 Notes to the consolidated balance sheet 86 Consolidated assets schedule for the previous year (2011/2012) 88 Consolidated assets schedule for the financial year 2012/2013 90 Notes to the consolidated cash flow statement 97 Other disclosures 97 List of investments 113

Auditors’ report 115

Corporate Governance 116 Corporate Governance Report 118 Statement of compliance with German Corp. Gov. Code 119 Report by the Supervisory Board 120 Glossary 124 Financial calendar Continuous increase in revenues

in EUR m

2,443

2,018 1,806 1,815

1,192

2008/2009 2009/2010 2010/2011 2011/2012 2012/2013

Record high yield ratios

2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 Total operating profitability 1 % 15.2 9.7 16.6 18.4 22.8

Return on revenues 2 % 3.7 -0.7 4.8 10.1 14.4

Return on equity 3 % 6.1 -1.7 10.6 20.4 26.7 Interest coverage ratio 4 10.5 2.8 6.0 12.1 22.3

Redemption period 5 years 1.8 4.0 1.1 0.6 0.1

Cash flow from operating activities per share EUR 3.46 6.78 6.49 4.59 6.49

Earnings (Group) per share 6 EUR 0.91 -0.27 1.80 4.22 7.27

Dividend per share 7 EUR 0.22 – 0.46 1.00 1.80

Total dividend EUR m 10.6 – 22.2 48.3 86.9

1 EBITDA/total revenues 5 Net debt/EBITDA 2 Net income/revenues 6 Net income/number of shares 3 Net income/equity 7 Total dividend/number of shares 4 EBITDA/net interest Annual Report Nordzucker 2012/2013

Record high net income

in EUR m

360

208

91 44

-10

2008/2009 2009/2010 2010/2011 2011/2012 2012/2013

Operating success drives all key financial figures

2008/2009 2009/2010 2010/2011 2011/2012 2012/2013

Revenues EUR m 1,192 1,806 1,815 2,018 2,443

of which abroad % 39 54 52 54 56

Total revenues EUR m 1,086 1,718 1,699 2,282 2,607

EBITDA EUR m 165 166 283 420 594

EBIT EUR m 79 66 188 315 507

Net income EUR m 44 -10 91 208 360

Cash flow for/from operating activities EUR m 167 328 313 222 313 Investments in property, plant and equipment and intangible assets EUR m 67 62 56 64 74 1

Our Nordzucker values of responsibility, commitment, courage and appreciation are an expression of what we stand for as a company.

We will use them as guidelines to influence our decisions and actions, to put ourselves on a stable footing and focus on our core business. They will help us to build on our position as a strong international company.

The values form a strong bond which links all Nordzucker employees; they define our attitude, the way we present ourselves to others and our dealings with business partners and stakeholders. 2 Annual Report Nordzucker 2012/2013

Dividend per share reaches high level

in EUR

1.80

1.00

0.46 0.22

0.00

2008/2009 2009/2010 2010/2011 2011/2012 2012/2013

Sound equity ratio, with net debt nearly reduced to zero

2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 Balance sheet total EUR m 1,879 2,456 1,982 2,262 2,393

Equity EUR m 718 744 819 999 1,316

Equity ratio % 38 30 41 44 55

Debt capital EUR m 1,160 1,712 1,163 1,263 1,077

Financial liabilities EUR m 497 778 364 256 71

Cash and cash equivalents EUR m 201 114 50 7 11

Net debt 1 EUR m 295 664 314 249 59

1 Cash and cash equivalents – financial liabilities Group figures and ratios 3

1,504

Sugar factories 5 Sugar refi neries 2 Sugar factory

Liquid sugar factory

Sugar refi nery

Bioethanol plant

Average number of

employees for the year Sugar factories 3 Sugar factories 5 Sugar refi neries Liquid sugar factories 2 (combined with Bioethanol plants 1 sugar factory) 1

544 1,242

Growth and consolidation alternate

2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 Beet farmers 11,430 16,292 16,091 15,379 14,981

Beet cultivation area ha 174,225 287,245 254,300 265,947 265,904

Beet processing t/day 98,681 143,392 133,192 143,520 138,797

Sugar production millions of tonnes 1.68 2.87 2.30 2.91 2.80 4 Annual Report Nordzucker 2012/2013

175 years of sugar production

The success story of 175 years of sugar Start-up boom in the European sugar Sugar is deemed “vital to the war production in Northern Germany and industry: Nordstemmen begins oper effort”. Beet farmers and sugar Northern Europe began in 1838 with ations in 1865, followed by the Arlöv factories are called on to engage the establishment of the sugar factory factory, now part of Nordic Sugar, in a “battle for production”. in Klein Wanzleben. in Southern Sweden in 1869, and Culmsee in Pomerania (now Chelmza in Poland) in 1882. Picture: Archives KWS

Following a complete reconstruction The orientation towards Eastern Europe is a Nordzucker AG is created when on a greenfield site, the factory in strategic focus for the years ahead. Zucker ZAG transfers its assets to ZVN. This Klein Wanzleben goes into operation. Aktiengesellschaft Uelzen-Braunschweig makes Nordzucker the third-largest It is still one of the most modern (ZAG) invests in the Czech sugar company sugar producer in Europe. plants in Europe today. Cukrovar a Rafinerie Cukru Dobrovice TTD (Thurn und Taxis Dobrovice) A.S. 175 years of sugar production 5

The sales company Norddeutsche Zuckerfabrik Uelzen AG merges with Five sugar companies decide to transfer Zucker GmbH & Co. KG is the first Braunschweiger Zucker AG to form their assets to Zuckerverbund Nord AG large-scale merger of sugar companies Zucker-Aktiengesellschaft Uelzen- (ZVN). This represents a milestone on in Northern Germany. Braunschweig (ZAG). the path to a common North German sugar company.

Together with Union-Zucker, Nordic Sugar joins the Nordzucker’s most successful almost the entire North Nordzucker family, making financial year to date ends with German sugar industry is it the second-largest sugar record earnings. united in Nordzucker AG. producer in Europe by a large margin. 6 Annual Report Nordzucker 2012/2013

Living our values. Creating growth.

Hartwig Fuchs, Chief Executive Officer

Axel Aumüller, Chief Operating Officer Living our values. Creating growth. 7

Mats Liljestam, Chief Marketing Officer

Dr Michael Noth, Chief Financial Officer

Dr Niels Pörksen, Chief Agricultural Officer 8 Annual Report Nordzucker 2012/2013

175 years ago, the first sugar factory in Nordzucker’s current region began producing sugar in Klein Wanzleben, creating the core of today’s company. Since then, the world of sugar has always had to adapt to changing political circumstances and economic necessities. Technical progress and the associated productivity gains have a long tradition in our business, as does the series of mergers that have formed ever larger entities. They have always been founded on close contact with our partners – our shareholders and beet suppliers – as well as on the drive to become better and stronger. In September of this year we will be celebrating this 175th anniversary accordingly.

We should also be proud that the financial year 2012/2013 will go down in the history of Nordzucker AG as the most successful to date. We increased both revenues and earnings again significantly compared with the previous year, which was already very good. We benefited from higher prices for quota sugar and higher sales volumes of non-quota sugar. The long-term measures to increase efficiency throughout the Group again bolstered our successful performance. The joint proposal by the Executive Board and Supervisory Board to pay a dividend of EUR 1.80 per share, which will be voted on at the Annual General Meeting, has a twin focus: it ensures that you, our shareholders, receive a reasonable portion of these outstanding earnings, and it strengthens the company financially, enabling it to respond to the challenges that lie ahead.

The figures in brief: We increased our revenues by EUR 424.8 million, from EUR 2,018.0 million in the previous year to EUR 2,442.8 million and reported excellent net income of EUR 360.3 million. Equity came to EUR 1,316.0 million, exceeding the EUR 1 billion mark for the first time. Although total assets were higher, the equity ratio went up to some 55 per cent. Increasing the equity ratio was a target that we set ourselves three years ago. We also used last year to reduce our net debt to around EUR 59 million, and so all in all we are in a very strong financial position. In view of the still volatile situation on the financial markets, this is an important message for our owners. Our environment is changing rapidly, however. As stock levels continue to rise and global sugar production exceeds overall consumption, we expect sugar prices on the world market to stay at their currently much lower level. This may also affect EU prices, so we cannot rule out a decline in rev enues and earnings for 2013/2014. The high volatility of sugar prices remains a considerable challenge for our business.

The EU’s decision-making bodies are expected to decide on the future of the sugar market regime in June. Until beginning 2014, it has defined the framework within which at least 85 per cent of the EU sugar market is covered reliably, regularly and predictably by sugar produced regionally at the social and production standards in force here. Our aim is to ensure that the EU market continues to enjoy stable supplies of high-quality, domestically produced sugar in the future. On the one hand, we have to keep improving our efficiency and competitiveness. And on the other, we are still campaigning for an extension of the sugar market regime until 2020; not only to preserve beet cultivation in our regions, but also to strengthen it. While doing so, we need time to prepare our company for market liberalisation.

The European sugar market is expected to undergo a further wave of consolidation by 2020. Given our market position, we have a strong base from which to seize growth opportunities in the EU as they arise. Sugar consumption within the EU will not go up, however, as growth in the demand for sugar is taking place outside Europe. We are currently looking closely at how we can participate profitably in this growth. At the same time, we are absolutely convinced that long-term success can only be secured by running a sustainable business, especially by including environmental protection and social aspects in business decisions. In parallel, the aim is to increase efficiency along the entire value chain. The five-year efficiency Welcome 9

improvement programme ‘Profitability plus’ has been under way since 2009/2010 and has also delivered savings in all areas of the company. More than three-quarters of the savings targets have been reached to date. Measures which make a major contribution to sustainably boosting the company’s competitiveness include the harmonisation and optimisation of business processes, the increasingly international organisation of sales and production structures, adjustments to investment and maintenance budgets in line with the demands of longer campaigns and the integration of the Group’s IT environment.

Alongside major investments to increase efficiency in the factories, sustainable success includes our activities to boost yields in sugar beet cultivation. The 20 · 20 · 20 initiative aims to make sugar beet even more competitive in comparison with other crops, so as to safeguard beet cultivation in our regions for the long term. It is vital to complete the integration of Nordic Sugar and Nordzucker into one European company. The basis for the European corporate culture that we want to develop across national borders and different languages is formed by the core values defined by our company staff: responsibility, dedication, appreciation and courage. And we invest in our employees – not only financially, although this year we were able to pay a performance bonus to all staff in the Group for the first time. With a wide range of programmes and modules, we not only encourage integration with focused training, but also strengthen employees’ emotional identification with the company.

Together with our dedicated colleagues, sustainability, customer focus and efficiency gains form the basis for strengthening the company’s position and achieving further growth in its core business. We and our highly dedicated team can look back on our past with pride and look to the future with optimism. Development continues. We thank you, our shareholders, for accompanying Nordzucker on this journey.

Nordzucker AG The Executive Board

Hartwig Fuchs Axel Aumüller Mats Liljestam

Dr Michael Noth Dr Niels Pörksen 10 Annual Report Nordzucker 2012/2013 Four values – growing together 11

The pillars of our business: four values

Making connections by upholding common values

All employees within the Nordzucker Group have discussed the company’s values in the recent year and questions such as:

Why are these values in particular important to me? How do the values help us to achieve our aims? What do the values mean in our dealings with colleagues, employees and managers?

Shortly after the acquisition of Nordic Sugar, employees of the Group had defined four common values: responsibility, courage, appreciation and dedication. A broad discussion and introductory process was then initiated in 2011. Employees from all regions talked about their understanding of the values, how they experience them and how they put them into practice. The aim was primarily to make the values known everywhere, but also to talk to one another and generate actions.

The four values will now be integrated into everyday working practices in the months ahead. Not only minor activities that permanently bring the values to mind, but also broader topics such as cultural diversity and collaboration across department, factory and national borders are now on the agenda. The values are also to be linked to everyday work and will form the basis for guidelines and standards within the Group. However, for the values to be successful, it is vital that they create a connection between all employees, providing motivation as well as a sense of belonging. They help when difficult decisions have to be taken and facilitate working relationships. In addition, the values create a positive culture; a culture we are proud of – proud of a company that is valuable and that adds value.

Hartwig Fuchs: “Our four corporate values constitute the pillars for the expansion and the integration of our company. I am very proud of the great commitment with which the value process is being driven forward by everyone involved, in all regions. The values have brought us a good deal closer together and have given us much greater clarity about what we can expect from one another. I believe that Nordzucker has made an exceptionally good choice!” 12 Annual ReportNordzucker2012/2013

“I am really very pleased that Nordzucker is investing such a large amount in Örtofta. It means a great deal to us: for our factory but of course for the success of the whole company as well.”

Bengt Högberg, Director of the Örtofta sugar factory

Responsibility for the future

For Nordzucker, taking responsibility means acknowledging the needs of our stakeholders and always finding new solutions. 14 Annual Report Nordzucker 2012/2013

Örtofta: consistent energy savings

Nordzucker equips additional factory with innovative technology

Great strides made towards sustainable efficiency It takes about an hour to drive from the Nordic Sugar headquarters in Copenhagen via the Öresund bridge and Malmö to Örtofta, which is home to a 14th-century castle, a church and 200 inhabitants. At the edge of this small village, surrounded by fields of rich, heavy soil, stands the largest factory operated by the Nordzucker subsidiary Nordic Sugar. All round the factory in the southern Swedish province of Scania, 2,000 farmers successfully grow sugar beet on an average of 19 hectares of arable land each. © Apelöga AB Last October, some good news and new challenges found their way across the Öresund to Örtofta: Good news and new tasks for Bengt Högberg (left) and the Director Bengt Högberg and his factory team were team of the Örtofta plant: beginning 2014, the plant will save given the go-ahead for the most important energy- one-third of its energy per year due to the new technology. saving project to be carried out at the Örtofta sugar factory since it began operations in 1890.

Following the plants in Uelzen, Germany, and Nakskov, Denmark, Nordzucker is now installing an innovative evaporation dryer at an additional production site, in Örtofta. A vertical crystallisation tower (VCT) is also being fitted at the same time. The company is investing a total of EUR 23.5 million in new technology for Örtofta, which will permanently cut the energy consumption of one of its most pro-

ductive factories by 30 per cent. Furthermore, the new equipment will reduce annual CO2 emissions from production by 32,000 tonnes. The investment is another stride towards realising Nordzucker’s biggest energy-saving project to date.

New technology saves 150 gigawatt hours a year Capital expenditure of around EUR 17 million is planned for the installation of the new evaporation dryer. The VCT is to cost another EUR 6.5 million, and both machines are to start operations in the 2014 campaign. The new technology will save the factory 150 gigawatt hours of energy per year. “We will be saving roughly as much energy as 7,500 Swedish houses use in a year for heating”, says Högberg, smiling.

Doing more with less energy The Örtofta factory processes some 18,400 tonnes of sugar beet on every day of the campaign. “It is an energy-intensive process, which we optimise continuously”, explains the director. “Crystallisation, the evaporation plant and the pulp dryer are our main consumers of energy.” The new VCT dries extracted pressed pulp, which the factory turns into high-grade animal feed pellets. The equipment achieves most of its efficiency by the systematic reuse of steam in production. With the new VCT, continuous crystallisation is possible at much lower temperatures than before. From 2014, the factory will save 50 gigawatts a year in this operation alone. Högberg sums it up as follows, “These are great strides, which bring our company closer to its demanding energy and climate targets while further boosting our competitiveness.” Responsibility 15

Keeping step with growing global demands

Meeting customer needs responsibly

“Their reactions are similar”, observes Marion Schaefer of customers visiting one of Nordzucker’s factor ies for the first time on a supplier audit. “Most of them are surprised by the unfamiliar dimensions and the enormous volumes that our factories deal with.” The food chemist coordinates the company’s sustainable development activities from her office in Copenhagen. Product quality and safety have top priority, alongside occupational health and safety, environmental, climate and social matters, plus the standards required for the corresponding inspections and certifications.

Customer audit: process quality under the microscope Regular inspections by customers who trade or process Nordzucker products do not just consist of a pleasant stroll through the factory. To answer all the customer’s questions, a competent team is available on site, which includes the plant manager, product or quality manager, factory coordinator and an engineer or foreman from the sugar house and service centre. Every audit entails the inspection of documents by the customer, and an analysis of potential product contamination is part of that. It also covers a concrete inspection of the steps that Nordzucker takes to minimise identified product risks, for instance.

All Nordzucker sites are certified in accordance with FSSC 22000, an internationally recognised product safety standard. “Our uniform, Group-wide product safety and product tracing systems are a key area of every customer audit nowadays”, explains Marion Schaefer: “What precautions are taken to prevent contamination of the products? How do we ensure the traceability of our supplies, in order to keep risks for the customer and end consumers, as well as for ourselves, to a minimum because as manufacturers, we bear liability for the product?” During the audits, which can last for up to two days, critical points are examined in detail in ongoing production, issues for improvement are noted, solutions discussed and implementation followed up. “Often, customers test our metal detectors to ensure they are working properly. Of course, individual product specifications and service requests to Nordzucker are also on the agenda – depending on the final product and the target market”, adds Marion Schaefer.

For materials that are bought in or used as raw materials, such as imported organic cane sugar or Fairtrade-certified products, Nordzucker is on the other side of the table and carries out the same kind of audits at its own suppliers – but this time as the customer.

Everyone bears responsibility “The standards of the food industry also increase the standards of product safety and traceability for us and our customers”, emphasises Marion Schaefer. This is an enormous challenge, especially for food producers with international sourcing and distribution systems. “We can only reach a solution by assum- ing our responsibility together – by obtaining systematic commitments from everyone involved in the manufacturing process”, says Schaefer.

Marion Schaefer, Corporate Sustainable Development: “We all bear liability to secure sustainable product quality. Our customers honour this.” 16 Annual Report Nordzucker 2012/2013

Focus on health and nutrition

Interview with Prof. Uwe Tegtbur

What is the basis for a healthy, balanced diet and what role do carbohydrates play in our diet? A conversation with Prof. Uwe Tegtbur, MD, Director of the Institute of Sports Medicine at the Hannover Medical School.

Professor Tegtbur, human beings need various nutrients: water, carbohydrates, proteins, fats, minerals and trace elements, just to name a few. What function do carbohydrates fulfil in the human body? Carbohydrates are the main source of energy for human beings. They supply energy for us to think and for our muscles to work. Our brains can only metabolise carbohydrates, not fats or proteins. Our muscles can also extract energy from fats and proteins. The

“Carbohydrates are the source of energy for body only uses proteins as an energy source when its carbohydrate us to think and for our muscles to work.” reserves are exhausted. This puts a strain on the body, as a lack of Prof. Uwe Tegtbur, MD, Hanover Medical School carbohydrates combined with physical activity leads to higher adrenalin levels, which in turn results in higher blood pressure and a faster heartbeat.

You said the body stores carbohydrates so that it can use them later for brain and muscle activity. Where are these “storerooms” for carbohydrates and can we fill them up indefinitely? Our bodies store carbohydrates in the liver and the muscles. It varies from person to person, of course, but on average you can say that an adult can store around 200 to 400 grams of carbohydrates, and someone who is physically fit can store more than someone who isn’t. So that means that unfortunately we can’t build up our reserves indefinitely. If too many carbohydrates are ingested, the body turns the excess into fat and stores it in this form.

What does that mean in terms of having a balanced, healthy diet? In the first instance, it’s about having the right energy balance. In other words, our energy intake and energy consumption must be in step. Over time, if we don’t use up enough energy, we put on weight. Excess weight is more of an exercise problem than a dietary problem. It is also important to consume carbohydrates when your body needs them, so before exercising or exposure to higher levels of stress. If you want to lose weight, I believe it can make sense to eat carbohydrates if you can actually burn them off.

We often hear about low-carb diets, in other words diets based on reducing carbohydrate intake. What do you think of these diets? As I said, carbohydrates supply our brains and our muscles with energy. With low-carb diets, I reduce my body’s ability to perform. The important thing is when I eat the carbohydrates and whether I have a good energy balance. Responsibility 17

Safety first

Nordzucker improves its safety culture

“Occupational health and safety are and always have been of the greatest importance for Nordzucker”, emphasises Axel Aumüller, Chief Operating Officer. Last year, the Group upgraded its efforts by another notch, focusing even more sharply on safe working conditions, accident prevention and health care. The reason for the additional efforts was an increase in accidents causing more than three sick days. A Group strategy has been adopted in consequence that emphasises the vision of zero accidents.

“Our foremost goal is to get the number of accidents further down again, because we have responsibilities – towards the employees and also as individuals for our own safety. Our renewed vision of zero accidents is therefore closely related to our value process,” says Joachim Rüger, Senior Vice President Production, Eastern Europe. Axel Aumüller adds, “We intend to lead the sugar industry and similar industries in terms of occupational health and safety.” To achieve this goal, the “Health & Safety Production Workgroup” has drawn up targets, responsibilities and an action plan. “We do not accept unsafe working conditions. Safety has top priority for us, putting it ahead of production, for example. Because we can only produce successfully when we offer a safe working environment”, continues Rüger.

“Safety is a matter for everyone. That is basically our starting point. In our action plan, we have called this “Talk Safety”. What we mean by that is that we should all make each other aware of risks at work. Everyone, especially in production, both during the campaign and after it has finished, should have an awareness of work processes that are potentially dangerous and should have the courage to tell colleagues who are putting themselves at risk”, says Iver Drabaek, coordinator of the working group. The working group is looking in particular at practical aspects: “Our aim is to establish a distinct safety culture. We have formed three subgroups in which safety experts from the factory contribute their experience. This enables us to identify potential sources of danger and therefore avoid accidents. Sharing experiences within the group also lets us learn from examples at other factories and identify measures which could be implemented as a Group-wide standard”, adds Drabaek.

These activities already had some initial success in the last campaign: the number of accidents went down. “Everyone knows this is just the beginning. It takes time to improve the safety culture and raise individual awareness, but we have got off to a good start”, says Drabaek.

Safety is a matter for everyone. Which is why Nordzucker makes every employee aware of risks at work. 18 Annual Report Nordzucker 2012/2013

Far-sighted investment

Investments in logistics and replacement machinery will become more important

The Nordzucker campaign begins in autumn, when the lime kilns are fired up in the 13 sugar factories. The factories operated by Europe’s second-largest sugar producer are then essentially expected to do one thing – run smoothly 24 hours a day, seven days a week, for around four months a year. They are also expected to do so cheaply, protecting the environment and conserving resources, as evenly as possible and without interruptions – along the entire process chain, from the incoming beet scales through to the sugar silo and on to the customer. It sounds trivial at first, but this actually makes a complex array of demands of the production managers at When to invest where on which project? Set priorities the factories and Group headquarters. today with investments focused on future needs. When the Nordzucker production team prepares the annual investment plan for 13 sugar factories, a large number of external voices make themselves heard indirectly: customers, shareholders, farmers, the European Commission and national governments in eight countries, local and regional regulatory authorities. Internally, it is mainly the sales and beet management teams that clamour for attention, as their demands also have to be aligned with the investment strategy of the production units. At the end of the day, there’s a whole host of legitimate interests that have to be continuously reconciled with production requirements, internal Group performance indicators and development targets.

Rebalance, prioritise, invest “To ensure our factories stay productive in the long term, we have to keep rebalancing internal and external demands and also set priorities”, says Chief Operating Officer Axel Aumüller. “How does Nordzucker make the most efficient use of limited resources? That’s the key question.” The production team provides the answers in a process of dialogue organised across the Group. These answers lead to plans for projects and budgets, which are agreed by the Executive Board and are then discussed and approved by the Supervisory Board. In the current financial year, around EUR 70 million is available for capital expenditure in the factories.

Energy: making up for higher costs About EUR 30 million of the total is currently earmarked for profitable investments: projects large and small that generally Installation of new evaporation dryer at the plants in Uelzen, Nakskov and Örtofta is part of the biggest energy-saving project of Nordzucker. Responsibility 19

have a fairly short payback period of four to five years, save costs and make a positive contribution to Group earnings. “Energy savings have indisput- ably played the main role in this area for many years now”, explains Aumüller. He is particularly pleased that the Swedish plant in Örtofta is now to follow those in Uelzen and Nakskov by starting the 2014 campaign with a new evaporation dryer, which will cut energy consumption there by a good 25 per cent. What’s more, every kilowatt- hour saved reduces carbon emissions and brings Nordzucker another step closer to reaching its ambitious reduction targets. “If we’re very good, we will manage to recoup most of the increase in energy and personnel expenses with the current investment volume”, says the COO in summary.

Nordzucker maintains outstanding environmental standards with Ensuring high environmental standards innovative technologies for efficient waste-water processing. The bulk of the investment budget, amounting to some EUR 40 million, is currently split between replacement and compliance activities. The latter consist of measures that are necessary to comply with statutory requirements and environmental standards. Nordzucker is presently focusing on in novative technologies for efficient waste-water processing and on steps to reduce unpleasant smells. “Here, too, we are investing continuously”, emphasises Aumüller. “It means we can maintain the outstanding environmental standards at our factories going forward.”

New focal areas In the years ahead, the production team expects a clear shift in capital expenditure towards replace- ments, compliance and logistics. This will be prompted partly by the EU’s new Industrial Emissions Directive, which stipulates that environmental pollution is to be reduced further in future by using the best available technology (BAT). “We will therefore need to, for example, renew the boilers for generating energy at a number of sites over the next few years, or make substantial modifications to them”, says Aumüller. The cost-cutting efforts that resulted from the sugar market reform have also left their mark on the production units. “Our capital expenditure on property, plant and equipment has not kept pace with depreciation for many years”, he stresses. At the same time, the campaign run by the factories has been a third longer for five years now. “The increase in capacity utilisation is good, but it also means the machines and components have a shorter useful life.” COO Aumüller is also expecting the cost of logistics to increase. As part of the sugar market reform, Nordzucker closed several sites and had to abandon some of the storage capacities available there. Today, production is concentrated at the remaining sites, where the demand for storage space is correspondingly higher. 20 Annual Report Nordzucker 2012/2013 Dedication 21

“It is our job to ensure that knowledge of improved cultivation methods reaches as many of our farmers as possible. We at Nordzucker have the capacity to conduct trials and pass on the results.”

Markus Reiners, Beet Procurement Manager – Nordzucker, Clauen sugar factory

Dedicated team

Dedication is an important part of our culture. A whole series of forward- looking projects, such as 20 · 20 · 20, are preparing our company and our beet farmers for future challenges. 22 Annual Report Nordzucker 2012/2013

Learning from the best

20 · 20 · 20 in practice

How can 20 per cent of the best-performing beet farmers in the whole of the Nordzucker Group produce 20 tonnes of sugar per hectare in the year 2020? Nordzucker and its farmers are busy finding answers to just this question. Nordzucker has been pursuing this goal since 2011 with the 20 · 20 · 20 initiative, concentrating on five areas: plant strains, cultivation methods, harvesting, storage and cultivation structure.

Regional expert teams have been set up in the seven countries where Nordzucker grows sugar beet. “Here in Trenčianska Teplá, we have chosen eight topics that we want to look at in detail and improve, in order to boost the sugar yield. They include preparing the seed beds in the autumn with a prelim inary round of fertilisation. The advantage is that in autumn the ground is mostly dry, so it is worked gently and not compacted unnecessarily. This gives us a soil which absorbs moisture evenly throughout the winter and then has a homogeneous structure in the spring. In spring, the field then only has to be harrowed lightly before it can be drilled. We can therefore maintain the capillarity of the undamaged soil and achieve better crop emergence and very good root growth. This increases beet yields per hectare. Our cultivation advisers use field trials to demonstrate the advantages of this practice, which is widespread in Germany, and so help to spread knowledge of it”, says Richard Šulík, member of the Board, Považský cukor.

Discussing practical cases and disseminating the results Another focal area in Slovakia is mulch seeding: “The mulch-seeded portion currently accounts for around 30 per cent of land under beet cultivation in Slovakia and we want to increase this to well over 50 per cent in the medium term. This improves the soil structure and offers active protection against erosion and surface siltation”, adds Richard Šulík.

In the German growing areas too, the farmers are busy fine-tuning their cultivation methods, to get closer to the magic figure of 20 tonnes of sugar per hectare. Here, too, the expert teams include cultivation advisers and farmers, who discuss practical situations and share their experience of growing techniques. It is particularly exciting when the yields vary considerably in a single natural environment in spite of being subject to similar conditions.

“In our 20 · 20 · 20 group, there are currently 20 to 25 farmers testing an app which adapts the planned crop protection to the local weather forecast. The app then determines the optimal time to apply the pesticide within the next 48 hours. This is partly to ensure and improve the effectiveness of the spraying and partly to protect the beet”, explains Markus Reiners, the beet procurement manager in Clauen, Germany. He goes on to add:

Close up: Nordzucker cultivation advisers make contact and prepare the ground for a broad sharing of knowledge. Dedication 23

“The fact that the app is now being tested in practice

is the result of a 20 · 20 · 20 workshop that we held in March this year. We invited a Dutch expert to the workshop, who gave a presentation on the influence of the weather on crop spraying and showed us this app. By the end of the talk, so many farmers were interested in the app that we were able to organise a trial run with some farmers in the Clauen area.”

Learning from one another The 20 · 20 · 20 initiative has been under way in the Nordzucker Group since 2011. As different as the conditions are in all of Nordzucker’s growing regions, one thing is the same: both sides learn from one another. “We learn from the farmers’ knowledge too. They are the ones out in the fields every day, looking for practical new solutions when With its 20 . 20 . 20 initiative, under way since 2011, Nordzucker is they are faced with challenges. And there are a aiming for a yield of 20 tonnes of sugar per hectare. lot of lateral thinkers among them, who generate innovative ideas. The latest example is a farmer who considerably reduced the quantity of crop protection products he applied. By adjusting the spraying technique and the timing, he achieved substantial savings here last year. Those are the projects where we at Nordzucker say, “Wow, we’d better have a look at that”. We have the opportunity to examine the matter in trials and to boost the power of projects like these by disseminating them widely when we see that they work”, explains Reiners.

Trials in Germany are currently focusing on cultivation and seeding. For example, we are looking at the effect the choice of catch crop has on sugar yields or what the effects of mulch seeding and autumn strip tilling are. In Sweden, the size of the trial area was extended from 12 to 22 hectares. As of last year, trials at Granhill Øst are concentrating on cultivation techniques. An additional trial area for Northern Europe has also been added in Denmark.

“At our trial area at Sofiehøj in Holeby, for instance, we have held trials with different varieties and different cultivation methods. Our aim is to pass on our findings by sharing experience directly on the ground”, says Claus Nordgaard, Manager of Agricenter Denmark, about the activities on the eight-hectare plot.

The regional 20 · 20 · 20 interim results are also being shared throughout the Group. “In June, we will be discussing the experience gained to date from the different initiatives within the project at a Group conference of all Nordzucker cultivation advisers and trial participants. In this way, we can ensure that the experience of different countries and natural environments is shared and can jointly decide on the direction things should take going forward. Because together we learn from and with one another”, says Dr Niels Pörksen, Chief Agricultural Officer. 24 Annual Report Nordzucker 2012/2013

Where does the sugar market regime go from here?

Interview with Marie-Christine Ribera

Marie-Christine Ribera, as CEFS Director General, could you explain a little bit about the organisation? CEFS stands for the Comité Européen des Fabricants de Sucre or the European Association of Sugar Manufacturers, created in 1953. Based in Brussels, we represent the activities of European sugar manufacturers and refiners, approximately 60 companies across 20 EU Member States plus Switzerland. Sugar is produced in 106 factories across the EU supporting 180,000 direct and indirect jobs and 170,000 growers. We are a small team, working on different issues of key importance to the industry, from nutrition to the environment, from trade to agriculture.

Marie-Christine Ribera, CEFS Director General And what is your biggest priority at the moment? (Comité Européen des Fabricants de Sucre, As an organisation, but also as an industry, our biggest priority is the European Association of Sugar Manufacturers). reform of the Common Agricultural Policy (CAP). The Single Common Market Organisation (CMO) for sugar provides the rules for managing the market and these rules are being reformed.

How are these rules being reformed? In October 2011, the European Commission came forward with a legislative proposal to end the current Single CMO for sugar on 30 September 2015, which foresees terms for buying sugar beet and sugar cane and, perhaps most importantly, national quotas to be distributed among EU sugar companies. It also includes mechanisms to monitor the market and withdraw sugar when there is a surplus on the market.

And since 2011? The proposal is now in the hands of the member states (brought together in the Council of the European Union) and the European Parliament, which have the right and competence to decide on the final outcome as co-decision makers. In March 2013, the Council decided to prolong the Single CMO for sugar until 2017 and the Parliament until 2020.

What is CEFS’ position? CEFS supports the prolongation of the current Single CMO for sugar until 2020. This will enable the European sugar sector to continue to optimise its competitiveness and efficiency; to counter the instability of the world sugar market, securing stable supply; and to provide LDC/ACP countries with more time to invest in their infrastructure in accordance with the EU’s international commitments.

You must have been disappointed with the Council’s position to prolong the Single CMO for sugar until 2017 rather than 2020? Yes. The Parliament sent a clear message to the Council – prolong the Single CMO for sugar until 2020 – and we were deeply disappointed to see the Council did not take this on board. The 2006 reform resulted in the closure of 83 factories (one in two) and the loss of more than 22,000 direct jobs – this should not have been in vain. We are becoming more competitive, but we need more time. We are simply asking for stability and predictability for five more years. This is not a long time in such a capital-intensive industry. Dedication 25

Are there any other issues, apart from the end date, which concern you? CEFS welcomed the Council and the Parliament’s maintenance of the current refiners’ privilege, as well as the Council’s decision not to include an increase in the quotas. We do not support a reallo cation to those who relinquished their quota(s) in the previous reform, nor do we support an increase in isoglucose quotas in certain member states. This would go against the 2006 reform which aimed to balance the market. We also consider that the production charge the sector has to pay on each tonne of quota sugar is unjustified and unfair. It should be eliminated when the current financial framework ends in 2014.

What is CEFS doing to make its position heard? CEFS and our members have been working hard to promote our position and explain the reasons for the prolongation until 2020. We put forward three main reasons detailed in our position from March 2012. We also have a joint position with our partners in the sector, CIBE (the growers), EFFAT (the trade unions) and the ACP/LDCs (least developed countries). As a coalition, we believe prolonging the Single CMO for sugar until 2020 would go a considerable way to guaranteeing decent employment, improving the sector’s sustainability and providing sufficient sugar supplies at sustainable prices for farmers, processors, suppliers, workers and consumers.

What is the timetable for the reform? As I said, the Council and the Parliament decided on their positions in March. Since then, the two bodies have been negotiating with each other in so-called trilogues in order to reach a common position. It is hoped that this will be done before June under the Irish Presidency. As you can see, it is a long decision- making process from October 2011 to June 2013: literally two years in the best case scenario, let alone the discussions on implementing regulations. Dr Niels Pörksen: “Our declared aim The entry into force is foreseen in 2015. remains to make beet farming in Europe even more competitive.” What next for CEFS? We are following the negotiations. We recognise the hard work that has been done and understand the need to ensure that the CAP is adopted and implemented in a timely manner. Nonetheless, Europe’s sugar manufacturers need a workable and reliable solution, not an agreement for the sake of an agreement, and insist that the prolongation of the Single CMO for sugar until 2020 with no change to the refiners’ privilege and no increase in quotas is still feasible – for the sake of the sector as a whole.

One last question, what about after the end of the current Single CMO for sugar? In order to ensure the European market is balanced after the quota, it is of utmost importance that the sector secures a commitment, such as a political declaration, that there should be no limit on exports after the quota. It is stating the obvious so it should not be too difficult for our decision- makers to find a proper way to express it. Similarly, there is a need for a crisis mechanism (market clearing mechanism), i.e. a withdrawal from all sources so all players make adjustments to ensure the market is balanced. This will enable the Commission to act before rather than after a crisis. 26 Annual Report Nordzucker 2012/2013 Courage 27

“Breaking new ground using innovative technology and going beyond national borders requires a great deal of courage. Nordzucker is developing a culture that not only makes this possible, but also encourages it.” Aljoscha Kotulla, SAP Special Applications Specialist, Nordzucker, Braunschweig Björn Windfall, Senior Consultant, Agri and Beet, Nordic Sugar, Copenhagen

Courage as a motor

Courage accompanies decisions and drives projects. Being open to new ideas makes development possible. 28 Annual Report Nordzucker 2012/2013

Communication creates connections

Making exemplary use of modern media

What distinguishes human beings from other animals? There is the upright posture, which is a requirement for agriculture because it frees your hands to do other things. You could say it’s the anatomical prerequisite for beet cultivation. Of course, that’s not all: human beings can communicate in words; they can read and write. Modern media make it possible to exchange information – even in large quantities, over great distances and with many people at the same time. Surveys among our beet farmers have shown that they would like Nordzucker to improve its communications. One of the ways we are doing this is by redeveloping our Agri-Portal.

For a number of years now, Nordzucker has provided its beet farmers with an information portal, the contents and technology of which are continu ally refined. As part of the increasing integration Consistent, coordinated project planning is the foundation for of the technologies and content used within the successful implementation. Group, we are currently working flat out to en- hance this Group-wide portal solution for the beet farmers.

“With all the changes to the portal, our main aim is to always see things from the farmers’ perspective”, says Björn Windfall, Senior Consultant, Agri and Beet, describing the objectives of the international Agri-Portal project. “First of all, we asked ourselves what users really need and how we can provide this information in a user-friendly way, so that it is easy to find”, explains Björn Windfall. “The main thing is to support farmers with their everyday work. We provide the information that the farmers really need for their work and which can be accessed simply, and always in the same way, from a standardised platform.”

A new, clearer page structure will guide the farmers better through the information on offer. “On the one hand, we want to offer farmers and interested parties a freely accessible area and on the other hand, it is important for us to have a password-protected page where we can exchange information directly with our beet farmers. The public pages always have the latest information and news about beet cultivation. In the private area, the farmers can find clearly structured, specific operating information for their business, such as contract details and invoices. They can also carry out compari- sons between farms and place orders, for seed, for instance. The focus is on rapid, direct access to personal information. With the new design, the structure and the search function, users can find the information they are looking for quickly and easily”, adds Aljoscha Kotulla, SAP Special Applications Specialist. Courage 29

“In addition, we are currently working on making the Agri-Portal mobile, i.e. compatible with smartphones and tablet PCs. Then the farmer out in the field can read tips on cultivation or the latest news”, points out Björn Windfall.

From the company’s perspective, the new approach also has huge advantages: “With the Agri-Portal, we are pursuing a Group-wide approach. That means we have a standard design for all country platforms. For the efficiency of the IT environment, the decisive aspect is that new developments and functionalities can be rolled out more quickly to other countries. Altogether, this integrated approach cuts maintenance costs and can be managed better by the IT department”, says Aljoscha Kotulla, describing the benefits from an IT perspective. Modern technology is changing communication.

Another objective is to expand the Agri-Portal so that it becomes the preferred information channel for our beet farmers – the address where everything should come together, without the need for complicated searches.

For all the enthusiasm and the clear advantages of modern communication media, Nordzucker nonetheless still puts personal contact and dialogue with the farmers at the heart of its strategy.

“The Agri-Portal doesn’t replace the personal conversation, it adds to it. We are positioning the Agri-Portal as an important communications tool that expands the dialogue with our business partners. A personal phone call and direct discussions with staff in the beet office are, and will remain a vital part of our individual service”, says Gerald Dohme, Senior Manager Corporate Communications.

This is how the Agri-Portal welcomes farmers in Germany today. 30 Annual Report Nordzucker 2012/2013

Hand in hand towards greater productivity

Sharing experiences – setting trends

Nordzucker has production facilities in seven countries. This means that different languages and cultures are confronted with one another. This can be a challenge for a pan-European company – especially if it has demanding objectives.

Four years ago, the three regional production managers responsible for Northern, Eastern and Central Europe decided on a joint initiative to drive forward the development of products and technology in the Nordzucker Group. Their aim is to share the lessons drawn from past experience and to intensify the exchange of information across national borders. This exchange has proven to be particularly effective since all are focused on Axel Aumüller and Zoltán Tóth in Clauen: exchanging know-how a common vision for the future. The initial meet- on all levels. ings were dominated by questions about future technological developments and the demands of our customers in terms of product innovation, product quality and safety, and sustainable development. It quickly became apparent that an organisational structure was required which would enable reciprocal learning and a common assessment of trends throughout the Group.

A solution was soon found and there are now 13 cross-border Production Working Groups which pool Group knowledge on topics relevant for the future and also keep developing it. In addition, all the experts, plant managers and production managers meet with Executive Board member Axel Aumüller twice a year for Global Production Meetings, to coordinate and optimise subjects such as the planning of investment and maintenance, energy conservation, technological development, production information systems, customer-specific product developments, occupational health and safety, and sustainability.

“The important thing is that it’s not just about defining standards and guidelines, but about reaching a common understanding of what we need in order to keep developing the production processes. We can only get better if we all pull in the same direction. It is vital that we define and implement a line of approach for the entire Group”, explains Dr Michael Gauss, Managing Director Central Europe and Senior Vice President Production Central Europe.

“Planning concrete activities is one aspect of that, but equally important are joint discussions and the exchange of knowledge. On the one hand, the technology used is the same everywhere, but on the other, there is a wide range of experiences with different projects. Jointly drawing on this wealth of experience promotes motivation and innovation ”, adds Achim Rüger, Senior Vice President Produc- tion Eastern Europe. Courage 31

“Discussing specific topics with colleagues from other regions is an exceptional experience every time. It gives you incredible impetus for your own work, in terms of the technology itself on the one hand, of course, but also in terms of the workflows and processes at a production facility. An inspirational atmosphere is generated in no time at all”, says Dr Jesper Thomassen, Senior Vice President Production Northern Europe.

The Production Working Groups pool all of the production technology expertise available within the company and also serve as important advisory and implementation teams. For example, the Energy Focus Group evaluated all the evaporation dryer projects that were approved recently and provided important implementation support. The Waste Stream Focus Group gave advice and support on the dimensioning and operational launch of the new waste-water treatment reactors in Opalenica, Kėdainiai and Klein Wanzleben. And an important contribution was made to our value process by the Health & Safety Group, which created a link between our Nordzucker values and the guidelines and processes for occupational health and safety.

All the teams have been focusing on their specific topics for more than three years. The exchange of knowledge informs and inspires a variety of activities, be they investments, environmental topics, occupational health and safety or the improvement of working practices. In this area, Nordzucker benefits in many ways from its size and its European structure.

Joachim Rüger, Dr Michael Gauß and Dr Jesper Thomassen in discussion. 32 Annual Report Nordzucker 2012/2013 Appreciation 33

“It’s the small everyday things that make a difference, for oneself and for others.”

Kristine Koppelhus, Assort Manager, Nordic Sugar, Copenhagen

Appreciation is the name of the game

Appreciation of each other is the basis for growth and progress. 34 Annual Report Nordzucker 2012/2013

Human resources management of the future

Focus on people

Attracting and retaining qualified staff is the main task for human resources at the Nordzucker Group. Nordzucker has long practised a modern approach to professional training and development and to work–life balance.

“The success of our company is based on dedicated, productive employees at the various sites in Europe. We offer an international working environment and wide-ranging development opportunities. We consider the long-term loyalty of our employees to the company to be particularly important. For this reason, we fill vacancies from within the company wherever possible and in doing so can offer excellent prospects for development”, says Inga Dransfeld-Haase, Senior Vice President Corporate Human Resources, explaining the principle that applies throughout the Group. Inga Dransfeld-Haase, Senior Vice President Corporate Human Resources: “Nordzucker relies on professional training Demographic changes will make it more difficult to and long-term employee loyality.” attract qualified professionals in future. Nordzucker therefore counts on fostering talent from within wherever possible. “For example, we encourage and support colleagues, especially those working in a technical field, to complete a part-time degree course in parallel to their work”, adds Inga Dransfeld-Haase.

Succession planning is another key aspect of human resources work at Nordzucker. A precise analysis of the age structure is carried out to determine when employees with specific qualifications will reach retirement age. “We use a modern IT solution, which enables us to model changes in the staff structure over the long term. This transparency is vital for succession planning and makes us less dependent on competing for talent”, emphasises Inga Dransfeld-Haase.

In order to address important human resources issues in a systematic and structured way, Nordzucker introduced HR conferences in 2010, which take place annually with managers at local, national and Group level. The focus of the HR conferences is the continued development of employees. “The HR conferences are an important part of our work. We consult with managers about individual staff development activities across different sites and the Group as a whole. In Germany, for instance, staff Appreciation 35

can systematically use the standardised training courses on offer at the Sugar Academy for their personal development”, explains Inga Dransfeld-Haase.

Modern human resources management covers much more than professional training, however. For many years, there has been an increasing focus on courses related to work–life balance. The Nordzucker ‘Time Out’ was opened recently at the company headquarters in Braunschweig. This is a separate area where staff can spend some time attending to their physical and mental well-being. It provides specific opportunities for fitness and healthy living, among other things. Flexible working hours and support with childcare have become a well-established feature of the Nordzucker culture, too.

“Nordzucker can therefore present itself as an all-round attractive employer, which is important for recruiting new staff. The main thing, however, is that people are at the heart of what we do.” Inga Dransfeld-Haase sums it up as follows, “We give our employees room to expand their abilities and to identify with the company, and this creates the conditions for a successful working relationship in which both sides can grow.”

Professional training, courses related to work–life balance and lived corporate values document: we focus on our employees. 36 Annual Report Nordzucker 2012/2013

There’s no such thing as a stupid question ...

Surveys are the starting point for making far-reaching improvements

Success for us doesn’t just mean the number on the bottom line at the end of the year, but also and equally the satisfaction of different interest groups. So surveys among different groups of stakeholders are an important element of Nordzucker’s positioning and continued development. Because it is only when we really know the expectations of our customers, shareholders and beet farmers that we have the opportunity of fulfilling them and entering into a constructive dialogue that improves our company.

“We carry out regular customer surveys in all regions and of course we are pleased when the feedback is positive. But being told about dissatisfaction is just as valuable. So the most important thing after the survey is to evaluate the results and start taking action”, says Mats Liljestam, Chief Marketing Officer.

As well as great praise for food safety, product range and punctual deliveries, the last survey of industrial customers in the Central Europe region revealed some areas where customers would like Nordzucker to do better. They include the time it takes to deal with complaints or the desire for more information on market developments, for example. “We started working on these topics immediately

Anja-Alexandra Horn, Sales Development Manager, is dedicated to customer satisfaction. Appreciation 37

after the customer survey. Our process for dealing with complaints was tightened up straight away, for instance”, explains Ingo Saß, Senior Vice President Sales Central Europe.

And it is not only our customers who are sur- veyed regularly, however, but also the beet farmers. “A close relationship with our beet farmers, based on partnership, is a tradition here and really is a matter of course for us. So it’s all the more important that every now and then we ask: What can we do better?”, says Dr Niels Pörksen, Chief Agricultural Officer, explaining the approach.

We are in close contact with our beet farmers and offer them advice and services: via our websites, in informal telephone conversa- Advice and communication with the farmers are particularly tions or on personal visits. In February and important. March we asked all our farmers to evaluate our contacts with them and Nordzucker as a business partner. A total of 5,087 farmers from seven countries took the opportunity to give their assessment and their comments. In most cases, Nordzucker came out very well. Compared with the previous survey in 2011, the results were much better – especially in Germany and Poland and in particular in the areas of cultivation advice and communications. The steps taken in 2011 have obviously hit their mark.

A survey carried out last year with a selection of shareholders was particularly exciting. The main focus was to find out how shareholders view the company’s strategy and to what extent they trust the company and the Executive Board. “The results of this survey were very positive. However, we did learn that we have to be even clearer and more candid in our communications on specific topics – especially those concerning the future. As the operating environment is set for more change in future, Nordzucker is in the process of becoming an international company. It is therefore all the more important that we gain the support of our shareholders and make it clear why we have chosen this strategy”, says Hartwig Fuchs.

Nordzucker will continue its policy of regular exchange with different interest groups in many areas. 38 Annual Report Nordzucker 2012/2013 Trends in agribusiness 39

“Agriculture thinks, lives and works in long time frames. The trick now is to bring together the speed of the markets with the long time frames of agriculture.“ Hartwig Fuchs, Chief Executive Officer

Focused on the future

Agricultural trends affect our business. Preparing for change in good time ensures sustainable success. 40 Annual Report Nordzucker 2012/2013

Trends in agribusiness

A changing industry

Klaus Schumacher: Welcome to Nordzucker. I am delighted to welcome Carl-Albrecht Bartmer, President of the German Agricultural Society (DLG), and Mark van Driel, Managing Director of Rabobank, Germany, who will be taking part in our panel discussion today together with our CEO Hartwig Fuchs and our CFO Dr Michael Noth. Today we want to talk about trends in agribusiness that influence the entire agricultural industry and therefore also the sugar industry and beet cultivation.

Mr Bartmer, when we look at agriculture in Germany today, what are the trends that farmers factor into their business decisions? Is it still the megatrends, so global population growth and rising incomes, which will lead to sustained growth in demand for food in the years ahead?

Carl-Albrecht Bartmer: The familiar megatrends do still have a considerable influence. At the moment, they also seem to be reflected in the relatively tight supply situation on global agricultural markets, and in the resulting high prices for almost all agricultural raw materials. The mood in the farming industry is therefore extremely upbeat. This is the case even though we are currently discussing a U-turn in agricultural policy, aimed at reducing support for farmers and at the same time tying the remaining payments much more closely to specific duties, especially concerning the environment. The willingness of German agriculture to invest is currently at a record high, according to the latest DLG-Trendmonitor publication. This also reflects the market conditions. So there is no reason to play down the current global megatrends – they remain strong. However, we must recognise that there are also particular dynamics in the EU and especially in Germany that affect how farmers run their businesses.

The best example of this is bioenergy. This has become very important, accounting for nearly 20 per cent of arable land use in Germany. We are seeing considerable shifts in the competitiveness of certain

Dr Michael Noth, Hartwig Fuchs and Klaus Schumacher organised a round-table discussion. Trends in agribusiness 41

production lines, which are often caused or accelerated by state intervention, as with Germany’s Renew- able Energy Sources Act (EEG). I wouldn’t call that a megatrend, but it is the result of political action that will be with us for a good while and will continue to affect business decisions in agriculture.

In Germany, we also have to deal with another trend: we have a tendency here to see agriculture and the rural environment more emotionally and expect them to carry out all kinds of functions for urban centres. Then there are the calls for the more extensive use of land for other purposes. The keywords here are ecol- ogy, sustainability and quality.

Klaus Schumacher: The development of agriculture over the past 20 years is also closely related to the Carl-Albrecht Bartmer: “The willingness of German creation of the common market in the EU, which farmers to invest is at a record high.” enabled a common agricultural policy to work. Is the trend now going back to renationalisation?

Carl-Albrecht Bartmer: The EU became powerful in agriculture because it strived for equal living and working conditions, with a sensible division of labour. In addition, the traditional safety nets of agricultural policy based on state intervention in markets have been scaled back over the past two decades. This has indeed proved to be a great impulse for the agriculture industry, in terms of qualifications and especially in the enterprising attitude of farm managers. The farmers have developed their processes much more efficiently as businessmen. There has been much greater technological progress in response to this environment, and more profitable methods as a result. Today, the most competitive countries in the EU are those that decided largely to uncouple production from subsidies very early on. Unfortunately, what we are seeing in discussions about the current reform of agricultural policy is essentially a step backwards. We are amazed to see political concepts being revived that we thought had been cast aside long ago, be it a philosophy of keeping small family farms instead of growing companies, often also run by families, of regionalised production systems instead of international trade, or of supposedly lost “traditional knowledge” versus modern technological progress.

Klaus Schumacher: Mr Fuchs, how are these changes in the agricultural industry reflected in the relations between Nordzucker and its beet farmers?

Hartwig Fuchs: There are various aspects that need to be considered. Here’s a small example of the willingness to invest: after we had agreed on the final beet price for the 2012 campaign, ten farmers and machinery syndicates here in Lower Saxony ordered new beet harvesters. In this case, there was a direct connection between the beet price and the order placed. 42 Annual Report Nordzucker 2012/2013

In other areas too, we see very clearly that our beet growers increasingly consider themselves to be businessmen. The close, even emotional relationship with Nordzucker does still largely exist, of course. But on the other hand, sugar beet increasingly has to compete with alternative crops. That makes greater demands of us than it used to because we have to be much more competitive. Every year, we have to fight for land to grow beet, and that brings us back to one of those megatrends: the global supply of arable land is scarce. For us, that means we have to offer competitive prices for beet compared with wheat and rapeseed every year, otherwise we won’t get our beet.

Klaus Schumacher: Mr van Driel, over the last few decades, Rabobank has become very closely involved in farming, agriculture and the food industry. How do you see these trends?

Mark van Driel: My perspective is very similar. Global population growth naturally has an effect on agriculture and prices. But that has been a topic for the last five years. What we are now seeing is that agriculture is being linked more and more closely with the major global topics that are concerning society. And, of course, with the world of finance too. For example, we see more and more investors trading on futures markets. But I believe this will only affect prices in the short term. In the medium to long term, prices will always be determined by supply and demand. Another topic is that many suppliers have begun to finance the farmers. Traditionally, here in Germany, there were the coopera- tives, of course, which financed the harvest, the seed and the fertiliser. But now we are seeing a new dynamic worldwide, including in Africa, where funding is scarce. There are more and more links

Mark von Driel: “Population growth affects agriculture and prices.” Trends in agribusiness 43

between seed and fertiliser companies, traders and providers of financial services. Another import ant area is food quality and safety. Where food comes from and how it is produced are increasingly becoming matters of social concern.

Klaus Schumacher: Dr Noth, the financial and agricultural markets are closely related. How does that affect Nordzucker?

Dr Michael Noth: It is vital for us that we have a business model which also stands up when markets are volatile. If we expose ourselves to risks, we must use the opportunities available to mitigate those risks as far as possible. Of course, the best Klaus Schumacher: “Finances and agricultural markets thing is when we can share these risks with our are closely related.” customers and suppliers. This will never be fully possible, however, so we make use of the opportunities offered by banks and futures markets to hedge market risks. Price movements on the sales side cannot always be directly passed on to the beet suppliers; we have to find compensation mechanisms instead. The second aspect is that we have to become more active in the area of hedging. We are making intensive use of the products on offer from the banks and the markets. They are an indispensable part of our risk management. We are therefore concerned to see that we are being tied up with a good deal more red tape as a reaction to the financial crisis. A financial transaction tax is also under discussion. All these things make the necessary hedging of risk more difficult and more expensive for companies like Nordzucker.

Klaus Schumacher: Does this high degree of Dr Michael Noth: “It is vital for us to have a stable volatility also have consequences for our financing? business model which also stands up when markets are volatile.” Dr Michael Noth: Financial markets now attach greater importance to a sound business. This is a result of the 2009 financial crisis and fits well with Nordzucker’s approach: solid, reliable funding is the basis of our business. The extreme volatility on both our procurement and sales markets makes this solid funding all the more important. And we are not just following a trend either, because this has always been our approach. 44 Annual Report Nordzucker 2012/2013

Klaus Schumacher: We have already heard about the “step backwards” being taken in agricultural policy. Mr Fuchs, is that something that could hold back Nordzucker’s future performance, which has been very strong in recent years?

Hartwig Fuchs: There are certainly elements that concern us. We are currently observing a sharp change in the mood surrounding political discussions about extending the sugar market regime . The positive aspects of the regime are not being given enough weight. Let’s talk about security of supply: the sugar market regime guarantees that the European market is supplied reliably and regularly with at least 85 per cent of its sugar requirements from regional production, at the social and production standards in force here. Reliability also means that if the quota regime is abolished, a price hedging mechanism must be created – and this is an option that we in the EU sugar industry simply do not have at present.

Intense discussions on the future of agriculture. Dr Michael Noth: Exactly, that is a very important point. At Nordzucker, we have to negotiate prices with our farmers at a very early stage – generally before the winter wheat is sown – in order to secure the land for beet. Our beet prices then have to compete with a wheat futures price, for example. So we guarantee the farmer a minimum price for his next harvest today, but only find out the price at which we will be able sell the sugar ourselves 18 months later.

Klaus Schumacher: Mr van Driel, has Rabobank thought much about what would happen in the EU sugar sector if the quota regime really was allowed to expire?

Mark van Driel: As soon as the sugar market regime comes to an end, the ones to profit will be those who can produce the most efficiently and who exploit available growth opportunities. Sugar prices will become more volatile, and we have already given some thought to whether sugar producers could hedge themselves using grain futures.

Klaus Schumacher: Of course, that raises the question of whether it would not be more sensible to think right away about creating a European futures exchange for sugar.

Mark van Driel: If the sugar market regime and the quota system are abolished, then this price hedging instrument must be set up. Because while there is no hedgeable market price, our funding possibilities are limited. We would certainly support the introduction of this kind of futures exchange. Because Trends in agribusiness 45

the shortages in the European market which would probably arise at times if the quotas were no longer there would have to be countered. Hedging raw materials from different parts of the world is becoming more and more important.

Dr Michael Noth: But I also think that the structure of the European sugar industry will undergo further changes, just as it has over the past decades. It needs to become more efficient and adjust to the market, especially where growing conditions and proximity to the market are more difficult to predict. So we have to keep on doing our homework, become more efficient and keep fighting to improve our processes, in order to hold our own against the competition and to grow.

Hartwig Fuchs: In principle, I don’t doubt that the sugar industry will continue to develop well in the best sites and the best regions, even without the sugar market regime. But my main concern is the time factor. Agriculture thinks, lives and works in long time frames. It is time to get the industry ready for the global market. But at least Nordzucker’s sites are in the best regions. We will, however, then have to do a great deal more in order to be able to ensure security of supply for our customers. That will include importing cane sugar for refining. But once again, in everything we do, it’s vital that we can hedge our risks. This will become more important than anything else. We at Nordzucker have a very clear task: we produce sugar and have to ensure our competitiveness by continuously becoming better, leaner and more efficient. Ultimately, we do all this to give our shareholders, i.e. our beet growers, the opportunity to retain sugar beet in their crop rotation in future.

Klaus Schumacher: If a company like Nordzucker is thinking about becoming more international, can it count on the support of its agricultural shareholders?

Dr Michael Noth: “We have to keep improving our efficiency and we have to adapt to the market”. 46 Annual Report Nordzucker 2012/2013

Presenting a united front to change – round table at Nordzucker.

Carl-Albrecht Bartmer: Well, I believe Nordzucker’s development in recent years does indeed reflect a process of considerable development on the part of the shareholders. It’s a development that has resulted in much greater recognition of the entrepreneurial role played by a food company that produces sugar and also in the realisation that sugar factories can no longer be seen as a mere appendix to the farming business, whose job it is to process the beet so as to maximise the beet price. And I believe there is a growing recognition that Nordzucker is a company which has to fight its corner against other sugar manufacturers and has to seize its opportunities in a globalising market. This evolution is a normal process, you could almost say of emancipation, from a processing company founded by farmers to a self-confident business in which farmers hold shares. Ultimately, that is lucrative for the farmers as shareholders and also ensures that beet processing takes place in their home region.

Mark van Driel: Development and internationalisation are important for the future, certainly, but Nordzucker also plays a pioneering role in the organisation and management of supply chains. Given the trends we have just been talking about, this is an increasingly relevant skill.

Hartwig Fuchs: There is still a vast amount of potential in the idea of processing an agricultural product from the region and producing something which really has this regional connection. Consumers are making ever higher demands of traceability and transparency in the food supply chain. With our approach, we can ensure this much more easily and thus differentiate ourselves from competitors on the world market.

Carl-Albrecht Bartmer: I think the importance of the value chain will keep on growing. And one of the reasons is something you just mentioned, Mr Fuchs: traceability. Another reason is: I believe that processes can be organised much more efficiently within an overarching value chain. Trends in agribusiness 47

Mark van Driel: Customer loyalty can also be improved with a tightly run value chain. The commodities markets, where a piece of meat is bought here and a sack of grain is sold there, will become less important, and more established, longer-term economic relationships will develop.

Klaus Schumacher: From a consumer perspective, food safety and quality are currently major topics. How do we deal with those?

Carl-Albrecht Bartmer: That is a very important issue. We have a highly efficient agricultural and food processing industry, in which quality assurance has never Hartwig Fuchs: “With a combination of attractive pricing, been better. The communication channel for this is not product quality and first-class services, the European sugar working properly, however. In my opinion, the local industry will be able to thrive on the world market.” farmer must become a much more vocal ambassador for their industry, as they enjoy the highest level of trust in their locality, and this would put agriculture in general and, of course, the farmer’s own work into a much better light.

Hartwig Fuchs: Absolutely, that is also one of our most important communication tasks. The aim must be to express the strength and the benefit of agriculture for society and our economy.

Mark van Driel: In my opinion, the answer to this problem is that we have to communicate the subject of sustainability much more and also more clearly. The only way we can cope with the increasing demand for food as a result of population growth and higher incomes while the amount of avail able land remains unchanged is by means of larger structures, which have to be organised better and more efficiently – not necessarily organic agriculture, but certainly sustainable farming. And these subjects will have to be communicated more clearly in future.

Klaus Schumacher: Mr Fuchs, we have a sustainability debate, we have a communications debate and, looking at the sugar market regime, we are probably also going to see severe changes in our operating environment. Taken as a whole, does this represent more of an opportunity for Nordzucker than a threat?

Hartwig Fuchs: Well, it’s certainly a challenge. We will have to adapt in order to stay in touch with the market. I believe it represents an opportunity because we are convinced that we will be capable of competing with the world market – if we are given enough time to adapt. That requires certain things, such as functioning price hedging mechanisms. But I can certainly envisage the EU continuing to regularly export sugar to countries in the future which are dependent on larger import volumes. With a combination of attractive pricing, product quality and first-class services, the European sugar industry will be able to thrive on the world market. It’s therefore also a huge opportunity. 48 Annual Report Nordzucker 2012/2013 Management report 49

“Transparency in the the figures is the most important prerequisite for initiating the right measures.” Sven Jansen, Senior Vice President Corporate Finance and Controlling, Nordzucker Braunschweig

Group management report of Nordzucker AG

Facts and figures on the course of the financial year 2012/2013. 50 Annual Report Nordzucker 2012/2013

Group management report of Nordzucker AG

Nordzucker at a glance one million tonnes of quota sugar a year for customers in the food and food retail industries – primarily for the German market. Business activities Nordzucker AG also sells other products of the sugar-making Nordzucker is the second-largest sugar producer in the European process, such as animal feed and molasses. Union, with a market share of more than 15 per cent. In the last financial year, the company produced around 2.8 million tonnes A wholly owned subsidiary of Nordzucker AG, fuel 21 GmbH of sugar from sugar beet at 13 sites in seven European countries. & Co. KG based in Klein Wanzleben produces and markets bio- On average over the year, the Group had 3,290 employees. ethanol from intermediate products of the sugar-making process (raw juice, thick juice) and molasses. Our customers include the confectionery industry as well as producers of dairy and bakery products, jams, ice cream and Furthermore, Nordzucker AG holds a majority stake in Norddeutsche drinks. Nordzucker sells some 80 per cent of its sugar to manu- Flüssigzucker GmbH & Co. KG (NFZ), which operates two liquid facturers of food and beverages. Around 20 per cent of our sugar sugar factories, in Nordstemmen and Groß Munzel. is sold via retailers. Nordzucker distributes most of this sugar under the product brands SweetFamily and Dansukker. The An average of 1,242 employees worked in the Central Europe portfolio includes other products of the sugar-making process, region in the financial year 2012/2103. especially dried pulp pellets and pressed pulp as animal feed and molasses for the yeast and alcohol industries. Central European business accounted for around 44 per cent of Group revenues. Group structure The Nordzucker Group consists of three regions: Central, Northern Europe Northern and Eastern Europe. In the Northern Europe region, Copenhagen-based Nordic Sugar produces and processes sugar in five factories and two refineries in Central Europe Denmark, Sweden, Finland and Lithuania. The company markets a Nordzucker AG operates five sugar factories in Germany, which broad range of sugar products, above all in the Nordic countries, account for the major share of business in Central Europe. The the Baltic states and Ireland. The Dansukker brand enjoys a high factories in Lower Saxony and Saxony-Anhalt produce around level of recognition in the region. Nordic Sugar is the market leader

Corporate structure of the Nordzucker Group

Nordzucker Group

Region Central Europe (CE) Region Northern Europe (NE) Region Eastern Europe (EE)

Nordzucker AG Nordic Sugar A/S, Nordzucker Polska S.A., Braunschweig, Germany Copenhagen, Denmark, 100 % Przeżmierowo, Poland, 99.87 %

Norddeutsche Flüssigzucker GmbH Nordic Sugar AB, Považský Cukor a.s., & Co. KG, Braunschweig, Germany, 70 % Malmö, Sweden, 100 % Trenčianska Teplá, Slovakia, 96.80 %

fuel 21 GmbH & Co. KG, Suomen Sokeri OY, Tereos TTD a.s., Klein Wanzleben, Germany, 100 % Kantvik, Finland, 80 % Dobrovice, Czech Republic, 35.38 %

Sucros OY, Säkylä, Finland, 80 %

AB Nordic Sugar Kėdainiai, Vilnius, Lithuania, 70.60 %

Nordzucker Ireland Ltd., Dublin, Ireland, 100 % Management report 51

Nordzucker at a glance

Locations in Europe

Group headquarters D 1 Braunschweig

Regional head offi ce Northern Europe DK 2 Nordic Sugar, Copenhagen

Sugar plants and refi neries 13 D 3 Clauen 12 4 Nordstemmen 30 5 Uelzen 28 6 Klein Wanzleben 7 Schladen DK 8 Nakskov 26 9 Nykøbing S 10 Arlöv 11 11 Örtofta 2 10 24 14 FIN 12 Porkkala 31 23 8 27 13 Säkylä 9 LT 14 Kėdainiai PL 15 Chełmża 15 16 Opalenica 5 1 6 SK 17 Trenčianska Teplá 18 22 D 18 Liquid sugar plant 3 4 7 16 Groß Munzel 25 19 19 Liquid sugar plant Nordstemmen 20 21

Sugar plants – Central Europe 17 non-consolidated minority stake CZ 20 Dobrovice 21 České Meziříčí Eastern Europe

Other locations D 22 fuel 21, bioethanol S 23 Köpingebro (Fibrex) DK 24 NP Sweet, Copenhagen B 25 Offi ce Brussels

Sales offi ces LV 26 Riga LT 27 Vilnius EE 28 Tallinn IS 29 Reykjavik NO 30 Oslo IE 31 Dublin 52 Annual Report Nordzucker 2012/2013

in Northern Europe and its 1,504 employees contributed around Shareholders’ structure Nordzucker AG 40 per cent to Nordzucker’s consolidated revenues in 2012/2013. EUR 123.7m share capital

NP Sweet is also based in Copenhagen. The joint venture be- Nordzucker Holding Aktiengesellschaft 76.23 %, EUR 94.3m tween Nordzucker and PureCircle develops and distributes products based on the sweetener stevia (steviol glycosides) in Union-Zucker Südhannover Gesellschaft mit beschränkter Haftung collaboration with its customers. 10.82 %, EUR 13.4m

Nordharzer Zucker Aktiengesellschaft Eastern Europe 7.83 %, EUR 9.7m The Eastern Europe region includes two sugar factories in Poland, Direct shareholders’ one of which is also used as a sugar refinery, and one in Slovakia. 5.12 %, EUR 6.3m Furthermore, Nordzucker has a 35 per cent stake in Tereos TTD a.s., a sugar producer in the Czech Republic. The Eastern Europe sales area also includes other Eastern European states. Nordzucker had an average of 544 employees in the Eastern Europe region in The 20 · 20 · 20 initiative aims to make sugar beet even more 2012/2013. It accounted for around 16 per cent of consolidated competitive in comparison to other crops, so as to safeguard revenues in 2012/2013. beet cultivation in our regions for the long term.

Strategy The five-year efficiency improvement programme “Profitability Since the company was founded in 1997, Nordzucker has focused plus” has been under way since 2009/2010 and has also deliv- on growth in its core sugar market. Expansion in Northern Germany ered savings in all areas of the company. More than two-thirds was followed by several acquisitions in Eastern Europe. Nordzucker of the savings targets have been reached to date. The harmon pursued its growth strategy with the purchase of Nordic Sugar in isation and optimisation of business processes and the integra- 2009 and is now the second-largest sugar producer in Europe. tion of the IT environment throughout the Group are other vital steps that make a major contribution to sustainably boosting After radically restructuring its investment portfolio in 2010 and the company’s competitiveness. 2011, the Group now initially intends to concentrate on its core business: the production and distribution of sugar. The Nordzucker Sustainability, customer focus and efficiency gains form the basis Group benefits from its strong market position in the EU. Developing for strengthening the company’s position and achieving further this position remains its foremost corporate objective. In addition, growth in its core business. the company reviews growth opportunities outside Europe. Company management Sustainable activities are important for work processes through- The company is managed by an Executive Board made up of out the company. Long-term success can only be secured by five members. It reports to the Supervisory Board, which has running a sustainable business, especially by including envir 21 members, of which 14 represent the shareholders and seven onmental protection and social aspects in business decisions. the employees. The internal management of the company is Product safety as well as occupational health and safety are other carried out by means of financial indicators. The following targets important factors in this context. Steps to achieve defined sustain- have been set: a return on sales of 5 per cent, total operating ability targets are taken continuously in all these areas. profitability of 15 per cent, a return on equity of 10 per cent and an equity ratio of 30 per cent. Customer focus and product safety are at the heart of our company policy. Nordzucker therefore sets great store by certified Shareholder structure of Nordzucker AG quality standards, great flexibility and dependability of supplies. The shares in Nordzucker AG are held by Nordzucker Holding The Group has a wide product range, which includes custom- Aktiengesellschaft (76.2 per cent), Union-Zucker Südhannover ised solutions and a broad assortment of speciality products. Gesellschaft mit beschränkter Haftung (10.8 per cent) and Nordharzer Zucker Aktiengesellschaft (7.8 per cent). A small Continuous efficiency improvements along the entire value chain portion of capital (5.2 per cent) is held by other shareholders. are driven by various projects throughout the Group. In addition The Nordzucker AG share is not traded on the stock exchange. to major investments to increase efficiency, these include activities Shareholders are to a large extent also active beet suppliers of aimed at achieving sustainable yield increases in beet cultivation. Nordzucker AG. Management report 53

Nordzucker at a glance | Economic environment and market developments

World market prices for sugar, 2004 – 2013

900

800

700

600 White sugar USD/t FOB 500

400

300

200 White sugar EUR/t FOB 100 Jan. July Jan. July Jan. July Jan. July Jan. July Jan. July Jan. July Jan. July Jan. July Jan. 04 04 05 05 06 06 07 07 08 08 09 09 10 10 11 11 12 12 13

Source: LIFFE white sugar trading, London No. 5, as of May 2013

Economic environment and market The sugar market in the EU developments In the past, the EU sugar market was largely decoupled from the global market by the European sugar market regime. As a result, it Macroeconomic situation was characterised by very stable volumes and prices, with its sur- Economic output declined slightly in Europe in 2012 as a result pluses being exported to the world market. of the sovereign debt crisis. The downhill trend accelerated over the course of the year. The macroeconomic performance All this changed with the reform of the sugar market regime in was slightly positive in Nordzucker’s main markets, however, 2006. The quotas for producing sugar for human consumption despite slowing over the year. Economic output contracted in the EU were reduced to around 80 to 85 per cent of market sharply in Europe’s southern member states. demand. Since then, it has therefore been necessary to import sugar from ACP countries and LDC to make up for the now missing Sector developments EU production. The non-quota sugar produced in excess of the World sugar market quotas is sold to customers outside the food industry in the EU World market prices for sugar fell in the financial year 2012/2013. or can be exported to non-EU markets up to a total volume of They nevertheless remained high from a long-term perspective. 1.35 million tonnes. As in recent years, prices were subject to great volatility. At the beginning of the 2012/2013 financial year, the sugar price on the If the import volumes provided for by preferential agreements are London Futures Exchange (white sugar No. 5, free-on-board, earli- not sufficient, the European Commission can respond to these est delivery) was USD 645 per tonne. It declined successively market developments within the framework of the sugar market over the following months to reach a low of USD 562 in May regime to guarantee a stable supply of sugar. To cover demand 2012. In July 2012 the sugar price rebounded to a peak of USD for sugar from the food industry, it can both approve non-quota 636, before falling back to USD 497 per tonne in February 2013. sugar for human consumption and enable additional imports at 54 Annual Report Nordzucker 2012/2013

reduced import duties. The European Commission takes these maize harvest in the USA and because of EU action against puta- decisions on the basis of supply balances for each sugar market- tive price dumping. This drove up prices for bioethanol in Europe, ing year, which in the EU runs from 1 October to 30 September especially from late spring. Price developments for crude oil and of the following year. This means the financial year for Nordzucker petrol also contributed to the increase. However, the price for AG straddles two sugar marketing years. bioethanol varied considerably over the course of the year.

In the last two financial years, the imported volumes were not Market developments in the sugar business sufficient to meet demand in the EU sugar market without add Market developments: Central Europe region itional measures. The European Commission therefore approved The Central Europe region mainly serves the German sugar 650,000 tonnes of non-quota sugar for human consumption in market – around 80 per cent of sugar sales by volume go to two stages in the sugar marketing year 2011/2012. This was sup- the food industry and 20 per cent to consumers via retailers. plemented by 399,000 tonnes of additional imports at reduced Altogether, the sugar market in Germany can be said to be rates of duty. balanced in terms of volumes of production and demand. However, imports from neighbouring countries are increasing For the current sugar marketing year 2012/2013, the European competition. Commission has announced that it will allow up to 1.2 million tonnes of additional import sugar and non-quota sugar onto the In the financial year 2012/2013, sales in the Central Europe region market. Of these 1.2 million tonnes, the Commission has so far were affected by cool, rainy weather in the summer months. approved 300,000 tonnes of non-quota sugar for use in food and Manufacturers of drinks, ice cream and barbecue sauces in par- awarded contracts for imports of 285,000 tonnes at reduced rates ticular suffered from lost revenue and sales in the summer, and of duty. Nordzucker’s sugar sales were therefore also below expectations. Sales of preserving sugar were also down since the bad weather Market for animal feed and molasses reduced the amount of fruit harvested. The prices for dried pulp pellets stayed high from February to August 2012 due to low stocks and a sharp rise in the prices Nordzucker’s customers export a large proportion of their products. for feed grain. Alternative sources of animal feed were also un In the financial year 2012/2013, these exports were hampered available, which contributed to the price rise. Prices continued to by the effects of the euro crisis, above all in Southern Europe. The go up well into the campaign and only stabilised once it became export-driven German food industry was partly able to make up clear that good yields could be expected from the beet harvest. for this drop in sales by opening up new markets outside the EU.

Although beet volumes remained high in the 2012/2013 campaign, In 2012/2013, Nordzucker sold around 1,000,000 tonnes of the good beet quality meant that there was no increase in molasses quota sugar in the Central Europe region, which was a slight in- production. In addition, imports of cane molasses to Europe crease on the previous year. Sales prices remained largely stable decreased. Lower availability and the ensuing price rise for cane over the year, but were much higher than the previous year on molasses made beet molasses competitive again and ensured that average. prices remained high overall in the molasses market. Sales of non-quota sugar were slightly higher than the previous Market for sweeteners year’s figure of approximately 60,000 tonnes. The market for stevia and products sweetened with stevia has developed steadily since stevia (steviol glycosides) was approved Market developments: Northern Europe region by the EU for food and beverages in 2011. Numerous products The Northern Europe region consists essentially of Finland, Sweden, are now on the market and many others are still in the development Denmark, Norway, Iceland, Ireland and the Baltic states. Sugar phase. These activities will successively boost market volumes, from internal production is supplemented by world market im- which are still low. ports of raw cane sugar for refining.

Market for bioethanol Nordic Sugar maintained its strong position in the Northern Europe Demand for bioethanol from sustainable production remains region, once again selling around 770,000 tonnes of quota sugar stable in the EU. In Germany, the market share of E10 fuel as a to industrial and retail customers, as it did in the previous year. proportion of total petrol sales is growing slowly but steadily, accounting for about 15 per cent in the third quarter of 2012. High yields in 2011/2012 enabled Nordic Sugar to sell an add At the same time, US exports to the EU sank due to the lower itional 320,000 tonnes of non-quota sugar, supplying customers Management report 55

Economic environment and market developments

from the chemical industry and markets outside the EU (previous The Nordzucker Group strengthened its position in the Eastern year: 225,000 tonnes). Europe region last year and actively seized market opportunities. The region’s own sugar quota of 200,000 tonnes was far exceeded Market developments: Eastern Europe region by quota sugar sales of 450,000 tonnes. The difference is explained The Eastern Europe region is characterised by a heterogeneous by purchases of sugar from within the Group, a stronger position market structure; both purchasing power and the proportion of in white sugar trading and activities to refine raw cane sugar. sugar sales destined for industrial and retail customers vary widely from one country to another. Local beet sugar production is not Beet cultivation and campaign sufficient to cover demand, so this is a classic import market. Very good weather conditions from the sowing period through to the harvest resulted in a high beet and sugar yield in most In Eastern Europe, both food retailers and industrial customers regions. Processing conditions were also mostly positive, which now attach greater importance to securing availability by means meant that 2012/2013 was a very positive beet year overall for of longer-term contracts. Nordzucker.

Group campaign results

Sweden 2012 2011 Finland 2012 2011 Beet yield (t/ha) 59.3 62.9 Beet yield (t/ha) 34.8 48.0 Sugar content (%) 17.1 16.8 Sugar content (%) 16.1 15.7 Sugar yield (t/ha) 10.2 10.6 Sugar yield (t/ha) 5.6 7.5 Campaign length (d) 126 129 Campaign length (d) 58 89

Denmark 2012 2011 Beet yield (t/ha) 68.2 73.3 Sugar content (%) 18.1 16.9 Sugar yield (t/ha) 12.3 12.4 Lithuania 2012 2011 Campaign length (d) 136 138 Beet yield (t/ha) 62.9 51.2 Sugar content (%) 17.1 17.3 Copenhagen Sugar yield (t/ha) 10.7 8.9 Campaign length (d) 129 115

Poland 2012 2011 Braunschweig Beet yield (t/ha) 72.0 64.1 Sugar content (%) 17.6 18.1 Sugar yield (t/ha) 12.7 11.6 Germany 2012 2011 Campaign length (d) 114 102 Beet yield (t/ha) 69.1 71.2 Sugar content (%) 18.3 18.1 Sugar yield (t/ha) 12.7 12.9 Campaign length (d) 133 130 Slovakia 2012 2011 Beet yield (t/ha) 47.8 63.5 Sugar content (%) 16.8 18.7 Sugar yield (t/ha) 8.0 11.9 Campaign length (d) 80 111 56 Annual Report Nordzucker 2012/2013

Average sugar yield ing. In Denmark, a small quantity of poor-quality beet could not tonnes per hectare be processed.

11.9 11.7 Excellent cooperation between beet deliveries, production and 10.6 10.9 sugar logistics also ensured that the campaign went off smoothly 9.6 all round. Weather conditions during the processing period only caused minor temporary disruptions in certain areas.

Earnings, net assets and financial position

Earnings position Group earnings again developed very well in the financial year 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2012/2013. This was mainly thanks to the prices for quota sugar, which on average were much higher than the previous year. In addition to higher prices, greater sales of non-quota sugar and additional steps to boost efficiency made a major contribution to Sugar production Nordzucker Group the earnings increase. in millions of tonnes Nordzucker reported an operating result (EBIT) of EUR 506.7 million in 2012/2013, which was well above EBIT for the previous 2.9 2.9 2.8 year of EUR 315.0 million. After deducting interest and taxes, this resulted in net income before minority interests of EUR 360.3 2.3 million (previous year: EUR 208.3 million). After deduction of 1.7 minority interests, this resulted in consolidated net income of EUR 351.0 million compared with EUR 203.9 million the previous year.

The return on sales, calculated as net income (after minority interests) divided by annual revenue, came to 14.4 per cent in the reporting year compared with 10.1 per cent the previous year. 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 This was again well above the target of 5 per cent.

To calculate total operating profitability, EBITDA (earnings before interest, taxes, depreciation and amortisation) is divided by total During the 2012/2013 campaign, Nordzucker produced 2.8 million output (revenues plus own work capitalised and changes in fin- tonnes of sugar from beet (previous year: 2.9 million tonnes). ished goods and work in progress). This year the figure was 22.8 As in the previous year, the campaign lasted for an average of per cent (previous year: 18.4 per cent), which was also well 125 days. above the target of 15 per cent.

The mostly fine weather was responsible for high yields only Revenues came to EUR 2,442.8 million, an increase of EUR 424.8 just short of those of the previous year. The average beet yield million on the previous year’s figure of EUR 2,018.0 million. This for the Group was 65.2 tonnes per hectare (previous year: sharp increase was achieved mainly with sugar. 67.3 tonnes). The sugar content came to 17.9 per cent (previous year: 17.6 per cent), which represented an average sugar yield Revenue from quota sugar (including purchased sugar) amount- of 11.7 tonnes per hectare (previous year: 11.9 tonnes). ed to EUR 1,750.9 million, or EUR 291.9 million more than the previous year’s EUR 1,459.0 million. Sales of quota sugar were Beet processing in the Nordzucker factories mostly went smoothly flat, but average prices were higher than the previous year. thanks to targeted investments and forward-looking maintenance. However, weather conditions towards the end of the campaign Sales of non-quota sugar rose sharply year on year following the required some additional efforts in order to maintain process- good harvest in 2011, whereas average prices were lower than Management report 57

Economic environment and market developments | Earnings, net assets and financial position

the previous year. Overall, revenue rose to EUR 261.0 million The cost of materials and services came to EUR 1,622.0 million, compared with EUR 162.6 million the previous year. or EUR 121.2 million more than the previous year (EUR 1,500.8 million). Above all, higher beet costs than the previous year were Bioethanol revenues from its own production at fuel 21 came to responsible for this increase. EUR 86.8 million, an increase of EUR 17.5 million on the previous year. Sales prices and, above all, sales volumes were higher than Personnel expenses rose from EUR 188.7 million the previous a year earlier. year to EUR 201.5 million. The rise stemmed mainly from collect ive wage increases and higher performance-related payments to At slightly lower sales volumes, revenues from molasses went the Group’s workforce. down, despite slightly higher prices, to EUR 45.1 million (EUR 4.2 million less than the previous year). Higher sales volumes for animal Depreciation, amortisation and impairment (less write-backs) in feed (pellets and cossettes) and roughly stable prices lifted revenue the reporting year came to EUR 87.6 million, compared with EUR by EUR 22.9 million to EUR 151.7 million. 105.4 million the previous year. Impairment losses of EUR 20.0 million were recognised the previous year on the non-current Revenues from other traded goods (especially seeds) accounted assets of fuel 21. for EUR 108.7 million, slightly below the previous year (EUR 119.3 million). Other operating expenses rose slightly from EUR 214.2 million to EUR 219.2 million. The increase was greatest for transport costs, Stocks of finished and unfinished goods went up as of the end of as a result of much higher sales. the financial year by EUR 163.6 million (previous year: EUR 261.8 million). This increase in stocks was EUR 98.2 million lower than a In total, Nordzucker reported an operating result (EBIT) of EUR year ago, mainly as a result of much higher sales of non-quota sugar. 506.7 million for the financial year 2012/2013, as against EUR 315.0 million the previous year. The operating result before The aggregate of higher revenues, higher stocks and own work depreciation, amortisation and impairment (EBITDA) came to capitalised resulted in total output of EUR 2,607.3 million, which EUR 594.3 million (previous year: EUR 420.4 million). was well above the previous year’s figure of EUR 2,281.6 million. Net interest amounted to EUR -26.7 million as against EUR -34.7 Other operating income came to EUR 29.7 million and was thus million the previous year. It should be noted that actuarial losses below last year’s figure of EUR 42.5 million. As in the previous of EUR 14.0 million were recognised through profit or loss in the year, there were no non-recurring factors to report. reporting year due to the effect of interest-rate movements on

Consolidated revenues Total revenues in EUR m in EUR m

2,607 2,443 2,282 2,018 1,806 1,815 1,718 1,699

1,192 1,086

2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 58 Annual Report Nordzucker 2012/2013

Consolidated EBITDA Consolidated EBIT in EUR m in EUR m

594 507

420

315 283

188 165 166

79 66

2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013

pension provisions. Without this non-recurring effect, net interest The net financial result includes net interest as well as net income/ would have been EUR -12.7 million. loss from investments and other net financial income/loss. These items added up to an earnings contribution of EUR 1.4 million The improvement in net interest – without the non-recurring effect (previous year: EUR 5.9 million). Overall, the net financial result – is largely due to further debt repayment and the favourable came to EUR -25.3 million compared with EUR -28.7 million the terms of the new loan taken out last year. previous year.

Tax expenses on pre-tax earnings of EUR 481.4 million (previous year: EUR 286.3 million) totalled EUR 121.1 million (previous year: EUR 78.0 million). This resulted in a tax rate of 25.2 per cent for the Group in the reporting year (previous year: 27.2 per cent).

In total, Nordzucker reported net income before minority interests Consolidated net income of EUR 360.3 million, as against EUR 208.3 million the previous in EUR m year. After deducting minority interests of EUR 9.3 million, this resulted in net income of EUR 351.0 million (previous year: EUR 360 203.9 million). This means that net income rose by more than 70 per cent compared with the previous year.

Net assets position 208 Total assets for the Nordzucker Group amounted to EUR 2,393.2 million at the end of the reporting year, an increase of EUR 131.6 91 million on the previous year’s figure of EUR 2,261.6 million. In- 44 ventories went up sharply thanks to the past two good campaigns. This was financed by a steep rise in equity following strong earnings; net debt was reduced again. -10 Non-current assets accounted for EUR 1,058.5 million, roughly 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 the same as in the previous year (EUR 1,079.2 million). Management report 59

Earnings, net assets and financial position

Intangible assets of EUR 165.3 million (previous year: EUR 174.1 Breakdown of the assets and liabilities million) include the goodwill on the acquisition of Nordic Sugar making up the 2012/2013 balance sheet total as well as capitalised sugar quotas and software/licences. in EUR m

Property, plant and equipment came to EUR 853.1 million (previous year: EUR 861.1 million). Capital expenditure in the reporting 2,393 2,393 year was slightly below the level of depreciation, amortisation 44% and impairment. 55%

Financial investments were slightly up on the previous year at 43% 14% EUR 26.6 million. There were no significant transactions to report 31% in this area. Deferred tax assets went down year on year from EUR 13% 11.9 million to EUR 7.8 million. Assets Equity & liabilities Current assets came to EUR 1,332.2 million, after EUR 1,180.5 Non-current million the previous year. The change is due to the further in- Equity assets crease in inventories. Inventories Non-current liabilities Inventories rose by EUR 129.6 million to EUR 1,027.8 million. The good harvest in the last two campaigns and increased production Other current Current costs again drove up the value of sugar stocks considerably year assets liabilities on year.

Current receivables and other assets were slightly higher year on year at EUR 293.1 million, compared with EUR 274.9 million the Overall, non-current and current financial liabilities were reduced previous year. to EUR 70.7 million (previous year: EUR 256.3 million).

Nordzucker’s equity went up to EUR 1,316.0 million, compared Cash and cash equivalents totalled EUR 11.3 million as of 28 February with EUR 999.2 million the previous year. Net income boosted 2013, compared with EUR 7.4 million the previous year. Net debt equity by EUR 360.3 million, whereas dividends of EUR 51.3 million (financial liabilities less cash and cash equivalents) was therefore paid to the shareholders of Nordzucker AG and minority interests reduced the figure. Although total assets increased, the equity ratio went up from 44.2 per cent the previous year to 55.0 per cent. This figure was in turn well above the Group target of 30 per cent.

Non-current provisions and liabilities fell to EUR 343.6 million Consolidated net debt in EUR m (previous year: EUR 428.2 million). The total includes non-current provisions of EUR 184.5 million (previous year: EUR 158.1 million), mostly for pension obligations.

Non-current liabilities mainly consist of financial liabilities and deferred tax liabilities. Financial liabilities fell year on year from EUR -59 83.9 million to EUR 4.6 million. Deferred tax liabilities stood at -249 EUR 136.2 million, as against EUR 153.9 million the previous year. -295 -314

Current provisions and liabilities declined to EUR 733.6 million (previous year: EUR 834.2 million). This is largely because current -664 debt of EUR 101.8 million was repaid, taking the total to EUR 66.1 million. 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 60 Annual Report Nordzucker 2012/2013

Capital expenditure in property, plant and equipment Cash flow from operating activities and intangible assets in EUR m in EUR m

328 313 313 74 67 62 64 56 222

167

2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013

reduced sharply year on year by a total of EUR 189.5 million to plant and equipment came to EUR 74.1 million, compared with EUR 59.4 million. EUR 64.0 million the previous year.

Financial position Cash flow from financing activities of EUR -237.2 million was Cash flow from operating activities of EUR 313.3 million was high- made up of outflows for current loans (EUR -185.9 million) and er than in the previous year (EUR 221.8 million). It was boosted dividend payments (EUR -51.3 million). in particular by earnings in the reporting period. The increase was partly offset by increases in working capital, however. As of 28 February 2013, cash and cash equivalents amounted to EUR 11.3 million (previous year: EUR 7.4 million). Cash flow from investing activities improved from EUR -129.6 million to EUR -72.2 million. This stems in particular from the payment of Investments the final purchase price instalment for Nordic Sugar of EUR 73.7 Nordzucker invested EUR 74.1 million in property, plant and million, which was recorded as a financial investment in the pre- equipment and intangible assets (previous year: EUR 64.0 mil- vious year. Capital expenditure on intangible assets and property, lion). Key investments were the first construction phase for the evaporation dryer in Nakskov, the second phase for the second evaporation dryer in Uelzen, the construction of a sugar silo in Kėdainiai and the improvement of the waste-water treatment plants in Klein Wanzleben, Opalenica and Kėdainiai. As in the previous years, capital expenditure was focused on increasing Total dividends, Nordzucker AG efficiency, above all by saving energy, on compliance with regu- in EUR m latory requirements and on replacing existing assets.

87 Responsibilities and objectives of financial management The main responsibilities of Nordzucker’s financial management are to manage and control flows of funds for the entire Group on the basis of clearly defined criteria. The most important objective 48 is to maintain liquidity. This is followed by the optimisation of net interest expense and the management of interest-rate and foreign- exchange risks. 22 11 The financial management function is also responsible for defin- 0 ing and executing financing strategies. It also maintains close 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 contact with the banks. Management report 61

Earnings, net assets and financial position | Employees | Opportunities and risks

Covenants evaluated at regular intervals. Individual steps to avert, limit or A number of financial covenants were agreed between the banking transfer exposure to risks are defined for every risk that is identified. consortium and Nordzucker AG as part of the syndicated loan Risk management constantly verifies the progress made on imple- arranged in June 2011. These consist of obligations to maintain menting the defined activities and revises them as necessary. certain financial ratios over the entire term of the loan. All operating and strategic decision making always takes risk as- The covenants are an essential component of the loan agreement. pects into account. Scenario planning is used for example to exam- Banks use them as a tool to identify and avoid risks at an early stage ine the effects different market situations would have on the by drawing conclusions from the figures about the company’s company’s business. Descriptions of opportunities and risks high- financial position. The covenants have been defined for the light alternative developments and encourage discussions of the whole Group and not solely for Nordzucker AG. steps that need to be taken. Over the course of the year, the Group reporting and controlling system provides all the responsible de- Nordzucker AG is obliged to demonstrate that it meets the cision-makers with continuous information on the actual business covenants in the syndicated loan agreement on certain dates in performance. the reporting year. In the reporting year, all the financial criteria were met on all test dates. On the basis of the planning currently Some of the risks are passed on to third parties, such as insurance available for the Group, the Nordzucker Executive Board assumes companies. The scope and amount of insurance coverage is re- that the agreed limits will also be adhered to in future. viewed regularly and adjusted as necessary.

Dividend Internal auditing A proposal will be put forward at the Annual General Meeting of Internal auditing examines and evaluates the business processes, Nordzucker AG to distribute a dividend of EUR 1.80 per share of organisational structure, risk management and internal control share capital for the reporting year. This corresponds to a total systems to ensure they are carried out correctly, are effective and dividend distribution of EUR 86.9 million. A total of EUR 48.3 mil- offer value for money. Once the individual audits have been com- lion (EUR 1.00 per share) was paid out the previous year. pleted, the implementation of the agreed recommendations and

The much higher dividend than the previous year enables shareholders to participate in the company’s strong performance. At the same time, a substantial proportion of net income is retained in the company to finance future profitable growth.

Average number of employees in the Nordzucker Group Employees for the year by region The Nordzucker Group had an average of 3,290 employees in the reporting year, roughly the same as the previous year (3,280). Of the total, 1,242 were employed in Central Europe, 544 in Eastern Europe and 1,504 in Northern Europe (including 2012/2013 1,242 544 1,504 3,290 Ireland). 2011/2012 1,211 548 1,521 3,280

2010/2011 1,357 563 1,588 3,508

Opportunities and risks 2009/2010 1,350 1,302 1,694 4,346

Risk management 2008/2009 1,360 1,484 2,844 Behaving entrepreneurially means seizing opportunities and exposing a company to risk as a result. To identify these risks at an early stage, to evaluate them and manage them consistently, Central Europe Eastern Europe Northern Europe Region Region Region Nordzucker has introduced an integrated system of risk identification and management for the entire Group. This ensures that risks which could jeopardise the company’s business are identified and 62 Annual Report Nordzucker 2012/2013

activities is systematically monitored. As well as audits carried out WTO negotiations on the basis of annual risk planning, the internal audit department The Doha round of WTO negotiations again made no progress in also carries out ad hoc checks. the reporting year. The next round of talks is scheduled to take place in Bali in December 2013. At this conference, the WTO It answers directly to the Chief Executive Officer and reports members will try to reach decisions for the agriculture sector in regularly to the Executive Board and to the Supervisory Board’s the areas of export subsidies/competition, the administration of Audit and Finance Committee. preferential import quotas, and food security/public stockpiling of agricultural products. Political and legal risks Sugar market regime A decision may also be taken to reduce import duties in the agri- The current sugar market regime forms the operating framework culture sector. Over a period of seven years, this could lead to a for the sugar industry in the EU up to the end of the marketing sharp reduction in import duties for sugar imports to the EU. year 2014/2015 on 30 September 2015. As part of its proposals to reform the Common Agricultural Policy (CAP), the European EU free trade agreements Commission has suggested letting the quota regime for sugar Free trade agreements are becoming more and more important expire on 30 September 2015. This would mean the end not only for the European Union. Such agreements have already been of the quota regime, but also of the minimum beet price. The signed with nine states, including Ukraine, Singapore, Colombia WTO export limit, currently set at 1.37 million tonnes, would also and countries in Central America, but have yet to take effect. be abolished. The European Commission also suggests maintaining Negotiations are taking place with 20 other states. This group special rules in the form of national subsidies that Finland pays its includes sugar exporters such as Brazil together with the other beet farmers (EUR 350 per hectare). Mercosur states, the USA, Canada, India, Malaysia, Thailand and Vietnam as well as the Gulf states. Additional regulations for existing In late January 2013, the European Parliament’s Agriculture and trade agreements are also under discussion, for example with the Rural Development Committee voted to extend the sugar market Mediterranean countries or the Republic of South Africa. regime until the end of the sugar marketing year 2019/2020 on 30 September 2020. In mid March 2013, this position was also An agreement has already been reached allowing Colombia, Peru adopted by the full European Parliament. For further details, we and the Central American states to export up to 246,000 tonnes refer to our report on events after the balance sheet date. a year (with annual increases) to the EU, duty free. Negotiations with the South American members of the Mercosur customs union Nordzucker supports the call by national and European sugar industry have come to a standstill at present. In particular, as one of the associations to prolong the sugar market regime until at least 2020. largest sugar exporters, Brazil is pressing for an import quota for Security of supply for the EU market can be ensured by means of a sugar and ethanol. production quota. Quotas and a minimum beet price also give beet farmers a sufficient degree of certainty for their planning. The large number of free trade negotiations currently taking place clearly shows that import quotas and preferential duties will The abolition of the EU sugar market regime could have consider become increasingly important for the European sugar market. able effects on the EU sugar market. As the quotas for isoglucose

would be abolished along with those for sugar, this could lead Additional costs of CO2 certificates

to ruinous competition with sugar. At present, it is impossible to As a company that emits carbon dioxide (CO2) from generating estimate with any degree of accuracy what the effects on market its own electricity and heat, Nordzucker requires corresponding supply and competitive structures in the EU market will be. certificates for its emissions. Some of these certificates are allocated to the company free of charge; others have to be bought by

In order to prepare as well as possible for any changes in the legal Nordzucker in CO2 certificate trading. framework, Nordzucker continues to work steadily on making the

cultivation of sugar beet even more competitive with alternative The third phase of the CO2 emissions trading scheme that has crops and will also seize all opportunities to increase the product been in place in the EU since 2005 begins in 2013. All compan ivity and efficiency of the company. ies subject to emissions trading have to buy all the certificates Management report 63

Opportunities and risks

needed for power generation at auction. Nordzucker receives therefore picked up. This could put pressure on market prices in certificates for heat generation based on natural gas free of charge the EU in future, which could diminish Nordzucker’s profitability until 2015, as the European Commission has listed the entire considerably. industry as being at risk of carbon leakage. For the industries on this list, the assumption is that the additional costs of CO2 certifi As a foodstuff, sugar has repeatedly been presented as unhealthy cates could result in production being outsourced to non-EU or even harmful. Individual scientists believe that the rising number countries. of certain diseases can be linked to higher sugar consumption. In its twelfth Nutrition Report published in December 2012, the German It can be assumed that emissions trading will represent an increasing Nutrition Society (DGE) found that annual sugar sales in Germany financial burden for the company in future, as the drying facilities have been constant at around 34 kilograms per capita for years. and other equipment not previously taken into account will also It is therefore the change towards a less active lifestyle that leads be subject to emissions trading as of 2013. The carbon leakage list to excess weight and obesity. Public and media debates may affect is to be reviewed in 2015. consumers’ eating habits and thus influence demand for sugar.

Under these circumstances, a major focus of capital expenditure The German Sugar Trade Association (WVZ) has launched an is on steps to reduce energy consumption, such as the installation information campaign to present the relationship between sugar of modern evaporation dryers, which use less energy to dry the and health objectively, in order to provide a counterweight to cossettes and reduce CO2 emissions at the same time. Furthermore, the negative media reporting and the negative public perception. Nordzucker monitors the market for certificates in order to purchase Nordzucker AG explicitly supports these efforts. the necessary allowances in good time. Securing raw materials Legal risks For farmers, sugar beet competes with other arable crops. The As reported in prior years, competition authorities are carrying decision whether to plant sugar beet or other crops depends to out investigations into possible breaches of competition law in a large extent on relative price levels for different crops and on the sugar industry. Generally speaking, breaches of competition the yield that can be obtained regionally. Attractive conditions law can give rise to risks for companies in the sugar industry in for growing other crops also increase the cost pressure for pur- the form of fines or claims for compensation by third parties. chases of sugar beet. Nordzucker nevertheless still assumes that no adverse effects on the company are to be expected from the proceedings. To secure its volumes of raw materials, Nordzucker always signs supply contracts with the beet farmers in advance. The company Nordzucker is also subject to various statutory regulations, which buys some of its industrial beet on one-year contracts and some can give rise to liability risks. They include in particular the sugar on multi-year contracts. All contracts offer attractive terms com- market regime in connection with the relevant provisions of customs pared with alternative crops. and licensing law as well as food and animal feed law. Further risks can also arise from tax regulations in the various countries in For the existing multi-year industrial beet contracts the company which Nordzucker operates. has agreed on a number of different pricing models. In Germany, farmers can choose between fixed beet prices and a variable Market risks price for industrial beet that is indexed to prices for wheat and Sugar rapeseed. Similar options for contracts are available in all the Since the reform of the sugar market regime in 2006, fluctuations Group’s regions, indexing the beet prices to those for wheat or in the world market price have had a considerable impact on sugar, for example, or to local company performance. These markets in the EU. To cover its supply, the EU is dependent on mechanisms ensure that the beet prices paid in each instance imports from world markets. World market prices fell once again are competitive. over the course of the past financial year. With world market prices being lower, there was once again greater incentive for ACP Another vital element of securing raw materials in the years ahead countries and LDCs to export their sugar to the EU, and imports is the 20 · 20 · 20 programme to increase yields. Nordzucker has 64 Annual Report Nordzucker 2012/2013

set itself the Group-wide target of achieving a sugar yield of 20 Operating risks tonnes per hectare with 20 per cent of farmers in 2020. This pro- Longer campaigns gramme is very important for safeguarding the relative attractive- The length of the campaign has been increased gradually in the ness of sugar beet cultivation compared with other arable crops, factories to raise productivity. A campaign now lasts for an average especially given the volatility of agricultural markets. To reach this of more than 120 days. This means that the production phase target, Nordzucker is working closely with farmers, agricultural as- generally continues into January. Longer campaigns entail two sociations and other companies in the value chain. risks. One is that the onset of winter weather can severely ham- per beet harvesting, logistics and processing. The other is that Energy prices longer campaigns make production downtime more likely. The tense situation on the commodities markets once again posed challenges for Nordzucker last year. Crude oil and its derivatives Nordzucker has therefore taken wide-ranging precautions both in climbed to historic highs, spurred on by exchange rate movements. the field and in the factory to minimise these risks. They include Political conflicts in the Middle East and economic fluctuations covering beet clamps with a sheet of fleece to protect the beet can have a considerable effect on energy prices. from frost.

To mitigate the effects of swings in energy prices, Nordzucker is New production processes help us to deal better with extreme investing in specific measures to reduce its energy consumption. changes in weather conditions and beet which has begun to thaw Examples include the new evaporation dryers in Uelzen and Nak- or decompose. One example is the optimisation of juice purifica- skov. The effect of potential price movements is also limited by tion, which is vital for processing even frost-damaged beet. specific hedging activities. Longer campaigns increase the risk of production downtime. In Dependence on individual suppliers and purchase price some regions the beet flows can be diverted to alternative sites, increases but this also leads to longer campaigns at those factories and The reduction of sugar production capacities in the course of the much greater logistical expense. Risk-oriented maintenance has sugar market reform in 2006 led to a process of concentration been introduced to reduce the risk of production downtime. among suppliers. This has often resulted in a monopoly among All the essential machinery in a factory is examined closely and providers of equipment made especially for the sugar industry, repaired or replaced as necessary in the phase between two cam- with correspondingly high prices. paigns. Nordzucker has also taken out production downtime insurance to reduce its exposure further. To counter this trend, a global sourcing programme has been launched to identify potential alternative suppliers. A marketing Environment campaign also aims to attract engineering companies to sugar The production of sugar has an impact on the environment. It technology. includes emissions, waste, waste water and smells. There is a risk that permitted limits may be exceeded. The standardisation of the technologies used often also leads to dependence on suppliers. Nordzucker therefore relies on long- The Nordzucker factories have been inspected in accordance with term partnerships and signs contracts for periods of several years. the applicable national and international legislation and standards. This includes certification in line with the environmental manage- Nordzucker has been able to largely avoid price increases for the ment system DIN EN ISO 14001 and the EU Environmental Audit purchase of components by means of long-term framework agree- Regulation (EC) 1221/2009 (EMAS II). ments. The company will also achieve additional savings with its “Profitability plus” programme, by qualifying European competitors Nordzucker has also taken numerous steps to reduce unpleasant for selected products and by standardising aspects of maintenance smells that affect neighbouring residents, particularly from water and packaging. purification.

Management report 65

Opportunities and risks

Product safety Default on receivables As a food producer, Nordzucker is responsible for the quality and Receivables from customers or other parties may become unrecov- safety of its products. erable. This risk rises at times of economic crisis or when extreme swings in the price of raw materials put pressure on customers. Regular inspections and product safety certifications are carried out to manage these risks. All sites comply with DIN EN ISO 9001 To address these risks, Nordzucker establishes a customer’s credit and the product safety standards DIN EN ISO 22000 in conjunction standing before signing a contract and generally takes out trade with PAS 220 (FSSC 22000). insurance. The sales team maintains close contact with the customer and defaults are limited by active receivables management. As a result of different local requirements, some sites are also certified under the following standards and norms: occupational Currency, raw materials and interest-rate risks health and safety management system OHSAS 18001, energy The increasing volatility of interest rates and exchange rates and management system DIN EN ISO 50001, German biofuels sustain fluctuations in the price of raw materials give rise to operating ability by-law (Biokraft-NachV – the transposition of Directive risks, which are pooled by the Group treasury department and 2009/28/EC to promote the use of energy from renewable sources), covered in accordance with rules drawn up by the risk manage- IFS standards (International Food Standard for food retailing) and ment department. the standard GMP B2 for quality control in raw materials for animal feed. Organic products are grown and inspected in line with the To limit these risks, they are analysed thoroughly before contracts applicable legislation. are signed. Standard financial instruments available from banks and exchanges are also used. Financial derivatives such as for- All processes relating to product safety are reviewed regularly ward contracts, swaps and futures are used to hedge the Group’s as part of the certification mentioned above and are adapted as open risk positions. necessary. This exposes the Nordzucker Group to a normal measure of IT risks counterparty risk, in the sense that a partner to a contract may The comprehensive use of IT systems gives rise to risks regarding not perform their contractual obligations. To minimise this coun- unauthorised access to sensitive company data and the unavail terparty risk, financial derivatives are only transacted with first- ability of these systems as a result of operating incidents or disas- class international financial institutions, whose economic perform ters. ance is monitored regularly, partly by analysing the financial ratings issued by international rating agencies. The risk exposure Nordzucker addresses the risk of unauthorised access to company to a given counterparty is also limited by dividing business volume data by using virus scanners and firewalls. IT security is also in- between several providers. creased by granting defined and restricted access to systems and information, and by backing up data. Proven, market-based tech- All the financial derivatives used serve solely to hedge operating nologies are used throughout the company on the basis of defined sales and purchase transactions and financial transactions that are standards. Nordzucker hedges against the risks that would ensue necessary for the company’s business. in the event of operating incidents or disasters by means of redun- dant IT infrastructures. The margins required for exchange-traded derivatives are also held exclusively on separate margin accounts with first-class international Financial risks financial institutions. Financial risks relate to unrecoverable receivables, currency, raw materials and interest-rate risks and liquidity risk. Risk exposure As of 28 February 2013, the Nordzucker Group had exchange- may also arise from the investment strategy and the availability rate derivatives with a notional net volume of EUR 49.9 million. of loan finance. At the end of the financial year, derivative transactions with a 66 Annual Report Nordzucker 2012/2013

notional value of EUR 1.5 million were open to hedge against price Investment policy movements for raw materials. These existing hedges generally Errors in investment strategy can result in the loss of financial run for less than one year and match the maturity profile of the assets. Nordzucker has a conservative investment policy with hedged transactions. regard to its cash and cash equivalents. The Group’s free liquidity is only invested in the money market products of first-class Euro- Liquidity risk pean financial institutions, taking national deposit insurance regu- The seasonality of the Group’s business means that its capital lations and the credit rating of counterparties into account. requirements vary widely over the course of a financial year. The quality of the harvest and developments in market prices also have Potential default risks are also addressed by spreading the invest- a considerable effect on the company’s funding requirements. ment of free liquidity across various counterparties.

If the company cannot draw on sufficient liquidity – either if there is a default on its investments or if borrowing is not available – its Supplementary report continued existence is at risk. Reform of EU agricultural policy Short- and medium-term liquidity forecasts for the subsidiaries and The continued existence of the sugar market regime is also being the entire Group are therefore regularly drawn up on the basis of discussed in the course of reforms to the European Union’s Com- a standardised process. Financing strategies are then prepared mon Agricultural Policy (CAP). The European Commission has and implemented on the basis of these forecasts. proposed not to extend the sugar market regime beyond the end of its current phase, which expires on 30 September 2015. Availability of credit With regard to the “trialogue” negotiations between the three No negative effects on the Nordzucker Group’s access to liquidity European institutions, the European Parliament is in favour of an have been felt to date, despite the ongoing economic crisis in extension until 2020, while the Council of Agriculture Ministers is the EU and the evolving situation on lending markets due to the backing an extension until 2017. increasing regulation of banks. One important reason for this is the continued improvement in the Group’s credit rating. In addition to the question of how long the sugar market regime is to continue after October 2015, discussions are also taking place For the period until 2016, the main source of financing will be on issuing new sugar quotas to member states who had returned a syndicated loan that the company took out in 2011 from 14 theirs after the 2006 reform and on other advantages for traditional banks. In the opinion of the company management, this medium- refinery operations. term syndicated loan to finance its operating business, together with its available liquidity, covers the company’s capital needs. From a current perspective, its cash reserves and unused lines Forecast of credit enable Nordzucker to meet its payment obligations at all times. Based on current assessments, sufficient funds are also The financial year 2012/2013 was the best in the history of available to ensure the financing of solid growth. On the basis Nordzucker AG to date. Compared with the previous year, stable of existing corporate planning for the Group, the company as- prices and higher sales of non-quota sugar were responsible for sumes that the terms of the loan agreement will be met in sub- a substantial increase in revenues and earnings. In addition, the sequent years as well. company’s efficiency improvement measures continued to pay off. The company’s strong performance in 2012/2013 was no longer The guarantees needed for current operations can also be pro- held back by the European economic and financial crisis or the vided at any time, as needed, by means of the syndicated loan decline in world market prices for sugar towards the end of the and bilateral lines of credit. The Group is not directly dependent financial year. on individual lenders. Management report 67

Opportunities and risks | Supplementary report | Forecast

In the current 2013/2014 financial year, we expect world mar- certain, it is difficult to provide forecasts for subsequent years. ket prices to remain at their present, substantially lower level, Nonetheless, the assumption is that earnings for 2014/2015 and since stocks are still rising and global sugar production exceeds thereafter will flatten out at a lower level than in 2012/2013. consumption overall. Over the course of the financial year, this will tend to have an effect on the EU sugar market too and we Increasing the efficiency and productivity of sugar production therefore expect revenues and earnings for 2013/2014 to be therefore remains vital. lower. This also includes examining potential growth options in order to The fundamental assumption is that sugar prices will remain highly build on Nordzucker’s strong position in the EU sugar market and volatile. Since the political framework for the industry is also un- to participate in the growing sugar market outside the EU.

Braunschweig, Germany, 26 April 2013 The Executive Board

Hartwig Fuchs Axel Aumüller Mats Liljestam

Dr Michael Noth Dr Niels Pörksen 68 Annual Report Nordzucker 2012/2013

Consolidated financial statements Nordzucker AG

Consolidated income statement Nordzucker AG, Braunschweig, Germany, for the period from 1 March 2012 to 28 February 2013

1/3/2012 1/3/2011 Further details - 28/2/2013 - 29/2/2012 in Note TEUR TEUR Revenues 5 2,442,840 2,018,017 Increase in finished goods and work in progress 163,603 261,834 Own work capitalised 814 1,815 Total revenues 2,607,257 2,281,666 Other operating income 6 29,676 42,477 Cost of materials and services 7 1,621,968 1,500,803 Personnel expenses 8 201,454 188,681 Depreciation of property, plant and equipment, amortisation and impairment of intangible assets 9 87,562 106,945 Appreciation of intangible assets and property, plant and equipment 0 1,537 Other operating expenses 10 219,245 214,231 Operating result (EBIT) 506,704 315,020 Net interest a) Interest income and similar income 11 437 3,806 b) Interest expenses and similar expenses 27,088 38,472 -26,651 -34,666 Net income/loss from investments a) Net income/loss from associated companies and joint ventures accounted for under the equity method 12 -822 76 b) Other net income from investments 4,713 3,471 3,891 3,547 Other net financial income/loss a) Other financial income 13 10,808 12,342 b) Other financial expenses 13,390 9,955 -2,582 2,387 Net financial income/loss -25,342 -28,732 Earnings before taxes 481,362 286,288 Income taxes 14 121,104 77,997 Consolidated net income 360,258 208,291 Consolidated net income attributable to minority interests 9,294 4,348 Consolidated net income attributable to shareholders of the parent company 350,964 203,943

Statement of comprehensive income

Consolidated net income 360,258 208,291 Currency conversion for foreign operations 6,568 -1,484

Net result of cash flow hedges 930 -2,587 Income taxes -279 769 651 -1,818 Other net income/loss after taxes 7,219 -3,302 Total net income/loss after taxes 367,477 204,989 Consolidated total net income attributable to minority interests 9,294 4,348 Consolidated total net income attributable to shareholders of the parent company 358,183 200,641 Consolidated financial statements 69

Consolidated income statement | Statement of comprehensive income | Consolidated cash flow statement

Consolidated cash flow statement Nordzucker AG, Braunschweig, Germany, for the period from 1 March 2012 to 28 February 2013

1/3/2012 1/3/2011 - 28/2/2013 - 29/2/2012 EUR m EUR m Earnings before taxes 481.4 286.3

Interest and similar income -0.4 -3.8 Interest and similar expenses 27.1 38.5 Net depreciation, amortisation and impairment on non-current assets 87.6 105.4 Changes in non-current provisions 26.3 4.8 Other non-cash expenses -14.1 3.5 Net loss/income from associated companies 0.8 0.0 Changes in finished goods and work in progress -163.6 -261.8 Changes in current provisions 5.6 15.0 Proceeds on disposal of non-current assets 1.6 -1.8 Changes in inventories, trade receivables and other assets not attributable to investing or financing activities 13.5 -96.9 Changes in trade payables and other liabilities not attributable to investing or financing activities -16.9 215.7 Interest received in the financial year 0.4 3.8 Interest paid in the financial year -7.7 -23.8 Taxes paid in the financial year -128.3 -63.1 Cash flow from operating activities 313.3 221.8

Proceeds on disposal of property, plant and equipment 1.9 7.1 Payments for investments in property, plant and equipment -69.3 -56.4 Proceeds on disposal of intangible assets 0.0 0.1 Payments for investments in intangible assets -4.8 -7.6 Proceeds from the sale of consolidated companies and other business units 0.0 0.9 Payments for the acquisition of consolidated companies and other business units 0.0 -73.7 Cash flow for investing activities -72.2 -129.6

Payments to shareholders (dividends) -51.3 -24.9 Proceeds from borrowing 41.7 88.3 Loan repayments -227.6 -198.1 Cash flow from financing activities -237.2 -134.7

Changes in cash and cash equivalents 3.9 -42.5 Cash and cash equivalents at the beginning of the period 7.4 50.3 Additions through mergers/other changes 0.0 -0.4

Cash and cash equivalents at the end of the period 11.3 7.4 70 Annual Report Nordzucker 2012/2013

Consolidated balance sheet as of 28 February 2013, Nordzucker AG, Braunschweig, Germany

Assets Further details 28/2/2013 29/2/2012 in Note TEUR TEUR Non-current assets Fixed assets Intangible assets 15 165,337 174,066 Property, plant and equipment 16 853,050 861,059 Investment property 18 5,676 6,785 Financial investments 19 Shares in associated companies and joint ventures accounted for under the equity method 19.1 3,068 3,593 Other financial investments 19.2 23,536 20,428 26,604 24,021 1,050,667 1,065,931

Receivables and other assets Financial assets 23 0 7 Other assets 24 9 1,369 9 1,376

Deferred taxes 14 7,827 11,883 1,058,503 1,079,190 Current assets Inventories 20 Raw materials, consumables and supplies 46,885 44,451 Work in progress 50,491 43,373 Finished goods and merchandise 930,387 810,414 1,027,763 898,238

Receivables and other assets Trade receivables from external companies 21 212,425 194,423 Receivables from related parties 22 4,263 233 Receivables from current income tax 14 1,470 5,084 Financial assets 23 12,597 13,185 Other current assets 24 62,376 61,971 293,131 274,896

Cash and cash equivalents 11,297 7,406 Current assets 1,332,191 1,180,540 Assets held for sale 25 2,497 1,867 1,334,688 1,182,407 2,393,191 2,261,597 Consolidated financial statements 71

Consolidated balance sheet

Shareholders’ equity and liabilities Further details 28/2/2013 29/2/2012 in Note TEUR TEUR Shareholders’ equity 26

Subscribed capital 26.1 123,651 123,651 Capital reserves 26.2 127,035 127,035 Retained earnings 26.3 954,501 653,603 Other comprehensive income 26.4 58,901 51,682

Equity attributable to shareholders of the parent company 1,264,088 955,971 Minority interests 26.5 51,880 43,260 1,315,968 999,231

Non-current provisions and liabilities

Provisions for pensions and similar obligations 27 151,944 134,727 Other provisions 28 32,541 23,415 Financial liabilities 29 4,575 88,473 Liabilities towards related parties 31 5,500 5,500 Other financial liabilities 32 294 1,181 Other liabilities 33 12,555 20,985 Deferred taxes 14 136,238 153,917 343,647 428,198

Current provisions and liabilities

Provisions for pensions and similar obligations 27 5,283 5,281 Other provisions 28 73,683 68,059 Financial liabilities 29 66,108 167,852 Current income tax liabilities 14 62,882 60,000 Trade payables 30 465,425 455,122 Liabilities towards related parties 31 16,245 11,498 Other financial liabilities 32 6,383 15,900 Other liabilities 33 37,567 50,456 733,576 834,168

2,393,191 2,261,597 72 Annual Report Nordzucker 2012/2013

Consolidated statement of changes in shareholders’ equity Nordzucker AG, Braunschweig, Germany

Equity attributable Other to share compre holders of Subscribed Capital Retained hensive the parent Minority Total capital reserves earnings income company interests equity TEUR TEUR TEUR TEUR TEUR TEUR TEUR

As of 1/3/2011 123,651 127,035 471,569 54,984 777,239 41,497 818,736

Net income 203,943 203,943 4,348 208,291 Other net income/loss -3,302 -3,302 -1 -3,303 Other comprehensive 203,943 -3,302 200,641 4,347 204,988 income Dividend payment -22,219 -22,219 -2,691 -24,910 Others 311 311 106 417

As of 29/2/2012 123,651 127,035 653,604 51,682 955,972 43,259 999,231

Net income 350,964 350,964 9,294 360,258 Other net income/loss 7,219 7,219 7,219 Other comprehensive 350,964 7,219 358,183 9,294 367,477 income Dividend payment -48,301 -48,301 -2,949 -51,250 Others -1,766 -1,766 2,276 510

As of 28/2/2013 123,651 127,035 954,501 58,901 1,264,088 51,880 1,315,968 Notes 73

Notes to the consolidated financial statements for the financial year 2012/2013 for Nordzucker AG, Braunschweig, Germany

General remarks cial statements of the subsidiaries are prepared for the same reporting period as the financial statements for the parent company using 1. Accounting principles uniform accounting methods. All intra-Group balances, transactions, unrealised gains and losses from intra-Group transactions and The consolidated financial statements as of 28 February 2013 for dividends are eliminated in full. Nordzucker AG (Küchenstrasse 9, 38100 Braunschweig) have been prepared in accordance with Sec. 315a HGB (German Commercial Losses from a subsidiary are attributed to non-controlling interests Code) in accordance with the International Financial Reporting even if this results in a negative net carrying amount. A change in Standards (IFRS) adopted and published by the International the equity interest in a subsidiary that does not result in a loss of Accounting Standards Board (IASB) as applicable in the European control is accounted for as an equity transaction. Union and with supplementary provisions of German commercial law. The financial statements comply fully with IFRS and give a Principles of consolidation up to 1 January 2010 true and fair view of the earnings and financial position and net items were dealt with on the basis of the previous principles of assets of Nordzucker AG and its consolidated subsidiaries, associated consolidation: companies and joint ventures (hereinafter known as “Nordzucker Group” or “Group”). The purchase of non-controlling interests was accounted for before 1 January 2010 using the parent-entity extension method. The consolidated financial statements have generally been pre- This entails the recognition as goodwill of the difference between pared using the historic cost convention. This does not apply to the purchase price and the carrying amount of the pro rata inter- the derivative financial instruments or the available-for-sale finan- est in the net assets. cial instruments, which are measured at fair value. Losses were attributed to non-controlling interests until their Individual line items of the income statement and the balance carrying amount was reduced to zero. Additional losses were sheet have been aggregated to improve readability. These items attributed to the parent company, except in cases in which the are listed in the notes. The income statement has been classified non-controlling interests had undertaken to make good the according to the total cost method. losses. The attribution of losses incurred before 1 January 2010 between the non-controlling interests and the shareholders of The consolidated financial statements have been prepared in the parent company was not revoked. Euros. Unless otherwise stated, all amounts are given in thousands of Euros (EUR ‘000). In the event of a loss of control, the Group recognised the remaining interest at the amount of the corresponding share of net The consolidated financial statements will be approved by the assets at the time control was lost. The carrying amount of these Executive Board of Nordzucker AG on 23 May 2013 for presenta- investments was not adjusted as of 1 January 2010. tion to the Supervisory Board. 2.2. Business combinations and goodwill Business combinations from 1 March 2010 2. Consolidation Business combinations are presented using the purchase method. The acquisition costs of a business combination are defined 2.1. Principles of consolidation as the total consideration paid, measured at fair value as of the Principles of consolidation from 1 January 2010 acquisition date and the non-controlling interests in the ac- The consolidated financial statements of the Nordzucker Group in- quired entity. For every business combination, the purchaser clude the domestic and foreign subsidiaries in which Nordzucker measures the non-controlling interests in the acquired entity AG has direct or indirect control of financial and operating policy. either at fair value or at their pro rata share of the identified net assets of the acquired entity. Costs incurred in the course of the Subsidiaries are fully consolidated from the acquisition date, i.e. business combination are recognised in profit and loss and the date on which the Group obtains control. Consolidation ends shown under administrative expenses. once the parent company no longer exercises control. The finan- 74 Annual Report Nordzucker 2012/2013

If the Group acquires an entity it determines the appropriate Business combinations before 1 March 2010 classification and designation of the financial assets and liabilities The method used previously for accounting for business com assumed in accordance with the terms of the contract, econom- binations applied the following principles instead of those de- ic circumstances and the conditions at the acquisition date. This scribed above: also includes separating embedded derivatives from their host contract. Business combinations were presented using the purchase method. Transaction costs directly attributable to the business combin For business combinations in stages, the fair value of the equity ation were part of the acquisition costs. Non-controlling interests interest held by the purchaser in the acquired entity is meas- (previously known as minority interests) were measured at their ured as of each acquisition date and the resulting gain or loss is pro rata share in the identifiable net assets of the acquired entity. recognised in the income statement. For business combinations achieved in stages, the individual ac- The agreed contingent consideration is recognised at fair value quisitions were accounted for separately. The acquisition of an as of the acquisition date. Subsequent changes in the fair value additional interest did not affect the goodwill from a previous of a contingent consideration that constitutes an asset or a li acquisition. ability are recognised either in the income statement or in other comprehensive income in accordance with IAS 39. Contingent If the Group acquired an entity, the embedded derivatives ac- consideration that is classified as equity is not revalued and its counted for separately from the host contract by the acquired subsequent settlement is accounted for within equity. entity were only revalued at the acquisition date if the business combination led to a change in the terms of the contract result- Goodwill is initially recognised at cost, which is defined as the ing in significantly different cash flows to those that would other- excess of total consideration transferred and the amount of any wise have resulted from the contract. non-controlling interest over the identifiable assets acquired and the liabilities assumed. If this consideration is below the fair A contingent consideration was only recognised if the Group value of the net assets of the subsidiary, the difference is recog- had a current obligation, if an outflow of resources embodying nised in the income statement. economic benefits was more likely than not and if a reliable estimate was possible. Subsequent adjustments to the contingent Following initial recognition, goodwill is measured at cost less consideration were recognised as part of goodwill. any accumulated impairment losses. For the purposes of impairment testing, the goodwill acquired in a business combination 2.3. Group of consolidated companies is allocated to the cash-generating units or groups of cash-gen- The consolidated companies in the Nordzucker Group are as erating units which benefit from the synergies of the business follows: combination as of the acquisition date. This applies irrespective of whether other assets or liabilities of the acquiring company Group of consolidated are assigned to those units or groups of units. Each unit or companies group of units to which the goodwill is allocated represents the 28/2/2013 29/2/2012 lowest level within the entity at which the goodwill is moni- Fully consolidated companies tored for internal management purposes. Domestic 4 4 Foreign 19 18 If goodwill has been allocated to a cash-generating unit (group Companies accounted for under of cash-generating units) and the entity disposes of an oper the equity method ation within that unit, the goodwill associated with the operation Domestic 2 2 disposed of shall be included in the carrying amount of the Foreign 2 2 operation when determining the gain or loss on disposal. The value of the goodwill disposed of is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained. If a cash-generating unit is disposed of, the difference between the sale price and the net assets plus accumulated foreign-exchange differences and goodwill without impairment is recognised in profit and loss. Notes 75

The list of investments is filed electronically with the operator of companies are not recognised unless there is an obligation to the electronic German Federal Gazette (Elektronischer Bundes provide further capital. anzeiger). 2.4. Conversion of financial statements All the companies included in the consolidated financial state- in foreign currencies ments have 28 February 2013 as their reporting date. Assets and liabilities of subsidiaries whose functional currency is not the Euro are converted at the exchange rate applicable Associated companies and joint ventures are accounted for in the on the balance sheet date. Items in the income statement are consolidated financial statements under the equity method. Asso- converted at the weighted average rate for the relevant year. ciated companies are defined as companies in which the Nord- Equity components of subsidiaries are converted at the histor zucker Group can exercise a significant influence over financial ical rate for the date first recognised. Exchange differences and operating policy. A company is defined as a joint venture if arising from the conversion are recognised as equalisation an agreement exists between the partners on joint management amounts within other comprehensive income or in non- of the economic activities of the company. In applying the equity controlling interests. method, the IFRS financial statements of these companies are used. Losses from associated companies which exceed the carry- The rates for the conversion of key financial statements in for- ing amount or other non-current receivables from financing these eign currencies into Euros have changed as follows:

Foreign currency Average rate Spot rate for EUR 1.00 2012/2013 2011/2012 28/2/2013 29/02/2012 Polish Zloty (PLN) 4.16353 4.18113 4.15150 4.12120 Hungarian Forint (HUF) 288.25639 283.62660 295.80000 288.71000 Danish Crown (DKK) 7.44799 7.44754 7.45600 7.43560 Swedish Crown (SEK) 8.65947 9.02575 8.44750 8.80880 Norwegian Crown (NOK) 7.43935 7.75952 7.48700 7.44050 Lithuanian Litas (LTL) 3.45280 3.45280 3.45280 3.45280

3. Explanation of accounting methods Dividends are recognised in profit and loss when the legal entitlement is vested. 3.1. Recognition of income and expense Revenues are recognised when the goods or services are de 3.2. Intangible assets livered if the amount of revenue can be estimated reliably and Internally generated intangible assets are recognised at the the flow of economic benefit is probable. Revenues are reduced costs arising in the development phase after technical and by sales discounts. economic feasibility has been determined and up to completion. Capitalised production costs consist of the costs directly attribut- Operating expenses are recognised when the service is used or able to the development phase. as of the date they arise. Separately acquired intangible assets are recognised at cost. Interest is recognised as an expense or as income in the period in which it arises. The Group only capitalises interest expense Internally generated and separately acquired intangible assets arising in connection with the purchase or production of certain which have a finite useful life are amortised from the time the assets if they are qualifying assets. asset is available for use on a straight-line basis over the expected useful life of the asset as follows:

76 Annual Report Nordzucker 2012/2013

Intangible assets As a rule, depreciation begins when the asset is made ready for Useful life operation. Production-related technical plant and machinery in years only used during the campaign are depreciated for the full year. Production quotas acquired against payment 9 ERP licences 20 For assets under finance leases where the transfer of title to Group Other software 3–15 companies at the end of the lease term is sufficiently certain, scheduled depreciation takes place over the useful life of the assets. Useful lives are reviewed regularly to ensure they are appropriate. If necessary, they are adjusted accordingly. Investment subsidies and public grants for the purchase or production of items of property, plant and equipment are accounted Goodwill is not subject to amortisation (see Note 2.2 above). for by recognising an item of deferred income under other liabil ities. The deferred income item is then reversed through profit Gains or losses on the disposal of intangible non-current assets and loss over the useful life of the subsidised asset. are recognised under other operating income or expenses. 3.4. Investment property 3.3. Property, plant and equipment Properties classified by the Nordzucker Group as available for let Items of property, plant and equipment are recognised at cost to third parties are carried at historical cost in accordance with the and depreciated on a straight-line basis over their expected use- classification option defined in IAS 40. These properties are depre- ful lives. The costs of internally generated items of property, plant ciated on a straight-line basis over a useful life of 20 – 60 years. and equipment include all direct costs as well as all indirect costs incurred in connection with the production process. Borrowing 3.5. Impairment of intangible assets and property, plant costs are capitalised when the internally generated items of and equipment property, plant and equipment constitute qualifying assets. Gains The Group assesses at each reporting date whether there is any or losses on the disposal of non-current assets are recognised in indication that non-financial assets may be impaired. If any such other operating income or expenses. indication exists or if an annual impairment test is required for an asset, the Group estimates the recoverable amount for the Rented or leased assets which are economically owned by Group respective asset (“impairment test”). companies (finance leases) are capitalised at the lower of the present value of the rental or lease payments and fair value of the Impairment losses are recognised for intangible assets and items leased asset. They are depreciated on a straight-line basis. The of property, plant and equipment if, due to particular events, the present value of payment obligations for future rental and lease carrying amount of the asset is no longer covered by the antici- payments is recognised as a liability. pated proceeds of disposal or the discounted net cash flows from its continued use. If the recoverable amount cannot be Depreciation takes place on a uniform basis for the Group over measured for individual assets because the cash flows depend the following useful lives: on other assets, the cash flow is determined for the next higher group of assets (reporting unit, cash-generating unit) for which Property, plant and equipment such a cash flow can be determined. The cash flows of the report- Useful life ing units are discounted at a rate which reflects current market in years assessments of the time value of money and the specific risks of Buildings 20–60 the asset. An impairment loss is recognised when the present Technical plant and machinery 4–60 value of the cash flows is less than the carrying amount of the Railway tracks 70 non-current and net current assets of the reporting unit. Vehicles 4–15 Trailers and rolling stock 25 An assessment is made as of each reporting date whether there Other operating and office equipment 3–25 is any indication that an impairment recognised in prior periods may no longer exist or may have decreased. Impairment losses are reversed if the value in use has increased in subsequent periods. Useful lives are reviewed regularly to ensure they are appropriate. The increased carrying amount of an asset attributable to If necessary, they are adjusted accordingly. a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. Notes 77

3.6. Investment subsidies and grants revaluation surplus is corrected for the amount of the impairment Claims for investment subsidies and grants are recognised from and the resulting amount recognised in profit and loss. the time the Nordzucker Group is sufficiently certain that they will be granted and that the conditions for receiving them will If the fair value of financial instruments cannot be measured or be met. Grants and subsidies for purchasing assets are carried derived using appropriate valuation methods, they are carried as liabilities and reversed through profit and loss over the useful at amortised cost. For cash and other current primary financial in- life of the subsidised assets. struments, fair value is equivalent to the carrying amount on each balance date. 3.7. Emissions rights The Nordzucker Group does not recognise emissions rights Assets held to maturity are carried at amortised cost using the received free of charge. The Nordzucker Group recognises the effective interest method. An impairment loss is recognised on corresponding obligations at cost if the emissions rights held these assets if the recoverable amount using the effective interest by the Group are not sufficient. originally determined is below the carrying amount.

3.8. Financial instruments In the financial year, no financial assets were reclassified from be- The Nordzucker Group accounts for financial instruments in ing available for sale to being held to maturity. Available-for-sale accordance with IAS 39. All purchases or disposals of financial financial instruments carried at fair value were also not reclassified assets within the Group are recognised on acquisition, i.e. as as being held at amortised cost. Reclassifications in the opposite of the settlement date, irrespective of their classification. direction were also not applicable for the Nordzucker Group.

Financial assets and financial liabilities are initially recognised at The Nordzucker Group also made no disposals of financial assets fair value. The transaction costs directly attributable to the acqui- without derecognising them, either in the reporting period or in sition are also recognised and amortised over the duration for all the previous year. financial liabilities which are not subsequently measured at fair value through profit and loss. The fair values carried in the bal- The Nordzucker Group carries out regular impairment tests on ance sheet are normally equivalent to the market prices of the financial assets held in the balance sheet in the categories loans financial instruments. If these are not directly available from an and receivables, available for sale and held to maturity. These are active market, measurement is made using the discounted cash based on past experience and individual risk assessments. The flow method (DCF method), i.e. based on expected future cash risk assessments include criteria such as severe financial difficulties flows using the reference interest rates applicable at the balance of the issuer or debtor, breach of contract, concessions made to sheet date. debtors for economic or legal reasons in connection with the debtor’s financial difficulties and an increased probability of the IAS 39 stipulates that financial instruments are to be classified as debtor’s insolvency. Other criteria are the disappearance of an loans and receivables (L&R), available for sale (AFS), held to maturity active market for the asset in question or observable data which (HTM), held for trading (HFT), fair value option (FVO) or financial indicates a measurable reduction in expected future cash flows liabilities measured at amortised cost (FLAC). from a group of financial assets since their initial recognition.

The Nordzucker Group has not used the option of designating Further information on financial instruments is given in Note 36. financial assets or financial liabilities upon initial recognition as at fair value through profit and loss (FVO). 3.9. Financial investments and securities Other financial investments and securities are categorised in line The Group measures financial assets and liabilities classified as with IAS 39 according to type and purpose and classified either held for trading at fair value. Changes in fair value are recognised as available for sale or as held to maturity. in profit and loss. 3.10. Assets held for sale Available-for-sale financial instruments are initially recognised at fair value. The result of subsequent measurement at fair value is Non-current assets are classified as held for sale if the disposal of recognised without effect on profit and loss in other comprehen- the asset within the next twelve months is highly probable. This sive income, having accounted for the effects of tax. When the classification is only made when the asset is available for sale in its financial asset is sold, the accumulated results of measurement present condition and the marketing of the asset has already begun. changes recognised in equity are reversed and the realised gain Assets held for sale are carried at the lower of amortised cost and or loss is recognised in profit and loss. If the asset is impaired, the fair value less costs to sell. No further depreciation or amortisation is 78 Annual Report Nordzucker 2012/2013

recognised for assets from the time they are classified as held for 3.13. Cash and cash equivalents sale. If no sale has taken place within twelve months, the assets Cash and cash equivalents include bank balances and cash in concerned are reclassified to the relevant balance sheet items and hand. Carrying amounts are equal to fair value. the necessary depreciation or amortisation is made good. 3.14. Pension provisions 3.11. Inventories Provisions for pension obligations are determined in line with IAS 19 Inventories are recognised at cost. using the projected unit credit method and taking future developments in salaries and pensions into account. The measurement of Costs are determined using weighted averages. Costs include all the pension obligations is made on the basis of actuarial opinions direct costs attributable to producing the asset as well as indirect and includes the assets available to cover these obligations (plan costs attributable to production. assets). The present value of defined benefit obligations is determined by discounting the estimated future cash outflows. The Measurement of inventories at the reporting date is made at the discount rate is based on the rate paid by high-quality corporate lower of cost and net realisable value. Net realisable value is the bonds which match the underlying pension obligations in terms estimated selling price less estimated costs to sell. of currency and maturity.

The net realisable value of work in progress is inferred from the If the actuarial gains and losses resulting from changes in the net realisable value of finished goods and services less the out- actuarial parameters exceed 10 per cent of the greater of the pen- standing costs of completion. sion obligations and plan assets at the beginning of the financial year, the amount exceeding the 10 per cent threshold is recog- Semi-finished goods from production processes are measured nised through profit and loss for the remaining term of service of using their respective full cost approach. Indirect costs are allocated the entitled staff (corridor method). As the actuarial parameters according to production volume and the amount of production changed sharply during the reporting year (lower interest rates) work carried out in-house. If the recognised amounts for finished and provoked an actuarial loss, the Nordzucker Group made use products and goods are higher than fair value as of the reporting of the option to recognise actuarial losses through profit or loss date, the inventories are written down to net realisable value. over a shorter period.

Sugar stocks from internal production disclosed under finished The interest component of pension expenses and the expected in- products are recognised at cost, unless they are recognised at come from plan assets is disclosed as part of the net financial result. lower net realisable value in view of sales opportunities. Costs include production costs, indirect costs attributable to the produc- 3.15. Other provisions tion department and straight-line depreciation for wear and tear. Other provisions include all identifiable legal and constructive The production costs of quota sugar also include the factory por- obligations of the Group towards third parties if their settlement tion of the production levy of EUR 6.00 per tonne. is probable and the amount can be reliably estimated. Provisions are recognised in line with IAS 37 as the best estimate of the Borrowing costs are not included in costs as the Group’s prod- amount required to settle the obligation. Non-current provisions ucts are not qualifying assets. are recognised as the present value of the amount required to settle the obligation, discounted using appropriate market inter- An impairment loss for inventories is reversed if the reasons for est rates. recognising the loss no longer exist. Provisions for restructuring are only recognised if the planned 3.12. Receivables and other assets measures have been developed in sufficient detail as of the Trade receivables and other assets are initially recognised at reporting date and if the measures have been announced. fair value plus transaction costs. Subsequent recognition is at amortised cost. For current financial assets in the loans and receiv 3.16. Liabilities ables category, fair value is approximately equal to the carrying Liabilities are recognised initially at fair value including transaction amount. costs and any premiums and discounts. Subsequent recognition is at amortised cost using the effective interest method. Default risks are recognised by appropriate write-downs based on past experience and individual assessments of risk. 3.17. Deferred taxes Deferred taxes are recognised for future tax assets and liabilities resulting from temporary differences between the value of assets Notes 79

and liabilities for tax purposes and their carrying amount in the are classified as held for trading and carried at fair value through IFRS financial statements, and for tax loss carry-forwards. Deferred profit and loss. taxes are measured on the basis of the fiscal legislation enacted at the end of each financial year for the financial years in which the When closing hedging transactions, the Nordzucker Group classi- differences are expected to reverse or in which it is likely that tax fies interest-rate derivatives solely as cash flow hedges for hedge loss carry-forwards will be used. Deferred tax assets for tax loss accounting purposes. Furthermore, the Group uses derivatives carry-forwards are only recognised if it is sufficiently likely that not designated exclusively as such to hedge exchange-rate and they will be realised in the near future. market risks.

Deferred tax assets and liabilities are netted out if the conditions 3.19. Foreign currency transactions for doing so are met. Purchases and sales in foreign currencies are converted at the exchange rate applicable at the time of the transaction. Assets 3.18. Derivative financial instruments and liabilities in foreign currencies are translated into the func- and hedge accounting tional currency at the exchange rate on the reporting date. For- Due to the nature of its business, the Nordzucker Group is eign currency gains and losses resulting from the conversion are exposed to interest-rate, exchange-rate and other market risks. recognised in profit and loss. Derivative financial instruments are used as a means of managing these risks. 3.20. Use of estimates Preparing the consolidated financial statements in line with IFRS As a rule, derivative financial instruments are recognised at fair requires the use of estimates and assumptions which affect the value. The fair value of derivatives can be both positive and nega- carrying amounts of assets and liabilities, the disclosure of contin- tive. If a market value is not available, fair value is determined gent liabilities as of the reporting date and the recognition of in- using net present value and option pricing models. The input come and expenses. In particular, key estimates and assumptions parameters for these models are the relevant market prices and have been made in defining uniform periods of depreciation and interest rates observed on the balance sheet date as derived from amortisation for the Group, the amount of write-downs on receiv- recognised sources. ables and the actuarial parameters for measuring pension provisions. For deferred tax assets, the main estimates relate to the tax Changes in the fair value of derivative financial instruments are able profits that will be generated in future. Other significant esti- recognised in equity without effect on profit or loss (for cash flow mates have been made in performing the impairment test in ac- hedges) or with effect on profit or loss (for fair value hedges) if cordance with IAS 36 concerning the determination of cash flows they form part of an effective hedging relationship hedge( ac- in the forecast period and the selection of a suitable capitalisation counting). The principles of hedge accounting are intended to rate. The actual amounts may vary from the amounts derived from capture as much as possible the offsetting effects on profit or loss the estimates and assumptions. We refer to the corresponding of changes in the fair values of the hedging instrument and the notes to the consolidated balance sheet for the carrying amounts hedged item. In addition to documentation on the hedging rela- of balance sheet items affected by significant estimates. tionship, IAS 39 requires that the hedge be shown to be highly effective in order for hedge accounting to be applied. The effect iveness of the hedge is demonstrated by its ability to achieve 4. Recently published IASB offsetting changes to alterations in the hedged item’s fair value accounting regulations in the case of fair value hedges or to cash flows attributable to the hedged risk in the case of cash flow hedges. The present financial statements for the financial year 2012/2013 have been prepared on the basis of the uniform application of Changes in the fair value of derivatives used to hedge future cash and in compliance with all International Financial Reporting Stand flows (cash flow hedges) and which are considered effective are ards (IFRS) applicable in the European Union as of the reporting recognised directly in other comprehensive income after ac- date 28 February 2013. Nordzucker does not apply standards al- counting for tax effects. The amounts recognised in other com- ready published and interpretations by the International Financial prehensive income are derecognised when the hedged item is Reporting Interpretations Committee (IFRIC) for which application is recognised in the balance sheet or in profit and loss. not yet mandatory for the reporting year.

Derivatives which despite their effect as economic hedges do not The accounting methods applied are the same as those applied fulfil the criteria of IAS 39 for recognition as hedging instruments the previous year, with the exception of the following new and revised standards and interpretations. 80 Annual Report Nordzucker 2012/2013

4.1. Mandatory application of new and amended IFRS 13 Fair Value Measurement: IFRS 13 was published in May standards in the reporting year: 2011 and is applicable for the first time in the financial year be- Amendment to IFRS 7 – Disclosures on the Transfer of Financial ginning on or after 1 January 2013. The standard provides guide- Assets: The amendment to IFRS 7 was published in October lines for fair value measurement and defines comprehensive 2010 and was applicable for the first time in the financial year quantitative and qualitative disclosures for fair value measure- 2012/2013. The amendment defines extensive new qualitative ment. However, the standard does not cover the question of and quantitative disclosures on transfers of financial assets that when assets or liabilities may or must be measured at fair value. have not been derecognised and on the continuing involvement IFRS 13 defines fair value as the price that would be received to in transferred financial assets as of the reporting date. sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The application of the amended standard described in this section had no significant effect on the presentation of the Group’s Amendment to IAS 1 – Presentation of Components of Other earnings and financial position and net assets, as the circum- Comprehensive Income: The amendment to IAS 1 was published stances referred to did not exist. in June 2011 and is applicable for the first time in the financial year beginning on or after 1 July 2012. The amendment to IAS 1 4.2. IFRS endorsed by the EU as of 28 February 2013 but relates to the presentation of components of other comprehen- not mandatorily applicable in the reporting year: sive income. Components which are intended to be reclassified The following new and amended standards and interpretations into profit or loss in future (“recycled”) must be presented sep have already been endorsed by the EU, but were not applied in arately from those components that will remain in equity. the reporting year as their application was not mandatory: Amendment to IAS 12 – Deferred Tax: Recovery of Underlying IFRS 10 Consolidated Financial Statements: IFRS 10 was pub- Assets: The amendment to IAS 12 was published in December 2010 lished in May 2011 and is applicable for the first time in the finan- and is applicable for the first time in the financial year beginning cial year beginning on or after 1 January 2014. The new standard on or after 1 January 2013. The amendment to IAS 12 simplified replaces the provisions of IAS 27 Consolidated and Separate Finan- the standard. It introduced the (rebuttable) presumption that for cial Statements on consolidated accounting and the interpretation the purpose of measuring deferred tax on investment property SIC-12 Consolidation – Special Purpose Entities. IFRS 10 defines a measured at fair value, the recovery of the carrying amount will uniform concept of control, which is applied to all companies normally be through sale. A sale should always be assumed for including special purpose entities. items of property, plant and equipment not subject to wear and tear that are measured using the revaluation model. IFRS 11 Joint Arrangements: IFRS 11 was published in May 2011 and is applicable for the first time in the financial year beginning IAS 19 Employee Benefits (revised 2011): The revised standard on or after 1 January 2014. The standard replaces IAS 31 Interests IAS 19 was published in June 2011 and is applicable for the first in Joint Ventures and the interpretation SIC-13 Jointly Controlled time in the financial year beginning on or after 1 January 2013. Entities – Non-monetary Contributions by Venturers. IFRS 11 abolish- The alterations range from fundamental changes such as to the es the previous option of accounting for joint ventures using the calculation of forecast returns on plan assets and the elimination proportional consolidation method. In future they are only to be of the corridor method, which served to smooth volatility result- consolidated using the equity method. ing from pension obligations over time, to simple clarifications and rewording, and also include new and amended disclosure IFRS 12 Disclosure of Interests in Other Entities: IFRS 12 was pub- requirements. The standard is to be applied retroactively. lished in May 2011 and is applicable for the first time in the financial year beginning on or after 1 January 2014. The standard de- Nordzucker had previously used the corridor method in the fines uniform rules for mandatory disclosures in the area of con- course of accounting for pension provisions. The elimination of solidated accounting and consolidates the disclosures on subsid the accounting method used to date is expected to have a signifi iaries that were previously governed by IAS 27, the disclosures on cant effect on Nordzucker’s future consolidated financial state- joint ventures and associated companies previously defined in IAS ments. Changes of some EUR 23 million in equity and of some 31 and IAS 28 respectively and those for structured entities. EUR 33 million in pension provisions are expected on the basis of the new rules. Fluctuations in actuarial assumptions, especially for the interest rate, will result in greater volatility in shareholders’ Notes 81

equity in future. The amendments to the accounting of phased must always be carried at fair value. Fluctuations in the value of early retirement obligations will not have a significant effect on the equity instruments may be recognised in other comprehensive earnings and financial position and net assets of the Nordzucker income, however, subject to an option specific to the individual Group. instruments that can be exercised when the financial instrument is recognised. In this case, only certain dividend income from the IAS 27 Separate Financial Statements (revised 2011): The re- equity instruments is recognised in profit or loss. An exception is vised standard IAS 27 was published in May 2011 and is applic made for financial assets held for trading, which must be meas- able for the first time in the financial year beginning on or after ured at fair value through profit or loss. The IASB completed the 1 January 2014. Following the adoption of IFRS 10 and IFRS 12, second part of phase 1 of the project in October 2010. This add- the scope of IAS 27 is limited to accounting for subsidiaries, joint ed provisions on financial liabilities to the standard and retains ventures and associated companies in separate financial state- the existing rules on classification and measurement of financial ments. liabilities with the following exceptions: effects of changes in the entity’s own credit rating on financial liabilities classified as at fair IAS 28 Investments in Associates and Joint Ventures (revised value through profit or loss must be recognised without effect 2011): The revised standard IAS 28 was published in May 2011 on profit or loss and derivative liabilities on unquoted equity in- and is applicable for the first time in the financial year beginning struments may no longer be held at cost. IFRS 9 is applicable for on or after 1 January 2014. Following the adoption of IFRS 11 and the first time in the financial year beginning on or after 1 January IFRS 12, the scope of IAS 28 has been extended to cover the ap- 2015. plication of the equity method to joint ventures as well as to associated companies. Improvements to IFRS (2009–2011) The 2009–2011 improvements to IFRS are a collection of Amendment to IAS 32 and IFRS 7 – Offsetting Financial Assets amendments published in May 2012, which are binding for and Financial Liabilities: The amendment to IAS 32 and IFRS 7 financial years beginning on or after 1 January 2013. The Group was published in December 2011 and is applicable for the first has not yet applied the following amendments: time in the financial year beginning on or after 1 January 2014 and 1 January 2013 respectively. The amendment is intended to ● IFRS 1: Clarifies that a company is able to apply IFRS 1 again if remove existing inconsistencies by extending the application it stops reporting in line with IFRS and subsequently decides guidelines. The existing basic rules on offsetting financial instru- or is obliged to resume the use of these accounting stand- ments are maintained, however. The amendment also defines ards. If the company does not apply IFRS 1 again, it must pre- additional disclosures. sent its financial statements retroactively as if it had never ceased to apply IFRS. Apart from the effects caused by the revision of IAS 19 and de- ● IAS 1: Clarifies the difference between voluntary additional scribed above, the application of the amendments in this section comparative information and obligatory comparative informa- would not have had any significant effect on the presentation of tion, which generally covers the preceding reporting period. the Group’s earnings and financial position and net assets. ● IAS 16: Clarifies that essential spare parts and servicing equipment that qualify as items of property, plant and equipment 4.3. IFRS still to be endorsed by the EU: are not to be treated as inventories. The following new and amended standards and interpretations ● IAS 32: Clarifies that income taxes on distributions to holders are still to be endorsed by the EU and have not been applied in of equity instruments fall within the scope of IAS 12 Income advance: Taxes. ● IAS 34: Aligns disclosures on segment assets with disclosures IFRS 9 Financial Instruments: Classification and Measurement: on segment liabilities in interim reports and aligns disclosures The first part of phase I for the preparation of IFRS 9 Financial In- for interim reports with those for annual financial reporting. struments was published in November 2009. The standard includes new rules on classifying and measuring financial assets. It No substantial effects on the presentation of the Group’s earn- provides for debt instruments to be accounted for either at amort ings and financial position and net assets are expected from the ised cost or at fair value through profit or loss, depending on application of the amendments described in this section. their characteristics and the business model. Equity instruments 82 Annual Report Nordzucker 2012/2013

Notes to the consolidated 7. Cost of materials and services income statement The cost of materials and services is made up as follows: 5. Revenues Cost of materials and services

Revenues are made up as follows: 1/3/2012 1/3/2011 TEUR -28/2/2013 -29/2/2012 Revenues Cost of raw materials, consumables and supplies and of purchased 1/3/2012 1/3/2011 merchandise 1,517,620 1,417,629 TEUR -28/2/2013 -29/2/2012 Cost of purchased services 104,348 83,174 Sugar revenues from own production 1,763,234 1,392,187 Cost of materials and services 1,621,968 1,500,803 Other 679,606 625,830 2,442,840 2,018,017 Regions 8. Personnel expenses Central Europe 1,059,303 940,840 Northern Europe 946,949 800,762 Personnel expenses are made up as follows: Eastern Europe 436,588 276,415 2,442,840 2,018,017 Personnel expenses 1/3/2012 1/3/2011 TEUR -28/2/2013 29/2/2012 Miscellaneous revenues include sales of merchandise, bioethanol Wages and salaries 181,179 170,063 and other products such as animal feed. Social security contributions and other social expenses 11,389 11,037

Expenses for defined benefit plans 2,281 1,845 6. Other operating income Expenses for defined contribution plans 6,604 5,737 Other operating income is made up as follows: Personnel expenses 201,453 188,682

Other operating income

1/3/2012 1/3/2011 TEUR -28/2/2013 -29/2/2012 Expenses for defined benefit and defined contribution plans re- Proceeds from disposal late to Group expenses for defined benefit and defined contribu- of non-current assets 861 3,806 tion pension plans and similar obligations. The interest portion of Reversals of write-downs defined benefit obligations relating to pension expenses is recog- (or write-backs) on receivables 104 2 nised in the net financial result. Income from the reversal of provisions 7,714 13,597 Insurance and other compensation In 2012/2013 and in the previous year, the average number of for damages 5,249 3,455 employees in the Group was as follows: Income from the reversal of investment subsidies, grants and other receivables 689 1,032 Average number of employees Rental and leasing income 1,248 1,598 1/3/2012 1/3/2011 -28/2/2013 -29/2/2012 Foreign-exchange gains 2,893 2,167 Miscellaneous operating income 10,918 16,820 Central Europe 1,242 1,211 Northern Europe (including Ireland) 1,504 1,521 Other operating income 29,676 42,477 Eastern Europe 544 548 Average number of employees 3,290 3,280

Foreign-currency gains and the foreign-currency losses disclosed under other operating expenses are mainly due to the movement of the relevant national currencies against the Euro. Notes 83

9. Depreciation, amortisation 11. Net interest and impairment Net interest is made up as follows: Depreciation, amortisation and impairment are made up as follows: Net interest

1/3/2012 1/3/2011 Depreciation, amortisation TEUR -28/2/2013 -29/2/2012 and impairment Interest and similar income 1/3/2012 1/3/2011 Interest income on bank balances 329 1,166 TEUR -28/2/2013 -29/2/2012 Income from securities and loans 26 3 Depreciation and amortisation of Other interest and similar income 82 2,637 intangible assets and property, plant and equipment 86,767 85,709 437 3,806 Impairment of intangible assets Interest and similar expenses and property, plant and equip- Interest expense on bank balances 5,234 23,552 ment 795 21,236 Interest expense on pension provisions (net) 19,873 5,972 Depreciation, amortisation 87,562 106,945 and impairment Other interest and similar expenses 1,981 8,948 27,088 38,472 Net interest -26,651 -34,666 Impairment losses on items of property, plant and equipment and intangible assets with finite useful lives are recognised in line with IAS 36 if the recoverable amount for an asset is lower than the carrying amount, whereby the recoverable amount is defined Net interest includes interest income and interest expense from finan- as the higher of net realisable value and value in use. cial instruments not held at fair value through profit and loss. Further details can be found in Note 36. The impairment losses in the previous year were primarily due to write-downs on non-current assets for the Nordzucker Group’s Net interest expense on pension provisions includes EUR 14,000,000 bioethanol activities. from the recognition through profit or loss of actuarial losses outside the 10 per cent corridor. The actuarial losses are recognised within a shorter period than the remaining term of service of the employees 10. Other operating expenses covered by the pension plan, which is also an option.

Other operating expenses are made up as follows: 12. Net income/loss from investments Other operating expenses Net income/loss from investments is made up as follows: 1/3/2012 1/3/2011 TEUR -28/2/2013 -29/2/2012 Cost of sales 131,160 112,888 Net income/loss Research and development from investments expenses 3,110 3,340 1/3/2012 1/3/2011 Expenses for leasing, rent, -28/2/2013 -29/2/2012 land leases and other hire TEUR costs 11,486 5,161 Net income/loss from associated -822 76 companies Administrative expenses 47,478 53,965 Other taxes 1,815 3,799 Net income/loss from other 4,713 3,471 investments Foreign-exchange losses 2,657 6,467 Net income/loss from 3,891 3,547 Miscellaneous expenses 21,539 28,612 investments Other operating expenses 219,245 214,232

Additional information on the earnings contributions of financial instruments can be found in Note 36. 84 Annual Report Nordzucker 2012/2013

13. Other net financial result Tax reconciliation 1/3/2012 1/3/2011 Other net financial result consists largely of price effects from fi- TEUR -28/2/2013 -28/2/2012 nancing arrangements and net gains/losses on futures transactions and derivatives. IFRS net profit before income taxes 481,363 286,288 Group tax rate in % 29.00 29.00 Expected tax expense 139,595 83,024 Differences due to different foreign 14. Income taxes and domestic tax rates -14,970 -10,649 Change in Group tax rate -8,825 -738 Income taxes include taxes on income paid or owed in the indi- Non-capitalised deferred tax assets vidual countries and deferred taxes. Income taxes consist of trade on tax loss carry-forwards -126 0 tax, corporation tax, solidarity surcharge and the equivalent for- Taxes for prior years 4,909 5,057 eign income taxes. Tax loss carry-forwards used 0 -611 Tax-free income -2,169 -1,743 Income tax expense is made up by origin as follows: Non-deductible operating expenses for tax purposes 1,285 3,220 Income taxes Non-offsettable income tax 0 301 1/3/2012 1/3/2011 Additions/deductions for trade tax 119 497 TEUR -28/2/2013 -29/2/2012 Other effects 1,286 -361 Current taxes Tax expense 121,104 77,997 Current domestic taxes 69,107 45,333 Current foreign taxes 67,400 44,027 136,507 89,360 Deferred taxes Deferred domestic taxes -3,346 -5,988 The corporation tax rate for stock corporations based in Germany Deferred foreign taxes -12,057 -5,375 is 15 per cent plus 5.5 per cent solidarity surcharge on the corpor -15,403 -11,363 ation tax liability. Income taxes 121,104 77,997

Companies based in Germany are also liable for trade tax at a rate determined by multipliers set by the local council.

Income taxes include tax expenses from other periods of The effects of differences between foreign tax rates and the EUR 4,909,000 (previous year: EUR 5,057,000). Group tax rate for Nordzucker AG (29 per cent) are shown in the reconciliation statement under tax rate differences between As of the reporting date, Nordzucker had a long-term tax asset of Germany and abroad. EUR 957,000 (previous year: EUR 1,153,000) from the reimbursement of corporation tax. The distribution of potential dividends Deferred tax assets and liabilities result from the capitalisation of to the shareholders of Nordzucker does not have any income tax tax loss carry-forwards and primarily from temporary valuation dif- consequences at the level of Nordzucker. ferences between the IFRS financial statements and the financial statements of the individual Group companies for local tax pur- The expected income tax expense, which would have been poses for the following items: payable if the tax rate for the parent company Nordzucker AG of 29 per cent (previous year: 29 per cent) were applied to the consolidated net income under IFRS before taxes and minority interests, can be reconciled with the income taxes in the income statement as follows: Notes 85

Deferred taxes 28/2/2013 29/2/2012

Deferred Deferred Deferred Deferred tax tax tax tax TEUR assets liabilities assets liabilities Intangible assets 443 10,202 59 12,067 Investment property 0 0 2 0 Other property, plant and equipment 2,490 124,278 8,423 134,532 Financial investments 0 0 61 323 Inventories 3,179 9,574 3,593 9,631 Receivables and other assets 459 1,991 2,438 1,082 Pension provisions 8,658 0 4,784 -508 Other provisions 9,221 -2,098 7,188 -2,569 Liabilities to banks 329 458 8 264 Other liabilities 185 11,676 5,061 21,544 Deferred taxes on temporary differences 24,964 156,081 31,617 176,367 Deferred tax assets on tax loss carry-forwards 2,706 0 2,716 0 Gross amount 27,670 156,081 34,333 176,367 Netting -19,843 -19,843 -22,450 -22,450 Carrying amount 7,827 136,238 11,883 153,917

Of the total change in deferred taxes recognised in the consoli- private partnerships, netting out only takes place at the level of dated balance sheet as of the reporting date, EUR 15,403,000 Nordzucker AG for corporation tax purposes. Deferred trade tax- was recognised in profit or loss and EUR -279,000 in equity with- es are netted out at the level of the individual private partner- out effect on profit or loss. ships.

Deferred tax assets and liabilities are netted out for each com The recognition of deferred taxes resulted in the following re- pany or taxable entity. To the extent that deferred taxes relate to statements of balance sheet items with effect on profit and loss:

Deferred taxes 1/3/2012 – 28/2/2013 1/3/2011 – 29/2/2012

Deferred Deferred Deferred Deferred tax tax tax tax TEUR assets liabilities assets liabilities Intangible assets -384 -1,865 34 -39 Investment property 2 0 6 103 Other property, plant and equipment 5,933 -11,715 1,046 -8,123 Financial investments 61 -323 0 210 Inventories 413 -57 -2,399 1,655 Receivables and other assets 1,980 589 -1,719 1,924 Pension provisions -3,873 508 1,089 537 Other provisions -2,033 471 -1,223 -865 Liabilities to banks -321 194 509 270 Other liabilities/leasing 4,876 -9,869 -1,467 -4,359 Deferred taxes on temporary differences 6,654 -22,067 -4,124 -8,687 Deferred tax assets on tax loss carry-forwards 10 1,448 Total 6,664 -22,067 -2,676 -8,687 86 Annual Report Nordzucker 2012/2013

The deferred tax liabilities include EUR 1,097,000 (previous year: Notes to the consolidated EUR 366,000) for temporary differences from derivatives in cash balance sheet flow hedges. As these items are not recognised in profit and loss, the corresponding deferred taxes are also recognised directly in other comprehensive income. 15. Intangible assets

With regard to the surplus of deferred tax assets over deferred tax Changes in the individual items of intangible assets are shown in the liabilities in the balance sheet and the capitalised tax loss carry- statement of changes in non-current assets. forwards at the level of individual Group companies, the value of the deferred tax assets is considered to be sufficiently certain, With the exception of goodwill, there were no intangible assets with based on the current earnings situation and/or business planning. an indefinite useful life in the reporting period. Goodwill of EUR 89.0 million comes from the acquisition of the Nordic Sugar Group. Deferred tax assets of EUR 2,706,000 were recognised for domestic trade tax loss carry-forwards of EUR 19,603,000 (previous year: In the financial year 2012/2013, intangible assets purchased for EUR EUR 20,517,000). Under current legislation, tax losses in Germany 3,972,000 (previous year: EUR 4,252,000) were still in use, although can be carried forward indefinitely. they had already been fully amortised.

In the financial year, no deferred tax assets were recognised for foreign tax loss carry-forwards of EUR 4,594,000 (previous year: 16. Property, plant and equipment EUR 3,479,000) and domestic trade tax loss carry-forwards of EUR 16,706,000 (previous year: EUR 18,269,000) as no positive tax We refer to the statement of changes in non-current assets for the able income is expected in the near future. Furthermore, no de- Nordzucker Group for changes in property, plant and equipment. ferred tax assets were recognised for tax loss carry-forwards of EUR 297,000 (previous year: EUR 297,000) that arose before the Assets which fulfil the criteria of IAS 17 for a finance lease are consolidated tax group was formed, as these may not be used mainly a storage reservoir in Stöcken and various lease agree- for the duration of the consolidated tax group. ments for IT equipment.

No deferred taxes were recognised for retained earnings and As of 28 February 2013, items of property, plant and equipment exchange-rate differences of subsidiaries and the resulting tem with acquisition and/or production costs of EUR 245,843,000 porary differences between the net assets of the subsidiaries in the (previous year: EUR 238,737,000) were in use although they had IFRS consolidated financial statements and the carrying amount of already been fully depreciated. the interests in the subsidiaries for tax purposes. As of the balance sheet date, the temporary differences for which deferred tax lia- In the reporting period, expenses of EUR 814,000 (previous year: bilities could be recognised came to EUR 364,353,000 (previous EUR 1,816,000) were capitalised for internally generated items of year: EUR 170,223,000). If deferred taxes were to be recognised property, plant and equipment. for these temporary differences, only 5 per cent of the gain on disposal or of the dividends, plus any foreign withholding tax, In the financial year 2012/2013, the Nordzucker Group received would be relevant for their measurement under German tax law. compensation of EUR 1,824,000 (previous year: EUR 1,522,000) for the loss or impairment of items of property, plant and equipment from third parties, e.g. insurance companies.

Net carrying amounts of capitalised leased items are as follows:

Finance leases

TEUR 28/2/2013 29/2/2012 Technical plant and machinery 607 711 Finance leases 607 711 Notes 87

17. Impairment test for intangible assets 19. Financial investments and items of property, plant and equipment There were no significant changes in the Nordzucker Group’s financial investments in the reporting period. Impairment tests for intangible assets and items of property, plant and equipment are mainly performed on the basis of the values 19.1. Companies accounted for under the equity method in use for cash-generating units. The cash-generating units have In the financial year, associated companies and joint ventures been determined according to the business activities of the accounted for under the equity method reported total net in- Nordzucker Group and taking regional aspects into account. come of EUR 8,000 (previous year: EUR 152,000), revenues of EUR 1,976,000 (previous year: EUR 0), assets of EUR 17,820,000 An impairment test was carried out for the goodwill of the Nordic (previous year: EUR 14,547,000) and liabilities of EUR Sugar Group recognised in the consolidated balance sheet (cal- 12,546,000 (previous year: EUR 9,314,000) in their financial culation of value in use). The cash flows for this cash-generating statements. unit were calculated for the next five years based on financial forecasts. The pre-tax interest rate used to discount the cash flows The Nordzucker Group’s share of the profit/losses of the associat- for this cash-generating unit was around 8.96 per cent (previous ed companies was EUR -821,000 in the reporting period (previ- year: 8.74 per cent). A growth rate of 0 per cent (previous year: ous year: EUR 76,000), because an impairment loss of EUR 0 per cent) was assumed for the long-term earnings component 825,000 was recognised for one joint venture in addition to its of the discounted cash flow calculation. No impairment charges current earnings contribution. were necessary for this goodwill. In applying the equity method, losses from an associated company In addition to the impairment tests at the level of the reporting that exceed the carrying amount of the investment or other non- units, individual items of property, plant and equipment were current receivables relating to the financing of the associated written down to their recoverable amount, e.g. in the case of fac- company are not recognised as there is no requirement to invest tory closures, and written back if the reasons for the impairment further equity. ceased to exist. There were no reversals of impairment losses in the reporting year (previous year: EUR 1,537,000). The Nordzucker Group received no dividends in the reporting year.

19.2. Other financial investments 18. Investment property Available-for-sale financial instruments included in other non-current financial assets are carried at fair value at the reporting date Investment property in the Nordzucker Group mainly consists of or at amortised cost if fair value cannot be reliably determined by flats and land not required for operating purposes. other valuation methods or because there is no active market.

In the financial year 2012/2013, rental income of EUR 133,000 (pre- In the reporting year, the company SWEETGREDIENTS GmbH & vious year: EUR 74,000) was generated and offset by expenses Co. KG, which had previously been consolidated pro rata, was of EUR 171,000 (previous year: EUR 228,000). There were also deconsolidated as it was considered insignificant. The carrying expenses of EUR 9,000 (previous year: EUR 11,000) for which amount of EUR 3,122,000 is now included in other financial in- there was no corresponding rental income. vestments.

The fair value of the property is EUR 9,502,000 as of 28 February The shares in Tereos TTD a.s. are disclosed here, despite a stake 2013 (previous year: EUR 10,991,000). Fair value was determined of 35.38 per cent, because the company’s articles do not permit on the basis of internal estimates of market values using compar the Group to exercise significant influence over its operating and able properties. financial policy.

No acquisition costs were capitalised retroactively in the financial The Nordzucker Group received dividends of EUR 4,713,000 in year 2012/2013 or in the previous year. the reporting year (previous year: EUR 3,763,000). 88 Annual Report Nordzucker 2012/2013

Consolidated assets schedule for the previous year (2011/2012) Nordzucker AG, Braunschweig, Germany

Cost or fair value Accumulated depreciation, amortisation and impairment Carrying amounts

As of Currency Additions Reclassifi- Disposals As of As of Currency Depreciation, Impairment Reversals of Reclassifi- Disposals As of As of As of 1/3/2011 effects cations 29/2/2012 1/3/2011 effects amortisation impairment cations 29/2/2012 29/2/2012 28/2/2011 TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR

Intangible assets Purchased rights and licences 147,182 -431 7,533 358 1,775 152,867 57,184 -232 13,174 358 250 0 1,666 68,568 84,299 89,998 Internally produced software 4,447 -1 0 0 0 4,446 3,912 0 114 0 82 0 0 3,944 502 535 Goodwill 89,072 216 0 0 0 89,288 38 -1 0 0 0 0 0 37 89,251 89,034 Advance payments made 330 2 61 -324 55 14 0 0 0 0 0 0 0 0 14 330 241,031 -214 7,594 34 1,830 246,615 61,134 -233 13,288 358 332 0 1,666 72,549 174,066 179,897 Property, plant and equipment Land and buildings 481,058 -1,584 1,195 -1,198 18,069 461,402 231,648 421 11,822 1,675 504 -1,430 15,737 227,895 233,507 249,410 Technical plant and machinery 1,491,616 -1,254 19,410 22,983 17,831 1,514,924 849,084 757 57,658 19,092 76 -712 16,529 909,274 605,650 642,532 Other plant, operating and office equipment 45,799 -307 1,699 2,272 3,108 46,355 36,152 -485 2,904 56 0 991 2,905 36,713 9,642 9,647 Advance payments made and plant under construction 4,614 -204 34,104 -26,026 80 12,408 147 1 0 0 0 0 0 148 12,260 4,467 2,023,087 -3,349 56,408 -1,969 39,088 2,035,089 1,117,031 694 72,384 20,823 580 -1,151 35,171 1,174,030 861,059 906,056 Investment property 14,568 0 2 1,986 4,075 12,481 6,052 -1 37 55 624 1,151 974 5,696 6,785 8,516

2,278,686 -3,563 64,004 51 44,993 2,294,185 1,184,217 460 85,709 21,236 1,536 0 37,811 1,252,275 1,041,910 1,094,469 Notes 89

Cost or fair value Accumulated depreciation, amortisation and impairment Carrying amounts

2,278,686 -3,563 64,004 51 44,993 2,294,185 1,184,217 460 85,709 21,236 1,536 0 37,811 1,252,275 1,041,910 1,094,469 90 Annual Report Nordzucker 2012/2013

Consolidated assets schedule for the financial year 2012/2013 Nordzucker AG, Braunschweig, Germany

Cost or fair value Accumulated depreciation, amortisation and impairment Carrying amounts

As of Currency Additions Reclassifi- Disposals As of As of Currency Depreciation, Impairment Reclassifi Disposals As of As of As of 1/3/2012 effects cations 28/2/2013 1/3/2012 effects amortisation cations 28/2/2013 28/2/2013 29/2/2012 TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR

Intangible assets Purchased rights and licences 152,867 881 3,826 177 2,127 155,624 68,568 197 13,979 2 10 2,110 80,646 74,978 84,299 Internally produced software 4,446 0 0 0 0 4,446 3,944 0 109 0 0 0 4,053 393 502 Goodwill 89,288 -214 0 0 0 89,074 37 0 0 0 0 0 37 89,037 89,251 Advance payments made 14 0 929 -14 0 929 0 0 0 0 0 0 0 929 14 246,615 667 4,755 163 2,127 250,073 72,549 197 14,088 2 10 2,110 84,736 165,337 174,066 Property, plant and equipment Land and buildings 461,402 1,042 3,668 -2,451 2,740 460,921 227,895 -78 11,704 230 -6,455 1,722 231,574 229,347 233,507 Technical plant and machinery 1,514,924 5,066 35,499 25,340 11,053 1,569,776 909,274 1,764 57,536 555 8,904 9,731 968,302 601,474 605,650 Other plant, operating and office equipment 46,355 56 2,669 1,573 4,673 45,980 36,713 9 3,405 5 218 4,428 35,922 10,058 9,642 Advance payments made and plant under construction 12,408 -2 27,462 -27,500 49 12,319 148 0 0 0 0 0 148 12,171 12,260 2,035,089 6,162 69,298 -3,038 18,515 2,088,996 1,174,030 1,695 72,645 790 2,667 15,881 1,235,946 853,050 861,059 Investment property 12,481 0 6 -1,263 62 11,162 5,696 0 34 3 -244 4 5,485 5,677 6,785

2,294,185 6,829 74,059 -4,138 20,704 2,350,231 1,252,275 1,892 86,767 795 2,433 17,995 1,326,167 1,024,064 1,041,910

Reclassifications to net carrying amounts of EUR 1,705,000 relate to assets of Nordzucker AG and the Hungarian subsidiary which are held for sale. Notes 91

Cost or fair value Accumulated depreciation, amortisation and impairment Carrying amounts

2,294,185 6,829 74,059 -4,138 20,704 2,350,231 1,252,275 1,892 86,767 795 2,433 17,995 1,326,167 1,024,064 1,041,910

Reclassifications to net carrying amounts of EUR 1,705,000 relate to assets of Nordzucker AG and the Hungarian subsidiary which are held for sale. 92 Annual Report Nordzucker 2012/2013

20. Inventories The receivables from related parties remaining after consolidation are classified as financial assets and other receivables. Details on Inventories are made up as follows: the default risks and the term structure for this category can be found in Note 37. Inventories

TEUR 28/2/2013 29/2/2012 23. Financial assets Raw materials, consumables and 46,885 44,451 supplies Work in progress 50,491 43,373 Financial assets are made up as follows: Finished goods and merchandise 930,387 810,414 Financial assets Inventories 1,027,763 898,238 TEUR 28/2/2013 29/2/2012 Claims for damages 3,260 711 Positive fair value of derivatives 5,033 7,695 Unfinished goods mainly consist of the thick juice required to pro- Available-for-sale securities 0 10 duce bioethanol. Other financial assets 4,304 4,776

Inventories of EUR 3,025,000 (previous year: EUR 1,258,000) are Financial assets 12,597 13,192 carried at net realisable value. Write-downs on inventories amounted to EUR 2,949,000 (previous year: EUR 2,306,000). Of total financial assets, EUR 0 (previous year: EUR 7,000) are non-current. 21. Trade receivables With the exception of positive fair values of derivatives and Trade receivables are made up as follows: available-for-sale securities, the financial assets have been classified in the financial assets and other receivables category of finan- Trade receivables cial instruments. Details of the default risks and term structure for this category can be found in Note 37. TEUR 28/2/2013 29/2/2012 Gross trade receivables 214,483 197,963 Current financial assets are included in the financial investments Write-downs on trade receivables 2,059 3,540 class, which is part of the available-for-sale category, and are all Trade receivables from external held at fair value. companies 212,424 194,423

24. Other assets Information on the default risks and the term structure of trade receivables is given in Note 37. Write-downs on trade receivables Other assets are made up as follows: in the financial year amounted to EUR 562,000 (previous year: EUR 905,000). Other assets

TEUR 28/2/2013 29/2/2012 Receivables from other taxes 50,092 31,510 22. Receivables from related parties Miscellaneous other assets 12,293 31,830 Receivables from related parties are made up as follows: Other assets 62,385 63,340

Receivables from related parties Of total other assets, EUR 9,000 (previous year: EUR 1,369,000) TEUR 28/2/2013 29/2/2012 are non-current. From this reporting year onwards, claims for the Receivables from associated companies and joint ventures 132 102 reimbursement of energy taxes are presented in receivables from other taxes. In the previous year, receivables of EUR 12,854,000 Receivables from other related parties 4,132 131 were shown in miscellaneous other assets. Receivables from related parties 4,264 233 Notes 93

25. Assets held for sale arising on acquisitions made by the Group before 1 March 2004 has been offset against reserves. In the IFRS opening balance Assets classified as held for sale in accordance with IFRS 5 con- sheet, the balancing item from the conversion of financial state- sist of land and buildings held at EUR 2,497,000 (previous year: ments prepared in foreign currencies was offset against retained EUR 1,867,000). earnings.

Retained earnings include statutory reserves of 10 per cent of 26. Shareholders’ equity subscribed capital, amounting to EUR 12,365,000 which, in line with statutory regulations (Sec. 150 AktG [German Stock Corpor Changes in Group shareholders’ equity are shown in the state- ation Act]), are not available for distribution to shareholders. ment of changes in shareholders’ equity. 26.4. Other comprehensive income Capital management at the Nordzucker Group is founded on a Other comprehensive income is made up as follows: strong equity base and a sustainable dividend policy in order to secure current operations on the one hand and to enable a rea- Other comprehensive income sonable dividend yield for the shareholders on the other. As of TEUR 28/2/2013 29/2/2012 28 February 2013, the equity ratio came to 55 per cent (previous Fair value adjustment to derivatives year: 44 per cent). The Executive Board will put forward a pro- in cash flow hedges 897 246 posal at the Annual General Meeting to distribute a of dividend Currency differences from the con- EUR 1.80 per share (previous year: EUR 1.00 per share). solidation of foreign subsidiaries 58,004 51,436 Other comprehensive income 58,901 51,682 Nordzucker AG’s Articles of Association do not require any particu lar amount of equity. The Executive Board manages the Group with the aim of generating a profit. It does this by means of cap ital market-oriented targets for the company which are measured As of 28 February 2011, the reserve for fair value adjustments in terms of specific financial indicators. The main financial indica- to derivatives in cash flow hedges came to EUR 2,064,000 and tors for the Group are total operating profitability, return on sales, exchange-rate differences from the consolidation of foreign equity ratio and return on equity, for which targets have been set. subsidiaries recognised in equity to EUR 52,920,000.

26.1. Subscribed capital 26.5. Non-controlling interests As of 28 February 2013, subscribed capital (ordinary share cap Minority interests exist primarily in the following companies: ital) remained unchanged at EUR 123,651,328.00 and was div ided into 48,301,300 registered common shares. Non-controlling interests

TEUR 28/2/2013 29/2/2012 The ordinary share capital is fully paid in and, as in the previous Sucros OY 29,844 26,924 year, has a nominal share of subscribed capital of EUR 2.56 per AB Nordic Sugar Kėdainiai 16,929 14,278 share. Norddeutsche Flüssigzucker GmbH & Co. KG 2,458 0 As of the reporting date, Nordzucker Holding Aktiengesellschaft, Považský cukor a.s. 2,272 1,708 Braunschweig, Germany, had provided evidence that it held Cukrownia Melno S.A., i.L. 210 211 more than 50 per cent of the shares, with 76.23 per cent. Other companies 167 139 Non-controlling interests 51,880 43,260 26.2. Capital reserves The capital reserves have been formed from share premiums paid in the course of capital increases by Nordzucker AG. In the reporting year, 30 per cent of the interests in Nord- deutsche Flüssigzucker GmbH & Co. KG were sold. The state- 26.3. Retained earnings ment of changes in shareholders’ equity shows this transaction Retained earnings are made up of the net income earned in in the row “Other”. prior financial years and the current period by the companies included in the consolidated financial statements. Goodwill 94 Annual Report Nordzucker 2012/2013

27. Pension obligations Net pension obligations

TEUR 28/2/2013 29/2/2012 Provisions for pension obligations are made for accrued and cur- Change in present value of pension rent benefits of both currently active and former members of staff entitlements of the Nordzucker Group and their surviving dependents. Present value of pension entitlements at the beginning of the financial year 188,076 179,250 Service cost in the financial year 2,816 2,058 Benefit obligations are structured in line with the legal, fiscal and Interest expense for pensions economic conditions in each country. in the financial year 9,043 8,832 Pension payments -10,898 -10,885 The Group has both defined contribution plans and defined benefit Transfers of pension obligations plans. Pension commitments are based on collective agreements to other companies 0 -71 and in a few cases on individual agreements with fixed benefit Effects of curtailments and amounts. The defined benefit plans have commitments both cancellations of pension plans -2 -2 covered by provisions and funded by plan assets. Actuarial gain (-)/loss (+) in the financial year 32,612 8,751 Effects of changes in exchange rates 2,022 143 Pension provisions are determined in accordance with IAS 19 on Present value of pension entitlements the basis of actuarial assumptions. The following weighted vari at the end of the financial year 223,670 188,076 ables were used in the financial year 2012/2013 and the previous year: Change in plan assets Present value of plan assets for funded Parameters of pension obligations pension obligations at the beginning of the financial year 35,685 38,223 28/2/2013 29/2/2012 Contributions to pension funds/ plan assets 1,524 152 Discount rate (%) 3.45 4.75 Income from plan assets -5,039 -3,682 Salary increase (%) 2.50 2.50 Return on plan assets 1,516 992 Pension increase (%) 1.50 1.50 Present value of plan assets for funded pension obligations at the end of the financial year 33,686 35,685 Net pension obligations 189,984 152,391 For domestic companies in the Nordzucker Group, the assumptions Unrealised actuarial gains (+)/losses (-) -32,756 -12,383 for life expectancy are taken from the actuarial tables 2005 G by Dr Klaus Heubeck. Pension provisions 157,227 140,008

Expenses of EUR 22,635,000 (previous year: EUR 7,818,000) were incurred in 2012/2013 for defined benefit plans, which are made The forecast return on pension plan assets is EUR 3,170,000 up as follows: (previous year: EUR 2,861,000); the variation based on past experience for the reporting year was EUR -1,654,000 (previous Expenses for pensions year: EUR -1,868,000). As of 28 February 2011, the variation based on past experience was EUR -760,000 (28 February 2010: TEUR 28/2/2013 29/2/2012 EUR 496,000; 28 February 2009: EUR -620,000). Service cost 2,816 2,058 Effects of curtailments and cancellations of pension plans 0 -2 As of 28 February 2011, the present value of pension obligations Amortisation of unrealised actuarial was EUR 179,250,000 (28 February 2010: EUR 177,181,000; gains (-) and losses (+) 13,877 -209 28 February 2009: EUR 137,657,000), the present value of plan Interest expense for provisions assets was EUR 38,223,000 (28 February 2010: EUR 39,335,000; for pension obligations in the 28 February 2009: EUR 41,667,000), the unrealised actuarial gains financial year 9,043 8,832 (+) and losses (-) amounted to EUR -1,633,000 (28 February Return on plan assets -3,170 -2,861 2010: EUR -2,542,000; 28 February 2009: EUR +10,942,000) and Effects of changes in exchange rates 68 0 the pension provisions to EUR 139,394,000 (28 February 2010: Expenses for pensions 22,635 7,818 EUR 135,304,000; 28 February 2009: EUR 106,932,000). No unrealised gains or losses were reported on plan assets in this period. Provisions for pensions and similar obligations disclosed in the balance sheet changed as follows: Notes 95

28. Other provisions

Other provisions are made up as follows:

Other provisions

As of Exchange- As of TEUR 29/2/2012 rate effects Addition Utilisation Reversal 28/2/2013 Recultivation obligations 6,615 53 0 252 100 6,316 Expenses for anniversaries 2,253 23 644 108 0 2,812 Partial early retirement 5,878 0 1,688 754 0 6,812 Profit sharing, bonuses and other gratuities 11,113 7 13,668 10,823 297 13,668 Early retirement, severance pay 4,639 0 109 1,670 33 3,045 Miscellaneous other provisions 60,976 -151 48,280 28,250 7,284 73,571 Other provisions 91,474 -68 64,389 41,857 7,714 106,224

Of total other provisions, EUR 32,540,000 (previous year: provisions made in prior years for probable production levy EUR 23,415,000) are non-current. payments.

Provisions for recultivation obligations include the forecast expenses for the demolition of buildings and recultivation of land 29. Financial liabilities used for operations as well as demolition obligations at former production sites. Financial liabilities are made up as follows:

The provision for early retirement and severance payments covers Financial liabilities the Group’s forecast obligations under existing collective early TEUR 28/2/2013 29/2/2012 retirement agreements as part of a redundancy settlement in connection with changes to the sugar market regime that will Liabilities to banks 70,050 255,577 come into effect in subsequent years. This item also includes obligations under other individual agreements. Liabilities from finance leases 634 748 Financial liabilities 70,684 256,325 Miscellaneous other provisions were made for bonuses and commissions, onerous contracts, outstanding invoices and other anticipated expenses. In the reporting year, EUR 10,939,000 As of 28 February 2013, liabilities to banks have the following was reclassified to this item from other liabilities. This relates to term structure:

Liabilities to banks

Remaining term Remaining term Remaining term TEUR of up to one year of one to five years of more than five years Total 28/2/2013 66,013 0 4,037 70,050 29/2/2012 167,741 81,008 6,828 255,577

Interest on bank loans partly depends on certain financial indicators, such as the equity ratio and EBITDA in relation to debt and interest expense.

On 17 June 2011 a syndicated loan was taken out for a period of five years to secure Nordzucker AG’s access to liquidity. 96 Annual Report Nordzucker 2012/2013

The syndicated loan is available to fund short-term operating 32. Other financial liabilities business and includes a revolving credit for EUR 465,000,000, of which EUR 395,892,000 (previous year: EUR 365,000,000) had Other financial liabilities are made up as follows: not been used in the reporting year. Other financial liabilities Further bilateral credit lines were also available as of the reporting TEUR 28/2/2013 29/2/2012 date, of which EUR 47,727,000 (previous year: EUR 44,957,000) Negative fair value of derivatives 2,615 13,002 had not been used. Miscellaneous financial liabilities 4,061 4,079 Other financial liabilities 6,676 17,081 In the financial year, Nordzucker did not pledge any financial assets within the meaning of IFRS 7.14 as collateral for financial liabilities. Of total other financial liabilities, EUR 294,000 (previous year: EUR 1,181,000) are non-current. 30. Trade payables With the exception of derivatives, the other financial liabilities are Trade payables are made up as follows: classified as other financial liabilities and liabilities towards related parties. The negative fair values of derivatives are carried in the Trade payables derivatives class of financial instruments. TEUR 28/2/2013 29/2/2012 Liabilities towards sugar beet suppliers 393,530 326,752 33. Other liabilities Other trade payables 71,895 128,370 Trade payables 465,425 455,122 Other liabilities are made up as follows:

Other liabilities

TEUR 28/2/2013 29/2/2012 31. Liabilities towards related parties Outstanding social security contributions 23,279 19,700 Liabilities towards related parties are made up as follows: Investment grants, subsidies and other support payments 11,584 16,897 Liabilities towards related parties Deferrals 3,852 5,452 Advance payments received TEUR 28/2/2013 29/2/2012 for orders 95 222 Liabilities towards associated Miscellaneous other liabilities 11,312 29,170 companies and joint ventures 5,500 5,500 Other liabilities 50,122 71,441 Liabilities towards other related parties 16,246 11,498 Liabilities towards related parties 21,746 16,998 Of total other liabilities, EUR 12,555,000 (previous year: EUR 20,985,000) are non-current.

EUR 5,500,000 of the item (previous year: EUR 5,500,000) is non- Liabilities from investment grants, subsidies and other support current. payments derive from public subsidies in connection with the purchase or production of subsidised property, plant and equip- Liabilities towards related parties have been classified under other ment. They are reversed through profit and loss over the useful financial liabilities and liabilities towards related parties. life of the subsidised assets.

Miscellaneous other liabilities mainly consist of liabilities towards staff for outstanding wages and salaries. Notes 97

Notes to the consolidated Net income from financial instruments – classified under the cash flow statement measurement categories defined in IAS 39 and listed under Note 3.8 – results from changes in fair value, write-downs, write-backs and disposals. Also included are interest income and expense and 34. Components of cash and cash equivalents other earnings components from financial instruments not held at fair value through profit and loss. The components of cash and cash equivalents are the same as in the balance sheet. They consist of liquid funds that are available Net interest includes interest income of EUR 411,000 (previous at any time. year: EUR 1,826,000) and interest expense of EUR 7,174,000 (previous year: EUR 30,289,000) from financial instruments not No cash or cash equivalents disclosed in the consolidated cash measured at fair value through profit and loss. flow statement were used for bank guarantees or escrow payments for warranties. In the reporting period there was no interest income from impaired financial assets.

35. Non-cash transactions 37. Risk management No significant non-cash transactions took place for financing and investing purposes in the reporting year and the previous year. 37.1. General remarks Nordzucker has a comprehensive system in place throughout the company for the early identification and permanent monitoring of risk as well as for risk measurement and limitation. The Other disclosures integrated risk management system is used to identify risks and the appropriate steps fully and to include them in operational 36. Other disclosures on financial and strategic planning. Potential risks such as default and credit instruments risks, liquidity, exchange-rate and interest-rate risks are assessed permanently as part of risk management, whereby appropriate Financial instruments are defined as contracts that give rise to a steps are developed and implemented. Operating and strategic financial asset for one entity and a financial liability or equity in- decision making always takes risk aspects into account. The strument for the counterparty. Group-wide reporting and controlling system ensures that all the responsible decision-makers are continually informed. In this context, financial assets include cash and cash equivalents, contractual rights to receive cash or other financial assets such By the nature of its business, the Nordzucker Group is exposed as trade receivables, derivative financial instruments and equity to default and credit risks, liquidity and exchange-rate risks and instruments of another company. Financial liabilities include con- interest-rate risks. These are controlled by means of suitable risk tractual obligations to deliver cash or other financial assets. These management processes. The Nordzucker Group uses derivative include borrowing, current loans, trade payables and derivatives. financial instruments to hedge against interest- and exchange-rate fluctuations and to hedge costs of raw materials. The use of these The following presentation provides information about the carry- derivatives is governed by Group guidelines and restricted to the ing amounts of the individual measurement categories. It also hedging of existing transactions or those which are sufficiently shows the fair value for each class of financial instrument. The likely to take place. The guidelines define the individuals respon- presentation enables a comparison between carrying amounts sible, the limits and reporting, and stipulate a strict separation be- and fair values. tween trading and clearing. This transparent and functional manner of organising risk management processes applies to all types For cash and other current primary financial instruments, i.e. trade of risk. receivables, financial assets, derivative financial instruments, and other receivables and liabilities, the fair value and the carrying 37.2. Default risk amount on each balance sheet date are the same. Credit or default risk is the risk that business partners do not meet their contractual payment obligations, causing the The Nordzucker Group does not make use of the fair value Nordzucker Group to suffer a loss as a result. As part of credit option. As of the balance sheet date, there are also no financial risk management, business partners are subject to a credit scor- instruments in the category “held to maturity”. ing in order to reduce credit risk. Identifiable default risks are 98 Annual Report Nordzucker 2012/2013

Overview by category and by class of financial instruments for the previous year (2011/2012) Nordzucker AG, Braunschweig, Germany

Assets

Valuation Total 29/2/2012 Nominal value Amortised cost Fair value

Cash & cash equivalents/ Available-for-sale Held for trading Derivatives in hedging Valuation category cash reserve Loans and receivables financial assets (AFS) (FVTPL-HFT) relationships under IAS 39

TEUR At cost Fair value At cost Fair value At cost Fair value At cost Fair value At cost Fair value At cost Fair value

Financial investments 20,429 10 0 0 70 0 20,359 10 0 0 0 0

Financial assets and other receivables 5,721 0 0 0 5,721 0 0 0 0 0 0 0

Trade receivables 194,423 0 0 0 194,423 0 0 0 0 0 0 0

Derivatives 0 7,695 0 0 0 0 0 0 0 5,910 0 1,785

Cash and cash equivalents 7,407 0 7,407 0 0 0 0 0 0 0 0 0

Total 227,980 7,705 7,407 0 200,214 0 20,359 10 0 5,910 0 1,785

Equity and liabilities

Valuation Total 29/2/2012 Amortised cost Fair value

Financial liabilities valued at Derivatives in hedging Held for trading Fair value option Valuation category amortised cost relationships under IAS 39 (FVTPL-HFT) (FVTPL-FVO)

TEUR At cost Fair value At cost Fair value At cost Fair value At cost Fair value At cost Fair value

Financial liabilities 256,325 0 256,325 0 0 0 0 0 0 0

Trade payables 455,122 0 455,122 0 0 0 0 0 0 0

Other financial liabilities and liabilities towards related parties 21,077 0 21,077 0 0 0 0 0 0 0

Derivatives 0 13,002 0 0 0 1,228 0 11,774 0 0

Total 732,524 13,002 732,524 0 0 1,228 0 11,774 0 0 Notes 99

Assets

Valuation Total 29/2/2012 Nominal value Amortised cost Fair value

Cash & cash equivalents/ Available-for-sale Held for trading Derivatives in hedging Valuation category cash reserve Loans and receivables financial assets (AFS) (FVTPL-HFT) relationships under IAS 39

TEUR At cost Fair value At cost Fair value At cost Fair value At cost Fair value At cost Fair value At cost Fair value

Financial investments 20,429 10 0 0 70 0 20,359 10 0 0 0 0

Financial assets and other receivables 5,721 0 0 0 5,721 0 0 0 0 0 0 0

Trade receivables 194,423 0 0 0 194,423 0 0 0 0 0 0 0

Derivatives 0 7,695 0 0 0 0 0 0 0 5,910 0 1,785

Cash and cash equivalents 7,407 0 7,407 0 0 0 0 0 0 0 0 0

Total 227,980 7,705 7,407 0 200,214 0 20,359 10 0 5,910 0 1,785

Equity and liabilities

Valuation Total 29/2/2012 Amortised cost Fair value

Financial liabilities valued at Derivatives in hedging Held for trading Fair value option Valuation category amortised cost relationships under IAS 39 (FVTPL-HFT) (FVTPL-FVO)

TEUR At cost Fair value At cost Fair value At cost Fair value At cost Fair value At cost Fair value

Financial liabilities 256,325 0 256,325 0 0 0 0 0 0 0

Trade payables 455,122 0 455,122 0 0 0 0 0 0 0

Other financial liabilities and liabilities towards related parties 21,077 0 21,077 0 0 0 0 0 0 0

Derivatives 0 13,002 0 0 0 1,228 0 11,774 0 0

Total 732,524 13,002 732,524 0 0 1,228 0 11,774 0 0 100 Annual Report Nordzucker 2012/2013

Overview by category and by class of financial instruments for the financial year 2012/2013 Nordzucker AG, Braunschweig, Germany

Assets

Valuation Total 28/2/2013 Nominal value Amortised cost Fair value

Cash & cash equivalents/ Available-for-sale Held for trading Derivatives in hedging Valuation category cash reserve Loans and receivables financial assets (AFS) (FVTPL-HFT) relationships under IAS 39

TEUR At cost Fair value At cost Fair value At cost Fair value At cost Fair value At cost Fair value At cost Fair value

Financial investments 23,537 0 0 0 64 0 23,473 10 0 0 0 0

Financial assets and other receivables 16,125 0 0 0 16,125 0 0 0 0 0 0 0

Trade receivables 212,425 0 0 0 212,425 0 0 0 0 0 0 0

Derivatives 0 5,033 0 0 0 0 0 0 0 2,038 0 2,995

Cash and cash equivalents 11,297 0 11,297 0 0 0 0 0 0 0 0 0

Total 263,384 5,033 11,297 0 228,614 0 23,473 10 0 2,038 0 2,995

Equity and liabilities

Valuation Total 28/2/2013 Amortised cost Fair value

Financial liabilities valued at Derivatives in hedging Held for trading Fair value option Valuation category amortised cost relationships under IAS 39 (FVTPL-HFT) (FVTPL-FVO)

TEUR At cost Fair value At cost Fair value At cost Fair value At cost Fair value At cost Fair value

Financial liabilities 70,684 0 70,684 0 0 0 0 0 0 0

Trade payables 465,424 0 465,424 0 0 0 0 0 0 0

Other financial liabilities and liabilities towards related parties 25,806 0 25,806 0 0 0 0 0 0 0

Derivatives 0 2,615 0 0 0 7 0 2,608 0 0

Total 561,914 2,615 561,914 0 0 7 0 2,608 0 0 Notes 101

Assets

Valuation Total 28/2/2013 Nominal value Amortised cost Fair value

Cash & cash equivalents/ Available-for-sale Held for trading Derivatives in hedging Valuation category cash reserve Loans and receivables financial assets (AFS) (FVTPL-HFT) relationships under IAS 39

TEUR At cost Fair value At cost Fair value At cost Fair value At cost Fair value At cost Fair value At cost Fair value

Financial investments 23,537 0 0 0 64 0 23,473 10 0 0 0 0

Financial assets and other receivables 16,125 0 0 0 16,125 0 0 0 0 0 0 0

Trade receivables 212,425 0 0 0 212,425 0 0 0 0 0 0 0

Derivatives 0 5,033 0 0 0 0 0 0 0 2,038 0 2,995

Cash and cash equivalents 11,297 0 11,297 0 0 0 0 0 0 0 0 0

Total 263,384 5,033 11,297 0 228,614 0 23,473 10 0 2,038 0 2,995

Equity and liabilities

Valuation Total 28/2/2013 Amortised cost Fair value

Financial liabilities valued at Derivatives in hedging Held for trading Fair value option Valuation category amortised cost relationships under IAS 39 (FVTPL-HFT) (FVTPL-FVO)

TEUR At cost Fair value At cost Fair value At cost Fair value At cost Fair value At cost Fair value

Financial liabilities 70,684 0 70,684 0 0 0 0 0 0 0

Trade payables 465,424 0 465,424 0 0 0 0 0 0 0

Other financial liabilities and liabilities towards related parties 25,806 0 25,806 0 0 0 0 0 0 0

Derivatives 0 2,615 0 0 0 7 0 2,608 0 0

Total 561,914 2,615 561,914 0 0 7 0 2,608 0 0 102 Annual Report Nordzucker 2012/2013

Overview of the net earnings from financial instruments Nordzucker AG, Braunschweig, Germany

28/2/2013 From subsequent valuation

TEUR From From At Currency Net income/loss interest dividends fair value conversion Write-down Write-back Disposal 2012/2013

Cash and cash equivalents/cash reserve 329 0 0 0 0 0 0 329

Loans and receivables 82 0 0 236 -562 104 0 -140

Available-for-sale financial assets (AFS) 3 4,713 930 0 0 0 0 5,646

Held-for-trading financial instruments (FAHFT and FLHFT) 0 0 -2,582 0 0 0 0 -2,582

Financial liabilities held at amortised cost (FLAC) -7,213 0 0 0 0 0 0 -7,213

Total -6,799 4,713 -1,652 236 -562 104 0 -3,960

29/2/2012 From subsequent valuation

TEUR From From At Currency Net income/loss interest dividends fair value conversion Write-down Write-back Disposal 2011/2012

Cash and cash equivalents/cash reserve 1,167 0 0 0 0 0 0 1,167

Loans and receivables 659 0 0 -773 -907 2 0 -1,019

Available-for-sale financial assets (AFS) -613 3,471 -2,587 0 0 0 0 271

Held-for-trading financial instruments (FAHFT and FLHFT) 0 0 2,116 0 0 0 0 2,116

Financial liabilities held at amortised cost (FLAC) -29,676 0 0 0 0 0 0 -29,676

Total -28,463 3,471 -471 -773 -907 2 0 -27,141 Notes 103

28/2/2013 From subsequent valuation

TEUR From From At Currency Net income/loss interest dividends fair value conversion Write-down Write-back Disposal 2012/2013

Cash and cash equivalents/cash reserve 329 0 0 0 0 0 0 329

Loans and receivables 82 0 0 236 -562 104 0 -140

Available-for-sale financial assets (AFS) 3 4,713 930 0 0 0 0 5,646

Held-for-trading financial instruments (FAHFT and FLHFT) 0 0 -2,582 0 0 0 0 -2,582

Financial liabilities held at amortised cost (FLAC) -7,213 0 0 0 0 0 0 -7,213

Total -6,799 4,713 -1,652 236 -562 104 0 -3,960

29/2/2012 From subsequent valuation

TEUR From From At Currency Net income/loss interest dividends fair value conversion Write-down Write-back Disposal 2011/2012

Cash and cash equivalents/cash reserve 1,167 0 0 0 0 0 0 1,167

Loans and receivables 659 0 0 -773 -907 2 0 -1,019

Available-for-sale financial assets (AFS) -613 3,471 -2,587 0 0 0 0 271

Held-for-trading financial instruments (FAHFT and FLHFT) 0 0 2,116 0 0 0 0 2,116

Financial liabilities held at amortised cost (FLAC) -29,676 0 0 0 0 0 0 -29,676

Total -28,463 3,471 -471 -773 -907 2 0 -27,141 104 Annual Report Nordzucker 2012/2013

accounted for by write-downs, whereby the risk of default on In the reporting period there were no financial assets which receivables is in part limited by trade credit insurance. would have become overdue and/or impaired had the contrac tual terms not been renegotiated. The Nordzucker Group does not see itself as exposed to a significant credit risk from any individual counterparty. As the customer For the portion of the receivables portfolio which has neither structure for the Nordzucker Group is diverse, there is only a limit- been written down nor is overdue, there is no indication as of ed concentration of credit risk. There is therefore no special moni- the reporting date that the Nordzucker Group’s debtors will not toring and management on the basis of specific risk categories to fulfil their payment obligations. avoid a concentration of risk. The following table shows total carrying amounts, the carrying The maximum default risk is equal to the carrying amounts for the amounts for financial assets which are neither overdue nor im- individual categories of financial assets, less all write-downs, and paired and the term structure of financial assets which are not irrespective of any agreements to reduce risk. (See overview of impaired but overdue, for the relevant classes of financial instru- classes and categories of financial instruments.) ments:

Not written down as of the reporting date Term structure of financial assets and overdue as follows:

Neither written Total down nor over- Between Between Between TEUR carrying due as of the Less than 31 and 60 61 and 90 91 and 180 More than As of 28/2/2013 amount reporting date 30 days days days days 181 days Financial investments 23,537 23,537 0 0 0 0 0 Financial assets and other receivables 16,125 16,125 0 0 0 0 0 Trade receivables 212,424 191,083 15,143 1,535 1,316 1,271 2,076 Total 252,086 230,745 15,143 1,535 1,316 1,271 2,076

As of 29/2/2012 Financial investments 20,439 20,439 0 0 0 0 0 Financial assets and other receivables 5,721 5,721 0 0 0 0 0 Trade receivables 194,422 157,703 23,524 830 1,957 9,866 542 Total 220,582 183,863 23,524 830 1,957 9,866* 542

*) The receivables are offset by corresponding liabilities, which were applied after the reporting date.

The total carrying amount of financial instruments in the classes 37.3. Liquidity risk financial investments, financial assets, and other receivables and Liquidity risk is the risk that the company cannot meet its pay- trade receivables before impairment is EUR 254,145,000 (previ- ment obligations at the contractually agreed time. To ensure the ous year: EUR 224,122,000). Write-downs of EUR 2,059,000 Nordzucker Group’s liquidity, the liquidity needs are monitored (previous year: EUR 3,540,000) were made. and planned centrally. Sufficient cash is held to be able to meet all obligations when they are due. Current lines of credit, which In the current and previous reporting period the Nordzucker can be drawn down as needed, provide additional liquidity. Group has neither pledged nor sold collateral within the meaning of IFRS 7.15. The following table shows contractually agreed (undiscounted) interest and capital repayments for the primary financial liabilities and for derivative financial instruments. Notes 105

Term to maturity Term to Term to Term to TEUR Carrying Gross inflow/ maturity up maturity from maturity more As of 28/2/2013 amount outflow to one year one to 5 years than 5 years Financial liabilities 70,684 -71,359 65,284 0 6,075 Trade payables 465,425 -465,425 465,425 0 0 Other financial liabilities and liabilities towards related parties 25,806 -25,806 20,306 5,500 0 Derivative financial liabilities 2,615 -2,615 2,615 0 0 Derivative financial assets 5,033 5,033 5,033 0 0 Total 569,563 -560,172 558,663 5,500 6,075

As of 29/2/2012 Financial liabilities 256,325 -265,666 172,998 84,871 7,797 Trade payables 455,122 -455,122 455,122 0 0 Other financial liabilities and liabilities towards related parties 21,077 -21,077 15,577 5,500 0 Derivative financial liabilities 13,002 -13,002 13,002 0 0 Derivative financial assets 7,695 7,695 7,695 0 0 Total 753,221 -747,172 664,394 90,371 7,797

The term-to-maturity analysis includes all instruments held for The net risk position is adjusted for planned transactions within which payments have been contractually agreed as of the report- the next twelve months and for existing hedging instruments ing date. Forecast payments on expected future liabilities are not (even if no hedge accounting takes place in accordance with included. Floating-rate interest payments on financial instruments IAS 39). are determined using the last interest rates set before the balance sheet date. Financial liabilities repayable at any time are categor Foreign currency positions in Danish Crowns and Lithuanian Litas ised according to their estimated repayment dates. are only exposed to an insignificant exchange-rate risk as these states are part of the European Union’s exchange-rate mecha- 37.4. Market risks nism. The exchange-rate risk from foreign currency positions in Market risks arise from potential changes in risk factors, which US Dollars is also insignificant as the amounts are minor and are lead to fluctuations in market values or alterations in future cash hedged directly. flows. The relevant risk factors for the Nordzucker Group are exchange-rate and interest-rate fluctuations. Furthermore, the Nordzucker Group hedges a large proportion of actual currency risks using the natural hedge approach and by a. Exchange-rate risk using derivatives, so that the remaining net risk exposure is insig- Due to its business operations in different countries which are nificant. not part of the Eurozone, the Nordzucker Group is exposed to an exchange-rate risk. b. Interest-rate risk Due to its borrowing activities, the Nordzucker Group is exposed IFRS 7 requires the disclosure of a sensitivity analysis to illustrate to interest-rate risk. Financing is arranged in various currency areas, the dimensions of exchange-rate risks. A sensitivity analysis shows although the most frequent currency is the Euro. Interest-rate the effects which changes in given exchange rates would have on risks from financing activities denominated in Hungarian Forints, profit and loss and equity for the Nordzucker Group as of the re- Swedish Crowns, Lithuanian Litas, Polish Zloty or Danish Crowns porting date. The effects are determined by applying a hypothet are insignificant as the amounts involved are minor. ical change of 10 per cent in the exchange rates to the amount of the relevant items in foreign currencies (the net risk position in As of the reporting date, Group companies hold a total of EUR the foreign currency) as of the reporting date. It is assumed that 65.2 million (previous year: EUR 256.3 million) in interest-bearing the exposure at year-end is representative of the whole year. or interest-rate-sensitive instruments. They consist exclusively of 106 Annual Report Nordzucker 2012/2013

floating-rate instruments (previous year: EUR 244.6 million). The accounting purposes in line with IAS 39. As of the reporting previous year, an additional EUR 11.7 million related to fixed-rate date, the Nordzucker Group had not taken out any interest- instruments. rate derivatives, since based on its financial planning it could not identify any exposure to interest-rate risk as of this date. In accordance with IFRS 7, interest-rate risks are illustrated using sensitivity analyses. The sensitivity analysis determines the effect The previous year, interest-rate swaps with a total nominal value of a change in market interest rates on profit and loss and equity of EUR 196.6 million were in place to hedge the interest-rate as of the reporting date. risk. The corresponding market value the previous year was EUR -1,228,000. In contrast to the previous year, the Nordzucker Group had no cash flow hedges to hedge the interest-rate risk of floating-rate It is generally assumed that the hedged transactions will instruments as of the reporting date, since these funds are sched actually take place. If a hedging transaction is cancelled, the uled to be repaid shortly and no further loans are to be taken out amounts accumulated in other comprehensive income during at floating rates of interest thereafter. In view of the remaining the term of the transaction are reversed when the hedged item duration of the derivatives, a hypothetical change in the is recognised in profit and loss or if it no longer takes place. relevant interest rates for floating-rate instruments of +/- 50 basis points would therefore not have a significant effect in relation In addition to the natural hedge approach for Poland and Sweden, to the Group’s equity and net interest. the gross positions are hedged to reduce exchange-rate risk. Exchange-rate risks are also hedged by means of appropriate c. Hedging transactions derivatives such as currency futures – including for periods of The Nordzucker Group uses derivative financial instruments less than a year. solely to hedge interest-rate and exchange-rate risks as well as price risks for raw materials. As of the balance sheet date, the Group holds derivatives aimed at hedging currency risks and price risks for sugar

As a rule, the existing interest-rate risk for floating-rate loans is and energy (CO2). The following table provides an overview reduced by means of interest-rate derivatives. All interest-rate of the derivative financial instruments used in the Group derivatives are designated as cash flow hedges for hedge and their market values:

Derivative financial instruments 2012/2013

Total Market Market Nominal market value value TEUR value value assets liabilities Currency-related transactions forward exchange contracts 186,388 -125 982 -1,107 Currency swaps 321,293 2,747 2,995 -248 Commodity price-related transactions Sugar future 41,520 -455 1,056 -1,511 Total 549,201 2,167 5,033 -2,866

All derivatives mature within one year. In the reporting period, EUR 930,000 (previous year: EUR -2,587,000) was recognised in equity. Derivatives with market values of EUR 2,995,000 (assets) and EUR 7,000 (liabilities) are not held for trading. A sensitivity analysis A fair value hierarchy is to be established for the measurement of for the market values in the balance sheet would not produce a financial instruments at fair value, which categorises the inputs into significant effect in relation to the Group’s equity and earnings. three levels. Measurement at level 1 is based on quoted prices on active markets, which are used directly. Measurement at level 2 The effective portion of changes in the market value of cash flow uses prices derived from quoted prices on active markets. Indi- hedges is recognised in equity without effect on profit and loss. vidual measurement parameters are used for measurement at Notes 107

level 3. The Nordzucker Group measures financial instruments on 39. Related party transactions the basis of level 2 inputs. For the Nordzucker Group, related parties within the meaning of IAS 24 The Group does not measure the derivatives itself. The fair value are individuals and companies which control the Group or exercise calculation (mark to market) is carried out by the contracting significant influence over it or are controlled or significantly influenced banks using recognised mathematical models and existing market by the Group. The first category includes the active members of the data (measurement level 2). Executive Board and Supervisory Board of Nordzucker AG and its majority shareholder Nordzucker Holding Aktiengesellschaft. The subsidiaries, parent company, associated companies and joint ven- 38. Significant subsidiaries tures in the Nordzucker Group are also defined as related parties. and joint ventures Receivables from and liabilities towards related parties are based on arm’s length transactions. Significant subsidiaries and joint ventures Group stake The following commercial relationships existed with related parties Central Europe region in addition to those existing with fully consolidated subsidiaries: NORDZUCKER GmbH & Co. KG, Braunschweig 100 % fuel 21 GmbH & Co. KG, Klein Wanzleben 100 % Related party transactions Norddeutsche Flüssigzucker GmbH & Co. KG, Braunschweig 70 % TEUR 28/2/2013 29/2/2012 Northern Europe region Balance sheet Receivables from related parties 4,263 233 Nordic Sugar A/S, Copenhagen, Denmark 100 % Nordic Sugar AB, Malmö, Sweden 100 % Liabilities towards related parties 21,745 16,997 Suomen Sokeri OY, Kantvik, Finland 80 %

Sucros OY, Säkvlä, Finland 80 % 1/3/2012- 1/3/2011- AB Nordic Sugar Kėdainiai, Vilnius, Lithuania 71 % TEUR 28/2/2013 29/2/2012 Nordzucker Ireland Limited, Dublin, Ireland 100 % Income statement Services provided to related parties 391 107 Eastern Europe region Net financial income/loss -822 -216 Považský cukor a.s., Trenčianska Teplá, Slovakia 97 % Nordzucker Polska S.A., Przeżmierowo, Poland 99 %

Joint ventures Receivables from related parties of EUR 4,105,000 (previous year: NP Sweet A/S, Copenhagen, Denmark 50 % EUR -5,693,000) were owed almost exclusively by Nordzucker MEF Melasse-Extraktion Frellstedt GmbH, Frellstedt, Germany 50 % Holding Aktiengesellschaft, Braunschweig.

Liabilities towards related parties consist mainly of EUR 5,500,000 The list of Nordzucker AG’s and the Group’s equity investments (previous year: EUR 5,500,000) owed to MEF Melasse-Extraktion is filed with and published in the electronic edition of the Ger- Frellstedt GmbH, Frellstedt, EUR 6,150,000 (previous year: EUR man Federal Gazette (Elektronischer Bundesanzeiger). 3,628,000) to Union-Zucker Südhannover Gesellschaft mit be- schränkter Haftung, Nordstemmen, EUR 3,542,000 (previous The following trading companies, structured as limited partner- year: EUR 1,966,000) to Nordharzer Zucker Aktiengesellschaft, ships (GmbH & Co. KG), Schladen, and for the first time, EUR 3,339,000 to SWEETGREDI- ENTS GmbH & Co. KG, Nordstemmen. ● NORDZUCKER GmbH & Co. KG, Braunschweig ● fuel 21 GmbH & Co. KG, Klein Wanzleben Nordzucker Holding Aktiengesellschaft, Union-Zucker Südhannover ● Norddeutsche Flüssigzucker GmbH & Co. KG, Braunschweig Gesellschaft mit beschränkter Haftung and Nordharzer Zucker Aktien gesellschaft are shareholders of Nordzucker AG; the liabilities relate are exempt from the obligation to prepare annual financial state- to current accounts. The remaining liabilities relate to other related ments in accordance with the regulations applicable to compan parties and stem largely from loans and trade in goods and services. ies with limited liability pursuant to Sec. 264b HGB (German Commercial Code). The provision of services for related companies concerns Nord- zucker Holding Aktiengesellschaft, Braunschweig, and the net financial result is from associated companies and joint ventures. 108 Annual Report Nordzucker 2012/2013

40. Contingent liabilities 41. Other financial obligations

The Group has the following contingent liabilities: The Group’s other financial obligations are made up as follows:

Contingent liabilities Other financial obligations

TEUR 28/2/2013 29/2/2012 TEUR 28/2/2013 29/2/2012 Liabilities for securities 1,395 1,288 Purchase commitments for property, 21,463 15,448 plant and equipment Maintenance obligations 0 0 Finance leases 815 985 As of 28 February 2013, items of property, plant and equipment Operating leases/rent 12,614 7,594 held at EUR 0 (previous year: EUR 42,214,000) have been Other financial obligations 34,892 24,027 pledged as collateral for liabilities.

As of 28 February 2013, total future payment obligations from rental and lease contracts are made up as follows:

Rental and leasing agreements Remaining Remaining term Remaining term term of more TEUR of up to one year of one to five years than five years Total Future payments for finance leases 152 558 105 815 Future payments for operating leases 3,903 7,740 971 12,614

As of 28 February 2013, future payments under finance leases are as follows:

Finance leases Remaining Remaining term Remaining term term of more TEUR of up to one year of one to five years than five years Total Principal 123 495 103 721 Interest 29 63 2 94 Payment 152 558 105 815

42. Auditors’ fees

Companies in the Nordzucker Group purchased services for EUR 352,000 from Ernst & Young GmbH in connection with the statutory audit of financial statements for the Nordzucker Group and Nordzucker AG, as well as tax advisory services for EUR 136,000 and other services for EUR 412,000. Notes 109

43. Supervisory Board and Executive Board Ulf Gabriel, electrician, Banteln Dieter Woischke, In the financial year 2012/2013 the Supervisory Board was made electrician, Algermissen, Vice Chairman up as follows: Marina Strootmann, Industrial clerk, Chair of the Works Council, Nordzucker AG, Braunschweig As shareholder representatives Hans-Christian Koehler, The members of the Executive Board in the financial year farmer, Barum-Eppensen, 2012/2013 were as follows: Chairman Hartwig Fuchs, Helmut Meyer, Hamburg, farmer, Betheln, Chief Executive Officer Vice Chairman Axel Aumüller, Dr Harald Isermeyer, Oelber a.w.W., farmer, Vordorf Chief Operating Officer Gerhard Borchert, Mats Liljestam, farmer, Brome Höllviken, Sweden, Chief Marketing Officer Michael Gerlif, CFO of Lekkerland AG & Co. KG, Frechen Dr Niels Pörksen, Limburgerhof, Rainer Knackstedt, Chief Agricultural Officer farmer, Dedeleben Dr Michael Noth, Matts Eskil Rosendahl, Braunschweig, consultant, Huddinge, Sweden Chief Financial Officer Hans-Heinrich Prüße, farmer, Lehrte-Ahlten (until 12 July 2012) Hans Jochen Bosse, 44. Remuneration report farmer, Ohrum In the following section the principles of remuneration for Dr Karl-Heinz Engel, Managing Director of Hochwald Nahrungsmittel-Werke GmbH, Riol members of the Executive Board and Supervisory Board will be explained together with disclosures on shares held by members Dr Clemens Große Frie, CEO of AGRAVIS RAIFFEISEN AG, Münster, Hanover of the Executive Board and Supervisory Board. Dr Hans Theo Jachmann, Managing Director of Syngenta Agro GmbH and 44.1. Remuneration of the Executive Board Syngenta Germany GmbH, Maintal The structure and amount of Executive Board remuneration are Jochen Johannes Juister, determined and regularly reviewed by the full Supervisory farmer, Nordhastedt Board following a proposal from the Human Resources Commit- Andreas Scheffrahn, tee of the Supervisory Board. farmer, Cramme Helmut Bleckwenn, The criteria for determining the remuneration of individual farmer, Garmissen (since 12 July 2012) Executive Board members are their responsibilities, personal performance, the economic situation, business success, future As employee representatives prospects, sustainable corporate development and also the ex- Rolf Huber-Frey, tent to which the remuneration is generally accepted considering businessman, Freiburg (until 12 July 2012) the sphere of comparison and remuneration structures applicable Wolfgang Wiesener, elsewhere in the company. metalworker, Uelzen, Vice Chairman (until 12 July 2012) Olaf Joern, The total remuneration of Executive Board members includes mechatronics engineer, Uelzen (since 12 July 2012) monetary payments, benefit commitments and other commit- Gerd von Glowczewski, ments such as the provision of a company car. The monetary metalworker, Schladen remuneration components consist of a fixed annual salary, paid Marie Lohel, in twelve equal monthly instalments, as well as an earnings and energy electronics engineer, Magdeburg (since 12 July 2012) performance-related payment. The variable bonus can be up to Sigrun Krussmann, a maximum of 50 per cent of total compensation (total compen- laboratory technician, Seelze sation is made up of fixed annual salary and the variable bonus). 110 Annual Report Nordzucker 2012/2013

The structure of Executive Board remuneration is aligned with the Benefit commitments made to Executive Board members in the company’s sustainable development, as recommended by the event that their appointment to the Executive Board ends prema- German Corporate Governance Code (GCGC). In consequence, turely are limited to the value of the remaining term of their 45 per cent of variable remuneration is paid as a short-term in- contract. centive (STI) linked to the achievement of targets for the given financial year. The remaining 55 per cent is paid as a long-term This results in the following remuneration for individual members incentive (LTI), calculated on the basis of average performance of the Executive Board for the financial year 2012/2013: against targets for the past three years.

Remuneration of members of the Management Board 2012/2013 Cash payments Pensions Other1) Total

Variable EUR Salary annual bonus

Hartwig Fuchs 460,417 455,403 160,000 15,996 1,091,816 Axel Aumüller 350,000 346,188 125,000 27,958 849,146 Mats Liljestam 350,000 346,188 108,000 26,933 831,121 Dr Niels Pörksen 380,000 375,861 125,000 14,733 895,594 Dr Michael Noth 380,000 375,861 125,000 16,172 897,033 Total 1,920,417 1,899,501 643,000 101,792 4,564,710

1) Non-cash benefit for tax purposes, e.g. for company car etc.

For the financial year 2011/2012 the members of the Executive Board were remunerated as follows:

Remuneration of members of the Management Board 2011/2012 Cash payments Pensions Other1) Total

Variable EUR Salary annual bonus

Hartwig Fuchs 450,000 430,962 160,000 15,926 1,056,888 Axel Aumüller 341,667 327,212 125,000 28,298 822,177 Mats Liljestam 342,235 327,756 108,000 26,812 804,803 Dr Niels Pörksen 362,500 347,163 125,000 14,663 849,326 Dr Michael Noth 380,000 363,923 125,000 16,273 885,196 Total 1,876,402 1,797,016 643,000 101,972 4,418,390

1) Non-cash benefit for tax purposes, e.g. for company car etc.

The pension commitments given to members of the Executive Board are solely defined contribution commitments.

Former Executive Board members received pension payments of EUR 752,000. Nordzucker AG has recognised provisions of EUR 10,728,000 (previous year: EUR 9,463,000) for pension commitments to former Executive Board members.

In the financial year 2012/2013 members of the Executive Board received neither loans nor advances from the company. Notes 111

44.2. Remuneration of the Supervisory Board above 5 per cent. Subject to approval at the Annual General The remuneration of the Supervisory Board is based on the size Meeting, the dividend for the financial year 2012/2013 will be of the company, the duties and responsibilities of the members EUR 1.80 (previous year: EUR 1.00) per share, or 70.31 (previous of the Supervisory Board and the economic situation of the year: 39.06) per cent. The Chairman of the Supervisory Board company. The remuneration includes a dividend-related compo- receives treble the fixed remuneration for a normal member while nent and an attendance fee, in addition to a fixed payment. The the two Deputies and the Chairman of the Audit and Finance Chairman and Deputy Chairman and the Chairman of the Audit Committee each receive one-and-a-half times the amount. In and Finance Committee receive additional remuneration. addition, each member of the Supervisory Board receives EUR 300 per meeting for attendance at meetings in their capacity as The remuneration of the Supervisory Board is defined in Sec. 14 members of the Supervisory Board. of the Articles of Association of Nordzucker AG. Subject to the approval of the dividend proposal at the Annual According to these rules, members of the Supervisory Board re- General Meeting, the following payments will be made for the ceive a fixed remuneration of EUR 13,000 and a dividend-related financial year 2012/2013: payment of EUR 500 for every per cent of dividend distributed

Remuneration of members of the Supervisory Board 2012/2013 Fixed Variable Attendance Total EUR remuneration1 remuneration1 fee1 Total previous year Hans-Christian Koehler 39,000.00 32,656.25 16,200.00 87,856.25 62,711.58 Helmut Meyer 19,500.00 32,656.25 3,600.00 55,756.25 41,331.25 Dieter Woischke 19,500.00 32,656.25 6,900.00 59,056.25 42,831.25 Andreas Scheffrahn 19,500.00 32,656.25 9,300.00 61,456.25 41,458.03 Dr Harald Isermeyer 13,000.00 32,656.25 6,600.00 52,256.25 48,424.14 Gerhard Borchert 13,000.00 32,656.25 3,900.00 49,556.25 35,731.25 Hans Jochen Bosse 13,000.00 32,656.25 2,400.00 48,056.25 32,131.25 Dr Clemens Große Frie 13,000.00 32,656.25 2,400.00 48,056.25 33,631.25 Sigrun Krussmann 13,000.00 32,656.25 4,800.00 50,456.25 34,231.25 Dr Karl-Heinz Engel 13,000.00 32,656.25 1,500.00 47,156.25 31,231.25 Dr Hans Theo Jachmann 13,000.00 32,656.25 3,300.00 48,956.25 33,031.25 Jochen Johannes Juister 13,000.00 32,656.25 5,400.00 51,056.25 32,431.25 Gerd von Glowczewski 13,000.00 32,656.25 2,400.00 48,056.25 32,431.25 Rainer Knackstedt 13,000.00 32,656.25 3,300.00 48,956.25 33,031.25 Michael Gerlif 13,000.00 32,656.25 4,200.00 49,856.25 33,031.25 Marina Strootmann 13,000.00 32,656.25 5,100.00 50,756.25 34,231.25 Ulf Gabriel 13,000.00 32,656.25 4,800.00 50,456.25 23,133.67 Matts Eskil Rosendahl 13,000.00 32,656.25 4,500.00 50,156.25 21,328.52 Rolf Huber-Frey 4,772.60 11,988.87 1,200.00 17,961.47 31,831.25 Wolfgang Wiesener 4,772.60 11,988.87 1,800.00 18,561.47 33,931.25 Hans-Heinrich Prüße 4,772.60 11,988.87 2,400.00 19,161.47 35,731.25 Olaf Joern 8,227.40 20,667.38 1,800.00 30,694.78 - Marie Lohel 8,227.40 20,667.38 1,800.00 30,694.78 - Helmut Bleckwenn 8,227.40 20,667.38 1,800.00 30,694.78 - Total 318,500.00 685,781.25 101,400.00 1,105,681.25 747,855.94

1 Does not include the VAT paid on behalf of Supervisory Board members for their work. 112 Annual Report Nordzucker 2012/2013

Furthermore, the members of the Supervisory Board are reim- 46. Events after the reporting date bursed for all out-of-pocket expenses incurred in the exercise of their duties as well as for the VAT payable on their remuner The continued existence of the sugar market regime is also being ation and on the reimbursed expenses. The total amount of these discussed in the course of reforms to the European Union’s Com- reimbursements, including VAT, was EUR 38,000 (previous year: mon Agricultural Policy (CAP). The European Commission has EUR 37,000). proposed not to extend the sugar market regime beyond the end of its current phase, which expires on 30 September 2015. With In the financial year 2012/2013 members of the Supervisory regard to the “trialogue” negotiations between the three European Board received neither loans nor advances from the company. institutions, the European Parliament is in favour of an extension until 2020, while the Council of Agriculture Ministers is backing 44.3. Shares held by members of the Executive Board and an extension until 2017. Supervisory Board Members of the Executive Board hold no shares. In addition to the question of how long the sugar market regime is to continue after October 2015, discussions are also taking As of 28 February 2013, members of the Supervisory Board and place on issuing new sugar quotas to member states who had related parties held under 1 per cent of the issued share capital of returned theirs after the 2006 reform and on other advantages Nordzucker AG. The shares bear no relation to the remuneration for traditional refinery operations. of the Supervisory Board.

44.4. Miscellaneous Braunschweig, Germany, 26 April 2013 Board members of Nordzucker AG are indemnified by Nordzucker AG against third-party liability as allowed by law. For this purpose, Executive Board the company has taken out D&O insurance for members of the Boards of Nordzucker AG. The insurance policy is taken out or Hartwig Fuchs renewed annually and covers the personal liability of Board members for claims for damages arising in the course of their Axel Aumüller Mats Liljestam work. It includes an excess in accordance with Sec. 3.8 of the German Corporate Governance Code. Dr Michael Noth Dr Niels Pörksen

45. Dividend proposal

The dividends that can be distributed to shareholders are defined in the German Stock Corporation Act (AktG) as the net balance sheet profit as determined under German commercial law and disclosed in the annual financial statements of Nordzucker AG. The annual financial statements for the financial year 2012/2013 show a net distributable profit of EUR 90,562,352.13. The Execu- tive Board proposes to use this net distributable profit to pay a dividend for the financial year 2012/2013 (EUR 1.80 per share with dividend entitlement). Notes 113

List of investments

List of investments Nordzucker AG, Braunschweig, as of 28 February 2013

Shareholding direct indirect Shortened form % % via subsidiaries

Consolidated subsidiaries fuel 21 GmbH & Co. KG (Stadt Wanzleben-Börde, Germany) fuel 21 100 Norddeutsche Flüssigzucker GmbH & Co. KG (Braunschweig, Germany) NFZ KG 70 NORDZUCKER SPEZIAL GmbH (Braunschweig, Germany) NZ SPEZIAL 100 NORDZUCKER GmbH & Co. KG (Braunschweig, Germany) NZ KG 100 Nordzucker Eastern Europe GmbH [in liquidation] (Vienna, Austria) NZ EE 100 Nordzucker Polska S.A. (Opalenica, Poland) NZ Polska 99.87 Cukrownia Melno S.A. [in liquidation] (Opalenica, Poland) Melno 84.32 Považský cukor a.s. (Trenčianska Teplá, Slovakia) Povazsky 96.798 Matra Cukor z.r.t. (Hatvan, Hungary) Matra 99.89 Nordic Sugar Holding A/S (Copenhagen, Denmark) NSH AS 100 Nordic Sugar A/S (Copenhagen, Denmark) NS AS 100 NSH AS Titoconcerto AB (Malmö, Sweden) Titoconcerto 100 NSH AS Nordic Sugar AB (Malmö, Sweden) NS AB 100 Titoconcerto Nordic Sugar Services AB [as of 28/02/2013: Gold Cup 8590 AB] (Malmö, Sweden) NSS AB 100 NS AB AB Nordic Sugar Kėdainiai (Kėdainiai, Lithuania) NS Kėdainiai 70.6 NS AS Nordic Sugar UAB [in liquidation] (Vilnius, Lithuania) NS UAB 100 NS AS Nordic Sugar Oy (Kantvik, Finland) NS Oy 100 NS AS Sucros Oy (Säkylä, Finland) Sucros Oy 80 NS Oy Suomen Sokeri Oy (Kantvik, Finland) Suomen Oy 80 Sucros Oy SIA Nordic Sugar (Riga, Latvia) NS SIA 100 NS AS Ingolf Wesenberg & Co. AS (Oslo, Norway) IW AS 50 NS AS Nordzucker (Ireland) Limited (Dublin, Ireland) NZ Ireland 100 SugarPartners Holdings Limited [in liquidation] (Dublin, Ireland) SP Holdings 100 NZ Ireland 114 Annual Report Nordzucker 2012/2013

Shareholding direct indirect Shortened form % % via subsidiaries

Associated companies accounted for using the equity method in accordance with Sec. 312 HGB MEF Melasse-Extraktion Frellstedt GmbH (Frellstedt, Germany) MEF 50 NZ KG Norddeutsche Zucker-Raffinerie Gesellschaft mit beschränkter Haftung (Frellstedt, Germany) NZR 50 NZ KG NP Sweet A/S (Copenhagen, Denmark) NP Sweet 50 NSH AS Eurosugar S.A.S. (Paris, France) ES 50

Subsidiaries not consolidated in accordance with Sec. 296 paragraph 2 German Commercial Code (HGB) Bioethanolgesellschaft Klein Wanzleben mbH (Stadt Wanzleben-Börde, Germany) Bioethanol KW 100 Norddeutsche Flüssigzucker Verwaltungs-GmbH (Braunschweig, Germany) NFZ GmbH 70 Nordzucker Verwaltungs-GmbH (Braunschweig, Germany) NZ GmbH 100 NZ KG SWEETGREDIENTS GmbH & Co. KG (Nordstemmen, Germany) SG KG 100 NZ NZ SPEZIAL SWEETGREDIENTS Verwaltungs GmbH (Nordstemmen, Germany) SG GmbH 100 SG KG NZ Erste Vermögensverwaltungsgesellschaft mbH (Braunschweig, Germany) NZ 1. VVG 100 NZ Zweite Vermögensverwaltungsgesellschaft mbH [as of 28/2/2013: Nordwestdeutsche Zucker Handelsge- sellschaft mbH] (Braunschweig, Germany) NZ 2. VVG 100

Associated companies not consolidated in accordance with Sec. 311 paragraph 2 German Commercial Code (HGB) Nordzucker Bioerdgas GmbH & Co. KG (Braunschweig, Germany) NZ BEG KG 50 Nordzucker Bioerdgas Verwaltungs-GmbH (Braunschweig, Germany) NZ BEG GmbH 50

Other non-consolidated investments Tereos TTD, a.s. (Dobrovice, Czech Republic) TTD 35.38 Notes 115

List of investments | Auditors’ report

Auditors’ report

We issued the following opinion on the consolidated financial related internal control system and the evidence supporting the statements and the group management report: disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis ”We have audited the consolidated financial statements prepared within the framework of the audit. The audit includes assessing by Nordzucker AG, Braunschweig, comprising the balance sheet, the annual financial statements of those entities included in con- the income statement, statement of consolidated income, the solidation, the determination of entities to be included in consoli- notes to the consolidated financial statements, the cash flow dation, the accounting and consolidation principles used and sig- statement and the statement of changes in shareholders’ equity, nificant estimates made by management, as well as evaluating together with the group management report for the fiscal year the overall presentation of the consolidated financial statements from 1 March 2012 to 28 February 2013. The preparation of the and the group management report. We believe that our audit consolidated financial statements and the group management provides a reasonable basis for our opinion. report in accordance with IFRS as adopted by the EU, and the additional requirements of German commercial law pursuant to Our audit has not led to any reservations. Sec. 315a (1) HGB are the responsibility of the parent company’s management. Our responsibility is to express an opinion on the In our opinion, based on the findings of our audit, the consolidated consolidated financial statements and on the group management financial statements comply with IFRSs as adopted by the EU, the report based on our audit. additional requirements of German commercial law pursuant to Sec. 315a (1) HGB and give a true and fair view of the net assets, We conducted our audit of the consolidated financial statements financial position and results of operations of the Group in accord- in accordance with Sec. 317 HGB and German generally ance with these requirements. The group management report is accepted standards for the audit of financial statements promul- consistent with the consolidated financial statements and as a gated by the Institut der Wirtschaftsprüfer [Institute of Public whole provides a suitable view of the Group’s position and suitably Auditors in Germany] (IDW). Those standards require that we presents the opportunities and risks of future development.” plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and Hanover, 29 April 2013 results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and Ernst & Young GmbH in the group management report are detected with reasonable Wirtschaftsprüfungsgesellschaft assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as Hentschel Janze to possible misstatements are taken into account in the determin Wirtschaftsprüfer Wirtschaftsprüfer ation of audit procedures. The effectiveness of the accounting- [German Public Auditor] [German Public Auditor] 116 Annual Report Nordzucker 2012/2013 Corporate Governance 117

“We on the Supervisory Board of Nordzucker accompany the path chosen by our company as a critical partner and support it fully. In addition to the ongoing dialogue with the Execu- tive Board in matters of strategic development, we focus on monitoring the integration of Nordic Sugar, the programme to boost efficiency and sustained maintenance and investment in the Group’s factories.”

Hans-Christian Koehler, Chairman of the Supervisory Board

Corporate Governance

Good corporate governance is a vital pillar of our business. 118 Annual Report Nordzucker 2012/2013

Corporate Governance Report for the financial year 2012/2013

Corporate governance covers the system of managing and moni- development of the company in an ever-changing competitive toring a company, including its organisational structure, its corpor environment. ate policies and guidelines as well as the internal and external mechanisms of control and monitoring. Nordzucker AG attaches Meeting high standards for food and animal feed quality and safety, great importance to well-structured, authentic corporate govern- conserving resources, continuously minimising and preventing ance as it ensures that the management of the company is carried environmental damage as well as safeguarding health and safety out in the spirit of long-term value creation. It fosters the confi- at work are an integral part of all Nordzucker’s activities. Particular dence of shareholders, financial markets, business partners, staff importance is attached to avoiding and preventing errors. and the general public in the management and monitoring of the Nordzucker Group. The Executive Board of Nordzucker AG is responsible for determining company policy. It sets corporate strategy, plans and ap- Corporate governance is the foundation for the decision-making proves company budgets, decides on the allocation of resources and controlling processes at Nordzucker AG. The activities of and monitors company development. The Executive Board is also Nordzucker AG are carried out in accordance with clearly defined responsible for preparing the quarterly and annual financial state- guidelines. These guidelines ensure that the company’s actions ments for Nordzucker AG and the consolidated financial statements. are systematically aligned with the interests and expectations of shareholders, customers, business partners and staff. The Supervisory Board of Nordzucker AG has 21 members. Two- thirds of the Supervisory Board members represent the share For publicly traded companies the principles of good company holders and one-third represents the workforce. The Supervisory management are laid down in the German Corporate Governance Board monitors the Executive Board and advises it on the manage- Code (hereafter known as the Code). The Code consists of rec- ment of the company. The Supervisory Board regularly discusses ommendations and suggestions for good company management the course of business and company planning as well as corporate and also describes statutory obligations for publicly listed compan strategy and its implementation. It examines and approves the ies. Section 161 of the German Stock Corporation Act (AktG) stip- annual financial statements of Nordzucker AG and the consolidated ulates that publicly traded companies must issue an annual state- financial statements for the Group, giving due regard to the audi- ment on compliance with the Code’s recommendations. This tors’ report and the results of the examination by the Audit Com- declaration relates to both past and future periods. As Nordzucker mittee. Major Executive Board decisions are subject to its approval. AG is not listed on a stock exchange, it is not legally obliged to issue a statement in accordance with Sec. 161 AktG. The Code In order to reflect recommendation 5.4.1 of the German Corporate is intended for listed companies, but non-listed companies are Governance Code, the Supervisory Board decided on 10 March also well advised to follow its recommendations. Nordzucker AG 2011 to take the following elements relating to its composition therefore studies the Code’s recommendations closely on a volun- into account: tary basis and reports at regular intervals, generally annually, on the company’s own corporate governance. This includes making l at least three Supervisory Board seats for people with a particu- a declaration on the recommendations of the Code, which re- larly international background (e.g. from having worked flects the contents of the statement of compliance required under abroad or holding foreign citizenship); Sec. 161 AktG. To the extent that the Code refers to statutory ob- l at least three Supervisory Board seats for people who hold no ligations of publicly quoted companies outside the scope of its functions at customers, farmers’ associations or other business recommendations, these are not applicable to Nordzucker AG. The partners; company also assumes no voluntary obligation to adhere to them. l at least two Supervisory Board seats for women.

The actions of all our staff are aimed at earning an appropriate and At present these targets have been met. sustainable profit, continually generating growth and increasing our market share. Continuous improvement of all business pro- According to the rules of procedure for the Supervisory Board, cesses by competent, well-managed staff earning performance- an age limit of 65 years applies to proposals for election to the related pay secures the existence and the systematic long-term Supervisory Board. Corporate Governance 119

Corporate Governance Report

Declaration by Nordzucker AG on the German since Nordzucker AG was established, is based on the dividend Corporate Governance Code in line with Sec. payment for a given year. It therefore does not comply with the 161 AktG (German Stock Corporation Act) recommendation of the Code introduced in May 2012, by which performance-related pay for Supervisory Board members should The Executive Board and Supervisory Board of Nordzucker AG, be aligned with the long-term performance of the company Braunschweig, have examined the recommendations of the German (Number 5.4.6). The Executive Board and Supervisory Board are Corporate Governance Code as amended on 15 May 2012 in detail. reviewing amendments to this provision and will put them for- Although the German Corporate Governance Code is not binding ward for adoption at the Annual General Meeting as appropriate. for Nordzucker AG, which is not publicly listed, the company has 5. As Nordzucker AG is included in the consolidated financial complied and continues to comply with the recommendations it statements of Nordzucker Holding Aktiengesellschaft, the latter contains, with the following exceptions: has a particular need for information (Number 6.3).

1. In view of the shareholder structure, the invitation to the Annual To the extent that the Code refers to statutory obligations of publicly General Meeting and the relevant documentation are not sent quoted companies outside the scope of its recommendations, these electronically (Number 2.3.2). are not applicable to Nordzucker AG. The company also assumes 2. Beyond the requirements for companies that are not publicly no voluntary obligation to adhere to them. Otherwise, we refer to listed, the Supervisory Board includes two members who are the comments in the Corporate Governance Report. financial experts within the meaning of Sec. 100 paragraph 5 AktG. Neither of these financial experts chairs the Audit Com- Braunschweig, March 2013 mittee, but both are members of it (Number 5.3.2). 3. Given the particular significance of agricultural expertise for the Hartwig Fuchs Hans-Christian Koehler company, conflicts of interest to which Supervisory Board mem- Chief Executive Chairman of the bers may be subject are of secondary importance (Number 5.5.3). Officer Supervisory Board 4. The provision on performance-related pay for Supervisory Board members, which has formed part of the Articles of Association 120 Annual Report Nordzucker 2012/2013

Report by the Supervisory Board of Nordzucker AG Financial year 2012/2013

In the financial year 2012/2013, the Supervisory Board continuously monitored the work of the Executive Board and advised the Executive Board on its management of the company. The Execu- tive Board fulfilled its obligations and informed the Supervisory Board regularly, both orally and in writing, promptly and compre- hensively about events of importance for the company. This included information on matters of strategy, company planning and any divergence between actual performance and these plans, the course of business, the current state of the company, its strategic development, the risk position, risk management and transactions of particular significance. The Supervisory Board held five ordinary meetings in the financial year to discuss the company’s operating and strategic development. Furthermore, all matters requiring the authorisation of the Supervisory Board were presented to us for approval. After thorough review and discussion the Supervisory Board gave its approval to the Executive Board proposals.

In addition to the Supervisory Board meetings, the Chairman of the Supervisory Board was in regular contact with the Executive Board. He was informed of the current state of business and major transactions and discussed matters of strategy, planning, corporate development, risk exposure, risk management and compliance affecting the company. All of the Supervisory Board’s discussions and decisions were aimed at protecting and increasing the company’s assets.

In the financial year 2012/2013, the Supervisory Board focused on providing support for the company’s continued strategic development. The Supervisory Board was kept abreast of European and global developments and prospects for the sugar market and their importance for Nordzucker by the Executive Board. Based on this, the Executive Board reported to the Supervisory Board Hans-Christian Koehler regularly and in detail regarding Nordzucker AG’s strategic activ- Chairman of the Supervisory Board ities and initiatives, in particular at a strategy meeting held in November 2012.

In addition, the Supervisory Board prepared the proposal put to the Annual General Meeting on amending the Articles of Associ ation with respect to the remuneration of the Supervisory Board from the financial year 2013/2014. The proposal stipulates that a maximum of two attendance fees per day may be charged for meetings of the Supervisory Board and its committees and that fees may no longer be charged for other meetings. The proposed increase in fixed remuneration for Supervisory Board members is Corporate Governance 121

Report by the Supervisory Board

intended to make up for the second part of the amendment. Board’s work had been further improved by the steps taken Variable remuneration for Supervisory Board members is to be following the efficiency review in the financial year 2010/2011. aligned with sustainable company development as recommend- The Supervisory Board aims to perpetuate this trend and achieve ed by the German Corporate Governance Code in May 2012 and further efficiency gains. will therefore henceforth be linked to the average dividend paid over the previous three years. A further proposal is to cap the vari The Supervisory Board welcomes the request addressed to the able remuneration at the amount of fixed salary and at the same Executive Board of Nordzucker AG by Nordzucker Holding time to set the hurdle for obtaining the maximum variable remu- Aktiengesellschaft and Nordharzer Zucker Aktiengesellschaft neration sufficiently high that it is not paid as a matter of course. in accordance with Sec. 122 paragraph 2 (AktG) to include a Other proposals include paying members of committees, apart resolution on the agenda of the ordinary Annual General Meeting from the Nomination Committee, a premium of 20 per cent on of Nordzucker AG not to pursue claims against members of the their fixed and variable remuneration. The Chairman of the Super- Supervisory Board of Nordzucker AG for receiving attendance fees visory Board shall receive a premium of 150 per cent and the inconsistent with the Articles of Incorporation. In the opinion of Chairman and Deputy Chairman of the Audit and Finance Com- the Supervisory Board, it is vital for the judgement of this matter mittee shall each receive a premium of 40 per cent on their fixed that over a period of many years, those involved assumed that the and variable remuneration. This proposal is based on an analysis attendance fees were a justified and legitimate compensation for of remuneration following broad market research, which includes the services those members of the Supervisory Board provided, data from nearly 1,000 companies. Overall, the new regulations which in some cases were complex and required a considerable would reduce the remuneration of the Supervisory Board com- amount of time. On this understanding, attendance fees were only pared with that paid for the financial year 2012/2013. charged for meetings which actually took place, were in connection with the activity of the Supervisory Board and which were The topics of cost-effectiveness and efficiency remain a high pri- therefore in the interest of Nordzucker AG. The great dedication ority given the further adjustments that are due to be made to of the Supervisory Board members on this basis has made a major the sugar market regime. The Supervisory Board therefore also contribution to the company’s strong position throughout Europe heard regular reports on the implementation of cost-cutting today. measures taken as part of the company’s long-term efficiency improvement programme and discussed these activities with the Supervisory Board committees Executive Board. The targets for the financial year 2012/2013 The Supervisory Board has set up committees to discharge its were met, so that the programme has again resulted in cost duties efficiently. The committees prepare the Supervisory Board savings in all areas of the company. The Supervisory Board will resolutions and matters for discussion by the full Supervisory continue to accompany and monitor the implementation of the Board. The committee chairs report to the Supervisory Board on efficiency programme closely. the work of the committees at the following Supervisory Board meeting. The Supervisory Board dealt thoroughly with Group planning for the financial year 2012/2013, including planned capital expenditure, The Executive Committee of the Supervisory Board met four mid-term planning and regular earnings forecasts for the last times in the reporting period. The Executive Committee dealt financial year. with Nordzucker AG’s statement on the German Corporate Govern ance Code in accordance with Sec. 161 AktG, the preparation and Furthermore, we discussed compliance with the recommenda- analysis of the efficiency review, proposed amendments to the tions and suggestions of the German Corporate Governance Code. Articles of Association relating to the remuneration of Supervisory The Executive Board and Supervisory Board have issued an up- Board members and other important topics, and also prepared dated statement of compliance in accordance with Sec. 161 AktG the subsequent Supervisory Board meetings. (Stock Corporation Act), which has been made permanently available to shareholders on Nordzucker AG’s website. In this The Audit and Finance Committee met five times during the re- context, we report that the Supervisory Board again carried out porting period. The Audit and Finance Committee examined the a review of its efficiency in accordance with 5.6 of the German financial statements and management reports for Nordzucker AG Corporate Governance Code in the financial year 2012/2013. and the Group for the financial year 2011/2012 in the presence of The result of the review was that the efficiency of the Supervisory the auditors. Furthermore, the Audit and Finance Committee 122 Annual Report Nordzucker 2012/2013

made a recommendation to the Supervisory Board for its proposal Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Hanover, to the Annual General Meeting on the election of auditors for audited the 2012/2013 financial statements for Nordzucker AG the financial year 2012/2013. Its work also included appointing and its management report, the consolidated IFRS financial state- the auditors for the financial year 2012/2013, verifying their inde- ments and the Group management report. It issued each with an pendence and setting their remuneration. The Audit and Finance unqualified audit opinion and presented the auditors’ reports to Committee also dealt with Group and investment planning, quar- the Supervisory Board in good time. These were examined thor- terly reports and the interim financial statements for Nordzucker oughly by the Audit and Finance Committee and the Supervisory AG and the Group, earnings forecasts for the financial year Board, and were discussed in detail in the presence of the auditors 2012/2013, the risk management system, the effectiveness, cap following their report on the main findings of the audit. The Super- acities and findings of the internal audit department, and the visory Board concurs with the result of the audit and concluded internal control system. The examination and approval of the sep- from its own examination that it has no objections to make. The arate and consolidated financial statements for the past financial Supervisory Board approved the annual financial statements as year as well as the proposal for election of the auditors for the prepared by the Executive Board, which are thereby adopted. financial year 2013/2014 were prepared at an additional meeting The Supervisory Board also approved the Executive Board’s pro- outside the period under review. Separate meetings took place posal for the use of distributable profit. between the Chairman of the Audit and Finance Committee, the Chairman of the Supervisory Board and the auditors. Executive Board report on related parties The Executive Board presented the Supervisory Board with its The Human Resources Committee met four times in the reporting report on related parties (dependent company report) in the period. The Human Resources Committee looked at the system financial year 2012/2013 in good time. The auditors audited the of Executive Board remuneration and in particular at the arrange- dependent company report and gave the following opinion: ments for the long-term performance component. Based on this, “On the basis of our audit and our professional judgement, we the Human Resources Committee prepared the Supervisory Board confirm that decisions on variable remuneration for the Executive Board members. 1. the report is factually correct, The Human Resources Committee also prepared the renewed 2. the consideration paid by the company for the transactions appointment of Hartwig Fuchs as Chief Executive Officer of listed in the report was not inappropriately high.” Nordzucker AG and the renewed appointment of Axel Aumüller as The dependent company report and the corresponding audit a member of the Executive Board of Nordzucker AG. report were sent to all the members of the Supervisory Board in good time. They were examined thoroughly by the Supervisory The Supervisory Board also formed a Nomination Committee Board and discussed in detail in the presence of the auditors fol- responsible for selecting suitable candidates for the Supervisory lowing their report on the main findings of the audit. The Super- Board to put forward for election as shareholder representatives visory Board came to the conclusion that it approves the result of at the Annual General Meeting. the audit and has no objections to make in relation to the Executive Board’s declaration on the dependent company report. Financial statements 2012/2013 The Executive Board presented the financial statements for Personnel matters concerning the Supervisory Board 2012/2013 and the management report for Nordzucker AG to On 12 July 2012, Hans-Heinrich Prüße left the Supervisory Board the Supervisory Board in good time. This also applies to the con- of Nordzucker AG as his age prevented him from standing for re- solidated financial statements in accordance with IFRS, the Group election. The Supervisory Board would like to thank Hans-Heinrich management report and the proposal for the appropriation of net Prüße for his work on the Board over many years. At the Annual profit. Under Sec. 315a of the German Commercial Code (HGB), General Meeting held on 12 July 2012, farmer Helmut Bleckwenn these IFRS consolidated financial statements exempt the company was elected to the Supervisory Board in place of Hans-Heinrich from the obligation to prepare consolidated financial statements Prüße, until the close of the Annual General Meeting that votes in line with German law. on discharging the boards for the financial year 2016/2017. On Corporate Governance 123

Report by the Supervisory Board

12 July 2012, the Annual General Meeting also re-elected farmer visory Board Executive Committee. The Supervisory Board elected Hans-Christian Koehler, farmer Rainer Knackstedt and farmer Dr Harald Isermeyer and Dieter Woischke to the Human Resources Andreas Scheffrahn to the Supervisory Board until the close of Committee. The Supervisory Board appointed Gerhard Borchert, the Annual General Meeting that votes on discharging the boards Dr Harald Isermeyer, Dr Hans Theo Jachmann and Helmut Meyer for the financial year 2016/2017. to the Nomination Committee. Hans-Christian Koehler is Chairman of the Supervisory Board and therefore a member and Chairman Rolf Huber-Frey and Wolfgang Wiesener also stepped down from of the Supervisory Board Executive Committee, the Human Re- the Supervisory Board of Nordzucker AG as of 12 July 2012. The sources Committee and the Nomination Committee. In addition, Supervisory Board would also like to thank Rolf Huber-Frey and the Supervisory Board elected Michael Gerlif, Matts Eskil Rosen- Wolfgang Wiesener for their work on the Board over many years. dahl, Andreas Scheffrahn, Ulf Gabriel and Marina Strootmann to On 19 June 2012, Ulf Gabriel, Gerd von Glowczewski, Sigrun the Audit and Finance Committee. Andreas Scheffrahn was elected Krussmann, Marina Strootmann and Dieter Woischke were re-elected as Committee Chairman. and Olaf Joern and Marie Lohel were elected anew to the Supervisory Board as employee representatives for a period of five years. The Supervisory Board would like to thank the Executive Board and all the staff for their personal and highly successful commit- In its constitutive meeting on 12 July 2012 the Supervisory Board ment. elected Hans-Christian Koehler as its Chairman. The shareholder representative Helmut Meyer and the employee representative Dieter Woischke were elected as Deputy Chairmen. At its consti- Braunschweig, Germany, 23 May 2013 tutive meeting the Supervisory Board also elected Michael Gerlif, Dr Harald Isermayer, Jochen Johannes Juister, Andreas Scheffrahn, Hans-Christian Koehler Sigrun Krussmann and Dieter Woischke as members of the Super- Chairman of the Supervisory Board 124 Annual Report Nordzucker 2012/2013

Glossary the rights of shareholders, how executive and supervisory bodies should be filled and how their members should be remunerated. Non-listed companies are also recommended to comply with the Finance Corporate Governance Code. Cash flowNet inflow of funds. Difference between receipts and spending expenses within one accounting period. For the sake of Hedge accounting under IAS 39 Refers to the way in which two or simplicity, the cash flow is determined on the basis of net income, more contracts (or financial instruments) between which hedging plus non-spending expenses, in particular write-downs and changes relationships exist are recognised in the balance sheet. This method in non-current provisions . The cash flow is available to the company differs from conventional accounting methods. for investment, repayment of liabilities and distribution of profits. IFRS (International Financial Reporting Standards) and IAS (International Consolidation The Group accounts are drawn up as if all Group mem- Accounting Standards) are accounting standards that render balance ber companies formed one uniform company in law. All expenditures sheet and disclosure methods comparable on a global scale. These and earnings as well as all interim trade results and other transactions accounting standards have been compulsory for listed companies between the Group members are eliminated by way of offsetting in Germany and throughout the EU since the beginning of 2005. (expense and result as well as interim result consolidation). Stakes held in Group companies are set off against their equity capital (capital Impairment test This test must be conducted regularly according to consolidation), and all intra-Group receivables and liabilities are elim IFRS in order to verify the valuation of non-current assets. It may result inated (debt consolidation) because such legal relationships do not in the recognition of impairment. exist within a legal entity. Summation and consolidation of the remaining items of the annual financial statements result in the consolidated Interest-rate swap Contractual agreement on the swap of interest cash balance sheet and the consolidated income statement. flows at specific points in time according to a basic notional principal. Interest-rate swaps enable variable interest-rate agreements to be Declaration of compliance Annual declaration made and published converted to fixed interest rates. by the Executive and Supervisory Boards of listed companies in accordance with Sec. 161 AktG (German Stock Corporation Act), International Accounting Standards Board (IASB) is an independent stating to which extent the company management complies with international committee of accounting experts that develops and the recommendations of the Commission of the German Corporate revises International Financial Reporting Standards (IFRS) as needed. Governance Code and which recommendations are not applied. International Financial Reporting Interpretations Committee (IFRIC) is Dividend The amount of a stock corporation’s net income apportioned the name of a group within the International Accounting Standards to each individual share. Dividends are either expressed as a percent- Committee Foundation (IASC). The job of IFRIC is to publish interpret age of the par value or as a currency amount per share (earnings per ations of IFRS and IAS accounting standards in cases where it becomes share). The Annual General Meeting votes on the distribution of the apparent that the standard is capable of being interpreted differently dividends. Dividends are paid out on an annual basis in Germany. or incorrectly or when new circumstances emerge which have not been dealt with fully in the previous standards. EBIT (earnings before interest and taxes) This figure supplies information on the results of current operations. Differences in capitalisation Joint venture A cooperation between companies in which a new, legally are not accounted for, therefore the general interest-rate level and independent business unit is created in which the founding companies tax rates are not considered. (two or more) invest capital. In addition to capital, the founding companies generally contribute a significant amount of technology, EBITDA (‚earnings before interest, taxes, depreciation and amortisati- intellectual property rights, technical or other expertise and operating on‘) This key indicator is a way of measuring operating performance equipment. before capital expenditure. Natural hedge approach Minimising currency risks by financing Equity method An accounting method in which shares in a company foreign-currency investments in the same currency, for example. are initially recognised at cost and subsequently adjusted to reflect the shareholders’ interest in the net assets of the investee company. Net debt Financial liabilities minus cash and cash equivalents.

Equity ratio A financial indicator describing the relationship between Operating lease A lease is classified as an operating lease under IFRS if shareholders’ equity and total assets. it does not transfer essentially all the risks and rewards of ownership of the leased asset. Finance lease In contrast to an operating lease, the lessor transfers the risk of the investment and thereby the economic ownership of the Registered share The subscribed share capital of Nordzucker AG is asset to the lessee. divided into registered shares with a nominal value of EUR 2.56 each.

German Corporate Governance Code Guidelines formulated in 2002 Return on equity A figure which shows the profitability of capital on the management and supervision of German companies listed on employed and is calculated by dividing net income for the year by the stock exchange. The German Corporate Gov ernance Code out- shareholders’ equity. lines nationally and internationally accepted standards of responsible business management, which primarily aim at transparency and clar- Return on revenues A financial indicator obtained by dividing net in- ity. The Code defines the responsibility of Executive and Supervisory come for the year by revenues and enabling an analysis of a com Boards and sets forth or makes recommendations on how to protect pany’s profitability. Glossary 125

Syndicated loan Lending by several banks (syndicate) on the basis of Refining Used in a general sense to describe a process of cleaning standardised contract documents and identical terms and conditions. or purifying raw materials. For sugar this means bleaching brown raw sugar (from sugar cane or sugar beet) by a (repeated) series of different Total profitabilityThis indicator is calculated by dividing EBITDA (earnings processes. before interest, taxes, depreciation and amortisation) by total output (revenues plus changes in inventories). Strip tilling In some cases beet has also been sown recently using the strip tilling method. This is a special method of sowing individual seeds Volatility (‘unpredictable, liable to change’) A market is volatile if it is in which the soil is only tilled in the seed row to a depth of 25 cm. subject to major price fluctuations. Volatility is the statistical means of This is done by chisel coulters attached in front of the drilling machine. measuring market fluctuations. Initial findings suggest that the advantages compared with conventional mulch seeding with seed bed preparation in the spring include Sugar and bioethanol greater energy efficiency and reduced work intensity per hectare, the Bioethanol Ethanol produced from biomass (renewable substances conservation of ground water and good protection against soil erosion. containing carbon). Starch (e.g. from wheat or maize) is broken down by enzymes into glucose. Yeast is then added and the glucose Thick juice Concentrated, purified sugar juice containing some 70 to is fermented to create ethanol. When sugar beet is used to produce 75 per cent solid material. Thick juice is produced at the end of the ethanol, the raw juice or thick juice created as a by-product of sugar steam dryer unit before the sugar undergoes the actual crystallisation extraction is fermented directly. Unlike fossil fuels, bioethanol is CO2- process in the sugar factory’s juice boilers. neutral and has long-term economic benefits. In Germany, the Biofuel Quota Act has been in force since 2007, which stipulates the amount White sugar is normal household sugar and is made from raw sugar. of bioethanol to be blended with petrol. Sugar industry Carbohydrates or saccharides, which mainly consist of sugars and ACP countries (Africa, Caribbean and Pacific) This encompasses 77 starches, form the largest usable and unusable (dietary fibre) share of states, most of them former French or British colonies. The EU has the human diet, along with fats and proteins. Carbohydrates are the granted these countries preferential access to the European market main source of energy for the human organism. and duty-free imports of 1.3 million tonnes of raw sugar since 1975 by means of the Cotonou Agreement. As of 2008, the EU wants to re-

CO2 (carbon dioxide, ‘greenhouse gas’) Chemical compound consist- place this treaty with Economic Partnership Agreements (EPA) with ing of carbon and oxygen which, like carbon monoxide, is a carbon the ACP countries. In terms of sugar, this should place the countries oxide. This colourless and odourless gas is a natural component of on an equal footing with the least developed countries (LDC). air. It is created when substances containing carbon are burnt, and during cellular respiration. Plants and some bacteria convert CO2 into CEFS Comité Européen des Fabricants de Sucre, the European biomass. Committee of Sugar Manufacturers represents all European sugar manufacturers and refiners among the European institutions (Council Cossettes Pressed beet chippings are a by-product of the sugar pro- of Ministers, European Commission, European Parliament, Economic duction process. They are used as animal feed. and Social Committee, etc.) and among different international organisations (FAO, WTO, etc.). Crystal sugar The term for standard grade sugar used in industry and the home for a variety of purposes, particularly for making desserts CIBE (Confédération Internationale des Betteraviers Européens) and cakes. In a second processing step the crystal sugar is turned into International Confederation of European Beet Growers caster sugar, which retails under the name of household sugar for instance. Dansukker Nordic Sugar, part of the Nordzucker Group, offers consumers a wide range of sweet sugar products from sugar beet and Emission The release of substances into the environment. sugar cane under the brand name of Dansukker. The assortment is refined continuously in keeping with the needs of modern house- Isoglucose Sugar made primarily from corn starch and used in bever- holds and includes for example various types of granulated sugar, ages and preserved fruit. Isoglucose is a regulated market product. sugar cubes and icing sugar, brown sugar and syrups as well as organic and Fairtrade products. Molasses Syrupy by-product of sugar production. Used to manufacture yeasts and animal feed. Doha development round is the name for a package of activities that the economic and trade ministers of the WTO member states were Mulch seeding Mulch seeding is a ploughless sowing method in which supposed to work through at the fourth World Trade Conference in the remains of a catch crop or the stubble of the preceding crop cover Doha (capital of Qatar) in 2001 and complete by 2005. The main the soil before and after sowing and protect it from erosion and siltation. topics of negotiations included the liberalisation of agricultural trade, improved market access for developing countries and matters relating Pellets By-product of sugar production. These extracted, dried sugar to intellectual property. Negotiations were suspended as no agreement beet pellets are sold molassed or unmolassed as animal feed. was reached at the WTO conference in Cancun in 2003. They were resumed in July 2004 and again suspended unresolved in late July Raw cane sugar Sugar made from sugar cane. This can then be 2006 by the WTO General Director Pascal Lamy. refined to convert it into white sugar. EFFAT European Federation of Food, Agriculture and Tourism Trade Raw juice Sugary juice extracted from sugar beet which can be Unions processed to make sugar or bioethanol. 126 Annual Report Nordzucker 2012/2013

Fairtrade The heart of the Fairtrade standard is the payment of a DIN EN ISO 22000 Covers rules for internationally accepted food guaranteed minimum price above the level of the world market price safety management standards. that covers the cost of living and production of the producers. DIN EN ISO 50001 An ISO (International Organisation for Standard LDC (Least developed countries) LDC relate to an EU resolution of isation) certifiable standard that specifies requirements for establishing, 2001 according to which the 50 least developed countries in the implementing, maintaining and improving an energy management world may import any goods except arms into the EU free of any system. duty. Sugar falls under a special transitional arrangement until 2009. As of 1 July 2009, sugar can also be imported into the EU free of duty EMAS II (Eco-Management and Audit Scheme) Voluntary system used and with no restriction of quantities. by the EU as an environmental management instrument and to promote environmental action. Sugar market regime A common market organisation for sugar founded in 1968 (active in the EEC/EC/EU) which regulates prices for sugar FSSC 22000 is the first global food safety norm covering food production. and sugar beet, maximum production quantities for sugar, and import The norm was developed specially for companies producing or pro- safeguards. The previous regulation (EC) No. 1260/2001 was replaced cessing animal or plant-based products or ingredients. on 1 July 2006 by regulation (EC) No. 318/2006, which was passed by the ministers of agriculture of the EU member states on 20 February 2006. GMP B2 (Good Manufacturing Practice B2) Dutch standard of quality control for animal feed from non-resident suppliers. Sugar quota Sugar quotas were introduced in the EU to limit sugar production and prevent surpluses. Volumes produced within these IFS (International Food Standard) This standard is a means of safe- quotas benefit from a sales and price guarantee. guarding food safety and consumer protection.

SweetFamily SweetFamily is the Nordzucker Group’s international OHSAS 18001 (Occupational Health and Safety Assessment Series) is umbrella brand. Beet sugar products for end consumers, bakers and not a norm, but can be used as a certification basis for management the food industry have been marketed in Germany, Poland, Slovakia systems relating to health and safety at work. The structure of OHSAS is and Hungary under the SweetFamily brand since November 2004. oriented towards DIN EN ISO 14001. This makes it suitable for use as an integrated management system. WTO (World Trade Organisation) Multinational organisation located in Geneva, in which 150 member states negotiate world trade PAS 220 (Publicly Available Specification 220) Certification standard liberalisation. developed to define basic requirements for the certification of production processes with the food supply chain and intended to assist in con- Certification, quality assurance and trolling food safety standards. It is intended to be used in conjunction consumer protection with DIN EN ISO 22000. ISO 22000 and PAS 220 are generally DIN EN ISO 9001 This standard is part of the EN ISO 9000 series, known as FSSC 22000. which documents the principles of quality management activities. EN ISO 9001 deals in particular with requirements of quality man- Q&S Standard German feed standard established by Q&S-GmbH, agement systems for which organisations must show that they are Bonn, Germany, to guarantee feed quality. capable of supplying products which conform to customer and regulatory demands. Work-life balance The term work-life balance refers to a situation in which people give equal priority to their professional and private DIN EN ISO 14001 This internationally valid standard lays down globally lives. It assumes that an equilibrium can be reached between two acknowledged specifications for environmental management. opposing demands. Important dates

Financial calendar

Annual General Meetings 2 July 2013 9 a.m. Union-Zucker Südhannover Gesellschaft mit beschränkter Haftung, Atrium at the country estate Gräflicher Landsitz Hardenberg, Nörten-Hardenberg 9 July 2013 10 a.m. Nordharzer Zucker Aktiengesellschaft, city hall Braunschweig 10 July 2013 10 a.m. Nordzucker Holding Aktiengesellschaft, city hall Braunschweig 11 July 2013 10 a.m. Nordzucker AG, city hall Braunschweig

Online publications

The following publications can be downloaded from www.nordzucker.de • Annual reports and interim reports • Declaration of compliance • Letter to shareholders

Latest publication • Sustainability Report 2012/2013 – „Follow us“

A deep-rooted approach Our focus on sustainability builds on a long-standing tradition in our company and is a natural priority for us. As a business dependent on nature’s resources and stable climates, our environmental and climate consciousness is deeply rooted. Nordzucker AG Küchenstrasse 9 38100 Braunschweig Germany Telephone: +49 (0)531 2411 0 Fax: +49 (0)531 2411 100 [email protected] www.nordzucker.de

Corporate Communications Klaus Schumacher Telephone: +49 (0)531 2411 366 [email protected]

Investor Relations Bianca Deppe-Leickel Telephone: +49 (0)531 2411 335 [email protected]

Shares register Claus-Friso Gellermann Telephone: +49 (0)531 2411 118 [email protected]

Printed copies of this Annual Report for the Nordzucker Group are also available in German. Alternatively, the report can be downloaded online as a PDF in German or English at www.nordzucker.de from the Download Centre.