FOR A NEW ERA
ANNUAL REPORT 2016 | 2017 WE ARE READY TO GO!
The liberalization of the sugar market in the EU on 1 October 2017 will lead to a fundamental change in Nordzucker’s world. We are starting the next chapter in our company’s history with a mixture of respect and confidence, as we have spent the last number of years carefully preparing our company for the challenges ahead – organizationally, financially and culturally. Whatever happens: Nordzucker is well prepared for the new era.
WEB REFERENCE
PAGE REFERENCE
Title: Filling area of the sugar in the sugar-drying drum at the Uelzen plant. NORDZUCKER AT A GLANCE
Sugar has been produced from sugar beet in Europe for more than 200 years. Nordzucker is part of this tradition, having manufactured the highest quality sugar since 1838, and is now Europe’s second-largest sugar producer. Our 3,200 employees at 18 sites in Europe provide the food industry, retailers and consumers with reliable supplies of top-quality products. As a food manufac- turer, thinking and acting in a sustainable manner is something we do as a matter of course. Ecological and social factors are an explicit part of our decision-making.
26 13 12 25 22
SITES IN EUROPE 23 11 GROUP HEADQUARTERS 10 14 2 8 24 D 1 Braunschweig 9
5 27 15 1 REGIONAL 18 6 ADMINISTRATION 3 7 16 4 DK 2 Copenhagen 21
19 20 SUGAR PLANTS 17 AND REFINERIES
D 3 Clauen 11 Örtofta 4 Nordstemmen FIN 12 Porkkala 5 Uelzen 13 Säkylä 6 Klein Wanzleben LT 14 Kèdainiai 7 Schladen PL 15 Chełmża DK 8 Nakskov 16 Opalenica 9 Nykøbing SK 17 Trenč ianska Teplá S 10 Arlöv
28 LIQUID SUGAR PLANTS OTHER SITES SALES SITES
D 4 Nordstemmen DK 2 NP Sweet. Copenhagen EE 22 Tallinn 18 Groß Munzel D 6 Bioethanol. Kl, Wanzleben LV 23 Riga S 10 Arlöv B 21 Brussels office LT 24 Vilnius FIN 12 Porkkala NO 25 Oslo IS 26 Reykjavík IE 27 Dublin SUGAR PLANTS – NON-CONSOLIDATED GR 28 Athens MINORITY HOLDINGS
CZ 19 Dobrovice 20 Ceské Meziříčí KEY FIGURES KEY BEET CULTIVATION AND CAMPAIGN 1 YEAR FINANCIAL THE OF END AT THE RATIO SHEET BALANCE 2 1 KEY FINANCIAL FIGURES 5 4 3 2 1 Total dividend RATIO YIELD Cash flow from operating activities Net incomefor period the Sugar yield Sugar Total assets Revenues RoCE Return onequity Total operating profitability EBIT margin Redemption period Return onrevenues Dividend pershare Cash flow from operating activitiespershare and intangible assetsand intangible Investment inproperty, plantandequipment Cash flow from investing activities Shareholders’ equity EBITDA Sugar contentSugar Earnings (Group) pershareEarnings Free cashflow Equity ratio EBIT Campaign length Debt capital Sugar production Sugar Capital employedCapital Financial liabilities Cash andcashequivalents financial liabilities) Net debt(cashandcashequivalents less Cashandcashequivalents –Financial liabilities Cashflow from operating activities+Cashflow from investing activities Net income/Equity Net income/Revenues EBITDA /Revenues EBIT/Revenues EBIT/Average employed capital Adopted 1 2 2 5 1 8 4 6
7 3 9 8 7 6 Proposal Total dividend/Number ofshares Total income/Number ofshares Net debt/EBITDA of tonnes millions EUR m EUR m EUR m EUR m EUR m EUR m EUR m EUR m EUR m EUR m EUR m EUR m EUR m EUR m EUR m EUR m years days t/ha EUR EUR EUR % % % % % % % 2012/13 2012/13 2012/13 2012/13 2,403 2,443 1,291 1,777 1,112 27.8 14.7 24.3 1.80 7.44 86.9 6.49 369 506 20.7 11.7 17.9 2.80 18.4 –59 –72 241 313 594 125 0.1 74 54 71 11 1 1 2013/14 2013/14 2013/14 2013/14 2,361 2,337 1,386 1,701 – 0.1 14.5 20.0 1.30 62.8 5.90 12.7 11.3 18.0 2.50 209 299 285 17.2 472 4.17 –75 210 106 951 8.5 79 52 59 58 6 2014/15 2014/15 2014/15 2014/15 1,866 1,272 1,660 2,144 –0.3 0.43 2.79 13.2 17.3 2.91 0.10 –79 135 140 125 872 1.6 7.5 4.8 1.4 1.5 1.1 20 26 56 37 82 59 45 7 2015/16 2015/16 2015/16 2015/16 2,013 1,607 1,278 1,600 11.6 17.5 2.00 –1.8 0.32 0.10 4.11 –65 164 134 199 734 172 1.0 1.0 1.0 1.2 5.6 4.8 60 15 16 90 64 88 7 2016/17 2016/17 2016/17 2016/17 1,708 1,375 1,500 2,117 –119 1.10 53.1 –1.4 13.2 2.00 12.5 5.54 17.7 2.50 131 308 149 268 226 103 742 322 5.6 7.7 8.5 7.0 99 84 65 14 9 9
Nordzucker at a glance VALUES: THE MARKET: SUCCESS IS WE ARE READY!
IN OUR GENES PAGE 6
PAGE 24
FINANCE: COMPANY: FUNDAMENTALLY SHARING KNOWLEDGE SOLID PAGE 20 PAGE 12
CONTENTS
2 LETTER FROM THE EXECUTIVE BOARD
4 READY FOR A NEW ERA
28 REPORT BY THE SUPERVISORY BOARD 36 CORPORATE GOVERNANCE REPORT
42 GROUP MANAGEMENT REPORT 82 CONSOLIDATED FINANCIAL STATEMENTS 89 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SUSTAINABILITY:
145 GLOSSARY AN EXTRA SOMETHING 149 FINANCIAL CALENDAR/ FOR OUR CUSTOMERS ONLINE PUBLICATIONS PAGE 16
150 IMPRINT 2 READY FOR A NEW ERA LETTER FROM THE EXECUTIVE BOARD
READY FOR A NEW ERA
DR LARS GORISSEN HARTWIG FUCHS AXEL AUMÜLLER DR MICHAEL NOTH Chief Agricultural Officer Chief Executive Officer Chief Operating Officer Chief Financial Officer
Member of the Executive Chairman of the Executive Member of the Executive Member of the Executive Board of Nordzucker AG Board of Nordzucker AG Board of Nordzucker AG Board of Nordzucker AG since 1 March 2014 since 1 February 2010 since 9 November 2009 since 16 August 2009
Nordzucker AG ANNUAL REPORT 2016 | 2017 3
» WE HAVE PREPARED EXTENSIVELY FOR THE NEW ERA WHICH WILL BEGIN WHEN THE QUOTA SYSTEM COMES TO AN END. «
ANNUAL REPORT 2016 | 2017 Nordzucker AG DEAR SHAREHOLDERS,
In the 2016/2017 financial year, a positive price trend sparked an upswing in the market that we were able to exploit. Moves to step up our sales efforts on the one hand and extensive savings on the other helped us to continually increase our earnings over the twelve-month period. 99.1 million Euro This enabled us to report net income of EUR 99.1 million as against net income EUR 14.9 million in the previous year, a solid operating result of EUR 131.4 million compared with EUR 16.2 million for the comparative period, 6% and sales growth of 6 per cent, bringing total sales to EUR 1,708.2 million sales growth compared with EUR 1,607.4 million in the previous year. Together with the Supervisory Board, we are proposing that the dividend be lifted back up to 1.10 EUR 1.10 per share, compared with EUR 0.10 in the previous year. Euro dividend per share (proposal) Although the result is still down considerably on the outstanding level seen in the years prior to 2014, it is nonetheless pleasing because we were able to earn the cost of capital again and give our shareholders an appropriate share in our earnings. Shares in Nordzucker are worth the investment again.
We have prepared for the new era starting on 1 October 2017 and the end of the quota system. In doing so, we have already been able to demonstrate how well we can adapt to new conditions. The preparation process was extremely labour-intensive and called for a change of mindset, as well as for ideas and courage, in a large number of areas. We are certainly not yet perfectly positioned, but we have already achieved a great deal, and we will continue to work on improving ourselves.
FOR A NEW ERA
Our business model is also fit for the future, which is why we are investing a considerable amount in our core business, primarily in the interfaces with our customers: logistics, loading, packaging and storage. After all, these are the areas in which we believe our particular expertise lie: in our ability to supply our customers reliably, flexibly and on time.
The second focal point of our investment activity relates to measures to boost our energy efficiency. The sugar production process is an energy-intensive sustainability. one. Our energy consumption has a direct impact on our costs and our nordzucker.com/en/ CO2 emissions. Our sustainability strategy aims to reduce both. Overall, we invested a total of EUR 84 million in our plants in the 2016/2017 financial year, a figure that will rise to EUR 87 million this year.
We are determined to continue optimizing our company so that it can deliver top performance. The targets we have set ourselves are ambitious: we want to boost our performance, cut costs, promote customer loyalty, increase unit sales, attract new customers, exploit export opportunities, improve our beet cultivation yields, and enhance and promote our attractiveness as an employer. In order to achieve this, we have launched numerous projects and measures and have a strong Nordzucker team that sticks together, maintains dialogue and is constantly developing – transcending national borders, factory fences and functional remits.
Nordzucker builds bridges between beet cultivation and the sugar market – between growers and consumers. We know that sugar prices will be subject to greater fluctuation in the future and that the world market price will dominate the EU price to an even greater degree. Dealing with positive and negative surprises and managing the resulting risks will be one of the challenges that we have to overcome. The current 2017/2018 financial year will be one of transition. Due to world market prices that have, at times, been higher than the EU prices, sugar imports to the EU have been low in recent months. Nonetheless, the price level in the EU has only risen moderately. The new campaign will fire the starting gun for more intense competition in Europe. The area under cultivation has been expanded, which will – in the case of a regular harvest – result in excess supply. In addition, a number of EU countries are granting their beet growers subsidies that are distorting the competition, slowing down the process of consolidation – i. e. the process by which unproductive regions end up leaving the market – and, as a result, are running contrary to the actual objective, namely to put an end to the old system of regulation.
While EU protection against imports for sugar will not be affected, the maxi See page 48 et seq. mum volumes for export will cease to apply. We will export in a structured way and in close relationships to our international customers and thereby we will create new sales opportunities. What is more, we offer our customers added value – be it in the form of service, advice, transparency, security or sustainability.
The changes in the market make it much more difficult to predict our future earnings. We expect the current stable market situation to persist until September, with the uncertainty mounting considerably from that point onwards. We should – assuming that nothing unforeseen happens – be able to achieve at least our current earnings of around EUR 100 million in this financial year, too, allowing us to strengthen our stable net assets and financial position even further.
65% In 2016/2017, we had an equity ratio of almost 65 per cent and only equity ratio EUR 13.5 million in liabilities to banks as of the reporting date, with net capital investments of EUR 308.3 million and cash flow from operating activities of EUR 267.8 million.
FOR A NEW ERA
267. 8 The figures speak for themselves: we are a strong sugar producer in Europe. million Euro Our good financial position, well-equipped plants and close relationships with cash flow from customers and growers alike are the advantages that we will be taking on to operating activities the competitive landscape as of October 2017. We will exploit changes in the market to our advantage by continuing to grow and investing in our factories based on market developments.
We would like to thank you, our shareholders, for the trust you have shown in us – and our employees for their tireless dedication.
Nordzucker AG The Executive Board
Hartwig Fuchs Axel Aumüller
Dr Lars Gorissen Dr Michael Noth 4 READY FOR A NEW ERA
READY FOR A NEW ERA
EXPORT EXPORT LIMIT ABOLISHED
The new market system will create new opportunities: In the future, there will be no restrictions on how much sugar can be exported from the EU. This means that prices will fluctuate more strongly and start to converge with the global market.
WORLD MARKET PRICE INCREASING
ANNUAL-REPORT.NORDZUCKER.COM INFLUENCE OF THE GLOBAL MARKET
GREATER VOLATILITY
178.0 MILLIONS OF TONNES GLOBAL SUGAR PRODUCTION 2016/2017, IN RAW VALUE
Nordzucker AG ANNUAL REPORT 2016 | 2017 5
2.5 MILLIONS OF TONNES SUGAR PRODUCTION NORDZUCKER 2016/2017
INFLUENCE FROM OTHER AGRICULTURAL MARKETS
EUROPEAN UNION PRODUCTION QUOTAS FROM ISOGLUCOSE ABOLISHED EUROPEAN UNION PRODUCTION QUOTAS ABOLISHED
17.1 MILLIONS OF TONNES EU SUGAR PRODUCTION 2016/2017, IN RAW VALUE
IMPORT PROTECTION TO CONTINUE
ANNUAL REPORT 2016 | 2017 Nordzucker AG 6 READY FOR A NEW ERA THE MARKET
» WE KNOW THE MARKET AND CAN DERIVE DECISIONS FROM THIS KNOWLEDGE. «
Nordzucker AG ANNUAL REPORT 2016 | 2017 7
THE MARKET: WE ARE READY!
In step exert more of an influence over our business than On 1 October 2017, the sugar market regime in its ever before. “In the future, the EU price will never current form will be relegated to the history books. be lower than the world market price – a situation “This is just how it is. We have been adapting to we have seen at times in the past. After all, if this the new situation for some time now”, explains were to happen, the new export opportunities Nordzucker CEO Hartwig Fuchs, emphasizing: would take effect right away”, explains Fuchs. “Our customers and competitors determine our business and plans – not political regulations. The A large number of factors determine the world market will now set the rhythm to a much greater market price: these include global weather influ- extent than ever before.” ences such as El Niño, as well as speculation in sugar trading. “We have to have all of these things Knowing the market on our radar. This is the only way in which we The new market system will create new opportu- can plan and negotiate the right prices with our nities: in the future, there will be no restrictions on customers and beet suppliers”, explains Fuchs, how much sugar can be exported from the EU. This adding: “We know the market and can derive means that sugar prices will fluctuate and global decisions from this knowledge. This is a key factor prices will start to converge. The global market will in our success.”
ANNUAL REPORT 2016 | 2017 Nordzucker AG 8 READY FOR A NEW ERA THE MARKET
Measured decisions going to start producing more sugar. Our strength If we look back on more than 175 years of sugar lies in our ability to have an overview of the market production, one thing is clear: the end of the as a whole and, most importantly, to base our plans current sugar market regime is a paradigm shift on the market. We want to earn money for our that will change how we think and act within the shareholders and beet growers in the long term. company. The company’s historical objective of So any decisions to up our production will be very providing farmers with a secure income has now measured ones”, explains Fuchs. turned into something much more complex. We are continuously adjusting our sugar production Beet cultivation remains attractive from the time of cultivation until the sugar reaches “Under the sugar market regime, the set minimum the consumer. “Just because the restrictive produc- price made beet an extremely attractive crop for tion limits are now being abolished, we are not just our farmers. This is a role that beet can continue to
2010
2013
» WE WILL BE ABLE TO EXPORT OUR SUGAR WITHOUT ANY LIMITS. «
Nordzucker AG ANNUAL REPORT 2016 | 2017 9
should have a 20-tonne sugar yield per hectare. 20 per cent of our top-performing farmers
By 2020
2017
EU MARKET PRICE 496 Euro/t
WORLD MARKET PRICE 439 Euro/t
Source: EU-Price-Reporting, 27 April 2017 and for the world market, London No 5
play, because we know that we still have the poten- into account, because beet competes with them tial to considerably increase the volume of sugar for the farmer’s land. Developments on the sugar we can produce from hectare of land and that market are taken into account via the variable con- the sugar markets offer attractive prospects. And tractual models on offer. that’s not all: the role of the beet in crop rotation is unchallenged. Admittedly, from the perspective of The demand for organic sugar produced from the growers, a few things have changed. There is sugar beet is also rising among our customers. less planning security because prices and volumes This is why, for 2017/2018, we have once again will now be subject to greater fluctuation. In order concluded supply contracts with beet growers to make the new situation attractive for both sides, who will produce sugar beet in accordance with we currently also offer multi-year agreements in EU basic regulation on organic farming, or who addition to other agreement models. These are are in the process of switching over their business. proving very popular among our growers”, explains “This step is once again testimony to our market CAO Dr Lars Gorissen. In order to set appropriate orientation and allows us to expand our offering to beet prices, we take the prices of other crop plants our farmers,” explains Gorissen.
ANNUAL REPORT 2016 | 2017 Nordzucker AG 10 READY FOR A NEW ERA THE MARKET
Our sugar is in demand Growth is out there Sugar produced from beet in Europe is attractive “We are currently looking into various oppor- for European and multinational customers thanks tunities to enter into cooperation projects or to the high quality and sustainability standards that acquire companies outside of Europe, too, in apply. They exceed the requirements that apply in order to achieve gradual growth”, explains most countries. “We can also offer our customers COO Axel Aumüller, and Hartwig Fuchs contin- excellent service: varietal purity, advice on recipes ues: “Nordzucker will continue to develop over and extensive logistics expertise for just-in-time the next few years. The focus will be on activities transportation and storage are competencies that outside of Europe because, while demand within set us apart from the competition”, explains Fuchs, Europe looks set to stagnate at best, demand is adding: “For years and years, we weren’t able to growing internationally. Africa and Asia are still even think about exports. Now, new opportunities very interesting destinations for us due to growing are appearing on the horizon.” sales markets. And then there is Brazil – the largest and most efficient sugar production country. This After all, in many regions of the world, sugar con- creates opportunities for us. We will continue to sumption is on the rise; the global growth rate is become more international and to grow in Europe around 1.5 to 2 per cent a year. and beyond. This won’t happen overnight, but will be part of a cautious, step-by-step process. This is the approach that we want to take.”
10,135
» 4,959 TWO CONSECUTIVE YEARS OF DEFICITS ON THE GLOBAL MARKET. « 826 2012|13 2013|14 2014|15 SURPLUS/DEFICIT in 1,000 mt raw value 2015|16 2016|17
–5,502
Source: F. O. Licht Weltzuckerbilanz, February 2017 –8,985
Nordzucker AG ANNUAL REPORT 2016 | 2017 11
HARTWIG FUCHS CEO, Nordzucker AG » Increase of 1.5 – 2% per year 193
173 AFRICA AND ASIA ARE GROWING SALES MARKETS WHICH ARE VERY INTERESTING DESTINATIONS FOR US. « 2016 2022 GLOBAL SUGAR CONSUMPTION millions of tonnes
Source: OECD – FAO
THREE FRIENDS OF SUGAR
Animal feed: high-quality and healthy Molasses: mounting market pressure Bioethanol: less diesel and more ethanol In addition to sugar, we also sell animal feed Molasses is the beet juice that granulated At its Klein Wanzleben plant, Nordzucker made from dried and pressed sugar beet: sugar can no longer be extracted from at produces around 130,000 cubic metres of a relatively straightforward product that is the end of the production process. Molasses bioethanol a year from intermediate products manufactured regionally and offers excellent is sold primarily to the yeast and alcohol of the sugar-making process. This bioethanol traceability, meaning that it can be used in industries and is also used in the mixed feed is mainly added to petrol. The drop in the the mixed feed industry without incurring industry. Imports increase competition, which number of diesel vehicles means that sales any risks. The stabilization of the milk mar- has considerable effects on prices. of petrol are on the rise, creating good pros- ket means that animal feed produced from pects for the further use of bioethanol as a beet can look forward to positive price fuel additive. We consider the developments developments. on the ethanol market to be positive on the whole, although this market will also continue to be faced with considerable price fluctua- tions, limiting the extent to which production can be calculated considerably.
ANNUAL REPORT 2016 | 2017 Nordzucker AG 12 READY FOR A NEW ERA FINANCE
» THE BASIC INFRASTRUCTURE
IS EXCELLENT. FREE OF DEBT «
SOLID CAPITAL BASE
Nordzucker AG ANNUAL REPORT 2016 | 2017 13
FINANCE: FUNDAMENTALLY SOLID
99
20 15
NET INCOME 2014|15 2015|16 2016|17 EUR m
Satisfactory result for 2016/2017 shareholders a decent dividend; our solid financing After two weak years, Nordzucker was able to also means that we can allow our shareholders to increase its net income for the period to just under participate more in our results than they have done EUR 100 million. “We have recovered to a level that in the past. Being a Nordzucker shareholder should we consider to be acceptable. Obviously, things also be fun”, continued Noth. aren’t as good as they used to be, but we can be satisfied”, is how CFO Dr Michael Noth describes Stable outlook the company’s results. The figures translate into The current sugar market regime will continue to a dividend proposal of EUR 1.10 per share. This apply until 30 September 2017, meaning that the means that, after low dividend payments of only new 2017/2018 financial year will include a period See Forecast EUR 0.10 over the last two years, shareholders with and a period without quotas. This makes page 80 et seq. will once again receive an adequate distribution. results difficult to forecast. “We expect to see “This year, we were able to earn the cost of capital. stable developments with reasonable prices until This is important to us. With equity of more than September. After that, we just have to see what EUR 1.3 billion in our company, we want to pay our happens. Given what is expected to be a good first
ANNUAL REPORT 2016 | 2017 Nordzucker AG 14 READY FOR A NEW ERA FINANCE
half of the year, however, we believe that earnings Further efficiency gains that are at least on a par with the prior year at just “We launched our successful FORCE efficiency under EUR 100 million are achievable, provided programme in good time and were already able that we are not hit by any unforeseen effects. We to reap considerable benefits from the savings last will see how our customers and competitors react year. A total of more than EUR 30 million was saved to the new market environment”, is Noth’s cautious in the 2016/2017 financial year. We are working on forecast. Any forecasts for the period beyond this reaching the EUR 50 million threshold as soon as point are difficult: “We are optimistic about the possible. The more demanding the market and the period following the end of the sugar market more intense the competition is, the more impor- For more information regime; on average, our earnings will be sufficient. tant it is for us to cut our costs”, explains Noth. It is on FORCE see page 46 But we have to expect greater volatility in the primarily about improving on a step-by-step basis. future. Our results will fluctuate considerably from This is a permanent entrepreneurial challenge; year to year in line with the world market price. “I think that we are on an equal footing with our So we have to adapt accordingly.” major competitors in Europe, but other companies are also developing further. We have no time to stand still.”
Nordzucker AG ANNUAL REPORT 2016 | 2017 15
NET DEBT (CASH AND CASH EQUIVALENTS LESS FINANCIAL LIABILITIES) EUR m DR MICHAEL NOTH 308 CFO, Nordzucker AG » OUR RESULTS WILL FLUCTUATE CONSIDERABLY 164 FROM YEAR TO YEAR IN LINE WITH THE WORLD MARKET 52 37 PRICE. « 2013|14 2014|15 2015|16 2016|17 2012|13
–59
Stable finances well prepared for a future without a quota. There In volatile markets, Nordzucker has to have a stable is a sense of starting afresh as we enter a new era. position to allow it to ride out difficult phases, too. With good financial resources and a solid capital “We think long-term. In our business, it makes structure to back it up, the company will be able to 268 no sense to think from quarter to quarter. We are continue to actively shape the European sugar mar- million Euro proud of our equity ratio of almost 65 per cent ket of the future. We plan to exploit and expand cash flow from operating activities and our substantial net fixed assets of more than our market position in Europe. Noth finishes off EUR 300 million. We had a high cash flow of by explaining: “Nordzucker has successfully dealt EUR 268 million in 2016/2017. We are therefore with all of the changes in Europe to date, and has solvent and well financed. This allows us to fight emerged from them even stronger. We would like back when times are tough”, continues Noth. to thank our shareholders, because they give us the freedom we need to continue on the path we have Ready for more carved out for ourselves and to achieve growth. Nordzucker is an attractive sugar provider in We have the power to continue to invest in our Europe that offers high-quality and sustainable European core business and grow successfully at products, as well as extensive services and solu- international level as well.” tion-oriented advice. All areas of the company are
ANNUAL REPORT 2016 | 2017 Nordzucker AG 16 READY FOR A NEW ERA SUSTAINABILITY
HOLISTIC APPROACH
» WE CREATE INTEGRATED SOLUTIONS ADDED VALUE ALONG THE VALUE CHAIN. «
Nordzucker AG ANNUAL REPORT 2016 | 2017 17
SUSTAINABILITY: AN EXTRA SOMETHING FOR OUR CUSTOMERS
VALUE CREATION
1 2 3 4
GROWING PRODUCTION COLLEGUES CUSTOMERS & SOURCING & QUALITY & COMMUNITIES & CONSUMERS
Something extra to offer our customers sustainable beet cultivation, we have set the bar It might always be sweet, but not all sugar is alike. high, as the SAI (Sustainable Agriculture Initiative) We enhance it with our specialized knowledge and has once again confirmed. “Our customers expect assume responsibility from the time of cultivation sugar beet to have been cultivated in a sustainable until the sugar reaches the consumer. Chief Oper- manner”, says Chief Agricultural Officer Dr Lars ating Officer Axel Aumüller explains: “We are trans- Gorissen. In order to achieve this, all locations are parent and produce sustainably (in accordance evaluated based on the SAI’s Farm Sustainability with both German and European standards) and Assessment (FSA). This approach ensures sus- regionally. Our products and processes are as safe tainability from the field to the customer and is a as they can be from beginning to end. We keep an pioneering development in the sector. According eye on social and ecological interests.” to the self-assessments and external verifications, all of the evaluated growers in Germany, Poland, Turning beets into gold Sweden, Denmark and Lithuania meet the require- Our entire production chain is based on high ments for the FSA Silver standard at the very least, standards that we can prove to have met. That’s whereby most of them even attain FSA Gold. something our customers value. When it comes to
ANNUAL REPORT 2016 | 2017 Nordzucker AG 18 READY FOR A NEW ERA SUSTAINABILITY
» ENERGY AND CLIMATE TARGETS ACHIEVED – NEW TARGETS SET «
–45% –65% –10% –10%
Achieved Achieved New target New target Reduction of energy CO2 reduction per Reduction of energy CO2 reduction per consumption per tonne of sugar since consumption per tonne of sugar by tonne of sugar since 1990 tonne of sugar by 2020 1990 2020
Up with yields – down with fertilizers sector in its core regions. The sugar from the beet Sugar beet offers potential. It stands out due to is a product of nature, a product of local fields and sustainability. its long-term prospects of further yield increases, therefore a regional product. nordzucker.com/en/ reducing costs and any environmental impact at the same time. For example, it is much more Saving energy – cutting CO2 environmentally friendly to transport beet with Producing energy requires energy. A key com- a high sugar content because this results in less ponent of our sustainability drive therefore lies in water being transported. When it comes to yield considerably reducing our energy consumption increases, our experts, the cultivation advisers, and CO2 emissions. “Since 1990, we have reduced play a key role. This is because better yields are our energy consumption by more than 45 per cent not achieved by using more nutrients and pesti- and our CO2 emissions by almost 65 per cent. This 45% cides, but through better cultivation techniques. is an exemplary achievement that we are extremely Reduction of energy The intensive exchange of knowledge between proud of”, says Axel Aumüller. These objectives consumption since 1990 growers – supported by our advisers – has resulted were achieved using a number of measures, includ- in significant improvements in beet cultivation over ing switching to gas and by using steam dryers to 65% the last few decades. The use of nitrogenous fer- dry the beet pulp. This allowed us to meet our CO2 reduction since 1990 tilizer has been strongly reduced while yields have energy target in as early as 2013, meaning that our been significantly raised over the same period. This targets are now being revised. The new objective results in much better nitrogen efficiency. is to reduce the energy consumption per tonne of sugar by 10 per cent as against 2014 – which would Sugar beet is an environmentally friendly crop then equate to a 50 per cent reduction since 1990 Sugar beet is anything but a monoculture. As a root by the year 2020. Nordzucker is also looking into crop, it forms a key part of the annual crop rota- the options available for using renewable energy. tion that protects the soil and promotes species The emissions target is also a 10 per cent reduction preservation. For this reason alone, sugar beet is in 2020 compared to 2014 which is 68 per cent less an indispensable feature of Europe’s agricultural than in 1990.
Nordzucker AG ANNUAL REPORT 2016 | 2017 19
Little water – no waste explains Aumüller. All in all, society has become a Our sugar plants cover 90 per cent of their water lot less knowledgeable in terms of how to prepare requirements themselves. Since sugar beet is food over the last few decades. Nordzucker is 75 per cent water, we extract this water and use it helping to remedy this by providing information in our plants, where we recycle it up to 20 times. to children and young people, in particular. What is more, our plants barely produce any waste. All components of the sugar beet are transformed Sustainable by nature into useful by-products in the production process, “Sustainability is a matter of course for us. It moti- including animal feed and molasses. The soil and vates us to strive for continuous improvement. It’s stones from the beet are used as construction not a contradiction in terms: companies can be materials and any lime as lime fertilizer. “Sugar very successful financially by pursuing objectives production is a sophisticated and environmentally that make sense from a social perspective. This is friendly process, particularly when it comes to the something we demonstrate day in, day out”, says exceptionally sparing use of water and the preven- Hartwig Fuchs. Nordzucker’s business model, tion of waste”, says Aumüller. which is now more than 175 years old, focuses on the long term. “Beet cultivation and handling in Sugar is a pleasure the regions where we produce forms the basis of The public debate often links sugar to obesity or our business. This is the general philosophy we illnesses like diabetes. “Sugar is a natural compo- want to use to achieve further growth. One of our nent of a balanced diet and a healthy lifestyle. As top priorities is to ensure that new business models with all food and drink, it’s a question of finding the always meet our requirements in terms of sustain right balance. If we consume more calories than ability, particularly as far as working conditions and we burn, we gain weight. But that’s never down environmental protection are concerned. Combin- to one specific food or ingredient like sugar. Each ing economic, ecological and social objectives is individual has to be able to decide for themselves second nature to us. In the long run, no one aspect what they like and what foods they want to enjoy”, can work without the other”, Fuchs is convinced.
ANNUAL REPORT 2016 | 2017 Nordzucker AG 20 READY FOR A NEW ERA COMPANY
INTERNATIONALLY POSITIONED
» WE ARE A STRONG PERFORMER IN THE NEW SUGAR MARKET. « HARMONIZED THROUGHOUT THE GROUP
Nordzucker AG ANNUAL REPORT 2016 | 2017 21
COMPANY: SHARING KNOWLEDGE
Moving closer together long way”, says Hartwig Fuchs. “We stand united Nordzucker’s growth over the course of decades internationally as one team and can offer our cus- is the result of the merging of many small sugar tomers both local and global contacts. It might plants, a process that has made the company sound like an easy solution – but it’s a key factor increasingly European. The company therefore in our success!” has strong roots in the regional agricultural sector. When it became clear that a freer market was inevi We are prepared table, the question arose: how does a company “We are looking forward to the new market adapt if it wants to be flexible and agile enough structure, the challenges of the competition – for both its clients and to hold its own in the and the opportunities that will arise for us”, says competition. Dr Michael Noth. “We know what the customers and shareholders expect from us and we will strive “It was clear that we would have to move closer to compare ourselves against other players on the together and that Nordzucker would have to market. We have also laid a good foundation: the become one team. We worked hard to achieve organization is effective, we have solid finances and this. And today, I can say that we have come a a strong, highly motivated team.”
ANNUAL REPORT 2016 | 2017 Nordzucker AG 22 READY FOR A NEW ERA COMPANY
It was also necessary to redefine the company’s planning was further developed. “Without the relationship with beet growers. Dr Lars Gorissen prescribed quotas, we will have to decide for our- explains: “The quotas created fixed ties that were selves how many beets our farmers should grow. more or less a matter of course. From growers’ We base this decision on our market assessments perspective, the beets were a safe bet and we of volumes and prices. This planing process takes obviously had a lot more planning security as well. place across all areas in a highly professional man- All in all, however, this made the whole relationship ner and is extremely well organized”, says Fuchs, very static. Things have changed now. Beet is now “even if there are still improvements to be made”. being purchased in a completely different market environment. This means that employees have to Sugar specialists meet much higher demands, particularly in terms Nordzucker offers customers real added value, be of beet, too. We have to be active and agile players it thanks to customized logistics, transparency in on the competitive landscape and direct contact the manufacturing process, deliveries that meet with growers is more important than ever before”, specifications, impressive quality or the company’s explains Dr Lars Gorissen. knowledge of sugar as an ingredient in customers’ recipes. As far as beet growers are concerned, the Improving our processes focus is on providing advice. “As well as offering “For as long as the sugar industry has existed conventional cultivation advice, we are also on in Europe, the industry has been improving its hand to assist with business-related matters, to processes. This is something of a tradition at explain the cultivation agreements and help with Nordzucker. We focus on logistics, efficiency, cultivation planning”, says Dr Lars Gorissen. The energy savings and top quality. We live up to the aim is always to be an equally good partner to responsibility we have vis-à-vis customers and both growers and customers. “We expect a lot other stakeholders with a sense of conviction and of our employees: they have to share specialist dedication”, explains Axel Aumüller. “The most knowledge, seek direct contact with customers important thing is to be fast, to be prepared to and farmers and be clear and open in the way they learn new things and make decisions. We have a communicate – that’s what our philosophy is all rock-solid foundation: modern plants, good grow- about”, emphasizes Hartwig Fuchs. ing regions, solid finances, long-term customer relationships and a wealth of expertise.” No time to rest on our laurels Nordzucker is ready – even if action still needs to Experts on the market be taken here and there. “But that doesn’t mean Broad-based, represented in a large number of that we can now just sit back. Markets change and countries and equipped with first-rate knowledge: technical developments such as the digitalization this is how Nordzucker presents itself on the in beet cultivation, in production or in logistics are market. “We are really reaping the benefits from progressing well. New investments due to environ- our efforts to move closer together internationally mental or customer requirements are presenting in recent years. This cultural and interdisciplinary us with new challenges day in, day out”, says dialogue is one of the key prerequisites for our flex- Fuchs. With the help of a clear customer focus and ibility and further development”, explains Hartwig a healthy awareness of efficiency and profitability, Fuchs. In particular, market-oriented production Nordzucker is extremely well prepared.
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AXEL AUMÜLLER Chief Operating Officer » THE MOST IMPOR TANT THING IS TO LEARN NEW THINGS AND MAKE DECI SIONS. «
DR MICHAEL NOTH Chief Financial Officer » WE ARE RISING TO THE CHALLENGES OF THE COMPETITION. «
DR LARS GORISSEN Chief Agricultural Officer » DIRECT CONTACT WITH GROWERS IS MORE IMPOR TANT THAN EVER BEFORE. «
» WE STAND UNITED INTERNATIONALLY AS ONE TEAM. «
HARTWIG FUCHS Chief Executive Officer
ANNUAL REPORT 2016 | 2017 Nordzucker AG 24 READY FOR A NEW ERA VALUES
DEDICATION
RESPONSIBILITY
COURAGE
APPRECIATION » OUR FOUR VALUES FORM THE BASIS FOR ALL CHANGE PROCESSES. «
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VALUES: SUCCESS IS IN OUR GENES
Always there in the background is something we managed to achieve more quickly Our four corporate values – courage, dedication, than I expected.” responsibility and appreciation – can be felt every- where at Nordzucker. They form the basis for the Canon of values decisions we make, the way in which we work and The interplay between the values is important. how we address the market. “The individual values can only develop their potential and act as meaningful guidelines as “Sometimes, our values crop up completely part of a canon. The canon of values is all about unexpectedly, for example during a discussion the interplay between four values. It helps us in or a decision-making process. They also draw our our daily work and decisions”, explains Dr Lars attention to aspects we had not yet considered”, Gorissen. For example, it’s one thing making emphasizes Dr Michael Noth. And Hartwig Fuchs courageous decisions. But being aware of one’s adds: “It is especially worth noting that these val- responsibility and the implications of the decision ues were not prescribed by the Executive Board, at the same time is another. “In our international but rather were discussed and defined by the group, a high degree of standardization and uni- employees themselves. It was a time-consuming form action that transcends national boundaries process that involved a large number of meetings are important aspects”, says Dr Michael Noth. “Our and workshops. At times, we faced opposition and values help us to be faster and less bureaucratic. If sometimes misunderstandings, too. The effort paid you take the values to heart, then there is no need off. Everyone within the entire Group is familiar to set out everything in detail.” with the values and has taken them on board. This
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Dedication Courage At Nordzucker, dedication to the company, our “Courage is about daring to take calculable work and our objectives also means accepting and risks. After all, we always have to deal with risks”, rising to challenges and being open to change. explains Hartwig Fuchs. “This is closely linked to This applies in relation to the campaign, innovative being tolerant of mistakes.” Mistakes create learn- projects, addressing future trends or when dealing ing opportunities. “If, for example, something goes with requirements of customers, residents or beet wrong with the campaign during a night shift, suppliers. employees have to take fast, dedicated and – the magic word – courageous action when it comes Responsibility to deciding what to do next. We give them a great Responsibility implies an obligation for Nordzucker, deal of responsibility in cases like these, because society and the environment. This means think- we trust our people”, says Axel Aumüller. ing and acting in the long term, making sound business decisions and taking responsibility for the motivation, safety, health and well-being of employees and colleagues.
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AXEL AUMÜLLER Chief Operating Officer » WE GIVE A GREAT DEAL OF RESPONSIBILITY BECAUSE WE
Appreciation TRUST OUR Appreciation lays the foundation for good col- laboration. “That means listening, understanding PEOPLE. and taking time, be it for colleagues, employees, managers but also for customers and suppliers”, « emphasizes Hartwig Fuchs. “This is the only way in which we can pick up on opportunities. Showing appreciation is a must if we want to develop further and become more successful.”
ANNUAL REPORT 2016 | 2017 Nordzucker AG 28 READY FOR A NEW ERA REPORT BY THE SUPERVISORY BOARD
REPORT BY THE SUPERVISORY BOARD OF NORDZUCKER AG FOR THE FINANCIAL YEAR 2016/2017
HANS-CHRISTIAN KOEHLER Chairman of the Supervisory Board
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Dear shareholders,
Nordzucker AG can look back on an encouraging financial year. As a result, following the low dividend payments made in the last two years, the Supervisory Board and the Executive Board will be proposing the distribution of a dividend of EUR 1.10 at the Annual General Meeting – this means that you, our shareholders, will once again receive an adequate return on your capital employed, allowing you to participate in the positive earnings achieved in the financial year under review.
Nordzucker is well prepared for the new market following the expiration of the sugar quota and minimum beet prices. A comprehensive transformation programme was launched to achieve this, involving employees at all levels and in all locations of the Group. This programme helped to raise further awareness of market changes among all employees. Thanks to this project and the numerous initiatives implemented in recent years, Nordzucker is not only more market and customer-oriented, but also more efficient and effective today than ever before. With this philosophy in mind, key resources are also being conserved. This is also highlighted by the investments being made in our factories to make them fit for the new era in sugar production and to boost the efficiency of our sites even further. After all, the expiration of the quotas is likely to result in a further process of consolidation on the EU sugar market, which will also be reflected in more intense competition. The Supervisory Board believes that Nordzucker AG is well equipped to tackle the challenges that lie ahead. Overall, Nordzucker has the best chances of being able to exploit the market opportunities that will arise from the end of the sugar market regime.
The Supervisory Board supports the Executive Board in its strategy of further growth, not only in Europe but also in third countries in which we expect to see rising demand for sugar. Just like our Executive Board members, however, the Supervisory Board has also identified the challenges and risks associated with the expiration of the sugar market regime. These include, first and foremost, price volatility, which is set to increase consider- ably as we are currently witnessing a dramatic slump in prices on the international raw sugar market. This will make our earnings less predictable and more difficult to plan in the future. Nevertheless, Nordzucker has its sights firmly set on the future and remains optimistic.
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In the financial year 2016/2017, the Supervisory Board of Nordzucker AG carried out the duties required of it by statutes, the company’s Articles of Association and rules of procedure, advising and monitoring the Executive Board of Nordzucker AG and the Nordzucker Group on an ongoing basis. This monitoring and advising took place in particular in meetings of the Supervisory Board and its committees.
SUPERVISORY BOARD MEETINGS AND RESOLUTIONS
The Supervisory Board held four ordinary meetings in the 2016/2017 financial year. Furthermore, the Supervisory Board held a closed meeting in March 2016 and a constitutive meeting following the Annual General Meeting in July 2016. The Executive Board also attended each of the meetings.
Prior to its first ordinary Supervisory Board meeting in the 2016/2017 financial year, the Supervisory Board held a closed meeting on 2 March 2016 to discuss Nordzucker’s marketing structure as part of the global competitive landscape. The Supervisory Board also discussed the amendments to the rules of procedure for the Supervisory Board and the Executive Board, as well as an amendment to the Articles of Association of Nordzucker AG. This amendment largely relates to the decision to reduce the size of the Supervisory Board from 21 to 15 members in order to make it more efficient. The Articles of Association also created authorized capital in order to allow the company to exploit any market opportunities that arise.
At its first ordinary meeting on 3 March 2016, the Supervisory Board adopted the budget for the Nordzucker Group for the financial year 2016/2017 and discussed and debated the long-term financial planning in detail. The Supervisory Board also adopted the statement of compliance issued by Nordzucker AG on the German Corporate Governance Code, the recommendations of which are followed by Nordzucker AG on a voluntary basis as a company that is not listed on the stock exchange. To the extent that the Code refers to statutory obligations of publicly quoted companies outside the scope of its recommendations, these are not applicable to Nordzucker AG. The company also assumes no voluntary obligation to adhere to them. Otherwise, we refer to the comments in the Corporate Governance Report. In addition, the amendments to the rules of procedure and the Articles of Association discussed at the closed meeting were debated.
The individual and consolidated financial statements for the financial year 2015/2016 and the dependent company report were the main subject of the second ordinary Supervisory Board meeting held on 23 May 2016 (financial statements meeting). After hearing the auditors’ report and conducting an in-depth discussion, and on the recommendation of its Audit and Finance Committee, the Supervisory Board endorsed the annual financial statements of Nordzucker AG and approved the consolidated financial statements. The Supervisory Board’s proposals to the Annual General Meeting to be held on 7 July 2016 were also on the agenda. The Supervisory Board also discussed the creation of authorized capital, which will give the Executive Board the opportunity to be flexible in reacting to market developments.
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At the recommendation of its Human Resources Committee, the Supervisory Board also adopted the targets for the variable remuneration of the Executive Board for the year 2016/2017. The Supervisory Board also voted to change the remuneration system for the members of the Executive Board. In the 2015/2016 financial year, the total monetary remuneration paid to members of the Executive Board was based on a fixed basic annual salary and on earnings and performance-related variable remuneration. The variable bonus can be up to a maximum of 50 per cent of total compensation. Therefore, 45 per cent of variable remuneration was paid as a short-term incentive linked to the achievement of targets for the given financial year. The remaining 55 per cent was paid as a long-term incentive, calculated on the basis of average performance against targets for previous years.
Following intensive discussions in the Human Resources Committee and the Supervisory Board as a whole, we reached an agreement with the Executive Board on a new remuneration system to replace the previous, highly complex system with a clear system that better suits the way our company works.
With effect from 1 March 2016, the remuneration components paid to Executive Board members were reweighted in terms of the ratio of fixed to variable remuneration. The variable component of the Executive Board remuneration has been reduced from the previous level of 50 per cent to around 25 per cent. In turn, the fixed remuneration paid to Executive Board members has been increased. Notwithstanding the description in paragraph 4.2.3 of the German Corporate Governance Code (GCGC) (version dated 5 May 2015), which is based on the legal provision for listed companies set out in Sec. 87 paragraph 1 AktG, the variable remuneration components following the change in the system of remuneration do not include a long-term assessment basis. This means that remuneration is now only based on the financial year in question, as opposed to on an assessment of the last three financial years as in the past. The individual “soft targets” set for the Executive Board have also been abolished. Since the 2016/2017 financial year, the variable remuneration paid to the Executive Board has been based on the achieve- ment of three key financial indicators. The Supervisory Board sets annual targets for two of these key indicators, whereas for the RoCE a target was fixed for several years. These three key figures – EBITDA, net income and RoCE – were also relevant in the past.
The reason behind the change is simple: the sugar market is expected to become even more volatile in the future. Although the Executive Board is responsible for the perfor- mance of Nordzucker AG, it is not responsible for the major fluctuations in market prices. The new system allows us to impose both lower and upper limits on the amount of remuneration. As a result, we are convinced that the changes to the remuneration system make sense and are appropriate both for Nordzucker as a company and for the Executive Board members. Even without a long-term assessment basis, the Supervisory Board believes that the remuneration paid to the Executive Board members is based on sustainable company performance overall, taking into account the particular circum- stances that apply to Nordzucker AG and the structure of the variable remuneration components.
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Detailed information on Executive Board remuneration is provided in the remuneration report, which forms part of the annual report (see pages 135 et seq.).
The constitutive meeting of the Supervisory Board took place immediately after the Annual General Meeting on 7 July 2016 and focused on personnel matters. Hans-Christian Koehler was confirmed as Chairman of the Supervisory Board. The shareholder represen tative, Jochen Johannes Juister, and the employee representative, Dieter Woischke, were elected as Deputy Chairmen. The following members were re-elected to the Steering Committee, which is chaired by Chairman of the Supervisory Board Hans-Christian Koehler: Hans Jochen Bosse, Michael Gerlif, Dr Harald Isermeyer, Jochen Johannes Juister, Sigrun Krussmann and Dieter Woischke. Michael Gerlif was re-elected as chairman and Ulf Gabriel, Jochen Johannes Juister and Marina Strootmann were re-elected as members of the Audit and Finance Committee. The shareholder representative Grit Worsch was newly elected. Dr Harald Isermeyer, Sigrun Krussmann, Dieter Woischke and Grit Worsch were elected as members of the Human Resources Committee and Helmut Bleckwenn, Gerhard Borchert, Dr Harald Isermeyer and Dr Hans Theo Jachmann were elected to the Nomination Committee. Hans-Christian Koehler chairs the Human Resources and Nomination Committees in his role as Chairman of the Supervisory Board.
At its third ordinary meeting held on 29 September 2016, the Supervisory Board, after careful consideration and on the recommendation of its Audit and Finance Committee, adopted the investment budget for the coming financial year as proposed by the Executive Board and was provided with detailed information on the long-term financial planning. The Supervisory Board also discussed new developments within production.
The fourth ordinary Supervisory Board meeting was held on 1 December 2016 as part of a Supervisory Board excursion to the plant in Kedainiai (Lithuania). This meeting focused on preparations for an internal efficiency review. In line with the German Corporate Governance Code we carried out this review in 2010/2011, 2012/2013 and in 2014/2015. Proposals were discussed for further optimizing the work of the Supervisory Board and its committees and the working relationship with the Executive Board on the basis of an anonymous online survey conducted among the Supervisory Board members.
At all its meetings in the reporting year the Supervisory Board also discussed the consequences and risks of the antitrust proceedings, the company’s financial status and the forecasts and budgets for Nordzucker AG and the Nordzucker Group. It discussed the Nordzucker Group’s strategy, continued development and corporate planning with the Executive Board on a regular basis. Also discussed at Supervisory Board meetings were the course of business, risk exposure, risk management, the internal control system and conformity with compliance regulations as well as transactions of considerable importance.
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The Executive Board fulfilled its obligations as defined by statute, the Articles of Association and the rules of procedure and regularly informed the Supervisory Board about events of importance for the company, promptly and comprehensively, both in the course of and outside Supervisory Board meetings. The Executive Board presented to the Supervisory Board all matters requiring its authorization. After thorough review and discussion, the Supervisory Board gave its approval to the Executive Board proposals.
The Chairman of the Supervisory Board was in regular contact with the Executive Board, also in-between Supervisory Board meetings. He was informed of the current state of business and major transactions and discussed with the Executive Board matters of strategy, planning, corporate development, risk exposure, risk management and compli- ance with company standards.
In the 2016/2017 financial year, the Supervisory Board was not informed of any conflict of interest by any of its members – in particular of any conflicts of interest which may result from a consultant or directorship function with clients, suppliers, lenders or other business partners.
SUPERVISORY BOARD COMMITTEES
For the efficient exercise of its duties, the Supervisory Board of Nordzucker AG has formed four committees: the Steering Committee, the Audit and Finance Committee, the Human Resources Committee and the Nomination Committee. The committee chairs reported on the main elements of the committee meetings at the Supervisory Board meetings. Minutes and documents of all committee meetings were provided to all the Supervisory Board members.
The Steering Committee of the Supervisory Board met five times in the 2016/2017 financial year (9 May, 11 August, 13 September, 15 November 2016 and 23 February 2017). The Supervisory Board Executive Committee discussed the latest key topics concerning the Nordzucker Group, important projects and the company’s strategic direction after the expiry of sugar quotas and the EU minimum price. In addition, the Executive Committee prepared the Supervisory Board meetings (including the dates and agenda items) and the Annual General Meeting, as well as the closed meeting of the Supervisory Board, and looked closely at the voluntary statement of compliance by Nordzucker AG on the German Corporate Governance Code in line with Sect. 161 of the German Stock Corporation Act (AktG).
The Audit and Finance Committee met four times in the financial year 2016/2017 (9 May, 13 September, 15 November 2016 and 23 February 2017). It looked regularly at the financial situation and forecasts, company funding, investment planning, quarterly and half-yearly financial statements for the Nordzucker Group and Nordzucker AG, risk management, the internal control system and the effectiveness, the resources and the findings of the Internal Audit department. In the presence of the auditors, the committee
ANNUAL REPORT 2016 | 2017 Nordzucker AG 34 READY FOR A NEW ERA REPORT BY THE SUPERVISORY BOARD
discussed the financial statements and management reports for the Nordzucker Group and Nordzucker AG for the financial year 2015/2016. Its work also included appointing the auditors for the financial year 2016/2017 and verifying their independence. The examination and approval of the individual and consolidated financial statements and the dependent company report for the past financial year 2016/2017 as well as the proposal for election of the auditors for the financial year 2017/2018 and the dividend proposal to the Annual General Meeting were prepared at an additional meeting held outside the period under review on 8 May 2017.
The Human Resources Committee met on 27 April 2016 and 24 February 2017 in the reporting period. In particular, it prepared the Supervisory Board’s decisions on the variable remuneration paid to the Executive Board (see remuneration report in the annual report). It also discussed the reappointment of Axel Aumüller to the Executive Board and submitted a recommendation to this effect to the Supervisory Board for its meeting on 9 March 2017.
The Nomination Committee met on 27 April 2016 and 22 February 2017 in the 2016/2017 financial year. It updated the job description for the shareholder representatives on the Supervisory Board. The members of the Committee also discussed a change in the target composition and set the target for the proportion of women on the Supervisory Board to be reached by 30 June 2022. At the moment, the Supervisory Board has five female members, which corresponds to a proportion of 23.8 per cent. At its meeting held on 9 March 2017, the Supervisory Board set a target of 25 per cent for the proportion of women on the Supervisory Board, which is to be met by 30 June 2022.
The Nomination Committee gave the full Supervisory Board recommendations for its proposal to the Annual General Meeting on the election of shareholder representatives to the Supervisory Board. The decision to reduce the size of the Supervisory Board to 15 members in the future had to be taken into account in this regard. It also made proposals to the full Supervisory Board on candidates for the chair and deputies as well as the Supervisory Board committees.
ANNUAL FINANCIAL STATEMENTS 2016/2017
The Executive Board presented the Supervisory Board in good time with the annual financial statements of Nordzucker AG and the Group, the management report and the Group management report, the proposal for the use of profits and the report on related party transactions. Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Hanover, were selected as auditors at the Annual General Meeting on 7 July 2016 at the Supervisory Board’s proposal. They audited the 2016/2017 annual financial statements for Nordzucker AG, its management report, the consolidated financial statements and the Group management report and issued each with an unqualified audit opinion. The auditors also audited the dependent company report, presented it to the Supervisory Board members in good time and gave the following opinion: “Following our profes- sional audit and assessment we confirm that 1. the factual statements in the report are correct, and 2. that the consideration paid by the company in the transactions listed in the report was not inappropriately high.”
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The aforementioned documents were presented in good time, examined thoroughly by the Audit and Finance Committee and the Supervisory Board, and were discussed in detail in the presence of the auditors following their report on the main findings of the audit. The Supervisory Board concurs with the result of the audit and concluded from its own examination at the meeting held on 22 May 2017 that it has no objections to make. The Supervisory Board approved the annual financial statements as prepared by the Executive Board, which are thereby adopted. The Supervisory Board also approved the Executive Board’s proposal to use the net distributable profit to pay a dividend of EUR 1.10 per share for the financial year 2016/2017.
PERSONNEL MATTERS
At the Annual General Meeting on 7 July 2016 the shareholders of Nordzucker AG again elected Gerhard Borchert and Dr Hans Theo Jachmann to the Supervisory Board. Dr Carin-Martina Tröltzsch was elected as a new member of the Supervisory Board to replace Mats Rosendahl, whose term of office had come to an end. The Supervisory Board would like to thank Mats Rosendahl for his many years of work for the benefit of the Nordzucker Group.
There were no changes to the Executive Board. Dr Lars Gorissen was re-elected to the Executive Board by the Supervisory Board at its meeting held on 23 May 2016. Outside of the reporting period, the Supervisory Board reappointed Axel Aumüller to the Executive Board at its meeting held on 9 March 2017.
Finally, the Supervisory Board would like to thank the Executive Board and all the employees of the Nordzucker Group for their work in 2016/2017.
Braunschweig, Germany, 22 May 2017
Hans-Christian Koehler Chairman of the Supervisory Board
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CORPORATE GOVERNANCE REPORT FOR THE FINANCIAL YEAR 2016/2017 and declaration on corporate governance in accordance with Sec. 289a paragraph 4 German Commercial Code (HGB)
GENERAL DUAL GOVERNANCE SYSTEM
Corporate governance covers the system of Nordzucker AG is based in Braunschweig and is managing and monitoring a company, including subject to German stock corporation law. As a its organizational structure, its corporate poli- fundamental principle it provides for a dual system cies and guidelines as well as the internal and of governance, in which the Executive Board is external mechanisms of control and monitoring. responsible for managing the company and the Nordzucker AG attaches great importance to Supervisory Board is responsible for advising and well-structured, authentic corporate governance monitoring the Executive Board. Both boards and as it ensures that the management of the company their members have their own authority and work is carried out in the spirit of long-term value cre- together closely and on the basis of mutual trust in ation. It fosters the confidence of shareholders, the interests of the company. financial markets, business partners, staff and the general public in the management and monitoring COMPOSITION AND of the Nordzucker Group. WORKING PRACTICES OF THE EXECUTIVE BOARD Corporate governance is the foundation for the decision-making and controlling processes at the The Executive Board of Nordzucker AG currently Nordzucker Group. Nordzucker’s activities are consists of four members. carried out in accordance with clearly defined guidelines. These guidelines ensure that the The Executive Board of Nordzucker AG is respon- company’s actions are systematically aligned with sible for determining company policy. It sets the interests and expectations of shareholders, corporate strategy, plans and approves company customers, business partners and staff. budgets, decides on the allocation of resources and monitors the performance of the company The actions of all our staff are aimed at earning and the Group. It is also responsible for preparing an appropriate and sustainable profit, continually the interim and annual financial statements for generating growth and increasing market share. Nordzucker AG and the consolidated financial Continuous improvement of all business processes statements. The Executive Board is collectively by competent, well-managed staff earning perfor- responsible for managing the business of mance-related pay secures the existence and the Nordzucker AG. systematic long-term development of the company in an ever-changing competitive environment.
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On 16 July 2015, the Supervisory Board decided COMPOSITION AND in accordance with Sec. 111 paragraph 5 German WORKING PRACTICES OF Stock Corporation Act (AktG) to set a target of THE SUPERVISORY BOARD 0 per cent for the proportion of women on the Executive Board, with a deadline of 30 June 2017 The Supervisory Board of Nordzucker AG currently for reaching this figure. There are currently no has 21 members. As of the close of the Annual women on the Executive Board. At its meeting General Meeting, in which votes are to be cast held on 9 March 2017, the Supervisory Board of on discharging the boards for the financial year Nordzucker AG set the following targets for the 2016/2017, the Supervisory Board will consist of future proportion of women on the Executive 15 members. Two-thirds of the Supervisory Board Board: By 30 June 2022, the target for the pro- members represent the shareholders and one-third portion of women on the Executive Board is 0 per represents the workforce. The Supervisory Board cent. monitors the Executive Board and advises it on the management of the company. The Supervisory For the first level below the Executive Board, a tar- Board regularly discusses the course of business get of 10 per cent of female managers should be and company planning as well as corporate achieved by 30 June 2017. Within the Nordzucker strategy and its implementation. It examines Group as a whole, the first level of management and approves the annual financial statements of below the Executive Board has a proportion of Nordzucker AG and the consolidated financial women currently amounting to 10.7 per cent, a statements for the Group, giving due regard to the figure that rises to 14.3 per cent for Germany in auditors’ report and the results of the examination particular. by the Audit and Finance Committee. Major Exec- utive Board decisions are subject to its approval. At the second level below the Executive Board – insofar as employees have management responsi- In order to reflect recommendation 5.4.1 of the bility – the target set for the proportion of women German Corporate Governance Code and Sec. 111 is 20 per cent. As of the end of the 2016/2017 paragraph 5 AktG, the Supervisory Board decided financial year, the proportion of women comes on 9 March 2017 to take the following elements to 20.79 per cent throughout the Group and relating to its composition and a reduction in the 18.18 per cent for Germany as a whole. number of Supervisory Board members into account in particular: On 20 March 2017, the Executive Board of Nordzucker AG set the following targets for the • At least three Supervisory Board seats for peo- future in accordance with Sec. 76 paragraph ple with a particularly international background 4 AktG: (e. g. people who have worked abroad or hold foreign citizenship). For the first level below the Executive Board, a target of 15 per cent of female managers should • At least three Supervisory Board seats for be achieved by 30 June 2022. For the second level, people who hold no functions connected with the target is 21 per cent. customers, growers’ associations or other busi- ness partners. The Executive Board, with the approval of the Supervisory Board, has adopted internal rules of procedure.
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• At least three Supervisory Board seats for • Building on these, the Code of Conduct pro- women. The target for the proportion vides general guidance for the employees of women on the Supervisory Board is of the Nordzucker Group and those sales 19 per cent, with an implementation deadline representatives, consultants and other business of 30 June 2017. At present, there are five partners who act on its behalf. women on the Supervisory Board, which cor- responds to a proportion of 23.8 per cent. • Internal rules, guidelines, process descriptions, directives and manuals apply this general guid- • At its meeting held on 9 March 2017, the ance to specific situations. Supervisory Board set a target of 25 per cent for the proportion of women on the Supervisory • Six key messages constitute the company’s Board. mission statement, with a particular focus on the change process triggered by the expiry • The age limit for Supervisory Board members is of the European sugar market regime on 65 as a general rule. 30 September 2017.
• There is a general membership limit of 25 years • The Business Principles form the basis for for the Supervisory Board. working together in a functional organizational structure. At present these targets have been met. DECLARATION BY THE The Supervisory Board has adopted internal rules EXECUTIVE BOARD AND of procedure and to optimize its working prac- SUPERVISORY BOARD tices has set up a Steering Committee, an Audit OF NORDZUCKER AG and Finance Committee, a Human Resources IN ACCORDANCE WITH Committee and a Nomination Committee. SECTION 161 AKTG
MAIN CORPORATE For publicly traded companies the principles of GOVERNANCE PRACTICES good company management are laid down in the German Corporate Governance Code (here- In addition to the principles of the German after known as the Code). The Code consists of Corporate Governance Code, the sustainable and recommendations and suggestions for good com- responsible governance of the Nordzucker Group pany management and also describes statutory is based on the following core principles: obligations for publicly listed companies. Publicly traded companies must issue an annual statement • The four company values – responsibility, dedi on compliance with the Code’s recommendations cation, courage and appreciation – form the pursuant to Sec. 161 of the German Stock Corpo- basis of the company culture at the Nordzucker ration Act (AktG). This declaration relates to both Group. past and future periods. Nordzucker AG is not a publicly traded company within the meaning of Sec. 161 paragraph 1 AktG. It is therefore not obliged to make an annual statement on whether
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the company complies with the recommenda- A responsible attitude to risk is also part of pru- tions issued by the Government Commission Ger- dent company management and good corporate man Corporate Governance Code and the reasons governance practice. The internal control system for any non-compliance. Despite this, the principles of the Nordzucker Group ensures that risks are of good and transparent corporate governance measured where they arise and steps are taken are an established part of the company culture at accordingly. Furthermore, the Nordzucker Group Nordzucker AG. As in previous years, the Execu- has a risk management system to identify and tive Board and Supervisory Board of Nordzucker measure developments that could cause substan- AG have therefore decided to make a voluntary tial losses. The risk management system also serves statement pursuant to Sec. 161 paragraph 1 AktG to avoid risks that could jeopardize the company’s (see page 41 of the annual report). The statements continued existence. Finally, internal audits are of compliance for the past five years can be found conducted on a regular basis, which contribute on the Nordzucker AG website. To the extent to good corporate governance by providing inde- that the Code refers to statutory obligations of pendent monitoring of the internal control system publicly quoted companies outside the scope of and risk management system. its recommendations, these are not applicable to Nordzucker AG. The company also assumes no FINANCIAL REPORTING voluntary obligation to adhere to them. Nordzucker AG prepares its annual financial state- COMPLIANCE, RISK ments in accordance with the accounting princi- MANAGEMENT, INTERNAL ples of the German Commercial Code (HGB). The CONTROL SYSTEM AND Nordzucker Group applies International Financial INTERNAL AUDIT Reporting Standards (IFRS) as applicable in the European Union (EU). Compliance refers to all the activities carried out across the Group to ensure that the company, its managers and employees act in accordance with statutory and internal rules and regulations. The Supervisory Board and Executive Board of Nordzucker AG will not tolerate any breaches, especially breaches of anti-trust and anti-bribery legislation. All indications of any such breaches will be followed up without delay. Internal meas- ures are in place that aim to prevent employees and the company from breaking the law and help them to apply the relevant regulations and internal guidelines correctly. Training courses are held on a regular basis. A “Speak Up!” system has been in place since 2 March 2017, allowing employees and individuals from outside of the company to submit anonymous tip-offs concerning ethical misconduct.
ANNUAL REPORT 2016 | 2017 Nordzucker AG 40 READY FOR A NEW ERA CORPORATE GOVERNANCE REPORT
SUSTAINABILITY AS AN ALL-ENCOMPASSING CONCEPT
Sustainability is a high-priority topic for the Nordzucker Group and many of its customers. As a food producer, ecological and social issues are a natural part of our daily work. For the Nordzucker Group it is vital to develop a sustainable value chain together with suppliers, service providers, employ- ees and customers. Our top priorities are tracea- bility, quality and dependability. The Nordzucker AG sustainability report is available at sustainability. nordzucker.com.
Furthermore, meeting high standards for food and animal feed quality and safety, conserving resources, continuously minimizing and prevent- ing environmental damage as well as safeguarding health and safety at work are an integral part of all the Nordzucker Group’s activities. Particular importance is attached to avoiding and preventing errors.
Braunschweig, Germany, May 2017
For the Supervisory Board For the Executive Board Hans-Christian Koehler Hartwig Fuchs Supervisory Board Chairman Executive Board Chairman
Nordzucker AG ANNUAL REPORT 2016 | 2017 41
VOLUNTARY STATEMENT ON 1. Given the particular significance of agricultural THE GERMAN CORPORATE expertise for the company, conflicts of interest to GOVERNANCE CODE IN which Supervisory Board members may be sub- ACCORDANCE WITH ject are of secondary importance (Number 5.5.3 SECTION 161 AKTG FOR THE sentence 2). FINANCIAL YEAR 2016/2017 2. As Nordzucker AG is included in the consoli- Nordzucker AG is not a publicly traded company dated financial statements of Nordzucker Hold- within the meaning of Sec. 161 paragraph 1 AktG. ing AG, the latter company has a particular need It is therefore not obliged to make an annual for information (Number 6.1). statement on whether the company complies with the German Corporate Governance Code To the extent that the Code refers to statutory issued by the Government Commission German obligations of publicly quoted companies outside Corporate Governance Code and the reasons for the scope of its recommendations, these are not any non-compliance. Despite this, the principles applicable to Nordzucker AG. The company also of good and transparent corporate governance assumes no voluntary obligation to adhere to are an established part of the company culture at them. Otherwise, we refer to the comments in the Nordzucker AG. As in previous years, the Execu- Corporate Governance Report. tive Board and Supervisory Board of Nordzucker AG have therefore decided to make a voluntary Braunschweig, March 2017 statement pursuant to Sec. 161 paragraph 1 AktG. Supervisory Board Executive Board On this basis, the Executive Board and Supervisory Hans-Christian Koehler Hartwig Fuchs Board of Nordzucker AG declare that since the last Supervisory Board Executive Board statement of compliance was made in March 2016, Chairman Chairman the company has complied and will comply with the recommendations of the Code as amended on 5 May 2015, with the following exceptions:
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DETAILED INDEX GROUP MANAGEMENT REPORT 2016 | 2017
44 NORDZUCKER AT A GLANCE 47 MACROECONOMIC SITUATION 48 THE SUGAR MARKET 52 MARKET FOR ANIMAL FEED AND MOLASSES 53 MARKET FOR BIOETHANOL 54 MARKET FOR SWEETENERS 55 BEET CULTIVATION AND SUGAR PRODUCTION 57 EARNINGS AND FINANCIAL POSITION AND NET ASSETS 63 CAPITAL EXPENDITURE 64 FINANCING 65 DIVIDEND 66 EMPLOYEES 70 OPPORTUNITIES AND RISKS 80 FORECAST
Nordzucker AG ANNUAL REPORT 2016 | 2017 43
ANNUAL REPORT 2016 | 2017 Nordzucker AG 44 GROUP MANAGEMENT REPORT NORDZUCKER AT A GLANCE CONSOLIDATED FINANCIAL STATEMENTS
GROUP MANAGEMENT REPORT OF NORDZUCKER AG
NORDZUCKER ice cream and drinks. To a lesser extent, Nordzucker’s AT A GLANCE products are also used for purposes other than human consumption, such as in the chemical industry, for example. The company sells some 80 per cent of its BUSINESS ACTIVITIES sugar to customers in the food industry. The remain- ing 20 per cent is supplied to consumers via the retail Nordzucker is the second largest sugar producer in industry. Nordzucker sells these retail sugar products 15% the European Union, with a market share of more than to consumers in many different product categories market share 15 per cent, as measured by the EU sugar quota. In and packaging sizes, primarily under the brand names the 2016/2017 financial year, the company produced SweetFamily in Germany, Poland and Slovakia and Dan- 2.5 million tonnes of sugar from sugar beet in 13 sugar sukker in Northern Europe. Standard products are also plants in seven European countries. On average over sold to consumers under white-label brands. The port- the year, the Group had 3,236 employees. folio includes other products of the sugar-making pro- cess, especially dried pulp pellets, pressed pulp and Our customers include the confectionery industry as molasses as animal feed – the latter also for the yeast well as producers of dairy and bakery products, jams, and alcohol industries.
Nordzucker AG
NORDZUCKER GmbH & Co. KG, NORDIC SUGAR A/S, NORDZUCKER POLSKA S.A., Braunschweig/Germany 100 % Copenhagen/Denmark 100 % Opalenica/Poland 99.87 %
For the sites see NORDDEUTSCHE FLÜSSIGZUCKER NORDIC SUGAR AB, POVAŽSKÝ CUKOR A.S., also front cover page GMBH & CO. KG, Malmö/Schweden 100 % Trencianska Tepla/Slovakia 96.80 % Braunschweig/Germany 70 % NORDZUCKER IRELAND LIMITED, NORDZUCKER SERVICES Dublin/Ireland 100 % GMBH & CO. KG, Braunschweig/Germany 100 % SUCROS OY, Säkvlä/Finland 80 %
SUOMEN SOKERI OY, Kantvik/Finland 80 %
AB NORDIC SUGAR KEDAINIAI, Kedainiai/Lithuania 70.60 %
Nordzucker AG ANNUAL REPORT 2016 | 2017 45
STRATEGY As the sugar market regime expires in 2017 and the limit on export volumes is lifted, the sugar trade will Since the company was founded in 1997, Nordzucker become more important in future. This means that it has systematically driven growth in its core sugar mar- will be important for the company to build up addition- More about the new ket. Consolidation of the North German sugar indus- al expertise in European sugar exports and to establish sugar market regime on page 48 et seq. try was followed by several acquisitions in Eastern the logistics required for this in order to ensure its fur- Europe. Nordzucker pursued its growth strategy with ther development. In light of this, Nordzucker acquired the purchase of the Nordic Sugar Group in 2009 and a stake of 25 per cent in August Töpfer Zucker is now the second largest sugar producer in Europe. handelsgesellschaft mbH & Co. KG, Hamburg, in the After restructuring its investment portfolio in 2010 and 2015/2016 financial year. This move to strengthen the 2011, the Nordzucker Group now concentrates on the company does not, however, mean compromising production and distribution of sugar. It benefits from existing relationships with international partners. a strong market position in the EU and a solid financial structure. In addition, Nordzucker reviews growth opportuni- ties outside Europe. The focus is on attractive growth Nordzucker’s aim is to offer high-quality products and regions where demand and/or production is likely to first-class service at a reasonable price. Nordzucker grow significantly – in contrast to the EU. The company therefore sets great store by customer orientation, aims to produce and market sugar outside of Europe individual solutions, great flexibility and dependabili- within the framework of cooperation initiatives with ty of supplies. Its broad product range, which includes local, national or international partners. Adjacent agri- a wide assortment of speciality products, adds value cultural markets in which Nordzucker can apply its out- for customers. standing expertise in the processing of, logistics for and distribution of agricultural products offer a further Sustainable business determines all of the workflows potential growth area. throughout the company and includes the entire val- sustainability. ue chain, from the beet to the customer. Environmen- To prepare for the challenges it will face after the sys- nordzucker.com/en tal protection, energy efficiency and social aspects are tem of EU quotas expires in 2017, Nordzucker embarked taken into account in all business decisions. Product on a wide-ranging programme of change that involved safety and occupational health and safety have top staff at all levels of the company. It aimed, in particular, priority. Nordzucker sets itself ambitious targets in to raise further awareness among all employees of the all areas of sustainability, which result in continuous changes in the market. Thanks to this project – entitled improvements. CHANGE – and to many other initiatives implemented in recent years, Nordzucker is more market- and cus- With the end of the quota system in 2017, competition tomer-oriented, efficient and effective today than ever will intensify further. The EU sugar market is therefore before. The transformation process is based on the four expected to undergo a renewed process of consolida- Nordzucker values, which have guided the company tion, in which Nordzucker aims to play an active role. for many years: dedication, responsibility, courage and Overall, Nordzucker has the best chances of being able appreciation. These values unite our employees in a More about the to exploit the resulting market opportunities. The com- manner that transcends national borders and they ena- company values on page 25 et seq. pany works continuously to achieve further efficiency ble them to perform to the very best of their ability. gains and makes targeted investments in its plants, in order to maintain their high level of productivity.
ANNUAL REPORT 2016 | 2017 Nordzucker AG 46 GROUP MANAGEMENT REPORT NORDZUCKER AT A GLANCE CONSOLIDATED FINANCIAL STATEMENTS MACROECONOMIC SITUATION
By 2020 Nordzucker works continuously to improve efficiency Since late 2014, Nordzucker has been managed and along the entire value chain. Efforts are particularly controlled purely in terms of functions. Within the focused on steps to achieve lasting increases in the Executive Board, the respective functions are the yields from beet farming. The aim of the 20·20·20 Chairman (responsible for HR, Legal, Business Devel- project is for the top 20 per cent of beet growers to opment, Internal Audit and Communications), Beet achieve a yield of 20 tonnes of sugar per hectare by Procurement, Production and Purchasing, Marketing 2020. This project aims to make sugar beet even more and Sales, and Finance. A business team, which con- competitive in comparison with other crops, thereby sists of five managers, is responsible for the operation- safeguarding beet cultivation in the catchment areas al management of the company at the level directly the top 20 per of the plants for the long term. Alongside elements of below the Executive Board and prepares decisions for cent of beet research work and cultivation techniques, the 20·20·20 the Board. Management is strictly by function, mean- growers project also includes communication of the findings, ing that each area of functional responsibility covers especially by means of cultivation-related advisory all the subsidiaries and plants and all the countries work. in which Nordzucker operates. The functional struc- ture pools professional expertise across the company Another efficiency programme called FORCE was and uses the existing knowledge to the benefit of the launched at the beginning of 2015. This programme company at all of its sites. Standardizing and harmoniz- achieve a yield of aims for substantial cost savings in all areas of the com- ing all processes facilitates international cooperation 20 tonnes of sugar pany. Various sub-projects are intended to deliver within the Nordzucker Group. As “One Company” per hectare. annual savings across the Nordzucker Group of at least (“One Nordzucker”), the business is much more pow- EUR 50 million. The focus is on purchasing, production erful; efficiency is thereby increased, process quality and all administrative areas. Furthermore, a team has improved, the transfer of knowledge enabled and cost been set up to establish lean management methods savings achieved thanks to clear responsibilities with- More information on at Nordzucker. The entire management at Nordzucker out overlaps. project 20·20·20 at as well as a large part of the workforce have since sustainability. nordzucker.com/en/ undergone training in these methods. Lean manage- The internal management of the Nordzucker Group is ment aims to simplify processes, prevent waste and cut carried out by means of financial and non-financial indi- costs in the long term. The approach is based on a con- cators. A new system of financial indicators was intro- sistent customer focus and on the systematic analysis duced in the reporting period, consisting of RoCE, EBIT of workflows. Various projects have already achieved margin, net income for the period, equity ratio, net
substantial performance gains. debt and free cash flow. The key indicators used to Target: at least date (EBITDA margin, return on sales, return on equity 50 million Euro COMPANY MANAGEMENT and the equity ratio that is already used) will continue savings per year AND ORGANIZATION to be reported in parallel for the time being. RoCE and the EBIT margin measure the profitability of the oper- The Nordzucker Group is managed by an Executive ating business, while net income for the period meas- Board made up of several members. The Executive ures profitability from the perspective of the owners. Board reports to the Supervisory Board, which has RoCE is an important key indicator: it corresponds to 21 members, of which 14 represent the sharehold- the ratio of EBIT to the average capital employed. By ers and seven the employees. After the 2017 Annual comparing the RoCE actually achieved with the expec- General Meeting, the Supervisory Board will be tations of our shareholders and lenders (known as the reduced to 15 members, of which ten will represent “cost of capital”), we can measure whether our lend- the shareholders and five the employees. ers have generated a return on their capital employed
Nordzucker AG ANNUAL REPORT 2016 | 2017 47
that is in line with market conditions. The other key financial indicators, equity ratio, net debt and free cash flow, measure the company’s financial stability, financ- ing leeway and the generation of cash flow within the business.
At the same time, non-financial performance indicators are becoming more important for managing all areas of the company. In the course of the 20·20·20 project, for instance, the aim is for the top 20 per cent of beet growers to produce 20 tonnes of sugar per hectare MACROECONOMIC by 2020. The company also tracks a large number of SITUATION key indicators relating to sustainability. These reflect the significance of environmental aspects, as well as product quality and occupational health and safety, for According to the Organisation for Economic Co- example. The development of these key indicators operation and Development (OECD), global eco- and their target achievement are reported regularly nomic growth in the year under review was almost sustainability. on the Group’s website. as strong as in the previous year. While global gross nordzucker.com/en/ purpose-approach/ domestic product (GDP) had increased by 3.1 per approach/ SHAREHOLDER STRUCTURE cent in 2015, growth in 2016 came to 2.9 per cent. sustainability-key- figures/ OF NORDZUCKER AG The slight slowdown was due, in particular, to the weaker development in the US and the Eurozone. In Nordzucker Holding AG holds 83.8 per cent of the addition, two major economies Russia and Brazil were shares in Nordzucker AG. A further 11.1 per cent is locked in a recession. held by Union-Zucker Südhannover Gesellschaft mit beschränkter Haftung. 5.1 per cent of the cap- Growth in the European Union was down year on year ital is held by other shareholders. Nordzucker AG from 2.2 per cent to 1.8 per cent. Bolstering effects shares are not traded on a stock exchange. A large such as the persistence of a relatively weak euro to proportion of the shareholders in Nordzucker Hold- US dollar exchange rate and the ongoing low inter- ing AG and Nordzucker AG, as well as the sharehold- est rate policy pursued by the European Central Bank ers of Union-Zucker Südhannover Gesellschaft mit were unable to compensate in full for the numer- beschränkter Haftung, are also active growers who sell ous sources of economic uncertainty – among other their beet to Nordzucker AG. No single shareholder of things due to several terrorist attacks, the United Nordzucker Holding AG has more than 25 per cent of Kingdom’s imminent exit from the EU and the bank- the shares. ing crisis in Italy.
SHAREHOLDER STRUCTURE OF NORDZUCKER AG According to the German Federal Statistical Office, economic growth in Germany came to 1.9 per cent in 2016 (previous year: 1.7 per cent). This puts it roughly 5.1 % on a par with the European average. As in the previ- Other shareholders 11.1 % ous year, German growth was driven largely by pri- Union-Zucker Südhannover GmbH vate consumer spending. Rising government spend- ing, the continued growth in the real estate sector 83.8 % Nordzucker Holding AG and moves by companies to increase their invest- ments in machinery also provided a boost to growth.
ANNUAL REPORT 2016 | 2017 Nordzucker AG 48 GROUP MANAGEMENT REPORT THE SUGAR MARKET CONSOLIDATED FINANCIAL STATEMENTS
THE SUGAR MARKET 0.6 per cent. Two years characterized by deficits will reduce stocks considerably, meaning that, when the 2016/2017 sugar marketing year comes to a close on SECTOR DEVELOPMENTS 30 September 2017, they are likely to correspond to 36.1 per cent (2015/2016: 39.4 per cent) of the annual WORLD SUGAR MARKET consumption – the lowest level since 2010/2011.
The 2015/2016 sugar marketing year (1 October Although the amount produced by the five biggest to 30 September) was the first in six years in which producer countries will fall in 2016/2017, the expected global consumption outstripped global production. volume loss is forecast to be offset by increased pro- According to data supplied by market research insti- duction in Europe, Africa and Central America. In India, tute F. O. Licht and the assessments of other market production is still suffering due to the dry weather observers, the total deficit came to 9.0 million tonnes, seen in 2015 and 2016, meaning that production in meaning that prices made a considerable recovery. 2016/2017 could continue to lag behind current expec- In the 2016/2017 sugar marketing year, the deficit is tations. According to F. O. Licht, global production set to drop to 5.5 million tonnes, as a number of pro- should increase by 3.3 million tonnes to 178.0 million ducer countries will increase their production while tonnes in 2016/2017. consumption is only likely to increase by a moderate
EU PRICES AND WORLD MARKET PRICES FOR SUGAR, 2006 2017 Euro
800
700
600 496 €/t
500
400 439 €/t
300
200
100 JUL DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN DEC JUN DEC APR 06 06 07 07 08 08 09 09 10 10 11 11 12 12 13 13 14 14 15 15 16 16 17
EU market price Euro/t Global market price Euro/t
Source: EU-Price-Reporting, 27 April 2017 and for the world market, London No 5
Nordzucker AG ANNUAL REPORT 2016 | 2017 49
Two consecutive years of deficits have left their mark According to the European Commission, only 18.3 mil- on prices; starting at a low of EUR 308 per tonne in lion tonnes were produced in the 2015/2016 sugar August 2015, the price of white sugar had risen to EUR marketing year, following the record campaign of 540 per tonne by October 2016, based on the Lon- 2014/2015, when 20.8 million tonnes of sugar were don No. 5 quoted price. The market has since calmed produced. Out of the amount produced in 2015/2016, down, with prices having dropped back to EUR 513 14.2 million tonnes were quota sugar and 4.1 million by the end of February 2017. In the last reporting year tonnes were non-quota sugar. In addition, 3.5 million (March 2016 to February 2017), the price of white sug- tonnes of quota sugar were imported, roughly the same ar rose by 43 per cent from EUR 358 per tonne to EUR amount as in the previous year. With consumption, 513 per tonne. Prices on the international raw sugar including exports, of 18.0 million tonnes, quota sugar 18.0 million tonnes markets collapsed in March 2017, however, which may stocks had declined further by the end of the marketing sugar consumption in the EU have an impact on the development of market prices year to the current level 1.0 million tonnes. This means in the EU. that stocks of quota sugar have dropped from 2.6 million tonnes in 2013/2014 to only 1.0 million tonnes. THE SUGAR MARKET IN THE EU Whereas in the 2014/2015 sugar marketing year, a large Nordzucker’s 2016/2017 financial year falls within two harvest and the ensuing sales pressure, ample supplies EU sugar marketing years: 2015/2016 and 2016/2017 of quota sugar as well as the weak world market pric- (each from 1 October to 30 September). Until 30 Sep- es at the time all put the market for quota sugar under tember 2017, the EU will distinguish between quota pressure, the situation stabilized in the 2015/2016 sug- sugar for human consumption and non-quota sugar for ar marketing year. Prices recovered again slightly after industrial use (especially the production of bioethanol) the sharp drop in the price of quota sugar in the previ- and export. Sugar for human consumption can also be ous year: according to the European Commission, the obtained by imports from ACP1)/LDC2) countries or by average market price at the beginning of the 2015/2016 CXL3) imports. sugar marketing year (October 2015) was EUR 417 per tonne of white sugar, but at the end of the 2015/2016 When the quota system for sugar and the minimum sugar marketing year in September 2016, it was EUR 450 price for sugar beet no longer apply from October per tonne. This means that, despite the increase, the 2017, the EU sugar market will be faced with fundamen- EU price in 2016 was, in some cases, still well below tal changes. There will then be no limits on the pro- the global market price after prices on the internation- duction of sugar for human consumption or on the pro- al markets showed a rapid increase. One of the main duction of isoglucose. This will not only considerably reasons behind this difference in prices is the different intensify competition among sugar producers, but also time frame used for reporting purposes – the EU price competition with isoglucose. is based on the contractually agreed revenues already transacted as reported by companies, whereas the futures markets trade based on the current market situ- ation and future expectations.
1) ACP countries: Africa, Caribbean and Pacific See also Glossary 2) LDC countries: least developed countries page 145 3) CLX imports: The “CXL quota” applies to Australia, Brazil, Cuba, India and other third countries. Each of these countries has quotas for importing sugar into the European Union with a combined total of 676,925 tonnes at a reduced rate of customs duties.
ANNUAL REPORT 2016 | 2017 Nordzucker AG 50 GROUP MANAGEMENT REPORT THE SUGAR MARKET CONSOLIDATED FINANCIAL STATEMENTS
The 2016/2017 sugar marketing year (30 September million tonnes. Taking account of stocks at the begin- 2017) has not yet come to an end. The European Com- ning of the period, the Commission expects to see total mission estimates that sugar manufacturers in the EU sugar stocks of 0.5 million tonnes of quota sugar and have produced around 18.3 million tonnes of sugar of 0.6 million tonnes of non-quota sugar at the end of this year, 14.2 million tonnes of which relate to quota the period. sugar. This production volume is on a par with the pre- vious year. In addition to the EU’s own production vol- The 2016/2017 sugar marketing year started in October ume, the 2016/2017 sugar marketing year is also likely with an average price of EUR 470, which represents a to see quota sugar imports of 3.5 million tonnes, i. e. further recovery as against the previous months. In Jan- also in line with the volume seen in the previous year. uary 2017, the average price reported by the European The European Commission estimates that the consump- Commission came to EUR 495 per tonne of white sugar. tion of quota sugar (including exports) will come to 18.2
GLOBAL SUGAR BALANCE
in 1,000 mt raw value 2016/2017 2015/2016 2014/2015 2013/2014 2012/2013 2011/2012
Opening Stocks 70,885 79,870 79,044 74,094 63,959 57,374
Production 177,958 174,678 180,683 181,496 184,166 174,349
Consumption 181,009 180,028 178,723 175,802 171,636 168,161
Unrecorded disappearance –2,451 –3,635 –1,134 –5,199 –2,395 397
Ending Stocks 65,383 70,885 79,870 79,044 74,094 63,959
Stock-to-use-ratio in % 36.12 39.37 44.69 44.96 43.17 38.03
Surplus/Deficit –5,502 –8,985 826 4,950 10,135 6,585
Source: F. O. Licht Weltzuckerbilanz, February 2017
TOP 5 PRODUCERS
in 1,000 mt raw value 2016/2017 2015/2016 2014/2015 2013/2014 2012/2013 2011/2012
Brazil 40,055 40,511 34,706 39,534 41,162 35,291
India 22,500 27,372 30,616 26,580 27,332 28,632
EU 17,069 15,146 19,147 17,123 17,415 19,166
China 10,869 9,459 11,474 14,476 14,205 12,519
Thailand 10,000 10,025 11,579 11,677 10,346 10,569
Source: F. O. Licht Weltzuckerbilanz, February 2017
TOP 5 CONSUMERS
in 1,000 mt raw value 2016/2017 2015/2016 2014/2015 2013/2014 2012/2013 2011/2012
India 26,300 27,010 27,842 26,295 24,751 24,568
EU 18,954 18,972 19,245 19,286 19,172 19,030
China 17,250 17,065 16,600 16,150 15,760 15,300
Brazil 12,000 12,000 12,139 12,411 12,522 12,463
USA 11,027 10,954 10,903 11,109 10,661 10,205
Source: F. O. Licht Weltzuckerbilanz, February 2017
Nordzucker AG ANNUAL REPORT 2016 | 2017 51
BUSINESS PERFORMANCE RETAIL CUSTOMER BUSINESS
INDUSTRIAL CUSTOMER BUSINESS The retail business includes retailers of food and house- hold products as well as discount supermarkets. As Most of Nordzucker’s industrial customers are food with the industrial customer segment, this sales func- and beverage producers. A smaller group includes tion is also managed centrally across all markets, with customers from the chemical industry, who use sugar customer support provided on-site by local sales units. for fermentation, for example, as opposed to for human consumption. The centrally managed sales team serves Nordzucker has a broad range of products encom- markets both within and outside of the EU. Nordzucker passing both standard products and a large number offers its customers pronounced product expertise of speciality sugars. These products are marketed via and a solution-oriented service. This includes provid- a portfolio of Nordzucker brands that includes the ing expert advice on the selection of different types high-volume SweetFamily and Dansukker brands, sweet-family.de of sugar and grain sizes, as well as extensive logistics but also other regional brands that are tailored to suit dansukker.com services, for example, and high standards in terms of the local market in question and that are very popular food safety and sustainability. with customers. In Lithuania, for example, sugar is sold under the Panevezio Plius brand, while the Jelgavas The 2016/2017 financial year was the last full finan- Cukurs brand is used in Latvia. Both regional brands cial year within the EU’s quota system. The pros- are very well-known among consumers and are associ- pect of the quotas expiring already had a significant ated with traditional values. White-label brands round impact on market activity, with competition becom- off the retail offering. Nordzucker is a strong and reli- ing much more intense, particularly in Central and able partner for the retail industry with excellent sales Eastern Europe. Europe’s sugar producers worked expertise relating to sugar. hard to strengthen their market positions, for exam- ple by focusing on specific customer groups or par- The same factors that affect the industrial customer ticular regions, or by pursuing aggressive price strat- segment also influence the retail business. Nordzucker egies, which increased the pressure on the market. At was able to hold its own in this challenging environ- the same time, the supply of quota sugar decreased, ment, with volumes on a par with the previous year in because imports were unable to fully compensate for most of its markets. It even managed to further expand the excess demand in an environment characterized by its good position in the key Scandinavian sales mar- a marked increase in world market prices. All in all, and kets. By contrast, the intense competition in Germany despite more intense competition – following strong – the biggest European retail market – continued in the price reductions in the previous year – prices recov- 2016/2017 financial year. In order to achieve the best ered considerably in the second half of the financial possible position for the period after the quotas expire, year. national and foreign competitors fought to secure market share, creating a tense price situation on the In this complex market environment, Nordzucker market. Although Nordzucker was able to strengthen was able to benefit both from higher prices and from its position with key customers, sales dipped slightly 1,995 higher sugar sales in Northern and Central Europe. on the whole, particularly with regard to standard thousand tonnes of Nordzucker was able to boost its sales with major inter- products, as a result of the difficult price situation. In sugar sold in the indus- trial customer business national customers, in particular. Business outside of total, 372 thousand tonnes of sugar were sold, which the EU also showed positive development and was up represents a decline of 5.5 per cent. in a year-on-year comparison. Overall, 1,995 thousand 372 tonnes of sugar were sold in the industrial sector in the thousand tonnes of past financial year, which corresponds to an increase of sugar sold in the retail customer business 4.1 per cent as against the previous year.
ANNUAL REPORT 2016 | 2017 Nordzucker AG 52 GROUP MANAGEMENT REPORT MARKET FOR ANIMAL FEED AND MOLASSES CONSOLIDATED FINANCIAL STATEMENTS MARKET FOR BIOETHANOL
MARKET FOR ANIMAL FEED mainly sells to farmers directly. Vinasse is a by-product AND MOLASSES of bioethanol production that largely corresponds to de-sugared molasses syrup and is also used in the pro- duction of mixed feed products. SECTOR DEVELOPMENTS The demand for mixed feed products, to which pressed When sugar is produced from beets, the de-sugared beet pulp, molasses or vinasse are often added, once beet cossettes are processed further to make valuable again dipped slightly in 2016. In the first few months of products. After being pressed mechanically, they are the year, mixed feed sales on the German market, for used as animal feed in the form of pressed beet pulp example, were down slightly on the previous year on or (after being dried) as dried beet pulp. Beet molasses average. In the cattle feed segment, which is the most can be added to both products in varying quantities. important to Nordzucker, sales even showed a particu- Molasses is a syrup with a relatively high sugar content larly strong drop compared with 2015. This was due to that can only be used to produce granulated sugar in the further drop in milk prices, which had reached a low a very laborious process. Molasses contains numerous by the middle of 2016 and then stagnated at around sugar beet ingredients that provide a natural source of EUR 0.22 per litre throughout the summer months. The nutrients for microbial processes during fermentation. drop in the volume of milk produced across Europe These nutrients make molasses a high-quality product has contributed to rising milk prices since then, mean- for use not only in the yeast and alcohol industries, but ing that the overall situation has improved considera- also as an additive for animal feed, such as in the produc- bly again. As milk prices started to rise, so too did the tion of high-quality mixed feed products for livestock demand for higher-quality animal feed like the products and pets alike. offered by Nordzucker.
Small beet parts are another product of the sugar- BUSINESS PERFORMANCE making process that consist largely of purified beet fragments and that can also contain beet leaves. This The demand for animal feed was low in the first half product is also a feed material that is approved in the of the year; orders for contractually agreed volumes EU catalogue of feed materials and that Nordzucker were placed very hesitantly. The situation bounced
Nordzucker AG ANNUAL REPORT 2016 | 2017 53
back considerably in the second half of the year, and MARKET FOR BIOETHANOL Nordzucker was able to sell a much larger volume of dried pulp pellets and pressed beet pulp. In some cas- es, customers placed delivery orders for these prod- SECTOR DEVELOPMENTS ucts earlier than contractually agreed, suggesting that Nordzucker has gained market share in the mixed feed The European demand for bioethanol for fuel mixing industry. Now that milk prices are on the rise, more came to an estimated 4.2 million tonnes in 2016 and attention is again being paid to high-quality feed com- only slightly exceeded the local production of approx- ponents. Nordzucker was able to significantly increase imately 3.9 million tonnes; the deficit was made up the volume of beet cossette products that it sold by imports. Demand is expected to increase slightly compared with the previous year. The volume of wet in 2017 due to isolated increases in biofuel quotas. In pressed beet pulp sold was up slightly on the previ- Germany, the demand for bioethanol – in the second ous year. year following the introduction of the greenhouse gas reduction quota – remained relatively constant at 1.2 After an increase in molasses sales in the previous year, around 1.2 million tonnes. This means that demand million tonnes market the volume sold slipped back down again in the period was once again lower than the level that was the norm volume for biothenol in Germany under review, mainly due to delayed animal feed pur- back when the energy quota applied (up to and includ- chases. At present, the addition of molasses to mixed ing 2014). In 2016, the amount of bioethanol added feed is at a low level. Molasses is being used less here directly to petrol was down by 0.7 per cent. By con- due to its feed properties and superiority, and more trast, the use of ethanol refined to produce ETBE (a fuel as a pressing additive for mixed feed. Since techni- additive) increased by 6 per cent. The German demand cal solutions are increasingly replacing this function, for petrol in 2016 was virtually on a par with the pre- the quantities used in the mixed feed industry would vious year, providing almost no demand impetus for appear limited in the current market environment. On bioethanol. German production of bioethanol came to the other hand, molasses is still being used to a signifi- around 0.7 million tonnes in 2016, down only slight- cant degree in the fermentation industry, such as in the ly on the previous year’s figure. Due to commodities yeast industry, for example; Nordzucker’s sales in this prices, however, the volume produced from grain rose segment remained stable in the period under review. by 14 per cent year on year, whereas production from sugar beet dropped by 28 per cent.
With the volume demanded remaining relatively con- stant, the availability and costs of European bioethanol had a considerable impact on prices; as was already the case in the previous year, the prices of bioethanol continued to fluctuate strongly in the 2016/2017 finan- cial year. Due to low demand for ethanol as a result of seasonal factors and a very weak wheat price, the price of ethanol (Platts T2 FOB Rotterdam price) had initial- ly fallen to EUR 433 per m³ by the end of March 2016. Prices made a marked recovery in May, reaching a peak of EUR 588 per m³; this was due to the insolvency of the Spanish producer Abengoa, which brought several of the company’s European plants to a standstill as well. The price recovery was supported by a temporary increase in the price of maize. The announcement of the planned recommissioning of a major ethanol plant
ANNUAL REPORT 2016 | 2017 Nordzucker AG 54 GROUP MANAGEMENT REPORT MARKET FOR BIOETHANOL CONSOLIDATED FINANCIAL STATEMENTS MARKET FOR SWEETENERS BEET CULTIVATION AND SUGAR PRODUCTION
in the United Kingdom and speculation regarding the resumption of operations at Abengoa’s plants, howev- er, put pressure on prices, meaning that by September, the price of bioethanol had dropped back to EUR 423 per m³. This meant that 2016 did not see the seasonal price recovery in the summer that is otherwise typical. Prices only started to bounce back again after a signifi- cant increase in the supply volume failed to materialize, contrary to expectations. On the back of a more stable oil price, a drop in ethanol production from sugar beet and the closure of a number of plants for maintenance purposes, the price of ethanol averaged EUR 638 per m³ in February 2017. MARKET FOR SWEETENERS
BUSINESS PERFORMANCE SECTOR DEVELOPMENTS Nordzucker processes beet supplies in Germany to produce either sugar or bioethanol depending on the The global demand for food and beverages sweetened respective market situation. Due to the increase in sug- with stevia (steviol glycosides) is continually growing. ar prices and the volatile development in bioethanol Developments in the EU stagnated last year, meaning prices, the company cut the volume of bioethanol pro- that they once again fell short of the original expecta- duced by 11 per cent in the 2016/2017 financial year. tions. Although new products sweetened with stevia As in the past, most of the bioethanol produced by are still being developed and launched on the mar- Nordzucker was sold in Germany, where transport is ket, the number of new product launches in the EU cheaper, although the proportion exported to other and Germany is now on the decline. When the prod- EU member states increased considerably year on year. ucts that are currently still in the development phase The export volumes were, however, marketed at prices achieve market readiness, the market volume, which that were on a par with the previous year. As in the is low at present, should gradually increase again, previous year, Nordzucker supplies not only the fuel although the small number of new products could market, which is very volatile in terms of prices, but result in a lower growth rate. also sells volumes for technical applications (industri- al alcohol); price development is more stable in this BUSINESS PERFORMANCE market segment. As in the previous year, around 15 per cent of sales were attributable to these applica- Nordzucker addresses the market for stevia sweeteners tions. More than 95 per cent of the volume supplied to in Northern and Eastern Europe in a joint venture with customers was again transported by rail in the report- the stevia producer PureCircle. The revenues of NP purecircle.com ing period. This logistics concept was optimized again Sweet A/S with regional European food and beverage considerably from both a technical and financial per- customers stagnated in the 2016/2017 financial year, spective as of January 2017. meaning that developments at the joint venture once again fell short of expectations.
Nordzucker AG ANNUAL REPORT 2016 | 2017 55
GROUP CAMPAIGN RESULTS
BEET YIELD SUGAR CONTENT SUGAR YIELD CAMPAIGN LENGTH t/ha % t/ha d
2016/2017 71.0 17.7 12.5 103
2015/2016 66.4 17.5 11.6 88
BEET CULTIVATION AND (previous year: 17.5 per cent), which represented an SUGAR PRODUCTION average sugar yield of 12.5 tonnes per hectare (previ- ous year: 11.6 tonnes per hectare). This represents the second-best result in the company’s history. In the 2016 growing year, the conditions for beet SUGAR PRODUCTION NORDZUCKER GROUP development varied during the vegetation period. in millions of tonnes After timely to early sowing, the weather conditions 2.9 in the period leading into July suggested that the har- 3,0 2.8 2.5 2.5 vest would be above average. A very dry late summer 2,5 in all the Nordzucker countries, with the exception of 2.0 2,0 Slovakia, resulted in a marked reduction in yield expec- 1,5 tations, with what had initially been a very high sugar 1,0 content in the campaign. Although sufficient precipi- 0,5 tation from October onwards increased the beet yield 0 considerably, the below-average hours of sunshine in 2012/13 2013/14 2014/15 2015/16 2016/17 October had resulted in an unusually pronounced fall in sugar content in the course of the campaign. Slova- In 2016/2017, the area under cultivation was increased kia reported a record harvest due to the better weather compared with the very low level seen in 2015/2016 conditions, while in almost all of the other countries, (approx. 191,000 hectares) to around 214,000 hec- the harvest was at least still above average. Weather tares. Nordzucker had reduced the area under culti- conditions during the campaign were good in most vation considerably in 2015/2016 in order to withdraw countries. The early onset of winter in Sweden, with ice surplus supply from the market and thereby to relieve and snow, as well as very low temperatures in Slovakia price pressure. Across the Group during the 2016/2017 at the end of the campaign resulted in processing-relat- campaign, Nordzucker produced some 2.5 million ed problems. The average beet yield for the Group was tonnes of sugar from beet (previous year: 2.0 million 103 71.0 tonnes per hectare (previous year: 66.4 tonnes tonnes) and the campaign lasted for 103 days, which days of per hectare). The sugar content came to 17.7 per cent was much longer than in the previous year (88 days). sugar beet campaign
ANNUAL REPORT 2016 | 2017 Nordzucker AG 56 GROUP MANAGEMENT REPORT BEET CULTIVATION AND SUGAR PRODUCTION CONSOLIDATED FINANCIAL STATEMENTS EARNINGS AND FINANCIAL POSITION AND NET ASSETS
Beet processing in the Nordzucker plants mostly went AVERAGE SUGAR YIELD NORDZUCKER tonnes per hectare smoothly thanks to targeted investments and main- tenance. The beet growers, their service providers, 14 13.2 12.5 as well as beet deliveries and production all worked 11.7 12 11.3 11.6 together excellently, and in addition to the general- 10
ly good weather, this helped to ensure that the cam- 8 paign ran smoothly. Nordzucker has a sophisticat- 6 ed and highly efficient system of beet logistics in all 4 countries. This has been and is still being developed 2 to prepare for the expiry of quotas in October 2017, 0 2012/13 2013/14 2014/15 2015/16 2016/17 taking country-specific requirements into account. In the 2016/2017 campaign in Germany, for example, new software (“Agri!og”) was used very successfully For the 2017/2018 financial year, Nordzucker is con- to plan and carry out all beet logistics activities as part cluding supply contracts with beet growers in Ger- of a pilot project. In the next campaign, Agri!og will many and Denmark who will produce sugar beet in be rolled out across the board in Germany and will be accordance with EU basic regulation No. 834/2007 on used as part of a pilot project in Denmark and Sweden. organic farming, or who are in the process of switch- ing over their business. This is Nordzucker’s way of reacting to the considerable increase in the demand for organic sugar produced from sugar beet.
Nordzucker AG ANNUAL REPORT 2016 | 2017 57
EARNINGS AND FINANCIAL were primarily responsible for the increase in reve- POSITION AND NET ASSETS nues. Revenues for bioethanol, however, dropped due to lower prices and volumes.
EARNINGS POSITION CONSOLIDATED REVENUES in EUR m
Compared with the weak previous year, profitability 3,000 within the Nordzucker Group increased considerably, 2,443 2,361 mainly due to higher sales volumes and prices for 2,500 2,000 1,866 1,708 quota and non-quota sugar. 1,607 1,500
The company’s profitability is measured using the new 1,000 key indicators RoCE, EBIT margin and net income for 500 the period. RoCE, which reflects the ratio of EBIT (oper- 0 2012/13 2013/14 2014/15 2015/16 2016/17 ating result) to the average capital employed came to 8.5 per cent in the reporting year (previous year: 1.0 per cent). This means that the company achieved Revenues of EUR 1,238.1 million were generated with its objective of at least earning the cost of capital. quota sugar. Quota-sugar revenues were therefore EUR 8.5% 86.0 million up on the previous year’s figure of EUR RoCE The EBIT margin is calculated based on the ratio of EBIT 1,152.1 million. The increase in revenues was due both to revenues, and came to 7.7 per cent in the reporting to higher volumes and higher prices; the same applies period (previous year: 1.0 per cent). Net income for to non-quota sugar. Revenues for non-quota sugar 7.7% the period amounted to EUR 99.1 million, compared also outstripped the prior-year level by a considerable EBIT margin with EUR 14.9 million in the previous year. margin, rising by EUR 49.7 million to EUR 171.6 million (previous year: EUR 121.9 million). The key indicators of profitability used in the past also 99.1 showed a marked improvement. The EBITDA margin is Revenues from the sale of bioethanol came to EUR 64.9 million Euro calculated by dividing EBITDA (operating result before million, which was down considerably on the previous net income depreciation, amortization and impairment) by reve- year’s figure of EUR 94.9 million due to lower sales vol- nues. It came to 13.2 per cent in the reporting peri- umes and -prices. Revenues from animal feed include od (previous year: 5.6 per cent), meaning that it fell revenues from the sale of molasses, dried pulp pel- just short of the target of 15.0 per cent. The return lets and pressed pulp. At EUR 151.1 million, they were on sales, calculated as net income (after minority inter- almost the same as in the previous year (EUR 153.7 mil- ests) divided by revenues, came to 5.6 per cent in the lion). Other revenues fell slightly from EUR 84.9 million reporting year compared with 1.0 per cent the pre- to EUR 82.5 million. vious year. This was above the target of 5.0 per cent. Production costs came to EUR 1,329.3 million in the Revenues came to EUR 1,708.2 million, a significant reporting period (previous year: EUR 1,365.2 million). increase of EUR 100.8 million compared with the pre- Despite an increase in sales volumes, the cost of materi- vious year’s figure of EUR 1,607.4 million. Higher sales als and services was down on the previous year, mainly volumes and prices for quota and non-quota sugar because the company did not purchase any additional bioethanol and due to lower raw materials costs. The higher raw materials costs in the previous year were partly due to the fact that beet costs were even higher in the 2014/2015 campaign.
ANNUAL REPORT 2016 | 2017 Nordzucker AG 58 GROUP MANAGEMENT REPORT EARNINGS AND FINANCIAL POSITION AND NET ASSETS CONSOLIDATED FINANCIAL STATEMENTS
Sales costs increased to EUR 160.1 million (previous Other expenses came to EUR 46.9 million in the year year: EUR 153.9 million), mainly due to the higher under review and were therefore well above the pre- cost of shipment to customers resulting from greater vious year’s figure of EUR 35.2 million. This was due to volumes, as well as to higher internal transport and much higher expenses for other impairments than in handling costs. Further measures to run down stocks the previous year and to losses on the disposal of prop- stored externally, on the other hand, enabled the com- erty, plant and equipment. By contrast, the expenses pany to reduce rental costs for external storage. for loss events in the reporting period were down sig- nificantly on the corresponding figure for the previous Administrative costs of EUR 75.4 million were down on year. the previous year’s figure of EUR 79.3 million, primarily due to lower consultancy costs. In total, the Nordzucker Group reported an operat- ing result (EBIT) of EUR 131.4 million, as against EUR Production, sales, administrative and other expenses 16.2 million in the previous year. The operating result included total personnel expenses of EUR 201.1 million before depreciation, amortization and impairment (previous year: EUR 186.6 million) and EUR 74.0 million came to EUR 225.4 million (previous year: EUR 89.8 in depreciation of property, plant and equipment (pre- million). vious year: EUR 73.7 million). The increase in personnel expenses was due, in particular, to collective wage and CONSOLIDATED EBIT salary increases, as well as to higher variable employee in EUR m payments due to the better 2016/2017 financial year. 600 506 Other income came to EUR 34.9 million and was there- 500 fore well below last year’s figure of EUR 42.4 million. 400 299 This was mainly due to the fact that income from insur- 300 200 ance and compensation for damages was much higher 131 in the previous year. 100 26 16 0 2012/13 2013/14 2014/15 2015/16 2016/17 *adopted
Nordzucker AG ANNUAL REPORT 2016 | 2017 59
CONSOLIDATED EBITDA CONSOLIDATED NET INCOME in EUR m in EUR m
700 400 369* 594 600 350 300 500 472 250 400 209 200 300 226 150 200 99 140 100 90 100 50 20 15 0 0 2012/13 2013/14 2014/15 2015/16 2016/17 2012/13 2013/14 2014/15 2015/16 2016/17 *adopted
Financial income fell from EUR 13.6 million to EUR 6.7 million. This was mainly due to interest income rec- NET ASSETS POSITION ognized in the previous year from the court-ordered repayment of production levies for prior years. Total assets for the Nordzucker Group amounted to EUR 2,116.9 million at the end of the reporting year, Financial expenses are largely made up of interest and an increase of EUR 104.2 million on the previous year’s similar expenses. Finance costs increased year on year figure of EUR 2,012.7 million. by EUR 1.7 million to EUR 9.3 million. BREAKDOWN OF THE ASSETS AND LIABILITIES MAKING The low tax ratio of 22.9 per cent (previous year: 32.8 UP THE 2016/2017 BALANCE SHEET TOTAL in EUR m per cent) was primarily the result of differing tax rates. Profits in foreign subsidiaries meant that the lower tax 2,117 2,117 2,200 rates there had a positive impact on the tax ratio. Neg- 1,800 ative earnings in foreign subsidiaries in the previous 42% 65% year had had the opposite effect. 1,400
1,000 33% In total, Nordzucker reported net income before 17% 600 minority interests of EUR 99.1 million (previous year: 25% 18% EUR 14.9 million). After deduction of minority interests, 200 0 this resulted in consolidated comprehensive income of Assets Equity & liabilities
EUR 96.4 million, compared with EUR 15.6 million in Non-current assets Equity the previous year. Inventories Non-current liabilities Other current assets Current liabilities
Intangible assets were down slightly at EUR 19.4 million (previous year: EUR 22.3 million).
ANNUAL REPORT 2016 | 2017 Nordzucker AG 60 GROUP MANAGEMENT REPORT EARNINGS AND FINANCIAL POSITION AND NET ASSETS CONSOLIDATED FINANCIAL STATEMENTS
In the reporting year, the Nordzucker Group invested amount of EUR 35.0 million in the reporting period, as EUR 81.2 million (previous year: EUR 57.9 million) in well as to an increase in receivables from other taxes of property, plant and equipment. Capital expenditure EUR 4.7 million. By contrast, claims for damages fell by See page 63 was offset by current depreciation and amortization of EUR 10.3 million and the volume of miscellaneous oth- EUR 69.0 million (previous year: EUR 68.5 million) and er assets declined by EUR 17.0 million, in the latter case other impairments of EUR 20.2 million (previous year: primarily due to payments received relating to interest EUR 0.6 million). Overall, property, plant and equip- owed on the court-ordered repayment of production ment fell by EUR 13.7 million, from EUR 834.8 million levies for prior years. in the previous year to EUR 821.1 million. As of the reporting date, cash and cash equivalents Financial investments came to EUR 30.6 million and exceeded financial liabilities by EUR 308.3 million (pre- were therefore roughly on a par with the previous vious year: EUR 164.4 million). year’s figure of EUR 31.2 million.
NET DEBT / INVESTMENT + Inventories fell by EUR 65.0 million to EUR 688.9 million in EUR m (previous year: EUR 753.9 million). Finished goods and 350 merchandise fell by EUR 52.6 million to EUR 602.4 mil- 308 300 lion. Raw materials, consumables and supplies declined 250 by EUR 5.3 million to EUR 52.0 million (previous year: 200 164 150 EUR 57.3 million). 100 52 37 50 0 Current receivables and other assets were EUR 37.2 mil- –50 –59 lion higher, at EUR 224.4 million compared with EUR –100 2012/13 2013/14 2014/15 2015/16 2016/17 187.2 million in the previous year. Trade receivables and receivables from related parties increased from EUR 128.3 million to EUR 149.6 million, although it is Equity rose by EUR 96.1 million in total to EUR 1,374.5 important to note that the trade receivables recog- million (previous year: EUR 1,278.4 million). Consol- nized at the end of the last reporting period had been idated net income for the period increased equity reduced by the sale of receivables as part of the ABS by EUR 99.1 million (previous year: EUR 14.9 mil- programme. Current income tax receivables went up lion). Equity was also increased by other income of by EUR 1.8 million to EUR 2.1 million. EUR 4.5 million recognized in other comprehen- sive income and in the statement of comprehensive Current financial and other assets increased by income (EUR 5.0 million from the remeasurement of EUR 14.0 million to EUR 72.7 million. This was main- defined benefit plans after adjustment for deferred ly due to the investment in current securities in the taxes and EUR –0.6 million from other matters). In
Nordzucker AG ANNUAL REPORT 2016 | 2017 61
the previous year, other comprehensive income had million) are for pension obligations. Non-current liabil- included a negative result of EUR –1.3 million (EUR 0.8 ities consist mostly of deferred tax liabilities, which fell million from the remeasurement of defined benefit from EUR 83.1 million to EUR 75.0 million in the report- plans after adjustment for deferred taxes and EUR –2.1 ing year. million from other matters). Equity was diminished by the payment of dividends amounting to EUR 5.0 mil- Current provisions and liabilities increased sharply from lion (previous year: EUR 6.8 million) to shareholders of EUR 357.4 million to EUR 383.4 million. Trade payables Nordzucker AG and minority shareholders. The equity to growers of EUR 222.7 million, in particular, were 64.9% ratio was 64.9 per cent, and thereby up slightly on the significantly up on the previous year (EUR 183.2 mil- equity ratio well above previous year (63.5 per cent). The figure was again well lion). Financial and other liabilities were down from the target of 30 per cent above the Group target of 30.0 per cent. EUR 66.7 million to EUR 35.3 million. The decline of EUR 31.4 million was largely attributable to liabili- Non-current provisions and liabilities fell to ties recognized in the previous year from receivables EUR 359.0 million (previous year: EUR 376.9 million). sold and from interest income from the court-ordered The total includes non-current provisions of EUR repayment of production levies for prior years, which 271.9 million (previous year: EUR 272.7 million), of were settled in the reporting year. which EUR 217.6 million (previous year: EUR 221.8
ANNUAL REPORT 2016 | 2017 Nordzucker AG 62 GROUP MANAGEMENT REPORT EARNINGS AND FINANCIAL POSITION AND NET ASSETS CONSOLIDATED FINANCIAL STATEMENTS CAPITAL EXPENDITURE
FINANCIAL POSITION OVERALL ASSESSMENT OF EARNINGS AND FINANCIAL CASH FLOW FROM OPERATING ACTIVITIES POSITION AND NET ASSETS in EUR m
Nordzucker improved all of its key earnings figures in 350 313 the 2016/2017 reporting year. RoCE came to 8.5 per 300 285 268 cent as against 1.0 per cent in the previous year. The 250 199 EBIT margin came in at 7.7 per cent (previous year: 200 1.0 per cent). Net income for the period amount- 150 135 100 ed to EUR 99.1 million, compared with EUR 14.9 mil- 50 lion in the previous year. The EBITDA margin came to
0 13.2 per cent (previous year: 5.6 per cent). The marked 2012/13 2013/14 2014/15 2015/16 2016/17 improvement in the earnings level compared with the previous year was due to higher sales volumes and Cash flow from operating activities of EUR 267.8 mil- prices for quota and non-quota sugar. lion was much higher than in the previous year (EUR 198.6 million). The increase was due, in particu- The Nordzucker Group’s net assets and financial posi- lar, to the much higher consolidated net income for the tion, which was already considered to be good in period than in the previous year. the previous two years, also improved further in the 2016/2017 reporting year. The equity ratio increased Cash flow from investing activities came to again and now amounts to 64.9 per cent. As of the EUR –118.9 million, which was also up considerably end of the reporting period, the company once again on the previous year (EUR –64.8 million). Compared had virtually no financial liabilities (EUR 13.5 million). with the difficult previous year, investments in prop- Cash and cash equivalents exceeded financial lia- erty, plant and equipment and intangible assets were bilities by EUR 308.3 million, an even larger margin stepped up again notably in the 2016/2017 financial than in the previous year again. Cash flow from oper- 148.9 year. Nordzucker also invested cash and cash equiva- ating activities was at a very high level of EUR 267.8 million Euro lents of EUR 35.0 million in current securities. million. Cash flow from investing activities came to free cash flow EUR –118.9 million. This brings the resulting free cash Cash flow from financing activities improved from flow to EUR 148.9 million. EUR –6.9 million to EUR 1.2 million. This was mainly due to the use of a subsidiary’s bilateral credit line that did not exist in the previous year.
The free cash flow, i. e. the total of cash flow from oper- ating activities and cash flow from investing activities, came to EUR 148.9 million, up on the prior-year value (EUR 133.8 million).
As of 28 February 2017, cash and cash equivalents amounted to EUR 321.8 million (previous year: EUR 171.8 million).
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CAPITAL EXPENDITURE
CAPITAL EXPENDITURE IN PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS in EUR m
100 82 84 79 80 74 60 60
40
20
0 2012/13 2013/14 2014/15 2015/16 2016/17
Nordzucker invested EUR 84.3 million in property, plant and equipment and intangible assets in the 2016/2017 financial year (previous year: EUR 60.1 million). As in the previous year, the focus was on measures aimed at increasing efficiency, meeting regulatory requirements and replacing existing assets. Key investments related to the completion of the white sugar evaporation crys- tallization tower in Clauen, the replacement of outdated pulp presses in Uelzen und Kedainiai with those of the latest construction type and efficiency, the installation of further pulp presses in Nakskov, the modernization of beet processing and receiving in Säkylä and the centrif- ugal control system for white sugar in Klein Wanzleben, After 30 successful but, recently, very challenging as well as the construction of a sugar cooler in Nakskov years on the market for fibres, the production of Fibrex and a goods warehouse for finished sugar products in and Fipec in Köpingebro, Sweden, is being discontin- 84.3 Kedainiai. Other projects, such as the modernization ued. Despite the large number of good, functional million Euro of the pulp press unit and the construction of a white properties of Fibrex for human and animal consump- capital expenditure in property, plant sugar silo in Örtofta for the 2017 campaign, the refur- tion, the product was finding it difficult to compete and equipment and bishment of the raw sugar melting system in Porkkala with newer fibre products in terms of both price and intangible assets and the replacement of clarified juice filters Opalenica, taste; as a result, it only generated revenues of around have been launched. EUR 2.8 million in the reporting year. This prompted Nordzucker to make the decision to stop the produc- There were investment commitments of EUR 16.7 mil- tion of Fibrex and Fipec in Sweden. Existing custom- lion as of the reporting date (previous year; ers will continue to receive supplies from Nordic Sugar EUR 11.9 million). These commitments will be financed during a phasing-out period. by cash flow from operating activities.
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FINANCING FINANCING, FINANCIAL COVENANTS AND INVESTMENT OF FREE CASH AND CASH RESPONSIBILITIES AND EQUIVALENTS OBJECTIVES OF FINANCIAL MANAGEMENT In March 2014, Nordzucker took out a new syndicated loan. This loan gave the company much greater lat- The main responsibilities of Nordzucker’s financial man- itude for entrepreneurial activities than the previous agement are to manage and control flows of funds for arrangement. The original term of the loan was five the entire Group on the basis of clearly defined crite- years initially. ria. The main aim is to ensure that sufficient liquidity is available at all times. Due to the considerable liquidity Loans of this kind include what are known as “financial that the Nordzucker Group currently has, the company covenants”. These consist of obligations to maintain will also focus on investing these funds with the aim of certain financial ratios over the entire term of the loan. limiting risks and preventing negative interest rates. In view of increasing volatility on international markets, The covenants are an essential element of the loan the management of raw material, exchange rate agreement. Banks use them as a tool to identify and and interest rate risks is also a priority. The finan- avoid risks at an early stage by drawing conclusions For the risks see also cial management function is also responsible for devel- from the figures about the company’s financial posi- the report on the oping and executing financing strategies. In order to tion. For Nordzucker, these have been defined at the risk management on page 70 execute these strategies successfully, Nordzucker main- Group level. Compliance with the covenants is mon- tains close contact with its banks. itored internally on a continual basis and reported to the banks at defined intervals.
In the 2016/2017 reporting year, the agreed financial ratio (EBITDA in relation to net debt) was met at all test dates. On the basis of the planning currently available
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for the Group, the Executive Board of Nordzucker AG assumes that the covenants will not be breached in future.
In March 2016, Nordzucker exercised the contractu- ally agreed extension option regarding an increase in the term by a further two years until March 2021. This means that Nordzucker AG now has access to credit facilities initially amounting to EUR 344.5 million, and then amounting to EUR 312.6 million as of 2019, in the period leading up to March 2021. DIVIDEND An ABS programme to sell trade receivables was also arranged in 2015/2016 as an alternative source of fund- ing for the Nordzucker Group. This ABS programme A proposal will be put forward at the Annual Gener- enables Nordzucker to sell receivables of Nordzucker al Meeting of Nordzucker AG by the Executive Board AG and its operating subsidiaries on a non-recourse and the Supervisory Board to distribute a dividend of basis. It therefore constitutes a “true sale”, which pro- EUR 1.10 per share of share capital for the 2016/2017 vides the company with cash and transfers the receiv- reporting year. This corresponds to a total dividend ables from the balance sheet. distribution of EUR 53.1 million. This means that, after the low dividend payments made in the two previous Thanks to the operating cash flows achieved over the years, shareholders will once again receive an appro- last few years and the willingness of the company’s priate return on their capital employed, allowing them shareholders to leave part of these cash flows within to participate in the good results achieved in the finan- the company, the Nordzucker Group has accumulated cial year. The 2016/2017 financial year is the last finan- a significant volume of freely disposable funds (as of cial year that will be covered in full by the existing sug- the reporting date, EUR 356.8 million including secu- ar market regime. The current dividend policy will have rities not reported as cash and cash equivalents). These to be reviewed, and adjusted where appropriate, fol- funds will allow the company to implement its growth lowing the end of the sugar market regime. strategy in the coming years. At the same time, they give the company sufficient reserves to hold its ground TOTAL DIVIDENDS, NORDZUCKER AG in EUR m on the market and to defend its market share even if prices drop considerably. There is a good chance that 100 the European market will enter a prolonged period 87 of weak development after the sugar market regime 80 63 comes to an end. Nordzucker is investing these free- 60 53* ly disposable funds with banks, on the capital mar- 40 ket and with investment companies; the investment 20 horizon is less than one year. Ideally, interest-bearing 5 5 securities should mature before the end of the finan- 0 2012/13 2013/14 2014/15 2015/16 2016/17 cial year. Nordzucker limits its risks by distributing its *Proposal investments across various asset classes, by stipulating a minimum credit rating to be achieved for all invest- ments and by using short interest periods.
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The average proportion of women employed by the Nordzucker Group is stable at 21.3 per cent.
The proportion of women in management positions within the Group currently stands at 17 per cent. To implement the Act on Equal Access by Women and Men to Management Positions in the Private and Public Sectors, Nordzucker continues to promote the recruitment of female managers to fill positions across the Group.
PROPORTION OF WOMEN EMPLOYED (PERMANENT STAFF)
% at the end of February 2017 2016 2015 EMPLOYEES Total company 21.3 21.5 21.4
Germany 19.0 18.9 18.8 EMPLOYEE STRUCTURE Denmark 35.3 35.7 29.9 Sweden 14.6 14.2 14.1 The Nordzucker Group had an average of Poland 22.8 24.0 25.3 3,236 employees in the reporting year, which was Finland 20.1 19.9 20.6 higher than in the previous year (3,206 employees). Lithuania 21.2 22.9 24.7 Slovakia 24.7 24.6 24.2 A look at the workforce by country shows slight Ireland 50.0 50.0 45.5 changes in recent financial years. The number of Latvia 100.0 100.0 100.0 employees has dropped slightly in the Scandinavian countries, whereas the figures have remained constant The age structure at Nordzucker shows a constant in the Eastern European countries. high proportion of older employees aged between 51 and 60. The increase in the statutory retirement age in Around 60 per cent of the workforce is employed in European countries will mean that our staff will spend Eastern and Northern Europe, with some 40 per cent longer in employment. Nordzucker is systematically working in Germany. preparing for the necessary transfer of knowledge and has a long-term succession plan in place.
EMPLOYEES IN THE FINANCIAL YEAR
Annual average 2016/17 2015/16 2014/15 EMPLOYEES BY AGE GROUP (PERMANENT STAFF)
% at the end of February 2017 2016 2015 Total company 3,236 3,206 3,283
Germany 1,292 1,262 1,263 > 60 9.9 8.8 7.6
Denmark 477 487 501 51–60 37.7 38.2 38.8
Sweden 397 395 439 41–50 25.4 26.6 28.5
Poland 333 332 339 31–40 16.5 15.9 15.1
Finland 276 273 286 up to 30 10.5 10.6 9.9
Lithuania 252 246 258
Slovakia 196 196 182
Ireland 10 11 11
Latvia 3 4 4
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Nordzucker continues to boast a very high average The four uniform Nordzucker values that are bind- length of service. 57.7 per cent of employees have ing for all employees unite the workforce regardless been with the company for at least 16 years, with of national borders and cultural differences, and form 37.4 per cent even having spent at least 26 years with the basis for successful day-to-day working relation- Nordzucker. Employee satisfaction levels are consistent ships. The values define what Nordzucker employees with our attractiveness as an employer, and staff turn- can expect from each other, and what customers and over remains stable at a low level within the Group. suppliers can expect from them: responsible action, For the values see respect for all, courage and dedication. also page 25 et seq.
PERIOD OF EMPLOYMENT IN YEARS (PERMANENT STAFF)
% at the end of February 2017 2016 2015 EFFECTIVE PERSONNEL DEVELOPMENT > 35 14.3 13.3 12.1
26–35 23.1 23.8 24.7 Qualifications, professional training and development 16–25 20.3 17.4 19.0 play an important role in the company. Nordzucker 6–15 25.7 26.5 26.0 focuses on vocational training as a proven, successful 0–5 16.6 19.0 18.2 cornerstone. In Germany, a total of 79 trainees were undergoing training as electricians (for industrial engi- neering) and industrial mechanics in 2016, a figure that DIVERSITY AND COMMON is on the rise. In the last three years, the number of VALUES – »ONE NORDZUCKER« trainees taken on as core employees in Germany after completing their training has almost doubled. In recent Nordzucker is present in nine countries in Europe and years, Nordzucker has received various prizes and benefits from its international workforce. Cultural diver- awards for its successful measures to promote young sity is a key asset and helps us to pick up on custom- talent as a result of its particular dedication to vocation- ers’ particular needs and expectations and to further al and professional training. Training plays a key role in strengthen our market presence. Different perspectives our European locations, too. Nordzucker has 21 train- result in creative new solutions and promote individual ees in Denmark and currently has six in Poland. Again, learning. Employees’ development prospects depend these figures are increasing. solely on their skills, not on their nationality, ethnic ori- gin, gender, religion, politics, disability, age or sexual identity. Its different sites in Europe and the diversity that they bring mean that Nordzucker considers it an obligation to support and promote openness and cul- tural expertise.
Learning from each other, developing and broadening horizons – this is something that Nordzucker also pro- motes by giving employees the opportunity to take part in national and international exchange, or “job rotation”, projects. Employees spend a certain peri- od working on cross-divisional and cross-border pilot projects in other countries and cultures, an experience that promotes both their personal development and their professional skills.
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It is the company’s stated aim to prepare the entire development. This raises awareness of, and makes Nordzucker workforce for the challenges of the inter- employees more open to, change, thereby enabling national sugar market and to provide them with effec- Nordzucker to become stronger, more efficient and tive support in adapting to the new requirements. more effective in the process. Nordzucker sees personnel development as an ongo- ing learning and development process and offers a The company’s holistic focus on employees resulted whole range of personnel development measures in Nordzucker achieving first place in the 2016 Focus throughout the company. The “Sugar Academy”, an Money survey “Top career opportunities” in the “Food in-house Nordzucker professional training programme production” industry. At the same time, Nordzucker in Germany, was completely revamped and expanded was awarded the “Germany’s best training compa- in 2016 and covers a broad range of specialist and man- nies 2017” seal. Excellent general working conditions, agement issues, self-management, communications modern working-time models and social benefits are and sector-specific areas of knowledge. For years, the also the reason why Nordzucker received the award as company has also been continuously focusing on oper- “Top national employer 2017” in Germany. ational health management measures that are imple- mented across the entire Group. The workforce makes From Nordzucker’s perspective, these awards are intensive use of workshops and seminars on stress man- another visible component in the company’s quest to agement, mindfulness training, nutrition and exercise. attract well-trained and first-class applicants, and show that staff retention and a focus on employees are a top Value-oriented leadership is another focal point of priority. But the high levels of employee satisfaction, personnel development at Nordzucker. The aim of the which are also evident from the above-average length management development process, that spans several of service and low staff turnover levels, are even more years was launched in 2016, is to further prepare all important to Nordzucker. levels of management and, on a step-by-step-basis, the entire workforce for the challenges and market HOLISTIC APPROACH – FOCUS changes that lie ahead. The modules that form part ON EMPLOYEES of the development process focus on core issues such as communication, reflection, how employees see Nordzucker is responding to the continuous chang- themselves and how others see them, as well as team es and rising demands on employees and employers
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alike with a holistic and constantly evolving concept proportion of 23.8 per cent. The Supervisory Board that addresses every aspect of the employee. A diverse consists of a total of 21 members, with 14 represent- and coordinated package of measures and services is ing the shareholders and seven being elected by the offered with the aim of enabling employees to stay employees. There are currently no women on the healthy, fit and active and to achieve a better work-life Executive Board. balance. The focus throughout the Group is on preven- tion and on promoting/maintaining health. For the first level below the Executive Board, a target of ten per cent of female managers should be achieved Ongoing dialogue with employees serves as the basis by 30 June 2017. For the second level – managers with for the selection and structuring of the measures on employee responsibility – the target is 20 per cent. offer. A process of continual exchange makes it possi- Within the Nordzucker Group as a whole, the first lev- ble to recognize needs in order to establish targeted el of management below the Executive Board has a activities that deliver long-term success. This holistic proportion of women currently amounting to 10.7 per approach not only reflects the duty of care and social cent, a figure that rises to 14.3 per cent for Germany responsibility that Nordzucker has as an employer, but in particular. At the second level below the Executive also its appreciation for its staff. Board, the proportion of women comes to 20.79 per cent for the Group as a whole, and 18.18 per cent for In 2016, Nordzucker’s endeavours in Germany focused Germany. primarily on prevention, particularly on ergonomics in the workplace. Workplace design and functionality The Executive Board of Nordzucker AG has also set the were reviewed and analyzed to make any necessary following targets for the future: for the first level below improvements. As employees spend a large part of the Executive Board, a target of 15 per cent of female their time at work, the functionality of their worksta- managers should be achieved by 30 June 2022. For the tions has a key impact on their health, effectiveness second level – managers with employee responsibility and satisfaction. The aim is to prevent any unneces- – the target is 21 per cent. sary health complaints or to alleviate any existing com- plaints. This means that ergonomics is a key compo- At its meeting held on 9 March 2017, the Superviso- nent of occupational health protection. ry Board of Nordzucker AG set the following targets for the future proportion of women on the Executive NORDZUCKER LIVES AND Board and the Supervisory Board: By 30 June 2022, the BREATHES DIVERSITY targets for the proportion of women on the Super visory Board are at least 25 per cent and on the Execu- To implement the Act on Equal Access by Women and tive Board 0 per cent. Men to Management Positions in the Private and Pub- lic Sectors, the Supervisory Board and Executive Board The company promotes the equality of women and of Nordzucker AG have taken the following decisions, men in all areas regardless of hierarchical level. The bearing in mind the company’s specific situation, in ability to reconcile family and work life remains a deci- particular its business, size, proportion of international sive criterion when choosing an employer. Since 2011, business, diversity and the current service contracts Nordzucker has supported its staff with a sustaina- of the Executive Board members: By 30 June 2017, the ble and varied concept for work-life balance, which, targets for the proportion of women on the Supervi- among other things, enables a straightforward and sory Board are at least 19 per cent and on the Execu- prompt return to work after parental leave. tive Board 0 per cent. At present, there are five wom- en on the Supervisory Board, which corresponds to a
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OPPORTUNITIES AND RISKS RISK MANAGEMENT
The risk management function discusses at regular RISK MANAGEMENT intervals the progress made in implementing the defined steps to manage risk with the different depart- BASIC PRINCIPLES OF RISK MANAGEMENT ments and/or managers responsible. Regular risk man- agement reports are made to the Executive Board and Given the changes on the European sugar market and Supervisory Board. the increasing level of market volatility, risk manage- ment is becoming ever more important. The purpose All major operating and strategic decisions always and aim of risk management within the Nordzucker take risk aspects into account. When such decisions Group is therefore to identify risks resulting from busi- are made, their consequences are evaluated in various ness activities at an early stage, to evaluate them and different scenarios. Given the highly volatile nature of to manage them consistently. Nordzucker deliberate- the market environment, the company’s plans have, for ly takes risks within the scope of a defined risk appe- a number of years now, illustrated how different market tite if the risks are unavoidable or are likely to be off- situations can impact the course of business. Descrip- set by opportunities; Nordzucker also transfers some tions of opportunities and risks highlight alternative risks to third parties. This strategy will help the com- developments and identify areas where action needs pany to achieve successful further development in the to be taken. Over the course of the year, the Group long term and to secure its future. Nordzucker’s risk reporting and controlling system provides all the deci- management system meets the requirements set out sion-makers responsible with continuous information in the Law on Control and Transparency in Business on the actual business performance. (KonTraG). Some of the risks are transferred to third parties, such STRUCTURE OF THE as insurance companies. The scope and amount of RISK MANAGEMENT SYSTEM insurance coverage is reviewed regularly and adjusted as necessary. Nordzucker has introduced an integrated system throughout the company for the identification and INTERNAL AUDITING management of risk. The key building block for the risk management system is the identification and manage- The Internal Audit department examines and evalu- ment of operational risks by means of the monitoring, ates the business processes, organizational structure planning, management and control systems in place in and the governance system (monitoring measures, the Nordzucker Group. risk management and the internal control system of the Nordzucker Group) to ensure they are carried The risk management system of Nordzucker AG is out correctly, are effective and offer value for mon- supported by an internal control system (ICS) that ey. The results of every audit are recorded in an audit has been set up on a company-wide basis and that report and the implementation of the agreed activi- also includes the accounting processes. The ICS is an ties is monitored systematically and regularly. As well ongoing process based on fundamental control mech- as audits carried out on the basis of annual risk-orient- anisms, such as technical system-based and manual ed audit planning, the Internal Audit department also reconciliations, the separation and clear definition of carries out ad hoc checks. The Internal Audit depart- functions and the monitoring of adherence to, and the ment also offers advice, such as on drawing up guide- further development of, Group-wide guidelines and lines, optimizing business processes or continuously specific directives.
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improving the Nordzucker Group’s internal control sys- The impending abolition of quotas for sugar and isoglu- tem. It answers directly to the Chief Executive Officer cose is already having a considerable impact on the EU and reports regularly to the Executive Board and to sugar market. A number of European competitors have the Supervisory Board’s Audit and Finance Committee. purchased much larger quantities of beet for the peri- This reporting comprises the status of internal audits, od following the abolition of the quotas; they could the key findings of the audits as well as the implemen- try to achieve significant market shares in Europe or tation status of the agreed activities. force competitors out of the market completely. Great- er supplies of sugar will increase competition and this POLITICAL AND LEGAL RISKS is expected to lead to crowding out among Europe- AND OPPORTUNITIES an sugar producers. Competition between sugar and isoglucose will also get much tougher, because quo- SUGAR MARKET REGIME tas for the latter are also being abolished along with See EU Directive of the sugar quotas. The European Commission and oth- 17 December 2013, www.eur-lex-europa.eu In June 2013, the member states of the EU, the Euro- er market observers anticipate that a larger volume of pean Parliament and the European Commission only isoglucose will be marketed in the EU in future. Secur- decided to extend the sugar market regime in its cur- ing sufficient quantities of beet at competitive prices rent form until the end of the 2016/2017 sugar mar- in the long term will play an even greater role in this keting year on 30 September 2017. Up to this point, environment (see section “Securing raw materials”). it remains the operating framework for the EU sug- At the same time, a market without quotas and export ar industry. At the same time, the European Council, restrictions offers competitive providers the chance to European Parliament and European Commission decid- boost their sales not only in Europe, but also in the ed to let the sugar market regime in its current form export business. expire thereafter. As far as the EU sugar producers are concerned, devel- The European Commission is still busy structuring the opments in the future relationship between the EU and legal framework for the period after October 2017. This the United Kingdom will also prove to be highly sig- entails reviewing the relevant regulations and making nificant. After the United Kingdom officially applied to any amendments as necessary. leave the EU on 29 March 2017, negotiations on the terms of its departure and on future trade relationships What is more, a number of EU member states have will now commence. The UK’s membership of the EU decided to subsidize sugar beet cultivation through is scheduled to end on 29 March 2019. The UK pro- coupled direct payments. This essentially means that duces around 1.2 million tonnes of sugar per year and they will be protecting cultivation in their own coun- consumes 2.2 million tonnes annually, making it a net tries. Because the same competitive conditions apply importer. In recent years, the EU has been exporting to all European producers, these member states cannot between 200,000 and 400,000 tonnes of white sugar increase their area under cultivation. to the United Kingdom every year. Conversely, the EU imported around 400,000 tonnes of sugar from the At the beginning of the 2017/2018 sugar marketing United Kingdom every year between 2011 and 2015. year, the main building blocks of the existing sugar The United Kingdom’s exit from the EU will result in it market regime – the quotas for sugar and isoglucose, losing access to all EU free trade agreements. If the EU as well as the minimum price for sugar beet – will be and the UK cannot agree on a separate trade agree- abolished. The end of the quota system also means the ment, British trade relations with the EU will be sub- end of the WTO export limit, presently set at 1.37 mil- ject to WTO rules, including the regulations on import lion tonnes. duties, in the future. Brexit could result in a change in
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British trade policy and see the United Kingdom open August Töpfer Zuckerhandelsgesellschaft mbH & Co. its market more to raw cane sugar from third countries, KG has allowed Nordzucker to strengthen its market thereby taking export opportunities away from conti- expertise and logistics capabilities for exports. nental European providers. In order to prepare employees for the future challenges In this environment, Nordzucker is well positioned to of the market, an extensive process of change has been defend/increase its market share. The aim, however, is launched throughout the entire company. The contin- not only for Nordzucker to hold its own on the market, ued development of the company culture requires the but rather to react to market conditions in a flexible involvement of all staff who are actively engaged in manner and, in doing so, to create value for sharehold- the change process. In this way, all areas of the com- ers and growers alike. In order to implement this strat- pany will get to grips with the expected changes and egy, the company will need to stay in touch with the prepare themselves intensively for the period after the market and further efficiency gains in all areas will be expiry of the sugar market regime. The aim here is to absolutely essential. exploit the opportunities it provides and to reduce the risks as far as possible. One important area within this context remains increas- ing the efficiency of sugar beet cultivation compared WTO NEGOTIATIONS with alternative crops. Nordzucker is pooling all of its activities to boost the productivity of beet cultivation At its ministerial conference held in Bali in December For more information in the 20 · 20 · 20 project; yields have already been 2013, the members of the World Trade Organization on the project 20 · 20 · 20 increased considerably in recent years. The FORCE (WTO) agreed to continue the liberalization of trade. see page 46 efficiency programme that was launched in 2015 to Building on this, the WTO member states voted at the achieve sustainable savings and efficiency gains within Nairobi Conference, held from 15–19 December 2015, all of the company’s other functions and sites is also to abolish export subsidies for agricultural goods five already bearing fruit. Overall, the project is resulting in years earlier than originally planned. The deadline of savings of around EUR 50 million. In order to make this 30 September 2017 was defined for phasing out export possible, Nordzucker has been using lean management subsidies for EU sugar. However, as EU sugar exports methods since 2015. Lean management facilitates per- are no longer considered to be subsidized as of 1 Octo- manent improvements in workflows, both in produc- ber 2017, this agreement has no effects for the EU sugar tion as well as in indirect units. The systematic use of industry. Export subsidies in developing countries are lean management will enable Nordzucker to improve to be abolished by the end of 2018, although export the efficiency and quality of all processes in the future. subsidies for transport, freight and marketing may still be granted until the end of 2023. As a result, the Nairo- Nordzucker’s strong position on the European market bi agreements do not have any impact on sugar trade and the wide-ranging efforts to become more compet- between the EU and the LDCs; the EU already meets itive also open up new market opportunities, both in all of the requirements. Europe and in export markets, when the quota system comes to an end. In Europe, Nordzucker is working on The future WTO negotiations are expected to con- securing and expanding its current market share in the centrate on reducing customs duties and subsidies for long term. When the quota system ends at the end agricultural produce. The agreement has no deadline, of September 2017, so does the restriction on export however, making further developments uncertain. The volumes from the EU. The acquisition of a stake in agenda for the next WTO ministerial conference, to be
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held from 11 to 14 December 2017 in Buenos Aires, is Negotiations are under way with other countries still being discussed. The conference is expected to be including Mexico, India, Malaysia, Thailand, Japan, used to discuss a wide range of issues, from agriculture Morocco, Egypt, Jordan and the Gulf states. Particularly to fisheries subsidies, services, digital trade and invest- important for the EU sugar market are the negotiations ment. The exploratory talks held so far on agricultural with the MERCOSUR states of the South American eco- issues have focused on reducing internal agricultural nomic area. Key strategic decisions are expected to be subsidies and protective clauses, which have a distort- made within the context of the negotiations in 2017. As ing effect. the world’s largest sugar exporter, Brazil, in particular, is pressing for an import quota for sugar and ethanol. Maintaining import duties is of vital importance for The negotiations on a transatlantic free trade agree- the European sugar sector. Reducing EU protection ment with the US have currently come to a standstill. against imports without taking the special interests of The protectionist trade policy supported by the US the sugar industry into account would make compe- president could also have an impact on trade relations tition in the EU even more intense than is already the between other countries as well as on the negotiations case given the changes that will take place from 2017. on future EU free trade agreements. Import duties protect the European sugar industry from imports in excess of those volumes that enter the Nordzucker is addressing the risks from the WTO nego- European market at reduced rates or duty-free via pref- tiations and from free trade agreements with steps to erential agreements with least developed countries further increase its competitiveness, as described in
(LDC) or, increasingly, also via bilateral trade agree- the “Sugar market regime” section. Sugar market regime ments. Without EU import duties, unlimited quantities see page 71 of sugar could be imported into the EU at global mar- ADDITIONAL COSTS FOR CO2 CERTIFICATES ket prices. This would discriminate against European sugar producers, because almost all the countries in As a company that emits carbon dioxide (CO2) from the world where sugar is produced provide massive generating its own electricity and heat, Nordzucker support to local producers and protect them from out- requires a number of certificates on the basis of the side competition. statutory provisions in order to cover its annual emis- sions. Missing certificates have to be purchased. The EU FREE TRADE AGREEMENTS poor economic performance in Europe has meant that the price increases expected for CO2 certificates have Free trade agreements are becoming more and more not materialized in recent years. Despite this, there is important for the European Union. Trade agreements considerable political pressure to reduce CO2 emis- signed in recent years with Moldova, Georgia, Ukraine, sions further in the years ahead by making the certif- Columbia, Peru, Panama, Ecuador, states in Central icates more expensive. The political aim is to achieve America and South Africa enable annual duty-free global greenhouse gas neutrality in the second half of sugar imports of more than 500,000 tonnes. Already the century. This was the agreement reached by the negotiated but not yet in effect are trade agreements UN member states at the Climate Change Conference including further import contingents of sugar and held in Paris in December 2015. Nordzucker is also products containing sugar with Canada, Vietnam and working continuously to cut its CO2 emissions even sustainability. nordzucker.com/en/ Singapore. Behind these negotiated agreements are further by investing in energy efficiency and optimiz- purpose-approach/ more import contingents (amounting to a total of ing its operations. This not only reduces the number approach/ sustainability-key- 95,000 tonnes), plus the gradual reduction of duties of CO2 certificates to be purchased and, as a result, the figures/ for white and raw sugar. associated costs, but also makes Nordzucker’s business more sustainable.
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LEGAL RISKS MARKET OPPORTUNITIES AND RISKS The companies in the Nordzucker Group are also sub- ject to various statutory regulations, which can give SUGAR MARKET AND SUGAR PRICES rise to liability risks. They include, in particular, the sug- ar market regime in connection with the relevant provi- Since the reform of the sugar market regime in 2006, sions of customs and licensing law. As of October 2017, which included substantial cuts to production quotas, the EU will be deregulating the sugar market consider- fluctuations in the world market price have had a sig- ably by abolishing the sugar quota and the minimum nificant impact on markets in the EU. To meet demand prices for sugar beet. This will reduce the risks associ- for sugar for use in food, the EU was dependent on ated with the stringent regulations. imports from ACP and LDC countries and world mar- kets. From October 2017, these imports are no longer Further risks can also arise from food and animal feed necessary, but are still possible. When the quotas are law, as well as from tax regulations in the various coun- abolished, the volume limits for export will also end. tries in which the Nordzucker Group operates and from This is again likely to heighten the influence of the legal disputes. Nordzucker is of the opinion that any global market on European prices and to increase vol- breaches of competition law in Germany before 2009 atility in Europe. that may be determined by the German competition authorities did not result in any losses to the purchasers As described in the “Sugar market regime” section, Sugar market of sugar. Even in the period examined by the compe- Nordzucker is preparing for these challenges by tak- see page 48 et seq. tition authority, there was competition between sugar ing extensive measures to become more market and producers leading to customers switching supplier and customer-oriented and to improve efficiency. Given its differences in sale volumes. Furthermore, many cus- strong market position, solid financial structure and the tomers bought sugar from multiple domestic and for- steps that have already been taken or which are cur- eign sugar producers. The sugar market was also highly rently under way, the company considers that it is well regulated as a result of the sugar market regime. This prepared for these market changes. applies particularly to volumes and prices. The sug- ar volume was limited by the quota regulations of the DISCUSSION ABOUT HEALTHY EATING European sugar market regime. Prior to 2006, sugar AND SUGAR producers could also export quota sugar onto the global market in exchange for a refund. The Europe- Sugar makes people neither fat nor ill, but is part of a an sugar market regime also stipulated intervention balanced diet. Despite this, sugar is presented in the prices, i. e. minimum prices for sugar. It also regulated public debate as a cause of being overweight, obese the minimum price to be paid for beet by the sugar and, as a consequence, of diseases such as diabetes and producers. caries. The discussion about sugar became more viru- lent in 2016/2017, and the matter is also being keenly Although Nordzucker does not expect this to be the case, successful claims for damages by third par- ties against Nordzucker cannot be ruled out for the future.
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debated outside of Europe. This is why food manufac- by intense competition for land under cultivation, it turers are working to reduce the content of sugar in important for beets to be worthwhile for growers in their food. Some countries have already imposed, or terms of allowing them to generate high yields and are debating the introduction of, a tax on sugary foods. keep their production costs down. More about sugar and In Denmark, however, this was abolished again after nutrition: www.schmecktrichtig.de just a short period of time. One important long-term element of securing raw materials is the 20·20·20 yield improvement pro- In spite of this, academic studies show that reducing gramme. Nordzucker has set itself the Group-wide sugar consumption does not necessarily lead people target of achieving a sugar yield of 20 tonnes per hec- to lose weight. There are many reasons why people tare with the top 20 per cent of growers in 2020. This are overweight, which is why focusing on individual programme is very important for safeguarding the ingredients such as sugar distracts from the bigger relative attractiveness of sugar beet cultivation com- picture. Ultimately, whether or not a person becomes pared with other arable crops, especially given the overweight is all about the balance between calorie volatility of agricultural markets. To reach this target, intake and calorie expenditure, and about how aware Nordzucker is working closely with growers, research individuals are of their own calorie intake. institutes, agricultural associations and other compa- nies in the value chain. To bring more clarity to the debate, Nordzucker works continuously and intensively at national and EU level, Nordzucker signs supply contracts with the beet grow- as well as within industry associations, to provide infor- ers well in advance in order to secure the necessary vol- mation about the effect of sugar in food and about the umes. Various supply contract models were offered to links between sugar and a balanced diet as part of a growers in all countries for 2017/2018. They have differ- healthy lifestyle. This is intended to inform politicians ent contractual terms and there are fixed-price models and consumers clearly, objectively and on the basis of as well as models with prices linked to sugar prices/ scientific findings, about the interrelationships. EBIT. Thanks to the conclusion of these market-driven supply contracts, the company believes that it is very GLOBAL DEMAND FOR SUGAR IS INCREASING well equipped for the period following the expiry of the quota regulations. With the conclusion of the sup- Population growth and greater prosperity, particu- ply contracts for the 2017/2018 campaign, the right to larly in emerging markets, are behind a long-term supply beet to the company in Germany was imple- global trend towards higher sugar consumption. This mented as defined in the Articles of Association of increase in demand will require the sustained expan- Nordzucker Holding AG and Union-Zucker Südhan- sion of global production capacities and will support nover Gesellschaft mit beschränkter Haftung. Share- long-term developments in the price of sugar. Like all holders who themselves are beet growers, or their European manufacturers, Nordzucker hopes that this tenants, will then have the right to supply a certain growth trend will open up export opportunities and amount of beet to Nordzucker AG for every share make investments in sugar attractive outside of Europe, they hold. Volumes not assigned on the basis of these too. delivery rights will then be offered to all beet growers as “free volumes”. If the beet growers want to sup- SECURING RAW MATERIALS ply more of these “free volumes” than Nordzucker AG requires, then the “free volumes” are distributed in line For farmers, sugar beet competes with other arable with economic criteria. crops. The decision whether to plant sugar beet or other crops depends to a large extent on relative price levels for different crops and on the yield that can be obtained regionally. In an environment characterized
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For 2017/2018, Nordzucker has also concluded One strategic objective of procurement is to diversify supply contracts with beet growers who will pro- sources of supply. This means that for all critical goods duce sugar beet in accordance with EU basic regu- and services to be purchased, there must be several lation No. 834/2007 on organic farming, or who are suppliers in principle; if necessary, new additional sup- in the process of switching over their business. This pliers have to be identified, evaluated and developed. is Nordzucker’s way of reacting to the considerable Wide-ranging steps to optimize costs and processes in increase in the demand for organic sugar produced procurement have also been identified and implement- from sugar beet. ed as part of the FORCE efficiency programme.
ENERGY PRICES OPERATING RISKS
The production of sugar requires energy in the form of LONGER CAMPAIGNS raw materials such as natural gas, coal or crude oil, the prices of which are generally subject to fluctuations. In order to boost productivity, the possible length In addition to the risk of changes in the price, there of the campaign has generally been increased in the is also a risk that the volumes required for production plants since 2009 to an average of 120 days. The are not available in time (production downtime risk). Trenciaska Tepla plant in Slovakia had the longest cam- To a certain extent, Nordzucker mitigates the risk of paign in the 2016/2017 financial year, at 130 days, while changes in prices by means of hedging transactions Säkylä in Finland had the shortest, at just 57 days. The and long-term supply contracts. It also invests sus- average plant campaign duration came to 103 days, up tainably in energy-efficient machinery and equipment by 17 per cent on the previous year. Longer campaigns in order to reduce energy consumption. Nordzucker entail two risks. One is that the onset of winter weath- counters production downtime risk by testing the use er can severely hamper beet harvesting, logistics and of alternative raw materials. It also reduces this risk by processing. The other is that longer campaigns make pursuing a forward-looking procurement policy and by production downtime more likely. establishing long-term supplier relationships. Nordzucker has therefore taken wide-ranging pre- SUPPLIER PORTFOLIO cautions both in the field and in the plant to minimize these risks. In recent years, for example, beet clamps Given the limited number of suppliers and an ongoing have been covered with a sheet of fleece to further process of concentration among them, there is a risk optimize the extent to which the beet is protected of increased dependence. This may cause problems in from frost. Further frost protection measures include the production process (in the event of insolvency or the systematic introduction of 10-metre-wide clamps. supply difficulties) or lead to price increases. Cutting Nordzucker has also improved the technical processes procurement costs then becomes much more difficult. in the plants to ensure they are adapted as well as pos- sible to processing beet which may have frost damage. To ensure that Nordzucker has low-cost access to key materials at all times, cooperation has been intensified In order to minimize maintenance costs while maintain- with the departments that consume supplies, in order ing high levels of availability at the plants, risk-oriented to determine purchasing requirements in good time maintenance was introduced some years ago and will and to optimize the procurement process. Across the now be applied systematically throughout the Group Group, critical spare parts have been identified, pri- as part of the new organizational structure. The risk of oritized, acquired and stored, which has reduced the production downtime can be reduced further by way procurement risk. of standardization, the identification of critical spare parts and a common spare parts pool.
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ENVIRONMENT Due to differences in local rules, some sites are also certified in accordance with the following stand- Environmental impacts, such as airborne emissions ards: occupational health and safety management (odours, noise, dust), the accumulation of waste and system OHSAS 18001, energy management system waste water treatment, cannot be avoided altogether DIN EN ISO 50001, German biofuels sustainability when sugar is produced. Risks arise from the potential by-law (Biokraft-NachV – the transposition of Direc- nordzucker.de/en/ for exceeding limits, complaints from neighbours or tive 2009/28/EC to promote the use of energy from business/certificates. html new statutory regulations. renewable sources), IFS standards (International Food Standard for food retailing) and the GMP B2 stand- Nordzucker gives high priority to limiting detrimental ard for quality control in raw materials for animal environmental effects as far as possible. Investments to feed. Organic and fair trade products are grown and avoid noise and odours are an important part of cap- inspected in line with the applicable legislation and ital expenditure every year. In recent years, for exam- standards. ple, key focus areas have been the optimization of waste water treatment in order to minimize unpleasant IT RISKS odours, new filters to reduce dust emission as well as noise-abatement measures. All Nordzucker plants are Digitalization is opening up new opportunities for audited regularly in accordance with applicable nation- Nordzucker. By evaluating the data that is already al and international legislation and standards to verify available in a digitally connected system, Nordzucker the results of these activities. This includes certification can pick up on any deviations more quickly and then in line with the EU Environmental Audit regulation (EC) take targeted measures to manage them. This not only 1221/2009 (EMAS III) and the DIN EN ISO 14001 envi- makes processes within Nordzucker more efficient, ronmental management system. Nordzucker not only but also boosts efficiency along the entire value chain, submits to the statutory inspections, but also carries from growers to customers. Nordzucker is already mak- out additional voluntary audits. ing use of these technical opportunities with the new Agri!og system, which optimizes the supply chain from An active dialogue with local residents is a matter of the grower to the plant, and with digital consultancy course for Nordzucker. Direct contact with neighbours solutions for growers. Further applications for use in enables plant managers to improve communication of production and in other areas will follow over the next how residents are affected and to explain processes years ahead. at the plant. At the same time, the further integration of business PRODUCT SAFETY partners is also resulting in mounting risks. An attack kritis.bund.de/ from outside could, for example, disrupt the produc- SubSites/Kritis/EN/ Home/ As a food producer, Nordzucker is responsible for the tion or delivery of sugar and valuable data could be quality and safety of its products. The company works stolen. In order to limit risks like these, Nordzucker is consistently to keep improving its already very high investing in further security measures, e. g. the use of safety standards by means of continuous improve- state-of-the-art techniques to detect the latest threats, ments to production processes, targeted investments in order to achieve an appropriate level of protection and strict internal guidelines. Regular inspections and for the company and to ensure system availability. product safety certifications are carried out to iden- The statutory requirements (German IT Security Act, tify risks at an early stage. All locations, for example, UP KRITIS) also have to be taken into account. By play- comply with DIN EN ISO 9001 and the FSSC 22000 ing an active role on the relevant committees (industry product safety standards. working group), Nordzucker can help shape the overall conditions.
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At the same time, the company is working intensively This exposes the Nordzucker Group to a normal meas- on continually providing all employees with informa- ure of counterparty risk, in the sense that a partner to tion on the risks and protective measures in the digital a contract may not perform their obligations. To min- world. Together with them and our external partners, imize this counterparty risk, financial derivatives are Nordzucker is making constant improvements to the either transacted directly via the stock exchange and/ protection of all systems, in order to make all IT services or only with first-class international financial institu- as reliable and secure as possible. tions, whose economic performance is monitored reg- ularly, partly by analyzing the financial ratings issued by FINANCIAL RISKS international rating agencies. Dependence on individ- ual institutions is also limited by spreading transactions Financial risks relate to unrecoverable receivables, cur- over various counterparties. rency, raw materials and interest rate risks and liquidity Details on risk risk. Risk exposure may also arise from the investment All the financial derivatives used serve solely to hedge management on strategy and the availability of loan finance. operating sales and purchase transactions and to page 70 et seq. hedge exchange rates for financial transactions. DEFAULT ON RECEIVABLES The margins required for exchange-traded derivatives Receivables from customers or other parties may are also held exclusively on separate margin accounts become unrecoverable. This risk rises at times of eco- with first-class international financial institutions. nomic crisis or when extreme swings in the price of raw materials put pressure on customers. As of 28 February 2017, the Nordzucker Group had exchange rate derivatives with a notional net volume of To address these risks, Nordzucker establishes a cus- EUR 44.3 million (as of 29 February 2016: EUR 135.7 mil- tomer’s credit standing before signing a contract and lion). At the end of the financial year, derivative trans- generally takes out trade insurance. The sales team actions with a notional value of EUR 0.7 million were maintains close contact with the customer and defaults open to hedge against price movements for raw mate- are limited by active receivables management. rials (as of 29 February 2016: EUR 20.0 million).
CURRENCY, RAW MATERIALS AND INTEREST These existing hedges generally run for less than one RATE RISKS year and match the maturity profile of the hedged transactions. The volatility of exchange rates, raw materials and interest rates give rise to operating risks, the hedging The new EU regulation “EMIR” introduced standards of which is the responsibility of the individual function- for reporting obligations for trading in derivatives. al units and, on a centralized basis within the Group, of Nordzucker implemented these as of the statuto- the Corporate Finance department. ry effective date on 14 February 2014. The statuto- ry reporting obligations have been met in full in the To limit these risks, they are analyzed thoroughly 2016/2017 financial year. The related audit required by before contracts are signed. Standard financial instru- Sec. 20 paragraph 1 German Securities Trading Act ments available from banks and exchanges are used if (WpHG) was conducted again in 2016/2017 without Nordzucker has to assume risks. Financial derivatives any objections. such as forward contracts, swaps and futures are used to hedge the Group’s open risk positions.
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LIQUIDITY RISK The availability of the loan nonetheless depends on the meeting of various conditions; in particular, Nordzucker The seasonality of the Group’s business means that its has to comply with a number of financial covenants. On capital requirements vary widely over the course of a the basis of existing corporate planning for the Group, financial year. The quality of the harvest and develop- the company assumes that the terms of the loan agree- ments in market prices also have a considerable effect ment will be met in subsequent years as well. Further on the company’s funding requirements. If the com- steps have also been taken to support compliance with pany cannot meet this funding requirement from free these covenants in future. cash flow or existing credit lines, a situation may arise in which its continued existence is at risk. This is why the The guarantees needed for current operations can also finance function regularly draws up liquidity forecasts be provided at any time as needed by means of the syn- for the Group, on the basis of which the financing strat- dicated loan and bilateral lines of credit. The Group is egies are then prepared and implemented. not directly dependent on individual lenders.
AVAILABILITY OF FUNDING INVESTMENT POLICY
The financial crisis in the EU resulted in much tighter Risky financial investments or the default of a bank regulation of banks, which may make it far more difficult may result in the loss of financial assets. Nordzucker for the company to obtain credit in future. New financial has a conservative investment policy. The Group’s free crises could also occur that would make financing much liquidity is largely invested in money-market products more expensive. with European financial institutions that are selected on the basis of a credit rating classification. In general, To reduce these risks, Nordzucker took out a new syndi- the investment amounts are spread to prevent clus- cated loan in March 2014 with a smaller group of banks ter risks and to ensure that the funds are largely cov- and on better terms. This loan had a minimum term of ered by the applicable deposit insurance mechanisms five years, and in March 2016 it was extended by two despite changes in the EU legal situation. In spite of years, i. e. until 2021, to make a seven-year term in total. these extensive measures, invested funds could suffer It therefore extends well beyond the end of the sug- value losses or be unavailable in the short term in the ar market regime. All the syndicate banks have good event of another financial crisis. Due to the continued credit ratings and are very dependable. In the opinion highly expansionary monetary policy pursued by the of the company management, the medium-term syndi- European Central Bank, Nordzucker could pay nega- cated loan to finance its operating business, together tive interest rates on investments. To date, it has been with the ABS programme and available liquidity, covers possible to avoid this; in any case, the impact on the the company’s capital needs. From a current perspec- company’s overall profitability is likely to be kept to a tive, its cash reserves and unused lines of credit enable minimum. Nordzucker to meet its payment obligations at all times. Based on current assessments, sufficient funds are also available to ensure the financing of solid growth.
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The liquidity available within Nordzucker allows the administrative structures are productive and efficient; company to exploit growth opportunities, also by with lean management, Nordzucker is using tools to taking growth steps outside of Europe. This strong forge ahead further with this process and achieve good financial position will enable the company to defend results. The entire value chain aims to achieve a high its market share and expand its market position in an level of sustainability; employees have recognized the environment that will be characterized by more intense changes and are embracing them. competition in Europe in the future. Nordzucker is also well positioned to weather any prolonged period of The overall assessment of current opportunities and lower prices. risks suggests that there are no risks that could jeop- ardize the company’s continued existence. Existential OVERVIEW OF ALL risks in the future have also not been identified at the OPPORTUNITIES AND RISKS present time.
The expiry of the sugar market regime on 30 Septem- ber 2017 will result in fundamental changes to the FORECAST overall conditions for the European sugar industry. The quotas for sugar and isoglucose will cease to apply, making the competition much more intense. The lift- Developments in 2016/2017 were consistent with the ing of all export restrictions will increase the influence positive outlook at the start of the financial year. The of the global market. Prices on the global market are world market price was at a very low level (EUR 358 per very volatile, and there have also been phases of very tonne of sugar in February 2016, based on London No. low prices in the past. In the long run, the supply of 5) at the end of the 2015/2016 financial year. It gradu- sugar could increase significantly (for example due to ally recovered in the course of the 2016/2017 financial a greater switch from bioethanol to sugar in Brazil) or year, reaching a high of EUR 541 per tonne in October growth in global demand could slow, for example due 2016. Sugar then lost considerable value again in the to changes in consumer behaviour, particularly in the period leading up to the end of the 2016/2017 finan- developed economies. Due to the energy required cial year (EUR 513 per tonne of sugar in February 2017). to produce sugar, energy prices/availability could put There were times when the world market prices were pressure on the profitability of the Nordzucker Group. higher than the prices in Europe, putting a consider- able damper on imports to Europe. With lower quota At the same time, there are also significant opportuni- sugar stocks in Europe, European prices then picked up ties for Nordzucker. Sugar is a product in high demand again slightly, although they were still down consider- across the globe, the consumption of which will con- ably on the level seen in the past. tinue to increase in the future as the global population grows and prosperity levels rise. In addition, global In this environment, Nordzucker was able to outper- growth is likely to present the company with attrac- form its return on sales target of 5.0 per cent, achieving tive investment opportunities outside of Europe in the a return on sales of 5.6 per cent in the 2016/2017 finan- coming years. The measures taken to date and those cial year At 13.2 per cent, the EBITDA margin only just planned for the future also put Nordzucker in a good fell short of the ambitious target of 15.0 per cent. The position for the period following the end of the sugar equity ratio once again exceeded the target of 30.0 per market regime. Its strong market presence gives the cent by quite some way. The capital structure is very company access to attractive sales markets. The ongo- solid. At the end of the year, the company had cash and ing work with growers and external partners is boost- cash equivalents of around EUR 357 million (includ- ing yields every year. The company’s production and ing securities not reported as cash and cash equiva- lents). This puts Nordzucker in an excellent position to achieve further growth and to defend/expand its mar- ket share in an environment that is set to become a lot more challenging in the future.
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The 2017/2018 financial year will be one of transition. the time being. As far as the 2017/2018 financial year is The current sugar market regime will continue to apply concerned, the Executive Board expects Nordzucker to until 30 September 2017, and the low level of imports achieve an RoCE that at least corresponds to the cost means that quota sugar is in shorter supply than in the of capital and for the company to record an improve- past. Measures taken by the European Commission ment not only in RoCE, but also in the other key finan- to convert non-quota sugar or duty-reduced imports cial indicators. could bring additional goods onto the market. Thanks to an early campaign start, supplies for European cus- In the medium term, the European sugar market tomers are likely to be secured even if no such meas- should show positive development. The high eco- ures are taken. nomic potential of sugar beet enables European sugar producers to supply their customers on competitive The current sugar market regime will cease to apply in terms and, after a transitional period, the market will October 2017. This has prompted a number of compet- consolidate further, driven by the competitive pres- itors to expand their area under cultivation considera- sure. The influence of the global market is expected bly, meaning that the competition in Europe is likely to to increase further. The rising demand for sugar, espe- become much more intense. Some countries are also cially in Asia and Africa, is likely to provide a boost to making coupled direct payments, with the result that prices on the global market. As sugar is highly volatile, competition for production sites in countries without however, there will be years with fairly high prices as such subsidies is becoming much more intense. well as years characterized by fairly low prices.
EU protection against imports for sugar will not be Nordzucker is a strong provider in Europe that will affected by the expiry of the sugar market regime, but make use of the opportunities on the markets and the maximum volumes for export will cease to apply that is preparing intensively to do so. The company is at the same time. This is likely to further increase the well set up to play an active role in the market consol- influence of world market prices. After a deficit on the idation and to further expand its position in Europe. global markets in 2015/2016 and 2016/2017, it is not Its capital structure is so solid that the company can clear whether the global market will continue to report also strengthen its core business further by means of a deficit or achieve a surplus in 2017/2018. It is virtual- investments. Growth opportunities outside of Europe ly impossible to predict what earnings will be during can also be considered. Nordzucker has successfully this period. dealt with all of the changes in Europe to date, and has emerged from them even stronger. Even in a world This is making it very difficult to arrive at a forecast for without sugar quotas, the company will continue on the 2017/2018 financial year as a whole. Thanks to the this successful path. stable development in the period leading up to Sep- tember 2017, however, the entire 2017/2018 financial Braunschweig, Germany, 20 April 2017 year should show positive development, with earnings (EBIT, net income for the period) at least on a par with The Executive Board those reported in the previous financial year. This will also have a positive impact on the key financial indi- cators. In order to better reflect the creation of val- ue, cash flow and financing stability, the following key financial indicators will be used: RoCE, EBIT margin, Hartwig Fuchs Axel Aumüller net income for the period, equity ratio, net debt and free cash flow. In order to make it easier for sharehold- ers to compare these figures with past figures, we will continue to report the previous financial indicators (EBITDA margin, return on sales, return on equity and Dr Michael Noth Dr Lars Gorissen the equity ratio that has been reported to date) for
ANNUAL REPORT 2016 | 2017 Nordzucker AG 82
DETAILED INDEX CONSOLIDATED FINANCIAL STATEMENTS 2016 | 2017
84 Consolidated income statement 84 Consolidated statement of comprehensive income 85 Consolidated cash flow statement 86 Consolidated balance sheet 88 Consolidated statement of changes in shareholders’ equity
89 Notes to the consolidated financial statements
89 General remarks 105 Notes to the consolidated income statement 112 Notes to the consolidated balance sheet 114 Consolidated assets schedule for the financial year 2016/17 114 Consolidated assets schedule for the previous year (2015/16) 123 Notes to the consolidated cash flow statement 124 Other disclosures 142 List of investments
144 Audit opinion 83 84 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED CASH FLOW STATEMENT
CONSOLIDATED INCOME STATEMENT
Nordzucker AG, Braunschweig, Germany, for the period from 1 March 2016 to 28 February 2017
Further details in 1/3/2016 1/3/2015 in EUR thousands Note – 28/2/2017 – 29/2/2016
Revenues 8 1,708,230 1,607,373
Production costs 9 –1,329,257 –1,365,153
Gross profit 378,973 242,220
Sales costs 10 –160,122 –153,904
Administrative expenses 11 –75,356 –79,330
Other income 12 34,830 42,441
Other expenses 13 –46,910 –35,205
Operating result (EBIT) 131,415 16,222
Financial income 14 6,663 13,579
Financial expenses 15 –9,333 –7,563
Result from companies accounted for using the equity method 16 –240 –85
Earnings before taxes 128,505 22,153
Income taxes 17 –29,415 –7,262
Consolidated net income 99,090 14,891
of which attributable to non-controlling interests 2,661 –675
of which attributable to shareholders of the parent company 96,429 15,566
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
1/3/2016 1/3/2015 In EUR thousands – 28/2/2017 – 29/2/2016
Consolidated net income 99,090 14,891
Remeasurement of defined benefit plans 6,789 639
Deferred taxes on items of other comprehensive income not reclassified to the income statement –1,749 187
Other comprehensive income from items not reclassified to the income statement 5,040 826
Exchange differences on translating foreign operations –3,206 –1,886
Net result of cash flow hedges 3,491 –345
Deferred taxes on items of other comprehensive income reclassified to the income statement –852 100
Other comprehensive income from items reclassified to the income statement –567 –2,131
Consolidated comprehensive income after taxes 103,563 13,586
of which attributable to non-controlling interests 2,683 –519
of which attributable to shareholders of the parent company 100,880 14,105
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CONSOLIDATED CASH FLOW STATEMENT
Nordzucker AG, Braunschweig, Germany, for the period from 1 March 2016 to 28 February 2017
1/3/2016 1/3/2015 In EUR thousands – 28/2/2017 – 29/2/2016
Earnings before taxes 128,505 22,153
Interest and similar income/expenses 5,963 –1,392
Depreciation, amortization and impairment/reversals of impairment of non-current assets 94,827 73,613
Change in provisions 11,916 –5,095
Change in inventories 62,613 231,119
Change in trade receivables –22,718 10,459
Change in trade payables 39,723 –144,054
Change in other operating assets/liabilities –17,430 11,745
Gains/losses on disposal of non-current assets 783 1,242
Other non-cash expenses/income –2,058 68
Interest received in the financial year 7,887 1,086
Interest paid in the financial year –3,096 –2,394
Result of companies accounted for using the equity method 240 85
Taxes paid in the financial year –39,361 –37
Cash flow from operating activities 267,794 198,598
Proceeds on disposal of property, plant and equipment 1,056 327
Payments for investments in property, plant and equipment –82,692 –58,062
Proceeds on disposal of intangible assets 75 10
Payments for investments in intangible assets –3,017 –2,274
Proceeds on disposal of financial assets 1,275 12
Payments for investments in financial assets –602 –4,849
Payments for investments in current securities –34,996 0
Cash flow for/from investing activities –118,901 –64,836
Inflows and outflows arising from changes in equity –40 0
Payments to shareholders (dividends) –4,963 –6,761
Proceeds from borrowing 6,392 0
Loan repayments 0 –1
Payments for finance leases –150 –141
Cash flow from financing activities 1,239 –6,903
Changes in cash and cash equivalents 150,132 126,859
Cash and cash equivalents at the beginning of the period 171,781 44,989
Effect of foreign exchange rate changes –99 –67
Cash and cash equivalents at the end of the period 321,814 171,781
ANNUAL REPORT 2016 | 2017 Nordzucker AG 86 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET
as of 28 February 2017, Nordzucker AG, Braunschweig, Germany
Further ASSETS details in In EUR thousands Note 28/2/2017 29/2/2016
NON-CURRENT ASSETS
Fixed assets
Intangible assets 21 19,445 22,269
Property, plant and equipment 22 821,069 834,810
Investment property 24 4,441 2,929
Financial investments 25
Shares in companies accounted for using the equity method 25.1/25.2 7,567 7,307
Other financial investments 25.3 23,040 23,906
30,607 31,213
875,562 891,221
Receivables and other assets
Financial assets 29 0 0
Other assets 30 1,241 1,432
1,241 1,432
Deferred taxes 17 4,978 5,583
881,781 898,236
CURRENT ASSETS
Inventories 26
Raw materials, consumables and supplies 52,026 57,346
Work in progress 34,490 41,595
Finished goods and merchandise 602,380 654,988
688,896 753,929
Receivables and other assets
Trade receivables 27 149,392 127,336
Receivables from related parties 28 215 914
Current income tax receivables 17 2,119 272
Financial assets 29 46,642 20,514
Other assets 30 26,017 38,156
224,385 187,192
Cash and cash equivalents 321,814 171,781
Current assets 1,235,095 1,112,902
Assets held for sale 31 48 1,516
1,235,143 1,114,418
2,116,924 2,012,654
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Further EQUITY AND LIABILITIES details in In EUR thousands Note 28/2/2017 29/2/2016
Shareholders’ equity 32
Subscribed capital 32.1 123,651 123,651
Capital reserves 32.2 127,035 127,035
Retained earnings 32.3 1,135,496 1,046,339
Other comprehensive income 32.4 –53,392 –57,844
Equity attributable to shareholders of the parent company 1,332,790 1,239,181
Non-controlling interests 32.5 41,731 39,186
1,374,521 1,278,367
Non-current provisions and liabilities
Provisions for pensions and similar obligations 33 217,643 221,834
Other provisions 34 54,239 50,874
Financial liabilities 35 1,471 7,147
Liabilities towards related parties 37 5,500 5,500
Other financial liabilities 38 0 18
Other liabilities 39 5,193 8,446
Deferred taxes 17 74,994 83,066
359,040 376,885
Current provisions and liabilities
Provisions for pensions and similar obligations 33 11,508 11,521
Other provisions 34 54,706 45,100
Financial liabilities 35 12,070 261
Current income tax liabilities 17 19,708 18,233
Trade payables 36 222,738 183,202
Liabilities towards related parties 37 27,331 32,384
Other financial liabilities 38 4,238 19,230
Other liabilities 39 31,064 47,471
383,363 357,402
2,116,924 2,012,654
ANNUAL REPORT 2016 | 2017 Nordzucker AG 88 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
Nordzucker AG, Braunschweig, Germany
Equity attributable to share- Other com- holders of Non- Subscribed Capital Retained prehensive the parent controlling Total In EUR thousands capital reserves earnings income company interests equity
As of 1/3/2015 123,651 127,035 1,035,604 –56,383 1,229,907 41,636 1,271,543
Net income 15,566 15,566 –675 14,891
Other comprehensive income –1,461 –1,461 156 –1,305
Consolidated comprehensive income 15,566 –1,461 14,105 –519 13,586
Dividend payment –4,830 –4,830 –1,931 –6,761
Other –1 –1 0 –1
As of 29/2/2016 123,651 127,035 1,046,339 –57,844 1,239,181 39,186 1,278,367
As of 1/3/2016 123,651 127,035 1,046,339 –57,844 1,239,181 39,186 1,278,367
Net income 96,429 96,429 2,661 99,090
Other comprehensive income 4,451 4,451 22 4,473
Consolidated comprehensive income 96,429 4,451 100,880 2,683 103,563
Dividend payment –4,830 –4,830 –133 –4,963
Other –2,442 –2,442 –5 –2,447
As of 28/2/2017 123,651 127,035 1,135,496 –53,392 1,332,790 41,731 1,374,521
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, NORDZUCKER AG
GENERAL REMARKS 2. CONSOLIDATION AND ACQUISITIONS
1. ACCOUNTING PRINCIPLES 2.1. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements as of 28 Feb- Subsidiaries ruary 2017 for Nordzucker AG (Küchenstrasse 9, In addition to Nordzucker AG as the parent compa- 38100 Braunschweig, Germany) have been prepared in ny, the Nordzucker consolidated financial statements accordance with Sec. 315a HGB (German Commercial also include the domestic and foreign companies con- Code) in accordance with the International Financial trolled by Nordzucker AG within the meaning of IFRS 10 Reporting Standards (IFRS) adopted and published by (subsidiaries). the International Accounting Standards Board (IASB) or the IFRS Interpretations Committee (IFRS IC) as appli- Subsidiaries are fully consolidated from the acquisition cable in the European Union (EU-IFRS) and with sup- date, i. e. the date on which the Group obtains control. plementary provisions of German commercial law. The Consolidation ends once the parent company no longer financial statements comply fully with EU-IFRS and give exercises control. The financial statements of the sub- a true and fair view of the net assets, financial and earn- sidiaries are prepared for the same reporting period as ings position of Nordzucker AG and its consolidated the financial statements for the parent company using subsidiaries, joint ventures and associated companies uniform accounting methods. Intra-Group transactions (hereinafter known as ‘Nordzucker Group’ or ‘Group’). between companies in the Group are eliminated in full.
As the parent company of the Group, Nordzucker AG Joint ventures is entered in the commercial register at Braunschweig Joint ventures are accounted for in the consolidated Local Court (HRB 2936). financial statements using the equity method. Nordzucker AG has rights to the net assets of the joint The consolidated financial statements of Nordzucker ventures and manages them with another party (joint AG, audited by Ernst & Young GmbH Wirtschafts- control). In applying the equity method, the IFRS finan- prüfungsgesellschaft, Stuttgart, and issued with an cial statements of these companies are used. Losses unqualified opinion, are published in the German Fed- from joint ventures which exceed the carrying amount eral Gazette. The annual report can be viewed on the or other non-current receivables from financing these Nordzucker AG website (www.nordzucker.de). companies are not recognized unless there is an obli- gation to provide further capital. The reporting currency is the Euro, with amounts reported in thousands of Euros (EUR ‘000). The joint ventures accounted for using the equity method were individually and collectively immaterial The consolidated financial statements will be approved for the presentation of the net assets, financial position by the Executive Board of Nordzucker AG on 22 May and earnings of the Nordzucker Group in the reporting 2017 for presentation to the Supervisory Board. period and in the same period of the previous year.
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Associates The number of fully consolidated subsidiaries fell due Associates are also accounted for in the consolidated to the merger of Nordic Sugar Services AB (Malmö, financial statements using the equity method. Sweden) and Nordic Sugar AB (Malmö, Sweden) in the Nordzucker AG has a significant influence with asso- reporting period. In addition, the company HZN Solu- ciates, i. e. it can contribute to shaping the company’s tions Zrt i.L. (Hatvan, Hungary) was deconsolidated. financial and operating policies, but does not have control or joint control of decision-making processes. The list of shareholdings can be found in the Nordzucker AG annual report and is published in the German Federal August Töpfer Zuckerhandelsgesellschaft mbH & Co. Gazette. KG, Hamburg, was included in the consolidated finan- cial statements of the Nordzucker Group as an associ- The reporting date for all fully consolidated subsidiaries ate for the first time in the previous year (2015/2016 included in the consolidated financial statements and financial year). The company is immaterial for the pres- for NP Sweet A/S, a joint venture accounted for using entation of the net assets, financial position and earn- the equity method, is 28 February 2017. All the other ings of the Nordzucker Group. companies accounted for using the equity method and included in the consolidated financial statements have 2.2. BUSINESS COMBINATIONS AND 31 December 2016 as their reporting date. INVESTMENTS 2.4. SIGNIFICANT SUBSIDIARIES No acquisitions were made in the reporting period or comparative period. The significant subsidiaries of the Nordzucker Group are listed in the table below: For the accounting principles relating to acquisitions, please see Note 3.16. SIGNIFICANT SUBSIDIARIES
Group stake 2.3. GROUP OF CONSOLIDATED Nordic Sugar A/S, Copenhagen, Denmark 100% COMPANIES Nordic Sugar AB, Malmö, Sweden 100%
The consolidated companies in the Nordzucker Group NORDZUCKER GmbH & Co. KG, Braunschweig, Germany 100% are as follows: Nordzucker Ireland Limited, Dublin, Ireland 100%
Nordzucker Services GmbH & Co. KG, GROUP OF CONSOLIDATED COMPANIES Braunschweig, Germany 100%
28/2/2017 29/2/2016 Nordzucker Polska S.A., Opalenica, Poland 99.870% Považský Cukor a.s., Trencianska Teplá, Slovakia 96.798% Fully consolidated subsidiaries Sucros Oy, Säkylä, Finland 80% Domestic 4 4 Suomen Sokeri Oy, Kantvik, Finland 80% Foreign 11 13 AB Nordic Sugar Kèdainiai, Kèdainiai, Lithuania 70.6% Companies accounted for using the equity method Norddeutsche Flüssigzucker GmbH & Co. KG, Braunschweig, Germany 70% Domestic 3 3
Foreign 1 2
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The following trading companies structured as limited 3. EXPLANATION OF partnerships (GmbH & Co. KG) ACCOUNTING POLICIES
• NORDZUCKER GmbH & Co. KG, Braunschweig, 3.1. GENERAL PRINCIPLES Germany • Norddeutsche Flüssigzucker GmbH & Co. KG, The valuation of the items in the consolidated financial Braunschweig, Germany statements is primarily at amortized cost. Derivative • Nordzucker Services GmbH & Co. KG, Braun- financial instruments and coverage capital for pension schweig, Germany obligations in the form of plan assets, in particular, are recognized at fair value. are exempt from the respective obligations in accord- ance with the regulations applicable to companies with Individual line items of the income statement and the limited liability pursuant to Sec. 264b German Com- balance sheet have been aggregated to improve read- mercial Code (HGB). ability. These items are listed in the notes.
2.5. CONVERSION OF FINANCIAL STATE- The income statement has been prepared using the MENTS IN FOREIGN CURRENCIES cost-of-sales method. As such, the revenues recog- nized in the reporting period are compared with the Assets and liabilities of subsidiaries whose functional costs incurred to achieve these revenues, catego- currency is not the Euro are converted at the exchange rized by the functional areas of production, sales and rate applicable on the balance sheet date. The func- administration. tional currency is the currency of the primary economic environment in which the subsidiary operates. Items in In the balance sheet, assets and liabilities are catego- the income statement are converted at the weighted rized as non-current (with maturities of more than one average rate for the relevant reporting period. Equity year) or current. components of subsidiaries are converted at the his- torical rate for the date first recognized. Exchange dif- 3.2. RECOGNITION OF INCOME AND ferences arising from the conversion are recognized EXPENSE without effect on profit or loss in other comprehen- sive income (i. e. in the statement of comprehensive Revenues are recognized in accordance with IAS 18 income and not in the income statement). when the goods or services are delivered if the amount of revenue can be estimated reliably and the flow of The rates for the conversion of key financial state- economic benefit is probable. Revenues are reduced ments in foreign currencies into Euros have changed by sales discounts. as follows: Operating expenses are recognized when the service EXCHANGE RATES OF FOREIGN CURRENCIES is used or as of the date they arise.
Average rate Spot rate for EUR 1.00 2016/2017 2015/2016 28/2/2017 29/2/2017 Interest is recognized as an expense or as income in the period in which it arises. Interest expense arising in Polish Zloty connection with the purchase or production of certain (PLN) 4.35309 4.21193 4.31480 4.35430 assets is only capitalized if they are qualifying assets in Hungarian Forint (HUF) 310.83736 310.10133 308.25000 311.26000 accordance with IAS 23.
Danish Krone (DKK) 7.44083 7.46144 7.43320 7.46020 Dividends are recognized in profit or loss when the Swedish legal entitlement is vested. Krone (SEK) 9.49225 9.33674 9.56750 9.32190
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3.3. INTANGIBLE ASSETS INCLUDING INTANGIBLE ASSETS
GOODWILL Useful life in years
This item primarily refers to intangible assets acquired, Production quotas acquired against payment 11
internally generated intangible assets and goodwill. ERP licences 20
Other software 3–15 Intangible assets acquired (purchased rights and licences) are valued initially at cost (purchase price, directly attributable costs). Assets related to acquisi- Useful lives are reviewed regularly to ensure they are tions (see also Note 3.16), such as contractual customer appropriate. If necessary they are adjusted accordingly. relationships, trademark rights and no-competition If there is reason for an impairment on intangible assets clauses, are recognized as separately acquired intan- with limited useful lives in accordance with IAS 36 and gible assets, provided that the criteria of IFRS 3 and the recoverable amount is less than the historical cost, IAS 38 are fulfilled, and valued for the first time at fair impairment losses are recognized on these items (see value. also Note 3.6). If the reasons for the impairment losses are no longer valid, the relevant reversals of impair- Internally generated intangible assets (such as internally ments are to be made. generated software) are recognized provided that they fulfil the capitalization criteria of IAS 38 (in particular Goodwill arises in conjunction with an acquisition (see with regard to demonstration of technical feasibility, also Note 3.16) if the total consideration transferred to of the intention and ability to use the asset, as well as the seller (purchase price and any future contingent of its reliable valuation). Production costs include the considerations) exceeds the net amount of the identi- costs directly attributable to the development phase, fiable assets acquired and the liabilities assumed. The as well as borrowing costs insofar as they can be capi- positive difference is capitalized under IFRS 3. talized under IAS 23. Research costs are recognized as an expense. Separately acquired and internally generated intangi- ble assets with indefinite useful lives, as well as good- Separately acquired and internally generated intan will, are not subject to scheduled amortization, but gible assets with limited useful lives are subject to must be tested for impairment at least once a year in scheduled amortization after initial recognition. This is accordance with IAS 36 (see also Note 3.6). The impair- done on a straight-line basis under the assumption of ment test for goodwill takes place at the level of the the following useful lives: cash-generating unit to which the item was attributed upon initial recognition. Goodwill is assigned to the cash-generating unit that stands to benefit from the synergies of the business combination. According to IAS 36, a cash-generating unit is the smallest identi- fiable group of assets with cash inflow that is largely independent of cash inflow from other assets. With- in the Nordzucker Group, the lowest possible level is deemed the one within the entity at which goodwill is monitored for internal management purposes. An impairment loss is recognized on goodwill when the
Nordzucker AG ANNUAL REPORT 2016 | 2017 93
recoverable amount attributed to the cash-generating Useful lives are reviewed regularly to ensure they are unit for this item is less than the carrying amount of this appropriate. If necessary they are adjusted accordingly. cash-generating unit; goodwill must then be written Depreciation starts from the time at which the asset in down by the amount of this difference. The basis for question becomes ready for use. Production-related calculating the recoverable amount is the value in use technical plant and machinery only used during the of the cash-generating unit. The cash-generating unit campaign are depreciated for the full year. If there is determines a present-value model taking into account reason for an impairment in accordance with IAS 36 cash flows that are based on internal targets. Reversals and the recoverable amount is less than the histori- of the impairment or increases in the carrying amount cal cost, impairment losses are recognized on these of goodwill cannot be carried out later. items (see also Note 3.6). If the reasons for the impair- ment losses are no longer valid, the relevant reversals Gains or losses resulting from the disposal or impair- of impairments are to be made. ment of intangible assets are recorded on the income statement under ‘Other income’ or ‘Other expenses’. If the major opportunities and risks associated with ownership of rented or leased items of property, 3.4. PROPERTY, PLANT AND EQUIPMENT plant and equipment are borne by the tenant or les- see, then the items are to be capitalized as an asset In accordance with IAS 16, property, plant and equipment under IAS 17 on the lessee’s balance sheet. The asset is initially recognized at historical cost and subsequently is initially valued at the present value of the minimum depreciated on a straight-line basis over their expected leasing payments, or at fair value for the leased item useful lives. Costs include the purchase price, all directly – whichever is lower. In exchange, a liability is to be attributable costs, estimated costs for future decommis- recognized at an appropriate amount for the finance sioning and restoration obligations, as well as borrowing lease. After initial recognition, the leased item is classed costs insofar as they can be capitalized under IAS 23. as an ordinary or extraordinary write-down. If it is not sufficiently clear at the start of the lease whether or not The following useful lives are assumed for depreciation: ownership will be transferred to the lessee, the sched- uled depreciation takes place either over the term of PROPERTY, PLANT AND EQUIPMENT the leasing arrangement or the useful life – whichever
Useful life is shorter. If this is not the case, the leased item must in years be depreciated over its useful life.
Buildings 20–60
Technical plant and machinery 4–60 Gains or losses resulting from the disposal or impair-
Railway tracks 70 ment of items of property, plant and equipment are
Vehicles 4–15 recorded on the income statement under ‘Other
Trailers and rolling stock 25 income’ or ‘Other expenses’.
Other operating and office equipment 3–25
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3.5. INVESTMENT PROPERTY The recoverable amount of an asset or cash-generat- ing unit equates to the higher of fair value less costs of Property intended to be let to third parties is initially disposal and value in use. For cash-generating units, recognized at historical cost under IAS 40. For subse- the recoverable amount is generally calculated using quent valuations, the Nordzucker Group consistently the discounted cash flow method, taking into account exercises the option of valuing investment property cash flows based on internal targets. The cash flows at historical cost, minus scheduled and unscheduled are discounted at a rate which reflects current market depreciation. Depreciation takes place on a straight- assessments of the time value of money and the spe line basis over the useful life of 20 to 60 years. If there cific risks of the cash-generating unit. is reason for an impairment in accordance with IAS 36 and the recoverable amount is less than the historical An impairment is applied if the recoverable amount cost, an impairment is recognized (see also Note 3.6), of the asset or cash-generating unit is lower than the which is reversed if the reason for the impairment no corresponding carrying amount. For cash-generat- longer exists in subsequent periods. ing units, any goodwill must first be reduced or elimi nated. If the carrying amount is insufficient, other 3.6. IMPAIRMENT OF INTANGIBLE ASSETS assets belonging to the cash-generating unit must be (INCLUDING GOODWILL), PROPERTY, reduced proportionally. PLANT AND EQUIPMENT AS WELL AS INVESTMENT PROPERTY With the exception of goodwill, a review must be con- ducted at the end of each reporting period to assess Under IAS 36, impairment losses are calculated by whether there are any reasons for whether a previous- comparing the carrying amount with the recoverable ly recognized impairment no longer exists or has been amount. This impairment test is applied at the level of reduced. If this is the case, the carrying amount of the individual assets, provided that it is possible to esti- asset or cash-generating unit must be increased to its mate the recoverable amount for the individual asset. recoverable amount. As such, assets may not be attri If this is not the case, the impairment test must be buted in excess of the amortized carrying amount as applied at the level of the cash-generating unit. The would have been determined in the absence of any cash-generating unit is the smallest possible group of prior impairment. assets that generate largely independent cash inflows. 3.7. INVESTMENT SUBSIDIES On each reporting date, a review is conducted to assess whether any indications for the impairment of Public subsidies representing grants for assets under assets exist. If such an indication exists, the recoverable IAS 20 (i. e. being investment subsidies) are only amount of the asset or cash-generating unit must be recorded if there is sufficient reason to believe that determined and compared with the carrying amount. a company within the Nordzucker Group is likely to Impairment testing is carried out once a year for good- fulfil the associated conditions and the grant will be will, other intangible assets with indefinite useful lives received. Subsidies are not subtracted from the corre- and for intangible assets not yet available for use – sponding asset but are considered as deferred income regardless of whether or not indications for impair- under ‘Other liabilities’. The deferred income is subse- ment exist. quently released to profit or loss (i. e. via the income statement) over the useful life or depreciation peri- od of the corresponding item of property, plant and equipment.
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3.8. FINANCIAL INSTRUMENTS Financial assets and liabilities must be recognized as soon as a company becomes a party to the contrac- Financial instruments are defined in IAS 32; the relevant tual provisions of the financial instrument. Within the accounting and disclosure principles can be found in Nordzucker Group, regular purchases and sales are IAS 39 and IFRS 7. The term financial instruments covers recognized on the settlement date (the day on which both financial assets and financial liabilities. Financial the asset is supplied to or by the company). Initial assets include cash and cash equivalents, contractual recognition is at fair value. The principles of IFRS 13 are rights to receive cash or other financial assets such as applied to determine fair value. For items not meas- trade receivables, derivative financial instruments with ured at fair value through profit or loss, transaction positive fair value and equity instruments of another costs must be taken into account in the initial carrying company. Financial liabilities include contractual obli- amount. gations to deliver cash and cash equivalents or other financial assets. These include, for example, borrowing, The Nordzucker Group has not used the voluntary current loans, trade payables and derivative financial option of designating financial assets or financial lia- instruments with negative fair value. bilities upon initial recognition as at fair value through profit or loss (fair-value option). Only financial assets are included under ‘Other finan- cial investments’, ‘Financial assets’, ‘Trade receivables’, After initial recognition, financial instruments in the cat- ‘Receivables from related parties’ and ‘Cash and cash egory ‘Financial assets/liabilities at fair value through equivalents’. The items ‘Financial liabilities’, ‘Trade pay- profit or loss’ are to be recognized at fair value. This ables’, ‘Liabilities towards related parties’ and ‘Other includes derivative financial instruments that are not financial liabilities’ only comprise financial liabilities. part of an effective hedging relationship as set out in IAS 39 (see also Note 3.14). Changes in value are rec- For the initial recognition, financial instruments must ognized through profit or loss (i. e. in the income state- be assigned to measurement categories as listed in ment). The subsequent valuation of items in the meas- IAS 39. The subsequent valuation of the items is deter- urement category ‘Available-for-sale financial assets’ mined by the measurement category. There are four is also at fair value. However, having considered the measurement categories for financial assets (‘Finan- effects of tax, changes in fair value are, recognized cial assets at fair value through profit or loss’, ‘Financial without effect on profit or loss in other comprehensive investments held to maturity’, ‘Loans and receivables’, income (i. e. in the statement of comprehensive income ‘Available-for-sale financial assets’). Financial liabili- and not in the income statement). If fair value for items ties may be assigned to two measurement categories in the measurement category ‘Available-for-sale finan- (‘Financial liabilities at fair value through profit or loss’, cial assets’ cannot be reliably determined, the items are ‘Financial liabilities measured at amortized cost’). In the to be valued at cost. reporting period and comparative period, no financial assets were assigned to the measurement category For derivative financial instruments that are part of an ‘Financial investments held to maturity’. In addition, effective hedging relationship (see also Note 3.14), no there were no reclassifications from one measurement measurement category is assigned. The instruments are category to another. also recognized at fair value. However, value changes are also recognized in other comprehensive income (i. e. in the statement of comprehensive income) depending on the type of hedging relationship.
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Following initial recognition at amortized cost, financial 3.9. ASSETS HELD FOR SALE assets in the measurement category ‘Loans and receiv- ables’ and financial liabilities in the measurement cat- Under IFRS 5, items classed as ‘Assets held for sale’ egory ‘Financial liabilities measured at amortized cost’ include non-current assets and disposal groups classi- are valued using the effective interest method. fied as ‘held for sale’. This categorization applies if the relevant carrying amount will be recovered principally Within the Nordzucker Group, the financial assets through a sales transaction rather than through con- included under the item ‘Cash and cash equivalents’ tinuing use. In addition, the items must be available are assigned to the measurement category ‘Loans and for immediate sale in their present condition and the receivables’. This includes bank balances, cash in hand sale must be deemed highly probable, and expected and current balances with banks which have an initial to occur within one year. remaining term of up to three months. Amortized cost is frequently the same as the nominal value. Non-current assets are not subject to depreciation, provided that they are categorized as ‘held for sale’ At the end of each reporting period, it must be iden- or belong to a disposal group categorized as ‘held for tified whether an impairment of a financial asset or a sale’. Non-current assets or disposal groups that are group of assets exists according to IAS 39. There must categorized as ‘held for sale’ must be valued immedi- be objective indications of a loss event (e. g. severe ately after being categorized as such, as well as before financial difficulties of the issuer or debtor, breach of subsequent ends of reporting periods, at either the contract, concessions made to debtors for economic carrying amount or fair value less costs to sell, which- or legal reasons in connection with the debtor’s finan- ever is lower. cial difficulties, an increased probability ofinsolvency, a significant or prolonged decline in the fair value below If a non-current asset is no longer categorized as ‘held its cost), and this must have a reliably estimated effect for sale’ or no longer belongs to a disposal group cat- on expected future cash flows. For financial assets in egorized as ‘held for sale’, and if it is again presented the measurement categories ‘Financial investments as a non-current item at the time of the decision not held to maturity’ and ‘Loans and receivables’, any to sell, it is valued either at the recoverable amount impairment amount is calculated by comparing the or – if this is lower – at the carrying amount prior to carrying amount with the present value of the expect- categorization, adjusted for all depreciation or revalua ed future cash flows (discounted using the effective tions that would have been recorded in the absence of interest rate). For items in the measurement category categorization. ‘Available-for-sale financial assets’, a comparison must be made between acquisition cost and fair value. 3.10. INVENTORIES
Under IAS 2, inventories are valued at the lower of cost and net realizable value. The historical cost of inven tories includes all costs of acquisition and production, as well as any costs incurred in transferring inventories to their current location and in their current condi- tion. Costs are determined using weighted averages. Costs include all direct costs attributable to producing the asset as well as indirect costs attributable to pro- duction. Borrowing costs are not included in costs as the Group’s products are not qualifying assets under IAS 23.
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The net realizable value is the estimated selling price in The valuation of the defined benefit obligation is made the ordinary course of business less estimated costs to using actuarial methods (projected unit credit method). completion and estimated costs to sell. The net realiz- This method assumes that each period of service gives able value of work in progress is inferred from the net rise to an additional unit of benefit entitlement; as such, realizable value of finished goods and services less the the defined benefit obligation increases successively outstanding costs of completion. Semi-finished goods until the employee retires. Future payouts are subject from production processes are measured using their to a discount rate, which is calculated on each reporting respective full cost approach. Indirect costs are allo- date based on market returns on high-quality corpo- cated according to production volume and the amount rate bonds. The method takes into account both actu- of production work carried out in-house. If the recog- arial and demographic assumptions (such as expected nized amounts for finished products and goods are mortality, fluctuations, early retirement, for example), higher than fair value as of the end of the reporting as well as financial assumptions (such as discount rates period, the inventories are written down to net realiz- and future salary trends, for example). able value. Sugar stocks from internal production pre- sented under finished products are recognized at cost, Cost components with a bearing on pension provisions unless they are recognized at lower net realizable value include service cost, net interest (interest expense, in view of sales opportunities. Costs include produc- interest income), actuarial gains or losses, return on tion costs, indirect costs attributable to the production plan assets. In the income statement, the service cost department and straight-line depreciation for wear and (i. e. the increase in the present value of a defined ben- tear. The production costs of quota sugar also include efit obligation arising from a service provided during the plant portion of the production levy of EUR 6.00 the reporting period) is recorded in the items ‘Pro- per tonne. duction costs’, ‘Distribution costs’ and ‘Administrative expenses’, while the net interest is recorded under An impairment loss for inventories to the net realizable ‘Financial expenses’. Net interest is calculated by multi value is reversed if the reasons for recognizing the loss plying net debt with the discount rate of the defined no longer exist. benefit obligation. Actuarial gains and losses and the return on plan assets are recognized without effect on 3.11. PROVISIONS FOR PENSIONS profit or loss in other comprehensive income (i. e. in the statement of comprehensive income and not in Under IAS 19, provisions must be made for pension the income statement). Actuarial gains and losses are commitments in the form of defined benefit plans defined as changes in the present value of the defined where the company primarily bears the actuarial benefit obligation as a result of experienced adjust- risk (that the benefits will result in higher costs than ments (effects of variations in past actuarial assump- expected) and the investment risk (that the assets tions and actual developments) and effects of changes invested will not be sufficient to provide the benefits in actuarial assumptions. The return on plan assets is expected). Provisions are presented as a net liability, the variation between the actual return for the plan i. e. the capital accrued to finance the pension pay- asset and the accrued interest based on the discount ments (coverage capital) is offset against the defined rate for the defined benefit obligation. benefit obligation (reflecting the future pension pay- ments to the employee) if the coverage capital shows the defining characteristics of plan assets.
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3.12. OTHER PROVISIONS 3.13. DEFERRED TAXES
The item ‘Other provisions’ includes personnel-relat- Under IAS 12, deferred taxes are recognized for future ed provisions for anniversaries, partial early retirement, tax assets and liabilities resulting from temporary dif- early retirement and severance pay obligations, as well ferences between the value of assets and liabilities as obligations for profit-sharing, bonuses and other gra- for tax purposes and their carrying amount in the IFRS tuities. Under IAS 19, these are recognized depending financial statements, and for tax loss carry-forwards. on the characteristics of the obligation – either accord- Deferred taxes are measured on the basis of the fis- ing to the rules for short-term employee benefits, the cal legislation enacted at the end of each reporting rules for other (i. e. not considered as pension bene- period for the reporting periods in which the differ- fits) long-term employee benefits, or according to the ences are expected to reverse or in which it is likely rules for long-term employee benefits resulting from that tax loss carry-forwards will be used. Deferred tax the termination of an employment relationship (termi- assets for tax loss carry-forwards are only recognized nation benefits). if it is sufficiently likely that they will be realized in the near future. Deferred tax assets are only offset against The ‘Other provisions’ item also includes recultiva- deferred tax liabilities if specific conditions are fulfilled. tion obligations and other provisions (e. g. for legal disputes or for onerous contracts or imminent losses). The offsetting entry of deferred taxes is made within Under IAS 37, these kinds of provisions are recognized the income statement under the item ‘Income taxes’ – if a present (legal or factual) obligation has arisen as a unless the tax results from a transaction or event that is result of a past event, which will probably result in an recognized directly in equity during the same period outflow of resources and if the extent of the provisions or another period either under other comprehen- can be reliably estimated. The valuation is based on sive income (i. e. in the statement of comprehensive the best-possible estimate of the expenses required to income) or in any other place. fulfil the obligation before the reporting date. Long- term provisions must be discounted with an interest rate commensurate to the risk.
Other provisions take into account all recognizable legal and factual obligations of the Nordzucker Group towards third parties.
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3.14. DERIVATIVE FINANCIAL INSTRUMENTS according to IAS 39, are always assigned to the meas- AND HEDGE ACCOUNTING urement categories ‘Financial assets/liabilities at fair value through profit or loss’. Value changes are recog- Due to the nature of its business, the Nordzucker nized in the income statement under either ‘Financial Group is exposed to interest rate, exchange rate and income’ or ‘Financial expenses’. other market risks. Derivative financial instruments are used as a means of managing these risks. For derivative financial instruments in an effective hedg- ing relationship, no measurement category is assigned. Accounting for derivative financial instruments is gov- They are also recognized at fair value, although their erned by the principles set out in IAS 39. Derivative recognition depends on the type of hedge (fair-value financial instruments are either accounted for sepa- hedge, cash flow hedge) or on the characteristics of the rately or they are part of an effective hedging relation- hedge as either with an effect on profit and loss (i. e. in ship (‘hedge accounting’). Hedge accounting means the income statement) or with no effect onprofit or loss addressing hedged items and hedging instruments under other comprehensive income (i. e. in the state- that are documented as being linked from a finan- ment of comprehensive income). cial point of view in such a way that the compensa- tory effects on the income statement resulting from Within the Nordzucker Group, interest rate derivatives changes in market prices occur in the same period. are always integrated into hedging relationships. If a hedging relationship is designated, recognition Stand-alone derivatives are also used to hedge of gains and losses from hedged items and hedging currency and market risks. instruments is based on special hedge accounting rules. There is a hedge accounting option for every 3.15. TRANSACTIONS AND ITEMS IN scenario. However, the application of hedge account- FOREIGN CURRENCIES ing rules is tied to certain conditions. For one thing, the hedging relationship must be documented. In addi- Under IAS 21, a foreign currency transaction is a trans- tion, the hedge must be effective, i. e. the fair value or action that is denominated or requires settlement in a cash flow changes of hedged items and hedge transac- foreign currency, or which must be fulfilled in a foreign tions must be offset within a specific range. currency. A foreign currency is defined as anycurrency other than the functional currency of the company. The value measure for the initial and subsequent rec- Foreign currency transactions are business transac- ognition of derivative financial instruments is fairvalue. tions for the acquisition or sale of goods or services The fair value of certain derivatives may be either posi- in a foreign currency, borrowing activity or leases in tive or negative; depending on whether they are either a foreign currency, or acquisitions or sales of assets or financial assets or financial liabilities. Fair value must be debt in a foreign currency by any other means. For- determined in accordance with the principles set out in eign currency items are balance sheet items that are IFRS 13. If no market prices for active markets are avail- received or borrowed in foreign currency (and which able, fair value is determined using the present value were related to foreign currency transactions before or option pricing models, whose significant input fac- initial recognition). tors (e. g. market prices, interest rates) are derived from price quotations or other directly or indirectly observ- Foreign currency transactions or foreign currency able input factors. items are translated into the functional currency ini- tially at the spot exchange rate valid on the day of the Stand-alone derivative financial instruments, i. e. those transaction. that are not part of an effective hedging relationship
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Subsequent recognition of foreign currency items If the Group acquires an entity it determines the appro- depends on whether they are monetary or non-mon- priate classification and designation of the financial etary items. Monetary items in a foreign currency are assets and liabilities assumed in accordance with the to be translated into the functional currency by each terms of the contract, economic circumstances and the reporting date using the closing rate (i. e. the spot conditions at the acquisition date. This also includes exchange rate at the end of the reporting period); separating embedded derivative financial instruments exchange differences must generally be recognized from their host contract. through profit or loss (i. e. in the income statement). Non-monetary items – provided that they are recog- For business combinations in stages, the fair value nized at historical cost – are to be translated into the of the equity interest held by the purchaser in the functional currency using the exchange rate on the acquired entity is measured as of each acquisition day of their initial recognition. Non-monetary items date and the resulting gain or loss is recognized in the recognized at fair value must be translated using the income statement. exchange rate that was valid on the day of their recog- nition (i. e. generally using the exchange rate on the The agreed contingent consideration is recognized reporting date). Translation differences from non-mon- at fair value as of the acquisition date. Subsequent etary items should be treated like all other gains or changes in the fair value of a contingent considera- losses, i. e. they are either recognized with an effect tion that constitutes an asset or a liability are gener- on profit or loss or with no effect on profit or loss under ally recognized either in the income statement or in other comprehensive income (i. e. in the statement of other comprehensive income in accordance with comprehensive income). IAS 39. Contingent consideration that is classified as equity is not revalued and its subsequent settlement is 3.16. ACQUISITIONS accounted for within equity.
Business combinations are presented using the pur- Goodwill is initially recognized at cost, which is defined chase method in accordance with IFRS 3. The acqui- as the excess of total consideration transferred and the sition costs of a business combination are defined as amount of any non-controlling interest over the identi- the total consideration paid, measured at fair value as fiable assets acquired and the liabilities assumed. If this of the acquisition date and the non-controlling inter- consideration is below the fair value of the net assets ests in the acquired entity. For every business com- of the company, the difference is recognized in the bination the acquirer measures the non-controlling income statement. interests in the acquired entity either at fair value or at their pro rata share of the identified net assets of After initial recognition, goodwill is not subject to the acquired entity. Costs incurred in the course of the scheduled amortization, but is tested at least once a business combination are recognized as expenses in year for impairment under IAS 36 (see also Notes 3.3 profit and loss. and 3.6).
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4. DISCRETIONARY DECISIONS 5. ACCOUNTING STANDARDS AND ESTIMATION UNCER- TO BE APPLIED FOR THE TAINTY FIRST TIME
The presentation of the net assets, financial and earn- The Nordzucker Group applied the following pro- ings position, as well as the accounting policies, are nouncements or amendments to existing pronounce- influenced by estimations and assumptions.Estimated ments of the IASB or IFRS IC for the first time during the values and actual amounts may vary – sometimes reporting period: significantly. • Amendment to IAS 16 Property, Plant and Equipment In particular, key estimates and assumptions have been and to IAS 38 Intangible Assets (title of amendment: made in defining uniform periods of depreciation and Clarification of Acceptable Methods of Depreciation amortization for the Group, the amount of write- and Amortization); downs on receivables, as well as determining the actu- arial assumptions for measuring pension provisions. At • Amendment to IAS 16 Property, Plant and Equipment the same time, it is necessary to make a large num- and to IAS 41 Agriculture (title of amendment: Agri- ber of estimates and assumptions to account for pro- culture: Bearer Plants); visions or disclose contingent liabilities – particularly with regard to related or potential legal disputes or • Amendment to IFRS 11 Joint Arrangements (title of other pending claims. Estimates, for example, must be amendment: Accounting for Acquisitions of Interests made regarding the likelihood of a pending case being in Joint Operations); ruled in the claimant’s favour, and regarding any pay- ment obligations arising as a recognition of the ruling. • Amendment to IAS 27 Separate Financial Statements There is also estimation uncertainty in the recognition (title of amendment: Equity Method in Separate of provisions for onerous contracts or imminent losses Financial Statements); with regard to whether a loss is likely, and whether it is possible to estimate this loss reliably. For deferred tax • Amendment to IAS 1 Presentation of Financial State- assets, the main estimates relate to the taxable prof- ments (title of amendment: Disclosure Initiative); its that will be generated in future. Other significant estimates are made with regard to the issue of wheth- • Improvements to International Financial Reporting er there are reasons for an impairment of assets or a Standards (2012–2014 Cycle; published 2014); cash-generating unit, as well as in the implementation of the impairment testing in accordance with IAS 36 • Amendment to IFRS 10 Consolidated Financial with regard to determining the cash flows in the fore- Statements, IFRS 12 Disclosure of Interests in Other cast period and the selection of a suitable capitaliza- Entities and IAS 28 Investments in Associates and tion rate. We refer to the corresponding notes to the Joint Ventures (title of amendment: Investment consolidated balance sheet for the carrying amounts of Entities: Applying the Consolidation Exception). balance sheet items affected by significant estimates. The amendment to IAS 16 and to IAS 38 clarifies that the relationship between the revenue generated and the expected future economic benefit may not be used for the depreciation property, plant and equipment, but only in limited circumstances for the amortization of intangible assets.
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The amendments to IAS 16 and to IAS 41 mean that 6. ACCOUNTING STANDARDS biological assets which meet the definition of bearer NOT APPLIED plants no longer fall within the scope of IAS 41 but within the scope of IAS 16. No IFRSs were voluntarily applied ahead of time in the consolidated financial statements of Nordzucker The amendment to IFRS 11 stipulates that the acquirer AG as of 28 February 2017. The pronouncements will of an interest in a joint operation in which the activity be taken into account for the first time when their constitutes a business, as defined in IFRS 3, is required application becomes mandatory. The application of to apply all of the principles on business combinations IFRS requires the European Union (EU) to first grant accounting in IFRS 3 and other IFRSs and to disclose the approval (endorsement process), which in some cases information required in these standards for business is still outstanding. combinations. It also clarifies that an existing interest in a joint operation is not remeasured when another In addition, the Nordzucker Group has not yet applied interest is acquired in the same joint operation and IFRS 8 Operating Segments or IAS 33 Earnings Per joint control continues to exist. An exception was also Share; their application is only mandatory for capital included to clarify that the amendments do not apply market companies. if the parties (including the reporting entity) that share joint control are under the joint control of one party. The amendments listed below are not likely to have any major impact on the presentation of the net assets, The amendment to IAS 27 allows an entity to account financial and earnings position or the cash flows of the for investments in subsidiaries, joint ventures and Nordzucker Group. associates in its separate financial statements using the equity method. 6.1. MANDATORY FIRST-TIME APPLICATION IN THE 2017/2018 REPORTING PERIOD The amendment to IAS 1 clarifies that materiality con- siderations apply to all parts of the financial statements The following pronouncements are to be applied for and that immaterial disclosures may limit the usefulness the first time in the Nordzucker consolidated financial of financial information. It is also clarified that immate- statements as of 28 February 2018: rial disclosures do not have to be made even when a standard requires a specific disclosure. The place and • Amendment to IAS 12 Income Taxes (title of amend- order in which information is presented in the financial ment: Recognition of Deferred Tax Assets for Unre- statements is also important. alised Losses; not yet endorsed by the EU);
The IASB makes amendments to various IFRSs via its • Amendment to IAS 7 Statement of Cash Flows overarching ‘Improvements to International Financial (title of amendment: Disclosure Initiative; not yet Reporting Standards’. The 2012–2014 Cycle amended endorsed by the EU); a total of five standards. • Improvements to International Financial Reporting None of the above amendments have any major impact Standards (2014–2016 Cycle regarding the amend- on the net assets, financial and earnings position or the ments to IFRS 12 Disclosure of Interests in Other Enti- cash flows of the Nordzucker Group. ties; published 2016; not yet endorsed by the EU).
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The amendment to IAS 12 clarifies that companies have • IFRS 9 Financial Instruments; to consider whether tax law restricts the sources of income to be taxed in the future, against which it may • IFRS 15 Revenue from Contracts with Customers; make deductions on the reversal of the correspond- ing deductible temporary differences. The amendment • Amendment to IFRS 15 Revenue from Contracts also contains guidelines on how companies have to cal- with Customers (title of amendment: Clarifications culate income to be taxed in the future and explains to IFRS 15 Revenue from Contracts with Customers; the circumstances in which future taxable income can not yet endorsed by the EU); contain amounts from the realization of assets in an amount that exceeds their carrying amount. • Amendment to IFRS 2 Share-based Payment (title of amendment: Classification and Measurement The amendment to IAS 7 requires disclosures that of Share-based Payment Transactions; not yet enable users of financial statements to evaluate both endorsed by the EU); cash and non-cash changes in liabilities arising from financing activities. • Amendment to IFRS 4 Insurance Contracts (title of amendment: Applying IFRS 9 Financial Instruments The IASB makes amendments to various IFRSs via its with IFRS 4 Insurance Contracts; not yet endorsed overarching ‘Improvements to International Financial by the EU); Reporting Standards’. The 2014–2016 Cycle amended a total of three standards. The amendment to IFRS 12 • IFRIC 22 Foreign Currency Transactions and will be applied within the Nordzucker Group in the Advance Consideration (not yet endorsed by the 2017/2018 reporting period. The amended version of EU); IFRS 12 clarifies that the disclosure requirements gen- erally also apply to an entity’s interests in accordance • Amendment to IAS 40 Investment Property (title of with IFRS 5 Non-current Assets Held for Sale and Dis- amendment: Transfers of Investment Property; not continued Operations. yet endorsed by the EU);
6.2. MANDATORY FIRST-TIME APPLICATION • IFRS 16 Leases (not yet endorsed by the EU); IN THE 2018/2019 REPORTING PERIOD OR LATER • Amendment to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates These standards or amendments are to be applied to and Joint Ventures (title of amendment: Sale or the Nordzucker consolidated financial statements for Contribution of Assets between an Investor and its the first time as of 28 February 2019 or for later report- Associate or Joint Venture; not yet endorsed by the ing periods: EU and deferred indefinitely).
• Improvements to International Financial Reporting Standards (2014–2016 Cycle regarding the amend- ments to IFRS 1 First-time Adoption of International Financial Reporting Standards and IAS 28 Invest- ments in Associates and Joint Ventures; published 2016; not yet endorsed by the EU);
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The amendments to the overarching Improvements the terms and conditions of a share-based payment to International Financial Reporting Standards (2014– transaction changes its classification from cash-settled 2016 Cycle) that will be applied for the first time in to equity-settled. the 2018/2019 reporting period relate to amended versions of IFRS 1 (deletion of certain exemptions) and The amendment to IFRS 4 resolves application prob- IAS 28 (clarification of the measurement of interests lems for insurers resulting from the fact that the effec- held by venture capital organizations). tive date of the standard is different to the effective date of IFRS 9. IFRS 9 replaces the existing regulations in IAS 39 regarding accounting for financial instruments. The IFRIC 22 refers to IAS 21 The Effects of Changes in For- standard contains new regulations on classifying and eign Exchange Rates and clarifies the point in time at measuring financial assets as well as on accounting for which the exchange rate for the translation of transac- hedging relationships. The existing guidelines on the tions in foreign currencies that include the receipt or classification and measurement of financial liabilities payment of advance consideration is to be calculated. will largely be retained. The amendment to IAS 40 specifies in which cases a IFRS 15 redefines the recognition of revenue and property’s classification as an ‘investment property’ replaces IAS 18 Revenue and IAS 11 Construction Con- begins or ends if the property is still under construc- tracts as well as the related interpretations. Revenue tion or development. is to be recognized when the goods or services are transferred to the customer. The standard also covers IFRS 16 replaces the existing regulations in IAS 17 regard- the presentation of the performance obligations at the ing accounting for and disclosure of leases. IFRS 16 stip- level of individual contracts (contract assets or con- ulates that the lessee must recognize all leases and the tract liabilities) and requires extensive disclosures on related rights and obligations; the previous distinction revenue. between finance leases (recognition of the leased item as an asset) and operating leases (no recognition of the The amendment to IFRS 15 clarifies implementation leased item as an asset; recognition of lease payments issues relating to the identification of performance obli- as expenses) no longer applies. Lessors still have to clas- gations, the application guidelines for principal versus sify their leases as finance or operating leases and rec- agent considerations, licences for intellectual property ognize them accordingly – as previously under IAS 17. and the transitional provisions. The classification criteria in IAS 17 were retained for IFRS 16. The amendments to IFRS 2 address the following main areas: the effects of vesting conditions on the meas- The amendment to IFRS 10 and IAS 28 clarifies that an urement of cash-settled share-based payment transac- investor is to recognize the full profit or loss on the sale tions; the classification of share-based payment trans- or contribution of assets to an associate or joint venture actions with net settlement features for withholding if the assets constitute a business activity within the tax obligation; the accounting of cash-settled share- meaning of IFRS 3 Business Combinations. based payment transactions where a modification of
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7. CHANGES TO THE NOTES TO THE REPORTING STRUCTURE AND CHANGES IN CONSOLIDATED ACCOUNTING POLICIES INCOME STATEMENT
No changes were made to the reporting structure in the reporting period.
Changes in accounting policies resulting from the first- 8. REVENUES time application of accounting standards (see Note 5) had no material effects on the presentation of the Revenues are made up as follows: Nordzucker Group’s net assets, financial and earnings position. REVENUES
1/3/2016 1/3/2015 In EUR thousands – 28/2/2017 – 29/2/2016
Products
Sugar 1,409,747 1,273,953
Bioethanol 64,935 94,878
By-products 151,096 153,663
Other 82,452 84,879
Total 1,708,230 1,607,373
Other revenues primarily include sales of merchandise.
9. PRODUCTION COSTS
Production costs are made up of the following:
PRODUCTION COSTS
1/3/2016 1/3/2015 In EUR thousands – 28/2/2017 – 29/2/2016
Cost of materials and services –1,096,676 –1,140,452
Personnel expenses –130,609 –118,095
Depreciation, amortization and impairment –67,340 –66,293
Other expenses –34,632 –40,313
Total –1,329,257 –1,365,153
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10. SALES COSTS 12. OTHER INCOME
Sales costs are made up as follows: Other income is made up as follows:
SALES COSTS OTHER INCOME
1/3/2016 1/3/2015 1/3/2016 1/3/2015 In EUR thousands – 28/2/2017 – 29/2/2016 In EUR thousands – 28/2/2017 – 29/2/2016
Freight –74,740 –72,456 Insurance and other compensation for damages 9,295 27,180 Rentals, land leasing and outside warehousing costs –29,326 –26,263 Income from the reversal of provisions 5,798 5,562 Personnel expenses –21,723 –20,534 Foreign exchange gains 2,431 1,795 Depreciation, amortization and impairment –5,003 –4,896 Proceeds from disposal of non-current assets 3,102 141 Advertising –9,151 –9,435 Reversals of impairments on Sales commission –1,414 –1,463 receivables 318 307 Other costs of sales –18,765 –18,857 Income from the reversal of Total –160,122 –153,904 investment subsidies, grants and other receivables 3,929 591
Rental and leasing income 462 516 Freight has increased on the back of higher sales Reversals of impairment of volumes. The rise in rentals, land leasing and outside intangible assets as well as warehousing costs resulted from the reduction of property, plant and equipment 105 770
stocks in external storage, which in turn caused greater Miscellaneous operating income 9,390 5,579
internal transport and handling costs. By contrast, the Total 34,830 42,441 costs for leasing external storage were reduced.
11. ADMINISTRATIVE Insurance and other compensation for damages in the EXPENSES reporting period consists mainly of compensation of EUR 6,543 thousand (previous year: EUR 12,032 thou- Administrative expenses are made up as follows: sand) resulting from a fire in a silo in Uelzen. In the pre- vious year, this also included compensation from fire ADMINISTRATIVE EXPENSES damage in an external warehouse in Tjustorp (Sweden)
1/3/2016 1/3/2015 in the amount of EUR 12,038 thousand. In EUR thousands – 28/2/2017 – 29/2/2016
Personnel expenses –42,620 –41,732 Foreign currency gains and the foreign currency losses disclosed under other expenses are mainly due to the Consultancy fees –10,523 –15,045 movement of the relevant national currencies against Fees and levies –4,490 –4,384 the Euro. Depreciation, amortization and impairment –2,993 –2,703
Rentals and land leasing –2,299 –2,382
Travel costs –2,126 –1,673
Phone/communications –1,360 –1,258
Other administrative expenses –8,945 –10,153
Total –75,356 –79,330
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13. OTHER EXPENSES 14. FINANCIAL INCOME
Other expenses are made up as follows: Financial income is made up as follows:
OTHER EXPENSES FINANCIAL INCOME
1/3/2016 1/3/2015 1/3/2016 1/3/2015 In EUR thousands – 28/2/2017 – 29/2/2016 In EUR thousands – 28/2/2017 – 29/2/2016
Depreciation, amortization and Income from other investments 3,827 5,860 impairment –19,286 –144 Other interest and similar income 1,293 7,532 Expenses from loss events –704 –13,381 Interest income on bank balances 57 91 Research and development –5,443 –4,961 Other financial income 1,486 96 Foreign exchange losses –1,967 –2,099 Total 6,663 13,579 Losses from disposal of non-current assets –3,885 –1,385 Impairments on receivables –66 –296 Net income/loss from other investments refers to Other operating expenses –15,559 –12,939 dividends. Total –46,910 –35,205 Other interest and similar income in the compara- Depreciation, amortization and impairment relates tive period relates mainly to interest income on the mainly to write-downs of machinery and other tech- court-ordered repayment of production levies for pri- nical equipment that was subject to individual impair- or years. ment testing. Further information on net income from financial instru- Expenses for loss events in the comparative period ments can be found in Note 42. include expenses of EUR 11,322 thousand and EUR 675 thousand as a result of fires in a silo in Uelzen and an 15. FINANCIAL EXPENSES external warehouse in Tjustorp in Sweden respectively. Financial expenses are made up as follows: The losses from the disposal of non-current assets in the reporting period and the comparative period relate FINANCIAL EXPENSES to machinery and other technical equipment that was 1/3/2016 1/3/2015 derecognized due to being sold or decommissioned. In EUR thousands – 28/2/2017 – 29/2/2016
Interest expense on provisions –4,218 –3,837
Other interest and similar expenses –2,536 –1,585
Interest expense from bank balances –560 –809
Other financial expenses –2,019 –1,332
Total –9,333 –7,563
Interest expense from bank balances comprises both interest on lines of credit drawn and fees.
Additional information on net income from financial instruments can be found in Note 42.
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16. RESULT FROM COMPANIES The expected income tax expense which would have ACCOUNTED FOR USING been payable if the tax rate for the parent company THE EQUITY METHOD Nordzucker AG of 30.00 per cent (previous year: 29.00 per cent) were applied to the consolidated net The net income/loss from companies accounted for income under IFRS before taxes and minority interests using the equity method fell by EUR 155 thousand can be reconciled with the income taxes in the income compared with the previous reporting period. Compa- statement as follows: nies accounted for using the equity method are shown in the balance sheet under the ‘Financial investments’ TAX EXPENSE
item (see Notes 25.1 and 25.2). 1/3/2016 1/3/2015 In EUR thousands – 28/2/2017 – 29/2/2016
17. INCOME TAXES IFRS net profit before income taxes 128,505 22,153
Group tax rate 30.00 % 29.00 % Income taxes include taxes on income paid or owed Expected tax expense –38,552 –6,424 in the individual countries and deferred taxes. Income Tax rate variances 7,743 –1,370 taxes consist of trade tax, corporation tax, solidarity Taxes for prior years 1,063 –479 surcharge and the equivalent foreign income taxes. Tax-free income 1,236 1,740
Non-deductible operating expenses Income tax expense is made up by origin as follows: for tax purposes –980 –688
Other effects 75 –41
INCOME TAXES Tax expense –29,415 –7,262 1/3/2016 1/3/2015 In EUR thousands – 28/2/2017 – 29/2/2016
Current taxes The corporation tax rate for stock corporations based in Germany is 15 per cent plus 5.5 per cent solidarity Current domestic taxes –17,564 –3,620 surcharge on the corporation tax liability. Current foreign taxes –21,062 –4,958
–38,626 –8,578 Companies based in Germany are also liable for trade Deferred taxes tax at a rate determined by multipliers set by the local Deferred domestic taxes 8,887 –4,132 council. Deferred foreign taxes 324 5,448
9,211 1,316 The effects of differences between foreign tax rates and Income taxes –29,415 –7,262 the Group tax rate for Nordzucker AG (30.00 per cent; previous year: 29.00 per cent) are shown in the recon- The current and deferred income taxes affecting ciliation statement under tax rate differences between previous years increased net income by EUR 1,063 Germany and abroad. thousand.
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Deferred tax assets and liabilities result primarily from temporary valuation differences between the IFRS financial statements and the financial statements of the individual Group companies for local tax purposes for the following items:
DEFERRED TAXES BY BALANCE SHEET ITEM
28/2/2017 29/2/2016
Deferred Deferred tax Deferred Deferred tax In EUR thousands tax assets liabilities tax assets liabilities
Intangible assets 169 1,192 441 1,054
Investment property 0 0 0 0
Property, plant and equipment 1,988 102,288 2,087 111,261
Inventories 1,378 7,661 1,064 10,298
Other assets 142 572 374 1,134
Pension provisions 34,588 211 36,005 81
Other provisions 2,179 234 1,449 0
Other liabilities 352 1,145 1,292 3,889
Deferred taxes on temporary differences 40,796 113,303 42,712 127,717
Deferred tax assets on tax loss carry-forwards 2,491 0 7,522 0
Gross amount 43,287 113,303 50,234 127,717
Netting –38,309 –38,309 –44,651 –44,651
Balance sheet amount 4,978 74,994 5,583 83,066
The changes of EUR 7,467 thousand in total (previous Deferred tax assets and liabilities are offset for each year: EUR 1,680 thousand) in deferred taxes as of the company or taxable entity. To the extent that deferred reporting date as shown in the consolidated balance taxes relate to private partnerships, netting out only sheet were recognized as a reduction in tax expense takes place at the level of Nordzucker AG for corpo- (i. e. in the income statement) at EUR 9,211 thousand ration tax purposes. Deferred trade taxes are netted (previous year: EUR 1,316 thousand). An additional tax out at the level of the individual private partnerships. expense of EUR 1,744 thousand (previous year: tax income of EUR 364 thousand) was recognized outside of profit or loss (i. e. in other comprehensive income in the statement of comprehensive income). Changes due to exchange rates are presented in the ‘Exchange differences on translating foreign operations’ item.
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The following table shows the changes in deferred tax assets and deferred tax liabilities as shown both within and outside of profit and loss:
CHANGES IN DEFERRED TAXES
1/3/2016 – 28/2/2017 1/3/2015 – 29/2/2016
Deferred Deferred tax Deferred Deferred tax In EUR thousands tax assets liabilities tax assets liabilities
Intangible assets –272 –138 –88 –416
Investment property 0 0 0 0
Property, plant and equipment –99 8,973 60 1,810
Inventories 314 2,637 –680 –1,083
Other assets –231 562 –359 250
Pension provisions –1,418 –130 –467 561
Other provisions 730 –233 –2,776 234
Other liabilities –941 2,743 228 4,865
Deferred taxes on temporary differences –1,917 14,414 –4,082 6,221
Deferred tax assets on tax loss carry-forwards –5,030 0 –459 0
Total –6,947 14,414 –4,541 6,221
With regard to the surplus of deferred tax assets over No deferred tax assets were recognized for tempo- deferred tax liabilities at the level of individual compa- rary differences on investments by subsidiaries of nies in the balance sheet, the value of the deferred tax EUR 217,464 thousand (previous year: EUR 192,715 assets is considered to be sufficiently certain, based thousand) because the Nordzucker Group is able to on the current earnings situation and/or business control the timing of the reversal and the temporary dif- planning. ferences will not be reversed in the foreseeable future.
In the financial year, no deferred tax assets were recog- nized for foreign tax loss carry-forwards of EUR 12,673 thousand (previous year: EUR 11,753 thousand) as no positive taxable income is expected in the near future. Furthermore, no deferred tax assets were recognized for domestic tax loss carry-forwards of EUR 528 thou- sand (previous year: EUR 298 thousand) as no positive taxable income is expected in the near future.
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18. COST OF MATERIALS AND In the reporting period, the Nordzucker Group had SERVICES an average of 3,236 employees (previous year: 3,206 employees). The cost of materials and services is made up as follows: 20. DEPRECIATION, COST OF MATERIALS AND SERVICES AMORTIZATION AND
1/3/2016 1/3/2015 IMPAIRMENT In EUR thousands – 28/2/2017 – 29/2/2016
Cost of raw materials, Depreciation, amortization and impairment are made consumables and supplies and up as follows: of purchased merchandise –954,198 –824,210
Cost of purchased services –93,616 –92,772 DEPRECIATION, AMORTIZATION AND IMPAIRMENT Total –1,047,814 –916,982 1/3/2016 1/3/2015 In EUR thousands – 28/2/2017 – 29/2/2016
Depreciation or amortization of 19. PERSONNEL EXPENSES intangible assets, property, plant and equipment, and investment property –73,989 –73,702 Personnel expenses are made up as follows: Impairment of intangible assets, property, plant and equipment, and PERSONNEL EXPENSES investment property –20,942 –641 Total –94,931 –74,343 1/3/2016 1/3/2015 In EUR thousands – 28/2/2017 – 29/2/2016
Wages and salaries –162,397 –149,814 Impairment losses in the reporting period relate main- ly to write-downs of machinery and other technical Social security contributions and other social expenses –22,642 –22,564 equipment. Expenses for defined contribution plans –11,091 –8,768
Expenses for defined benefit plans –4,926 –5,499
Total –201,056 –186,645
Expenses for defined benefit and defined contribu- tion plans consist of Group expenses for defined ben- efit and defined contribution pension plans and simi- lar obligations. The expenses for defined benefit plans affect service costs. They do not contain the net inter- est expenses of defined benefit obligations associated with pension expenses. These are shown in the income statement under ‘Financial expenses’.
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NOTES TO THE CONSOLIDATED BALANCE SHEET
21. INTANGIBLE ASSETS 23. IMPAIRMENT TEST FOR INTANGIBLE ASSETS AND Changes in the individual items of intangible assets ITEMS OF PROPERTY, are shown in the statement of changes in non-current PLANT AND EQUIPMENT assets. Impairment tests for intangible assets and items of At the end of the reporting period, there were no property, plant and equipment are mainly performed intangible assets with indefinite useful lives. on the basis of the values in use for cash-generating units. In the Nordzucker Group, the impairment tests In the reporting period, research and development are performed by a cash-generating unit that contains expenses of EUR 5,443 thousand (previous year: all the Group’s cash flows from sugar sales, as well as EUR 4,961 thousand) were recognized in the income the related assets and liabilities. statement. These expenses are attributed in full to the item ‘Other expenses’. In the reporting period and in the comparative peri- od, an impairment test was performed for intangible 22. PROPERTY, PLANT AND assets and items of property, plant and equipment. EQUIPMENT The recoverable amount is based on the value in use in each case. The pre-tax interest rate used to dis- We refer to the statement of changes in non-current count the cash flows for this cash-generating unit was assets for the Nordzucker Group for changes in prop- around 7.72 per cent (previous year: 7.47 per cent). erty, plant and equipment. A growth rate of 0 per cent (previous year: 0 per cent) was assumed for the long-term earnings component of Assets capitalized within a finance lease under IAS 17 the discounted cash flow calculation. No impairment primarily include a storage reservoir in Stöcken, a water charges were recognized in the reporting period or pipeline to Rosche (both in the district of Uelzen), as comparative period. well as a silo in Saxkøbing and two co-generation plants, in Groß Munzel and Nordstemmen. The leased 24. INVESTMENT PROPERTY items are presented as technical plant and machinery. Investment property in the Nordzucker Group mainly As of the end of the reporting and the comparative consists of flats and land not required for operating period, items of property, plant and equipment in the purposes. amount of EUR 5,400 thousand were pledged as col- lateral for liabilities. In the reporting period, rental income of EUR 16 thou- sand (previous year: EUR 29 thousand) was generated, offset by expenses of EUR 10 thousand (previous year:
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EUR 12 thousand). There were also expenses of EUR 52 25.3. OTHER FINANCIAL INVESTMENTS thousand (previous year: EUR 35 thousand) for which there was no corresponding rental income. Financial assets in the measurement category ‘Avail- able-for-sale financial assets’ as shown in other finan- The fair value of the property is EUR 7,753 thousand as cial investments are recognized at the reporting date of the reporting date (previous year: EUR 6,172 thou- either at fair value or at cost (see Note 3.8). sand). Fair value was determined on the basis of inter- nal estimates using comparable properties. The shares in Tereos TTD a.s. are disclosed here, despite a stake of 35.38 per cent, because the compa- No subsequent acquisition costs were capitalized in ny’s articles do not permit the Group to exercise signifi the reporting period or in the comparative period. cant influence over its operating and financial policy.
25. FINANCIAL INVESTMENTS The Nordzucker Group received dividends of EUR 3,763 thousand in the reporting year (previous There were no significant changes in the Nordzucker year: EUR 5,802 thousand). Group’s financial investments in the reporting period.
25.1. JOINT VENTURES ACCOUNTED FOR USING THE EQUITY METHOD
There were no joint ventures accounted for using the equity method that were individually or collectively material for the presentation of the net assets, finan- cial position and earnings of the Nordzucker Group in either the reporting period or the same period of the previous year.
25.2. ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD
August Töpfer Zuckerhandelsgesellschaft mbH & Co. KG was included as an associate using the equity method for the first time in the previous year.
There were no associates accounted for using the equity method that were individually or collectively material for the presentation of the net assets, finan- cial position and earnings of the Nordzucker Group in either the reporting period or the same period of the previous year.
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CONSOLIDATED STATEMENT OF CHANGES IN NON-CURRENT ASSETS 2016/2017
Nordzucker AG, Braunschweig, Germany Cost or fair value Accumulated depreciation, amortization and impairment Carrying amounts
Deprecia- Reversals As of Currency Reclassifi- As of As of Currency tion, amor- Impair- of impair- Reclassifi- As of As of As of in EUR thousands 1/3/2016 effects Additions cations Disposals 28/2/2017 1/3/2016 effects tization ment ment cations Disposals 28/2/2017 28/2/2017 29/2/2016
Intangible assets
Goodwill 0 0 5 0 0 5 0 0 0 –5 0 0 0 –5 0 0
Rights, patents and licences 52,289 50 211 0 –4 52,546 –49,806 –50 –2,369 0 0 0 4 –52,221 325 2,483
Internally generated intangible assets 2,720 2 0 0 –457 2,265 –2,616 –2 –102 0 0 0 457 –2,263 2 104
Other intangible assets 35,657 17 1,377 188 –1,990 35,249 –18,298 –16 –2,506 –689 0 16 1,861 –19,632 15,617 17,359
Advance payments made 2,323 0 1,429 –209 –42 3,501 0 0 0 0 0 0 0 0 3,501 2,323
92,989 69 3,022 –21 –2,493 93,566 –70,720 –68 –4,977 –694 0 16 2,322 –74,121 19,445 22,269
Property, plant and equipment
Land and buildings 455,620 –596 10,342 1,307 –1,149 465,524 –258,755 115 –8,006 –112 0 –74 868 –265,964 199,560 196,865
Technical plant and machinery 1,737,370 –2,997 52,795 6,028 –33,959 1,759,237 –1,120,161 1,620 –58,228 –19,879 0 977 30,546 –1,165,125 594,112 617,209
Other plant, operating and office equipment 48,314 –20 3,717 –66 –4,343 47,602 –37,733 16 –2,777 –4 0 269 4,252 –35,977 11,625 10,581
Advance payments made and plant under construction 10,155 –21 14,389 –8,480 –18 16,025 0 0 0 –253 0 0 0 –253 15,772 10,155
2,251,459 –3,634 81,243 –1,211 –39,469 2,288,388 –1,416,649 1,751 –69,011 –20,248 0 1,172 35,666 –1,467,319 821,069 834,810
Investment property 4,667 0 0 1,838 –111 6,394 –1,738 0 –1 0 105 –344 25 –1,953 4,441 2,929
2,349,115 –3,565 84,265 606 –42,073 2,388,348 –1,489,107 1,683 –73,989 –20,942 105 844 38,013 –1,543,393 844,955 860,008
CONSOLIDATED STATEMENT OF CHANGES IN NON-CURRENT ASSETS 2015/16
Nordzucker AG, Braunschweig, Germany Cost or fair value Accumulated depreciation, amortization and impairment Carrying amounts
Deprecia- Reversals As of Currency Reclassifi- As of As of Currency tion, amor- Impair- of impair- Reclassifi- As of As of As of In EUR thousands 1/3/2015 effects Additions cations Disposals 29/2/2016 1/3/2015 effects tization ment ment cations Disposals 29/2/2016 29/2/2016 28/2/2015
Intangible assets
Rights, patents and licences 53,878 –267 3 0 –1,325 52,289 –48,544 253 –2,841 0 0 1 1,325 –49,806 2,483 5,334 Internally generated intangible assets 2,720 0 0 0 0 2,720 –2,512 0 –104 0 0 0 0 –2,616 104 208 Other intangible assets 101,029 60 1,432 398 –67,262 35,657 –83,135 –60 –2,278 0 0 –1 67,176 –18,298 17,359 17,894 Advance payments made 1,887 0 691 –255 0 2,323 0 0 0 0 0 0 0 0 2,323 1,887 159,514 –207 2,126 143 –68,587 92,989 –134,191 193 –5,223 0 0 0 68,501 –70,720 22,269 25,323 Property, plant and equipment Land and buildings 451,851 –1,651 3,774 2,667 –1,021 455,620 –250,876 484 –8,344 –73 653 –872 273 –258,755 196,865 200,975 Technical plant and machinery 1,700,399 –1,883 41,139 6,895 –9,180 1,737,370 –1,071,017 568 –57,677 –568 2 –2 8,533 –1,120,161 617,209 629,382 Other plant, operating and office equipment 47,040 –148 3,242 405 –2,225 48,314 –37,602 111 –2,457 0 0 0 2,215 –37,733 10,581 9,438 Advance payments made and plant under construction 9,068 –39 9,794 –8,616 –52 10,155 –15 0 0 0 15 0 0 0 10,155 9,053 2,208,358 –3,721 57,949 1,351 –12,478 2,251,459 –1,359,510 1,163 –68,478 –641 670 –874 11,021 –1,416,649 834,810 848,848 Investment property 6,263 0 0 –1,529 –67 4,667 –2,742 0 –1 0 100 874 31 –1,738 2,929 3,521 2,374,135 –3,928 60,075 –35 –81,132 2,349,115 –1,496,443 1,356 –73,702 –641 770 0 79,553 –1,489,107 860,008 877,692
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Cost or fair value Accumulated depreciation, amortization and impairment Carrying amounts
Deprecia- Reversals As of Currency Reclassifi- As of As of Currency tion, amor- Impair- of impair- Reclassifi- As of As of As of in EUR thousands 1/3/2016 effects Additions cations Disposals 28/2/2017 1/3/2016 effects tization ment ment cations Disposals 28/2/2017 28/2/2017 29/2/2016
Intangible assets
Goodwill 0 0 5 0 0 5 0 0 0 –5 0 0 0 –5 0 0
Rights, patents and licences 52,289 50 211 0 –4 52,546 –49,806 –50 –2,369 0 0 0 4 –52,221 325 2,483
Internally generated intangible assets 2,720 2 0 0 –457 2,265 –2,616 –2 –102 0 0 0 457 –2,263 2 104
Other intangible assets 35,657 17 1,377 188 –1,990 35,249 –18,298 –16 –2,506 –689 0 16 1,861 –19,632 15,617 17,359
Advance payments made 2,323 0 1,429 –209 –42 3,501 0 0 0 0 0 0 0 0 3,501 2,323
92,989 69 3,022 –21 –2,493 93,566 –70,720 –68 –4,977 –694 0 16 2,322 –74,121 19,445 22,269
Property, plant and equipment
Land and buildings 455,620 –596 10,342 1,307 –1,149 465,524 –258,755 115 –8,006 –112 0 –74 868 –265,964 199,560 196,865
Technical plant and machinery 1,737,370 –2,997 52,795 6,028 –33,959 1,759,237 –1,120,161 1,620 –58,228 –19,879 0 977 30,546 –1,165,125 594,112 617,209
Other plant, operating and office equipment 48,314 –20 3,717 –66 –4,343 47,602 –37,733 16 –2,777 –4 0 269 4,252 –35,977 11,625 10,581
Advance payments made and plant under construction 10,155 –21 14,389 –8,480 –18 16,025 0 0 0 –253 0 0 0 –253 15,772 10,155
2,251,459 –3,634 81,243 –1,211 –39,469 2,288,388 –1,416,649 1,751 –69,011 –20,248 0 1,172 35,666 –1,467,319 821,069 834,810
Investment property 4,667 0 0 1,838 –111 6,394 –1,738 0 –1 0 105 –344 25 –1,953 4,441 2,929
2,349,115 –3,565 84,265 606 –42,073 2,388,348 –1,489,107 1,683 –73,989 –20,942 105 844 38,013 –1,543,393 844,955 860,008
Cost or fair value Accumulated depreciation, amortization and impairment Carrying amounts
Deprecia- Reversals As of Currency Reclassifi- As of As of Currency tion, amor- Impair- of impair- Reclassifi- As of As of As of In EUR thousands 1/3/2015 effects Additions cations Disposals 29/2/2016 1/3/2015 effects tization ment ment cations Disposals 29/2/2016 29/2/2016 28/2/2015
Intangible assets
Rights, patents and licences 53,878 –267 3 0 –1,325 52,289 –48,544 253 –2,841 0 0 1 1,325 –49,806 2,483 5,334 Internally generated intangible assets 2,720 0 0 0 0 2,720 –2,512 0 –104 0 0 0 0 –2,616 104 208 Other intangible assets 101,029 60 1,432 398 –67,262 35,657 –83,135 –60 –2,278 0 0 –1 67,176 –18,298 17,359 17,894 Advance payments made 1,887 0 691 –255 0 2,323 0 0 0 0 0 0 0 0 2,323 1,887 159,514 –207 2,126 143 –68,587 92,989 –134,191 193 –5,223 0 0 0 68,501 –70,720 22,269 25,323 Property, plant and equipment Land and buildings 451,851 –1,651 3,774 2,667 –1,021 455,620 –250,876 484 –8,344 –73 653 –872 273 –258,755 196,865 200,975 Technical plant and machinery 1,700,399 –1,883 41,139 6,895 –9,180 1,737,370 –1,071,017 568 –57,677 –568 2 –2 8,533 –1,120,161 617,209 629,382 Other plant, operating and office equipment 47,040 –148 3,242 405 –2,225 48,314 –37,602 111 –2,457 0 0 0 2,215 –37,733 10,581 9,438 Advance payments made and plant under construction 9,068 –39 9,794 –8,616 –52 10,155 –15 0 0 0 15 0 0 0 10,155 9,053 2,208,358 –3,721 57,949 1,351 –12,478 2,251,459 –1,359,510 1,163 –68,478 –641 670 –874 11,021 –1,416,649 834,810 848,848 Investment property 6,263 0 0 –1,529 –67 4,667 –2,742 0 –1 0 100 874 31 –1,738 2,929 3,521 2,374,135 –3,928 60,075 –35 –81,132 2,349,115 –1,496,443 1,356 –73,702 –641 770 0 79,553 –1,489,107 860,008 877,692
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26. INVENTORIES 28. RECEIVABLES FROM RELATED PARTIES Unfinished goods mainly consist of the thick juice required to produce bioethanol and granulated Receivables from related parties are made up as products. follows:
Write-downs and reversals of write-downs (write- RECEIVABLES FROM RELATED PARTIES
backs) on inventories are recognized in the ‘Produc- In EUR thousands 28/2/2017 29/2/2016 tion cost’ item of the income statement. Write-downs of EUR 858 thousand (previous year: EUR 1,256 thou- Receivables from joint ventures 201 897 sand) and write-backs of EUR 1,143 thousand (previ- Receivables from other related parties 14 17 ous year: EUR 3,916 thousand) were recognized in the Balance sheet amount 215 914 reporting year. Write-downs in the reporting period and the previous year mainly related to inventories damaged by fire and other damaged stocks. Details on the default risks and the age structure can be found in Note 43.2. 27. TRADE RECEIVABLES 29. FINANCIAL ASSETS Trade receivables are made up as follows: Financial assets are made up as follows:
TRADE RECEIVABLES
In EUR thousands 28/2/2017 29/2/2016 FINANCIAL ASSETS
In EUR thousands 28/2/2017 29/2/2016 Gross trade receivables 150,712 129,091 Securities held 34,996 0 Write-downs on trade receivables –1,320 –1,755 Positive fair value of derivative Balance sheet amount 149,392 127,336 financial instruments 4,982 1,509
Claims for damages 1,498 11,773
Information on the default risks and the age struc- Other financial assets 5,166 7,232
ture of trade receivables is given in Note 43.2. Write- Balance sheet amount 46,642 20,514 downs on trade receivables in the reporting period amounted to EUR 66 thousand (previous year: EUR 296 thousand). The securities held are fixed-income investments with a term of less than one year.
Details on the default risks and the age structure can be found in Note 43.2.
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30. OTHER ASSETS manages the Group with the aim of generating a profit. It does this by means of capital-market-related targets Other assets are made up as follows: for the company which are measured in terms of spe- cific financial indicators. The main financial indicators OTHER ASSETS for the Group are RoCE and EBIT margin.
In EUR thousands 28/2/2017 29/2/2016 32.1. SUBSCRIBED CAPITAL Receivables from other taxes 15,493 10,793
Miscellaneous other assets 11,765 28,795 As of the reporting date, subscribed capital (ordi- Balance sheet amount 27,258 39,588 nary share capital) remained unchanged at EUR 123,651,328.00 and was divided into 48,301,300 registered common shares. Subject to the approval of Miscellaneous other assets in the comparative period the Supervisory Board, the Executive Board is author- relate mainly to interest owed on the court-ordered ized to increase the ordinary share capital by up to repayment of production levies for prior years. 11.11 per cent or up to EUR 13,739,036.16 (authorized share capital). 31. ASSETS HELD FOR SALE The ordinary share capital is fully paid in and, as in the Assets classified as held for sale in accordance with previous year, has a nominal share of subscribed capital IFRS 5 consist of land and buildings with a carrying of EUR 2.56 per share. amount of EUR 48 thousand (previous year: EUR 1,516 thousand). They only gave rise to immaterial income, As of the reporting date, Nordzucker Holding AG, expenses and cash flows in the reporting period and Braunschweig, Germany, had provided evidence the previous year. that it held more than 50 per cent of the shares, with 83.77 per cent. 32. SHAREHOLDERS’ EQUITY 32.2. CAPITAL RESERVES Changes in Group shareholders’ equity are shown in the statement of changes in shareholders’ equity. The capital reserves have been formed from share premiums paid in the course of capital increases by Capital management at the Nordzucker Group is Nordzucker AG. founded on a strong equity base and a sustainable dividend policy in order to secure current operations 32.3. RETAINED EARNINGS on the one hand and to enable a reasonable dividend yield for the shareholders on the other. As of 28 Febru- Retained earnings are made up of the net income ary 2017, the equity ratio came to 64.9 per cent (previ- earned in prior financial years and the current period ous year: 63.5 per cent). The Executive Board will put a by the companies included in the consolidated finan- proposal at the Annual General Meeting to distribute a cial statements. Goodwill arising on acquisitions made dividend of EUR 1.10 per share (previous year: EUR 0.10 by the Group before 1 March 2004 has been offset per share). against reserves. In the IFRS opening balance sheet the balancing item from the conversion of financial state- Nordzucker AG’s Articles of Association do not require ments prepared in foreign currencies was offset against any particular amount of equity. The Executive Board retained earnings.
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Retained earnings include statutory reserves of Total net income for the period attributable to ten per cent of subscribed capital, amounting to non-controlling interests, amounting to EUR 2,661 EUR 12,365 thousand which, in line with statutory reg- thousand, came largely from AB Nordic Sugar Kedainiai ulations (Sec. 150 AktG [German Stock Corporation (EUR 2,079 thousand), Sucros Oy (EUR 387 thousand) Act]), are not available for distribution to shareholders. and Norddeutsche Flüssigzucker GmbH & Co. KG (EUR 155 thousand). 32.4. OTHER COMPREHENSIVE INCOME In the previous year, total net income for the period Other comprehensive income is made up as follows: attributable to non-controlling interests of EUR –675 thousand came mainly from Norddeutsche Flüssig- OTHER COMPREHENSIVE INCOME zucker GmbH & Co. KG (EUR 164 thousand), Sucros
In EUR thousands 28/2/2017 29/2/2016 Oy (EUR –739 thousand) and Považský Cukor a.s. (EUR –122 thousand). Remeasurement of defined benefit plans –83,166 –88,185 33. PENSION OBLIGATIONS Exchange differences on translating foreign operations 28,166 31,373
Net result of cash flow hedges 1,608 –1,032 Provisions for pension obligations are made for accrued
Balance sheet amount –53,392 –57,844 and current benefits of both currently active and for- mer members of staff of Nordzucker Group and of their surviving dependants. 32.5. NON-CONTROLLING INTERESTS Pension obligations are structured in line with the Non-controlling interests exist primarily in the follow- legal, fiscal and economic conditions in each country. ing companies: The Group offers both defined contribution and NON-CONTROLLING INTERESTS defined benefit plans. Pension commitments are based
In EUR thousands 28/2/2017 29/2/2016 on collective agreements and in a few cases on individ- ual agreements with fixed benefit amounts. Sucros Oy 23,133 22,753
AB Nordic Sugar Kèdainiai 14,695 12,615 The defined benefit plans have commitments both Norddeutsche Flüssigzucker GmbH covered by provisions and funded by plan assets. As & Co. KG 2,328 2,282 such, reinsurance was pledged to the beneficiaries for Považský Cukor a.s. 1,472 1,452 some of the benefit plans in 2005. Furthermore, the Nordzucker Polska S.A. 103 82 Nordzucker Group has concluded an additional pen- Matra Cukor Ztr. 0 2 sion commitment with a pension fund for some of the Balance sheet amount 41,731 39,186 benefit plans. As such, 80 per cent of pension obliga- tions can now be funded in full in exchange for a sin- gle premium.
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In 2012, the Nordzucker Group concluded a defined The following table shows the percentage effect that benefit plan for all new employees that distributes a change in assumptions would have on the defined the biometric risks between the employee and the benefit obligations at the reporting date, provided the employer. The benefit plan involves changing to a cap- other assumptions remained unchanged: ital commitment with market-based interest.
SENSITIVITY ANALYSIS
In the reporting period, the expenses for defined con- 2016/17 2015/16 tribution plans amounted to EUR 11,091 thousand (pre- reporting period comparative period vious year: EUR 8,768 thousand). % Domestic Foreign Domestic Foreign
Discount rate Provisions for pension benefits are determined in +0.5 –7.81 –5.79 –7.86 –6.00 accordance with IAS 19 on the basis of actuarial –0.5 8.92 6.42 8.97 6.67 assumptions. In the reporting and comparative peri- Salary increase od, the following weighted financial assumptions were +0.5 0.44 1.35 0.47 1.40 applied: –0.5 –0.42 –1.30 –0.45 –1.26 Pension increase +0.5 4.63 5.40 4.76 5.68 FINANCIAL ASSUMPTIONS REGARDING PENSION OBLIGATIONS –0.5 –4.26 –4.99 –4.38 –5.23 2016/17 2015/16 reporting period comparative period
% Domestic Foreign Domestic Foreign
Discount rate 1.80 2.10 1.80 2.30
Salary increase 2.50 2.50 2.50 3.00
Pension increase 1.50 1.70 1.50 1.50
For domestic companies in the Nordzucker Group the assumptions for life expectancy are taken from the actuarial tables 2005 G by Dr Klaus Heubeck.
With a discount rate of 1.8 per cent (previous year: 1.8 per cent), the duration of domestic obligations was 20.2 years (previous year: 21.1 years). With a discount rate of 2.1 per cent (previous year 2.3 per cent), the duration of foreign obligations was 13.0 years (previ- ous year: 14.0 years).
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Provisions for pensions and similar obligations dis- closed in the balance sheet changed as follows:
CHANGE IN PENSION PROVISIONS
Net Defined benefit obligation Plan assets liability
In EUR thousands Domestic Foreign Total Domestic Foreign Total Total
As of 1/3/2015 253,414 53,491 306,905 69,073 7,190 76,263 230,642
Service cost 4,993 506 5,499 / / / 5,499
Interest expense/interest income 4,055 855 4,910 1,105 103 1,208 3,702
Other value changes 0 –13 –13 0 0 0 –13
Total recognized on the income statement 9,048 1,348 10,396 1,105 103 1,208 9,188
Return on plan assets / / / –12,808 –648 –13,456 13,456
Actuarial gains/losses –10,914 –3,181 –14,095 / / / –14,095
Total remeasurements (not recorded in the income statement) –10,914 –3,181 –14,095 –12,808 –648 –13,456 –639
Payments made for reinsurance / / / 102 35 137 –137
Reimbursements from reinsurance / / / –5,157 –635 –5,792 5,792
Pension payments made –8,850 –2,756 –11,606 0 0 0 –11,606
Exchange rate differences and other adjustments / 115 115 / 0 0 115
As of 29/2/2016 242,698 49,017 291,715 52,315 6,045 58,360 233,355
Service cost 4,419 507 4,926 / / / 4,926
Interest expense/interest income 4,369 932 5,301 1,174 95 1,269 4,032
Other value changes 0 0 0 0 0 0 0
Total recognized on the income statement 8,788 1,439 10,227 1,174 95 1,269 8,958
Return on plan assets / / / 838 –37 801 –801
Actuarial gains/losses –2,509 –3,479 –5,988 / / / –5,988
Total remeasurements (not recorded in the income statement) –2,509 –3,479 –5,988 838 –37 801 –6,789
Payments made for reinsurance / / / 152 1 153 –153
Reimbursements from reinsurance / / / –5,331 –648 –5,979 5,979
Pension payments made –8,856 –2,836 –11,692 0 0 0 –11,692
Exchange rate differences and other adjustments / –507 –507 / 0 0 –507
As of 28/2/2017 240,121 43,634 283,755 49,148 5,456 54,604 229,151
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The actuarial losses in the reporting period were pri- marily attributable to differences between the fore- cast and actual mortality; furthermore, actuarial losses were recognized as a result of changes to the financial assumptions (discount rate, pension increase) abroad. The actuarial losses in the previous year were primarily attributable to changes in the discount rate.
For the 2017/2018 reporting period, contributions to plan assets are expected to amount to EUR 693 thou- sand (previous year: EUR 719 thousand).
34. OTHER PROVISIONS
Other provisions are made up as follows:
OTHER PROVISIONS
Additions/ As of Exchange reclassifica- As of In EUR thousands 29/2/2016 rate effects tions Usage Reversal 28/2/2017
Litigation risks and risk provisions 43,424 0 10,047 –5,051 –1,259 47,161
Staff-related provisions 21,229 13 18,489 –14,982 –428 24,321
Provisions for suppliers and customers 6,332 –1 7,748 –4,616 –1,716 7,747
Miscellaneous other provisions 24,989 –52 7,911 –1,956 –1,176 29,716
Balance sheet amount 95,974 –40 44,195 –26,605 –4,579 108,945
Provisions for litigation risks and other risks were Provisions for suppliers and customers relate to variable mainly made to reflect the risks of various ongoing payments to beet suppliers and to bonus and commis- legal proceedings and other legal risks. Additions sion payments to customers. recognized in the reporting period relate to forecast legal consultancy fees, among others. Miscellaneous other provisions partly relate to reculti- vation obligations. The provision made for this includes Staff-related provisions consist mainly of provisions the forecast expenses for the demolition of buildings for profit-sharing, bonuses and other gratuities, holi- and recultivation of land used for operations as well as day and flexitime entitlements and partial early retire- demolition obligations at former production sites. Mis- ment, as well as for early retirement and severance pay cellaneous other provisions were made in the report- obligations. ing period for outstanding invoices and other antici- pated expenses.
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35. FINANCIAL LIABILITIES 37. LIABILITIES TOWARDS RELATED PARTIES Financial liabilities are made up as follows: Liabilities towards related parties are made up as FINANCIAL LIABILITIES follows:
In EUR thousands 28/2/2017 29/2/2016 LIABILITIES TOWARDS RELATED PARTIES Liabilities to banks 11,793 5,400 In EUR thousands 28/2/2017 29/2/2016 Liabilities from finance leases 1,748 2,008
Balance sheet amount 13,541 7,408 Liabilities towards joint ventures 5,926 6,062 Liabilities towards other related parties 26,905 31,822 A syndicated loan has been taken out for an initial Balance sheet amount 32,831 37,884 period of five years to secure the Nordzucker Group’s access to liquidity. The syndicated loan is available to fund short-term operating business and includes a 38. OTHER FINANCIAL revolving credit for EUR 344,500 thousand, of which LIABILITIES EUR 344,500 thousand was unused in the reporting period. Other financial liabilities are made up as follows:
Interest on the revolving credit partly depends on a OTHER FINANCIAL LIABILITIES
certain financial indicator (EBITDA in relation to debt). In EUR thousands 28/2/2017 29/2/2016
In the reporting period and comparative period, the Negative fair value of derivative financial instruments 1,289 7,477 Nordzucker Group did not pledge any financial assets Miscellaneous financial liabilities 2,949 11,771 as collateral for financial liabilities. Balance sheet amount 4,238 19,248 36. TRADE PAYABLES Miscellaneous financial liabilities include payments of Trade payables are made up as follows: EUR 0 thousand (previous year: EUR 10,026 thousand) received for trade receivables sold as part of the TRADE PAYABLES ABS programme. These proceeds are owed to the
In EUR thousands 28/2/2017 29/2/2016 purchaser of the receivables.
Liabilities towards sugar beet suppliers 135,253 97,762
Other trade payables 87,485 85,440
Balance sheet amount 222,738 183,202
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39. OTHER LIABILITIES NOTES TO THE CONSOLIDATED CASH Other liabilities are made up as follows: FLOW STATEMENT OTHER LIABILITIES
In EUR thousands 28/2/2017 29/2/2016
Outstanding social security 40. COMPONENTS OF CASH contributions 18,893 17,869 AND CASH EQUIVALENTS Investment grants, subsidies and other support payments 5,701 9,631
Deferrals 2,665 2,529 Cash and cash equivalents in the cash flow statement
Advance payments received for comprise all cash and cash equivalents in the balance orders 201 75 sheet (i. e. cash in hand, cheques and bank balances), Miscellaneous other liabilities 8,797 25,813 provided that they are available for use within three Balance sheet amount 36,257 55,917 months. Cash is not subject to any restrictions on availability.
Liabilities from investment grants, subsidies and other 41. OTHER DISCLOSURES support payments derive from public subsidies in con- REGARDING THE CASH nection with the purchase or production of subsidized FLOW STATEMENT property, plant and equipment. They are reversed through the income statement over the useful life of No significant non-cash transactions took place for the subsidized assets. financing and investing purposes in the reporting year and the previous year. In the reporting year and the previous year, the miscel- laneous other liabilities primarily comprised tax liabili- Dividends of EUR 3,763 thousand (previous year: ties. In the previous year, they also included liabilities EUR 5,802 thousand) received in the reporting period from interest income on the court-ordered repayment were accounted for within cash flow from operating of production levies for prior years. activities.
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OTHER DISCLOSURES
42. OTHER DISCLOSURES ON FINANCIAL INSTRUMENTS
The following table lists the carrying amounts for finan- cial assets and financial liabilities by measurement cate- gory for the reporting period:
CARRYING AMOUNTS OF FINANCIAL INSTRUMENTS BY MEASUREMENT CATEGORY
FAFVPL/ No LaR 1 AfS 2 FLFVPL 3 FLAC 4 category
As of Amortized Amortized in EUR thousands 28/2/2017 cost Cost Fair value Fair value cost Fair value
Non-current assets
Other financial investments 23,040 0 23,040 0 0 / 0
Financial assets 0 0 0 0 0 / 0
Current assets
Trade receivables 149,392 149,392 0 0 / / /
Receivables from related parties 215 215 0 0 / / /
Financial assets 46,642 36,494 0 0 2,957 / 7,191
Cash and cash equivalents 321,814 321,814 / 0 0 / /
Non-current liabilities
Financial liabilities 1,471 / / / 0 1,471 0
Liabilities towards related parties 5,500 / / / 0 5,500 0
Other financial liabilities 0 / / / 0 0 0
Current liabilities
Financial liabilities 12,070 / / / 0 12,070 0
Trade payables 222,738 / / / 0 222,738 0
Liabilities towards related parties 27,331 / / / 0 27,331 0
Other financial liabilities 4,238 / / / 1,289 2,949 0
Total assets 541,103 507,915 23,040 0 2,957 / 7,191
Total liabilities 273,348 / / / 1,289 272,059 0
1 Measurement category ‘Loans and receivables’ 2 Measurement category ‘Available-for-sale financial assets’ 3 Measurement category ‘Financial assets at fair value through profit or loss’ or ‘Financial liabilities at fair value through profit or loss’ 4 Measurement category ‘Financial liabilities measured at amortized cost’
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The following table shows the carrying amounts of financial assets and financial liabilities by measurement category for the comparative period:
CARRYING AMOUNTS OF FINANCIAL INSTRUMENTS BY MEASUREMENT CATEGORY
FAFVPL/ No LaR 1 AfS 2 FLFVPL 3 FLAC 4 category
As of Amortized Amortized In EUR thousands 29/2/2016 cost Cost Fair value Fair value cost Fair value
Non-current assets
Other financial investments 23,906 0 23,906 0 0 / 0
Financial assets 0 0 0 0 0 / 0
Current assets
Trade receivables 127,336 127,336 0 0 / / /
Receivables from related parties 914 914 0 0 / / /
Financial assets 20,514 11,773 0 0 1,411 / 7,330
Cash and cash equivalents 171,781 171,781 / 0 0 / /
Non-current liabilities
Financial liabilities 7,147 / / / 0 7,147 0
Liabilities towards related parties 5,500 / / / 0 5,500 0
Other financial liabilities 18 / / / 0 18 0
Current liabilities
Financial liabilities 261 / / / 0 261 0
Trade payables 183,202 / / / 0 183,202 0
Liabilities towards related parties 32,384 / / / 0 32,384 0
Other financial liabilities 19,230 / / / 7,231 11,753 246
Total assets 344,451 311,804 23,906 0 1,411 / 7,330
Total liabilities 247,742 / / / 7,231 240,265 246
1 Measurement category ‘Loans and receivables’ 2 Measurement category ‘Available-for-sale financial assets’ 3 Measurement category ‘Financial assets at fair value through profit or loss’ or ‘Financial liabilities at fair value through profit or loss’ 4 Measurement category ‘Financial liabilities measured at amortized cost’
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The measurement of financial assets and liabilities is The net gains or net losses by measurement category made in accordance with the availability of relevant are as follows: information on the basis of the three levels of the fair value hierarchy detailed in IFRS 7 and IFRS 13. For the NET GAINS OR LOSSES FROM FINANCIAL INSTRUMENTS
first level, market prices for identical assets and lia- 1/3/2016 1/3/2015 bilities can be observed directly on active markets. in EUR thousands – 28/2/2017 – 29/2/2016
For the second level, the measurement is made on Loans and receivables (LaR) 2,009 1,311 the basis of valuation models that are determined by Available-for-sale financial assets parameters observed on the market. The use of valu- (AfS) 3,826 5,860 ation models that are not based on input factors that Financial assets/liabilities at can be observed on the market is covered by the third fair value through profit or loss (FAFVPL/FLFVPL) –5,111 4 level. All derivative financial assets and liabilities are Financial liabilities measured at classed under level 2. Accepted financial models are amortized cost (FLAC) –3,096 –2,394
used to determine the fair value of derivative financial Total –2,372 4,781 instruments; as such, only input factors that can be observed (e. g. interest rates, exchange rates) are taken into account. For derivative financial instruments, fair Changes in the market value of derivative financial value corresponds to the amount that the Nordzucker instruments are recognized under financial asset/lia- Group would receive or have to pay for the transfer on bilities at fair value through profit or loss. They are the reporting date. presented in the income statement under ‘Financial income’ or ‘Financial expenses’, and also under ‘Rev- For cash and other current financial instruments, i. e. enues’ and ‘Production costs’. trade receivables, financial assets, derivative financial instruments, and other receivables and liabilities, the Loans and receivables include impairments on receiv- fair value and the carrying amount on each reporting ables, interest from receivables and loans granted, as date are the same. well as gains or losses from currency translation for receivables. Impairments on receivables and gains or losses resulting from currency translation for receiv- ables are recognized in the income statement under ‘Other income’ or ‘Other expenses’. Interest from receivables and loans granted is presented under ‘Financial income’.
The available-for-sale financial assets include dividends, which are recognized in the income statement under ‘Financial income’ or ‘Financial expenses’.
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Interest on loans received is recognized as financial lia- likely to take place. The guidelines define the individ- bilities measured at amortized cost. This is presented uals responsible, the limits and reporting and stipulate in the income statement under ‘Financial expenses’. a strict separation between trading and clearing. This transparent and functional manner of organizing risk Within the income statement, the ‘Financial income’ management processes applies to all types of risk. or ‘Financial expenses’ item includes interest income of EUR 1,293 thousand (previous year: EUR 995 thou- Nordzucker has also installed an adequate reporting sand) and interest expense of EUR 3,096 thousand system in line with the EU regulation EMIR, which came (previous year: EUR 2,394 thousand) from financial into effect on 12 March 2014. In accordance with the instruments not measured at fair value through profit legal requirements of Sec. 20 paragraph 1 WpHG (Ger- and loss. man Securities Trading Act), the Nordzucker Group had this system audited during the reporting period In the reporting period and comparative period, there by a firm of German public auditors and was not noti- was no interest income from impaired financial assets. fied of any objections.
43. RISK MANAGEMENT 43.2. DEFAULT RISK
43.1. GENERAL REMARKS Credit or default risk is the risk that business partners do not meet their contractual payment obligations, The Nordzucker Group has a comprehensive system in causing the Nordzucker Group to suffer a loss as a place throughout the company for the early identifica- result. As part of credit risk management, business part- tion and permanent monitoring of risk as well as for risk ners are subject to a credit scoring in order to reduce measurement and limitation. The integrated risk man- default risk. Identifiable default risks are accounted for agement system is used to identify risks and the appro- by impairments, whereby the risk of default on receiv- priate steps fully and to include them in operational ables is mostly limited by trade credit insurance. and strategic planning. Potential risks such as default and credit risks, commodity, liquidity, exchange rate The Nordzucker Group does not see itself as exposed and interest rate risks are assessed permanently as to a significant default risk from any individual coun- part of risk management, whereby appropriate steps terparty. As the customer structure for the Nordzucker are developed and implemented. Operating and stra- Group is diverse, there is only a limited concentration tegic decision-making always takes risk aspects into of credit risk. There is therefore no special monitoring account. The Group-wide reporting and controlling and management on the basis of specific risk catego- system ensures that all the responsible decision mak- ries to avoid a concentration of risk. ers are continually informed. The maximum default risk corresponds to the carrying By the nature of its business, the Nordzucker Group is amounts of the financial assets on the balance sheet at exposed to default and credit risks, commodity, liquid- the relevant reporting date. ity and exchange rate risks as well as interest rate risks. These are controlled by means of suitable risk manage- ment processes. The Nordzucker Group uses deriva- tive financial instruments to hedge against interest and exchange rate fluctuations and to hedge costs of raw materials. The use of these instruments is governed by Group guidelines and restricted to the hedging of existing transactions or those which are sufficiently
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The following table shows total carrying amounts, the carrying amounts for financial assets which are neither overdue nor impaired and the age structure of finan- cial assets which are not impaired but past due, for the financial assets:
AGE STRUCTURE OF FINANCIAL ASSETS
Not impaired at the end of the reporting period and past due as follows:
Neither impaired nor past due at the Total end of the Between Between Between carrying reporting Less than 30 and 61 and 91 and More than in EUR thousands amount period 30 days 60 days 90 days 180 days 180 days
As of 28/2/2017
Other financial investments 23,040 23,040 0 0 0 0 0
Financial assets (excluding derivative financial instruments), receivables from related parties 41,875 41,875 0 0 0 0 0
Trade receivables 149,392 141,584 6,638 337 59 263 379
Total 214,307 206,499 6,638 337 59 263 379
As of 29/2/2016
Other financial investments 23,906 23,906 0 0 0 0 0
Financial assets (excluding derivative financial instruments), receivables from related parties 19,919 19,919 0 0 0 0 0
Trade receivables 127,336 112,853 12,390 819 429 14 339
Total 171,161 156,678 12,390 819 429 14 339
For the portion of the receivables portfolio which has EUR 215,627 thousand (previous year: (EUR 172,916 neither been impaired nor is past due there is no indi- thousand). Impairments of EUR 66 thousand (previ- cation as of the reporting date that Nordzucker Group’s ous year: EUR 296 thousand) were recognized in the debtors will not fulfil their payment obligations. reporting period.
Financial assets that are shown in the table above under The Nordzucker Group did not provide or receive ‘Financial investments’, ‘Financial assets (excluding financial assets as collateral either in the reporting derivative financial instruments), receivables from relat- period or the comparative period. ed parties’ or ‘Trade receivables’ have a gross carrying amount (i. e. carrying amount before impairments) of
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43.3. LIQUIDITY RISK
Liquidity risk is the risk that the company cannot meet its payment obligations at the contractually agreed time. To ensure the Nordzucker Group’s liquidity, the liquidity needs are monitored and planned centrally. Sufficient cash and short-term credit lines are available to meet all obligations when they are due.
The following table shows contractually agreed (undis- counted) interest and capital repayments – also cat- egorized by remaining term – for the non-deriva- tive financial liabilities and for derivative financial instruments.
PAYMENTS FROM FINANCIAL INSTRUMENTS BY REMAINING TERM
Remaining Remaining Gross term of Remaining term of Carrying inflow/ up to one term of more than in EUR thousands amount outflow year 1–5 years five years
As of 28/2/2017
Financial liabilities 13,541 –14,067 –12,209 –1,173 –685
Trade payables 222,738 –222,738 –222,738 0 0
Other financial liabilities, liabilities towards related parties 35,780 –35,883 –30,383 –5,500 0
Derivative financial liabilities 1,289 –1,289 –1,289 0 0
Derivative financial assets –4,982 4,982 4,982 0 0
Total 268,366 –268,995 –261,637 –6,673 –685
As of 29/2/2016
Financial liabilities 7,408 –8,039 –391 –6,696 –952
Trade payables 183,202 –183,202 –183,202 0 0
Other financial liabilities, liabilities towards related parties 49,655 –50,029 –44,511 –5,518 0
Derivative financial liabilities 7,477 –7,477 –7,477 0 0
Derivative financial assets –1,509 1,509 1,509 0 0
Total 246,233 –247,238 –234,072 –12,214 –952
The term to maturity analysis includes all instruments determined using the last interest rates set before the held for which payments have been contractually balance sheet date. Financial liabilities repayable at agreed as of the reporting date. Forecast payments any time are categorized in accordance with remain- on expected future liabilities are not included. Float- ing term according to their estimated repayment dates. ing-rate interest payments on financial instruments are
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43.4. MARKET RISKS mechanism. The exchange rate risk from foreign cur- rency positions in US Dollars is also insignificant as the Market risks arise from potential changes in risk factors, amounts are minor and are hedged directly. which lead to fluctuations in market values or altera- tions in future cash flows. The relevant risk factors for Furthermore, the Nordzucker Group hedges a large the Nordzucker Group are exchange rate and inter- proportion of actual currency risks using the natural est rate fluctuations, as well as changes in the price of hedge approach and by using derivatives, so that the commodities. remaining net risk exposure is insignificant.
a. Exchange rate risk b. Interest rate risk Due to its business operations in different countries Due to its borrowing activities, the Nordzucker Group which are not part of the Eurozone, the Nordzucker is exposed to interest rate risk. Financing is arranged Group is exposed to an exchange rate risk. in various currency areas, although the most frequent currency is the Euro. Interest rate risks from financing IFRS 7 requires the disclosure of a sensitivity analysis activities denominated in Swedish krone, Polish zloty to illustrate the dimensions of exchange rate risks. The or Danish krone are insignificant, as the amounts application of sensitivity analyses enables the calcula- involved are minor. tion for this type of risk of the effects that a change of the given exchange rate on the reporting date would In accordance with IFRS 7 interest rate risks are illus- have on the net income for the period and on the equi- trated using sensitivity analyses. The sensitivity analysis ty of the Nordzucker Group. The effects are deter- determines the effect that a change in market interest mined by applying a hypothetical change of ten per rates on the reporting date would have on the result cent in the exchange rates to the amount of the rele- for the period and on equity. vant items in foreign currencies (the net risk position in the foreign currency) as of the reporting date. It is In the reporting and comparative periods, no cash flow assumed that the exposure at the reporting date is rep- hedges were used to hedge the interest rate risk of resentative of the whole reporting period. floating-rate instruments, since these funds are sched- uled to be repaid shortly and no further loans are to The net risk position is adjusted for planned transac- be taken out at floating rates of interest thereafter. In tions within the next twelve months and for existing view of the remaining duration of the derivatives, a hedging instruments (even if no hedging relationship hypothetical change in the relevant interest rates for in accordance with IAS 39 exists). floating-rate instruments of +/- 50 basis points would therefore not have a significant effect in relation to the Foreign currency positions in Danish krone are only Group’s equity and net interest. exposed to an insignificant exchange rate risk, as the country is part of the European Union’s exchange rate In terms of its investments, the Nordzucker Group has been faced by a new development across Europe since the 2015/2016 financial year. The new reserve policy of the European Central Bank and other cen- tral banks, entailing negative interest rates on banks’ reserve facilities, resulted in increasing pressure on the
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interest rates paid on the credit balances of corporate As of the reporting date, the Group holds derivative clients. A number of institutes are already demanding financial instruments aimed at hedging currency risks negative interest rates on deposits. The Nordzucker and price risks for sugar and energy (oil). Almost all Group responded to this trend early on and remains of the derivative financial instruments mature within in a position that gives it considerable scope to invest one year. money without negative interest rates. In addition, the Nordzucker Group now also invests cash and cash In order to protect itself from fluctuations in the consol- equivalents in money market securities. While tak- idated net income for the period due to oil price and ing acceptable risks, the aim here is to limit expenses exchange rate movements, Nordzucker has designat- caused by negative interest rates. ed the future purchase of oil (expected transactions in October, November, December 2017) as underlying c. Commodity risk transactions within the framework of cash flow hedg- As a result of its business activities, the Nordzucker es. The hedging instruments used are forward transac- Group is exposed to various price risks for commod- tions on commodities (oil futures) and currency futures, ities. These primarily relate to world market prices for which had positive fair values totalling EUR 2,025 thou- sugar, energy sources and the related CO2 emissions. sand as of the reporting date. During the reporting period, income after deferred taxes of EUR 1,579 thou- d. Hedging activities sand was recognized outside of profit or loss (i. e. in The Nordzucker Group uses derivative financial instru- other comprehensive income in the statement of com- ments solely to hedge interest rate and exchange rate prehensive income). No amounts were recognized in risks as well as price risks for raw materials. the income statement as ineffective components of hedging relationships in the reporting period. As a rule, the existing interest rate risk for floating-rate loans is reduced by means of interest rate derivatives. A sensitivity analysis for the market values in the bal- All interest rate derivatives are designated as cash flow ance sheet would not produce a significant effect in hedges in hedging relationships under IAS 39. As of relation to the Group’s equity and earnings. the reporting date, the Nordzucker Group had not tak- en out any interest rate derivatives, since based on its The Group does not measure the derivatives itself. financial planning it could not identify any exposure to The fair value determination is carried out by the interest rate risk as of this date. contracting banks using accepted financial methods and observable input factors (level 2 of the fair value It is generally assumed that the hedged transactions hierarchy). will actually take place. If a hedging transaction is can- celled, the amounts accumulated in other compre- hensive income during the term of the transaction are reversed when the hedged item is recognized in profit and loss or if it no longer takes place.
In addition to the natural hedge approach for Poland and Sweden, the gross positions are hedged to reduce exchange rate risk. Exchange rate risks are also hedged by means of appropriate derivatives such as currency futures – including for periods of less than a year.
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44. RELATED PARTY In the reporting period, receivables from related par- TRANSACTIONS ties of EUR 164 thousand were owed mainly by August Töpfer Zuckerhandelsgesellschaft mbH & Co. KG. In For the Nordzucker Group, related parties within the comparative period, receivables from related par- the meaning of IAS 24 are individuals and companies ties of EUR 779 thousand were mainly owed by August which control the Group or exercise significant influ- Töpfer Zuckerhandelsgesellschaft mbH & Co. KG, with ence over it or are controlled or significantly influenced a further EUR 92 thousand owed by NP Sweet A/S. by the Group. The first category includes the active members of the Executive Board and Supervisory Of the liabilities towards related parties in the reporting Board of Nordzucker AG and its majority shareholder period, EUR 9,448 thousand was owed to Nordzucker Nordzucker Holding AG. In addition, the subsidiaries, Holding AG, Braunschweig, EUR 3,417 thousand to parent company, joint ventures and associates of the SWEETGREDIENTS GmbH & Co. KG, Nordstemmen, Nordzucker Group are defined as related parties. EUR 5,846 thousand to MEF Melasse-Extraktion Frell- stedt GmbH, Frellstedt, and EUR 12,759 thousand to Receivables from and liabilities towards related parties Union Zucker Südhannover GmbH, Nordstemmen. Of are based on arm’s length transactions. the liabilities towards related parties in the comparative period, EUR 10,234 thousand was owed to Nordzucker The following commercial relationships existed with Holding AG, Braunschweig, EUR 3,427 thousand to related parties in addition to those existing with fully SWEETGREDIENTS GmbH & Co. KG, Nordstemmen, consolidated subsidiaries: EUR 6,062 thousand to MEF Melasse-Extraktion Frell- stedt GmbH, Frellstedt, and EUR 17,055 thousand to RELATED PARTY TRANSACTIONS Union Zucker Südhannover GmbH, Nordstemmen.
in EUR thousands 28/2/2017 29/2/2016 Nordzucker Holding AG and Union Zucker Südhan- Balance sheet nover GmbH are shareholders of Nordzucker AG; the Receivables from related parties 215 914 liabilities relate to current accounts. The remaining lia- Liabilities towards related parties 32,831 37,884 bilities relate to other related parties and result largely Income statement from loans and trade in goods and services. Services provided to related parties 519 508 Net financial result –240 –85 The provision of services for related companies primar- ily concerns NP Sweet A/S, Copenhagen, and the net financial result is from associated companies and joint ventures.
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45. CONTINGENT LIABILITIES As of the reporting date, future payments under finance leases are as follows: As of the reporting dates in the reporting year and the previous year, there were no contingent liabilities FINANCE LEASES towards third parties outside the Group. Remain- Remain- ing term Remain- ing term of up ing term of more 46. OTHER FINANCIAL to one of 1–5 than five OBLIGATIONS in EUR thousands year years years Total Principal The Nordzucker Group’s other financial obligations are repayments 277 865 616 1,758 made up as follows: Interest 114 308 69 491 Payment 391 1,173 685 2,249
OTHER FINANCIAL OBLIGATIONS in EUR thousands 28/2/2017 29/2/2016 47. AUDITORS’ FEES Purchase commitments for property, plant and equipment 16,692 11,852 Companies in the Nordzucker Group purchased servic- Purchase commitments for intangible assets 66 690 es for EUR 379 thousand (previous year: EUR 388 thou-
Obligations from finance leases 2,249 2,639 sand) from Ernst & Young GmbH Wirtschaftsprüfungs-
Obligations from operating leases 9,736 9,478 gesellschaft, Stuttgart, in connection with the statutory
Total 28,743 24,659 audit of financial statements for the Nordzucker Group and Nordzucker AG, as well as tax advisory services for EUR 2 thousand (previous year: EUR 27 thousand) As of the reporting date, total future payment obliga- and other services for EUR 76 thousand (previous year: tions from rental and lease contracts are made up as EUR 165 thousand). follows:
RENTAL AND LEASING AGREEMENTS
Remain- Remain- ing term Remain- ing term of up ing term of more to one of 1–5 than five in EUR thousands year years years Total
Future payments for finance leases 391 1,173 685 2,249
Future payments for operating leases 4,630 5,106 0 9,736
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48. SUPERVISORY BOARD AND EXECUTIVE BOARD
In the reporting period, the Supervisory Board was made up as follows:
SUPERVISORY BOARD
Shareholder representatives Matts Eskil Rosendahl (until 7/7/2016), Hans-Christian Koehler, consultant, Svartsjö, Sweden farmer, Barum, Chairman Dr Carin-Martina Tröltzsch (from 8/7/2016), Managing Director of DuPont Deutschland Holding Jochen Johannes Juister, GmbH & Co. KG, Bad Homburg v.d. Höhe farmer, Nordhastedt Deputy Chairman Grit Worsch, Chairwoman of the Executive Board of Volksbank Helmut Bleckwenn, Osterburg-Lüchow-Dannenberg eG, Woltersdorf farmer, Garmissen Employee representatives Gerhard Borchert, Dieter Woischke, farmer, Brome electrician, Algermissen, Deputy Chairman Hans Jochen Bosse, farmer, Ohrum Ulf Gabriel, electrician, Banteln Dr. Karl-Heinz Engel, former Managing Director of Hochwald Gerd von Glowczewski, Foods GmbH, Riol metalworker, Schladen
Joachim Engelke, Olaf Joern, farmer, Giesen OT Hasede mechatronics engineer, Uelzen
Michael Gerlif, Sigrun Krussmann, management consultant, Cologne laboratory technician, Seelze
Friedrich Christoph Heins, Marie Lohel, farmer, Uehrde energy electronics engineer, Magdeburg
Dr Harald Isermeyer, Marina Strootmann, farmer, Vordorf industrial clerk, Braunschweig, Chair of the Works Council, Dr Hans Theo Jachmann, headquarters of Nordzucker AG agricultural engineer, Limeshain
Rainer Knackstedt, farmer, Dedeleben
Nordzucker AG ANNUAL REPORT 2016 | 2017 135
The members of the Executive Board in the reporting The criteria for determining the remuneration of indi- period were as follows: vidual Executive Board members are their responsibil- ities, personal performance, the economic situation, EXECUTIVE BOARD business success, future prospects, sustainable cor- porate development and also the extent to which the Hartwig Fuchs, remuneration is generally accepted considering the Hamburg, Chairman of the Executive Officer Board, sphere of comparison and remuneration structures Chief Executive Officer applicable elsewhere in the company.
Axel Aumüller, The total remuneration of Executive Board members Braunschweig, Chief Operating Officer includes monetary payments, benefit commitments and other commitments such as the provision of a com- Dr Lars Gorissen, pany car. The monetary remuneration components Braunschweig, Chief Agriculture Officer consist of a fixed annual salary, paid in twelve equal monthly instalments, as well as an earnings and per- Dr Michael Noth, formance-related payment. The variable bonus, plus Braunschweig, Chief Financial Officer any special remuneration, can be up to a maximum of 50 per cent of total compensation (total compen- 49. REMUNERATION REPORT sation is made up of fixed annual salary and the varia- ble bonus, as well as any special remuneration). Since In the following section the principles of remunera- the 2016/2017 reporting period, the variable remu- tion for members of the Executive Board and Super- neration paid to Executive Board members has been visory Board of Nordzucker AG are described and the calculated based on a one-year observation period and amount of their remuneration disclosed, together with taking key indicators that are relevant for control pur- disclosures on shares held by members of the Execu- poses into account. Notwithstanding the description tive Board and Supervisory Board. in paragraph 4.2.3 of the German Corporate Govern- ance Code (GCGC) (version dated 5 May 2015), which 49.1. REMUNERATION OF THE EXECUTIVE is based on the legal provision for listed companies set BOARD out in Sec. 87 paragraph 1 AktG, the variable remuner- ation components following the change in the system The structure and amount of Executive Board remu- of remuneration as of 1 March 2016 do not include a neration are determined and regularly reviewed by long-term assessment basis. the full Supervisory Board following a proposal from the Human Resources Committee of the Supervisory This results in the following remuneration for the indi- Board. vidual members of the Executive Board as well as for former Executive Board member Mats Liljestam for the 2015/2016 comparative period and for the 2016/2017 reporting period:
ANNUAL REPORT 2016 | 2017 Nordzucker AG 136 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
REMUNERATION OF EXECUTIVE BOARD MEMBERS 2016/2017
HARTWIG FUCHS CHAIRMAN OF THE EXECUTIVE BOARD SINCE 1 FEBRUARY 2010
2016/17 2016/17 2015/16 2016/17 EUR 2015/16 2016/17 Minimum Maximum Allocation Allocation
Fixed remuneration 575,000 750,000 750,000 750,000 575,000 750,000
Fringe benefits 17,643 19,531 19,531 19,531 17,643 19,531
Total 592,643 769,531 769,531 769,531 592,643 769,531
One-year variable remuneration 108,793 213,750 0 250,000 51,502 108,793
Long-term variable remuneration
LTI (period from 2012/13 to 2014/15) 0 0 0 0 219,767 0
LTI (period from 2013/14 to 2015/16) 157,178 0 0 0 0 157,178
Miscellaneous 0 0 0 0 0 0
Total 265,971 213,750 0 250,000 271,269 265,971
Retirement benefit expenses 160,000 160,000 160,000 160,000 160,000 160,000
Total remuneration 1,018,614 1,143,281 929,531 1,179,531 1,023,912 1,195,502
AXEL AUMÜLLER MEMBER OF THE EXECUTIVE BOARD SINCE 9 NOVEMBER 2009
2016/17 2016/17 2015/16 2016/17 EUR 2015/16 2016/17 Minimum Maximum Allocation Allocation
Fixed remuneration 400,000 550,000 550,000 550,000 400,000 550,000
Fringe benefits 18,615 19,363 19,363 19,363 18,615 19,363
Total 418,615 569,363 569,363 569,363 418,615 569,363
One-year variable remuneration 75,682 149,625 0 175,000 35,827 75,682
Long-term variable remuneration
LTI (period from 2012/13 to 2014/15) 0 0 0 0 152,881 0
LTI (period from 2013/14 to 2015/16) 109,342 0 0 0 0 109,342
Miscellaneous 0 0 0 0 0 0
Total 185,024 149,625 0 175,000 188,708 185,024
Retirement benefit expenses 125,000 125,000 125,000 125,000 125,000 125,000
Total remuneration 728,639 843,988 694,363 869,363 732,323 879,387
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DR LARS GORISSEN MEMBER OF THE EXECUTIVE BOARD SINCE 1 MARCH 2014
2016/17 2016/17 2015/16 2016/17 EUR 2015/16 2016/17 Minimum Maximum Allocation Allocation
Fixed remuneration 350,000 550,000 550,000 550,000 350,000 550,000
Fringe benefits 15,287 15,737 15,737 15,737 15,287 15,737
Total 365,287 565,737 565,737 565,737 365,287 565,737
One-year variable remuneration 66,222 149,625 0 175,000 29,110 66,222
Long-term variable remuneration
LTI (period from 2012/13 to 2014/15) 0 0 0 0 124,216 0
LTI (period from 2013/14 to 2015/16) 95,674 0 0 0 0 95,674
Miscellaneous 0 0 0 0 0 0
Total 161,896 149,625 0 175,000 153,326 161,896
Retirement benefit expenses 125,000 125,000 125,000 125,000 125,000 125,000
Total remuneration 652,183 840,362 690,737 865,737 643,613 852,633
DR MICHAEL NOTH MEMBER OF THE EXECUTIVE BOARD SINCE 16 AUGUST 2009
2016/17 2016/17 2015/16 2016/17 EUR 2015/16 2016/17 Minimum Maximum Allocation Allocation
Fixed remuneration 400,000 585,000 585,000 585,000 400,000 585,000
Fringe benefits 16,796 17,261 17,261 17,261 16,796 17,261
Total 416,796 602,261 602,261 602,261 416,796 602,261
One-year variable remuneration 75,682 149,625 0 175,000 35,827 75,682
Long-term variable remuneration
LTI (period from 2012/13 to 2014/15) 0 0 0 0 152,881 0
LTI (period from 2013/14 to 2015/16) 109,342 0 0 0 0 109,342
Miscellaneous 0 0 0 0 0 0
Total 185,024 149,625 0 175,000 188,708 185,024
Retirement benefit expenses 125,000 125,000 125,000 125,000 125,000 125,000
Total remuneration 726,820 876,886 727,261 902,261 730,504 912,285
ANNUAL REPORT 2016 | 2017 Nordzucker AG 138 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MATS LILJESTAM MEMBER OF THE EXECUTIVE BOARD UNTIL 25 DECEMBER 2015
2016/17 2016/17 2015/16 2016/17 EUR 2015/16 2016/17 Minimum Maximum Allocation Allocation
Fixed Total 400,000 166,667 166,667 166,667 400,000 166,667
Fringe benefits 2,601 912 912 912 2,601 912
Total 402,601 167,579 167,579 167,579 402,601 167,579
One-year variable remuneration 35,827 9,270 0 9,270 35,827 45,097
Long-term variable remuneration
LTI (period from 2012/13 to 2014/15) 0 0 0 0 152,881 0
LTI (period from 2013/14 to 2015/16) 95,186 0 0 0 0 95,186
LTI (period from 2014/15 to 2016/17) 0 15,671 0 15,671 0 15,671
Miscellaneous 0 0 0 0 0 0
Total 131,013 24,941 0 24,941 188,708 155,954
Retirement benefit expenses 125,000 27,783 27,783 27,783 125,000 27,783
Total remuneration 658,614 220,303 195,362 220,303 716,309 351,316
The members of the Executive Board are assured pen- The first column shows the Executive Board remunera sion commitments in the form of defined benefit com- tion granted in the 2015/2016 comparative period. This mitments and defined contribution commitments. remuneration is broken down into (i) fixed remunera- tion, (ii) fringe benefits (such as the provision of com- Former Executive Board members received pension pany cars), (iii) one-year variable remuneration, (iv) payments of EUR 811 thousand (previous year: EUR 802 long-term variable remuneration, (v) miscellaneous thousand). Nordzucker AG recognized provisions of and (vi) retirement benefit expenses. EUR 11,891 thousand (previous year: EUR 12,267 thou- sand) for pension commitments to former Executive The second column indicates the Executive Board Board members. remuneration for the 2016/2017 reporting year, which is broken down in the same way. In the reporting and comparative period, members of the Executive Board received neither loans nor The third and fourth columns present the minimum advances from the company. and maximum Executive Board remuneration attain able for the 2016/2017 reporting period. In respect The above tables on Executive Board remuneration of the fixed remuneration, the fringe benefits and the correspond to the tables recommended in the German retirement benefit expenses, the minimum and max- Corporate Governance Code as of the last financial imum remuneration, as well as the actual remunera- year (Recommendation 4.2.5 of the GCGC in conjunc- tion granted, are identical. In respect of the one-year tion with the sample tables). variable remuneration, the minimum amount is zero.
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In respect of the long-term variable remuneration, General Meeting, the dividend for the 2016/2017 both the minimum and the maximum amount for the reporting period will be EUR 1.10 per share (2015/2016 members of the Executive Board have been zero since reporting period: EUR 0.10; 2014/2015 reporting peri- the 2016/2017 reporting year, as no long-term variable od: EUR 0.10). The amount of variable remuneration is remuneration has been granted following the change limited to the amount of fixed salary. The Chairman of in the system of remuneration. the Supervisory Board receives 2.5 times the total of fixed and variable remuneration for an ordinary mem- The fifth column shows the actual allocation in the ber, while the Deputies and the Chairman of the Com- 2015/2016 comparative year and the sixth column mittee each receive 1.4 times the remuneration of an shows the actual allocation in the 2016/2017 reporting ordinary member, and committee members receive period. Variable remuneration in particular is paid out 1.2 times the remuneration of an ordinary member. If a in the following financial year (i. e. the variable remu- member of the Supervisory Board occupies more than neration for the 2015/2016 comparative period is paid one of these positions, the increased rate of remunera out in the 2016/2017 reporting year. As a result, the tion only applies once. In addition, every member of amounts shown in the fifth (and sixth) columns deviate the Supervisory Board receives an attendance fee of from those shown in the first (and second) columns. EUR 300 for attending each meeting of the Supervisory Board and its committees. A maximum of two meetings 49.2. REMUNERATION OF THE per day can be remunerated. SUPERVISORY BOARD Subject to the approval of the dividend proposal at the The remuneration of the Supervisory Board is based Annual General Meeting, the following payments will on the size of the company, the duties and responsibil- be made for the 2016/2017 reporting period: ities of the members of the Supervisory Board and the economic situation of the company. The remuneration includes a dividend-related component and an attend- ance fee, in addition to a fixed payment. The Chairman and Deputy Chairman of the Supervisory Board and the Chairmen of committees as well as those participat- ing in them receive additional remuneration (with the exception of the Nomination Committee).
The remuneration of the Supervisory Board is defined in Sec. 14 of the Articles of Association of Nordzucker AG.
In accordance with these rules, members of the Super- visory Board receive a fixed salary of EUR 18,000 and a dividend-related payment of EUR 90 for every EUR 0.01 of dividend paid out per share on average over the past three years. Subject to approval at the Annual
ANNUAL REPORT 2016 | 2017 Nordzucker AG 140 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
REMUNERATION OF SUPERVISORY BOARD MEMBERS 2016/17
Fixed Variable Total Total remu remu remu Attend previous EUR neration* neration* Total Factor Pro rata neration ance fee* Total year
Hans-Christian Koehler 18,000 3,960 21,960 2.5 365/365 54,900 5,700 60,600 62,850
Jochen Johannes Juister 18,000 3,960 21,960 1.4 365/365 30,744 4,500 35,244 34,903
Dieter Woischke 18,000 3,960 21,960 1.4 365/365 30,744 3,900 34,644 35,700
Michael Gerlif 18,000 3,960 21,960 1.4 365/365 30,744 4,500 35,244 36,900
Dr Harald Isermeyer 18,000 3,960 21,960 1.2 365/365 26,352 4,500 30,852 33,300
Marina Strootmann 18,000 3,960 21,960 1.2 365/365 26,352 3,000 29,352 30,600
Ulf Gabriel 18,000 3,960 21,960 1.2 365/365 26,352 3,000 29,352 30,900
Sigrun Krussmann 18,000 3,960 21,960 1.2 365/365 26,352 3,900 30,252 30,900
Hans Jochen Bosse 18,000 3,960 21,960 1.2 365/365 26,352 3,000 29,352 30,600
Grit Worsch 18,000 3,960 21,960 1.2 365/365 26,352 3,000 29,352 27,404
Gerhard Borchert 18,000 3,960 21,960 1.0 365/365 21,960 2,400 24,360 25,500
Helmut Bleckwenn 18,000 3,960 21,960 1.0 365/365 21,960 2,400 24,360 24,300
Dr Karl-Heinz Engel 18,000 3,960 21,960 1.0 365/365 21,960 1,500 23,460 24,300
Joachim Engelke 18,000 3,960 21,960 1.0 365/365 21,960 1,800 23,760 15,216
Friedrich Christoph Heins 18,000 3,960 21,960 1.0 365/365 21,960 1,800 23,760 14,916
Dr Hans Theo Jachmann 18,000 3,960 21,960 1.0 365/365 21,960 2,100 24,060 25,500
Olaf Joern 18,000 3,960 21,960 1.0 365/365 21,960 1,800 23,760 24,600
Rainer Knackstedt 18,000 3,960 21,960 1.0 365/365 21,960 1,200 23,160 24,300
Marie Lohel 18,000 3,960 21,960 1.0 365/365 21,960 1,800 23,760 24,600
Dr Carin-Martina Tröltzsch (8/7/2016 – 28/2/2017) 18,000 3,960 21,960 1.0 236/365 14,199 900 15,099 /
Gerd von Glowczewski 18,000 3,960 21,960 1.0 365/365 21,960 1,800 23,760 24,000
Matts Eskil Rosendahl (1/3 – 7/7/2016) 18,000 3,960 21,960 1.0 129/365 7,761 900 8,661 24,600
Total 546,804 59,400 606,204 605,889
* Does not include the VAT paid on behalf of Supervisory Board members for their work.
Furthermore, the members of the Supervisory Board are reimbursed for all out-of-pocket expenses incurred in the exercise of their duties as well as for the VAT payable on their remuneration and on the reimbursed expenses. The total amount of these reimbursements, including VAT, was EUR 23 thousand (previous year: EUR 25 thousand).
In the reporting and comparative period, members of the Supervisory Board received neither loans nor advances from the company.
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49.3. SHARES HELD BY MEMBERS OF THE 51. EVENTS AFTER THE EXECUTIVE BOARD AND SUPERVISORY REPORTING PERIOD BOARD No significant events occurred after the reporting Members of the Executive Board hold no significant period. stocks of shares. Braunschweig, Germany, 20 April 2017 As of 28 February 2017, members of the Supervisory Board and related parties held under one per cent of The Executive Board the issued share capital of Nordzucker AG. The shares bear no relation to the remuneration of the Supervi- sory Board.
49.4. MISCELLANEOUS Hartwig Fuchs Axel Aumüller Board members of Nordzucker AG are indemni- fied by Nordzucker AG against third-party liability as allowed by law. For this purpose, the company has taken out D&O insurance for members of the Boards of Nordzucker AG. The insurance policy is taken out or renewed annually and covers the personal liability of Dr Michael Noth Dr Lars Gorissen Board members for claims for damages arising in the course of their work. It includes an excess in accord- ance with Sec. 3.8 of the German Corporate Govern- ance Code.
50. 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 of Nordzucker AG for the 2016/2017 reporting period show a net distributable profit of EUR 53,131,430.00. The Executive Board pro- poses to use this net distributable profit to pay a divi- dend for the 2016/2017 reporting period (EUR 1.10 per share with dividend entitlement).
ANNUAL REPORT 2016 | 2017 Nordzucker AG 142 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
LIST OF INVESTMENTS
Nordzucker AG, Braunschweig, as of 28 February 2017
Shareholding
direct indirect
Shortened via form % % companies
Consolidated subsidiaries
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 Services GmbH & Co. KG NZ Services (Braunschweig, Germany) KG 100
Nordzucker Polska S.A. (Opalenica, Poland) NZ Polska 99.87
Považský Cukor a.s. (Trencianska Tepla, Slovakia) Povazsky 96.798
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
AB Nordic Sugar Kedainiai (Kèdainiai, Lithuania) NS Kedainiai 70.6 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
Nordzucker Ireland Limited (Dublin, Ireland) NZ Ireland 100
Joint ventures accounted for using the equity method
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
Associates accounted for using the equity method
August Töpfer Zuckerhandelsgesellschaft mbH & Co. KG (Hamburg, Germany) ATZU 25
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Shareholding
direct indirect
Shortened via form % % companies
Non-consolidated subsidiaries
NZ Dritte Vermögensverwaltungsgesellschaft mbH (Braunschweig, Germany) NZ 3. VVG 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 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 (Braunschweig, Germany) NZ 2. VVG 100
Nordzucker Services Verwaltungs-GmbH NZ Services (Braunschweig, Germany) GmbH 100
Nordic Sugar SIA (Riga, Latvia) NS SIA 100 NS AS
Nordic Sugar UAB i.L. (Vilnius, Lithuania) NS UAB 100 NS AS
Joint ventures not accounted for using the equity method
Ingolf Wesenberg & Co. AS (Oslo, Norway) IW AS 50 NS AS
Associates not accounted for using the equity method
August Töpfer Verwaltungs GmbH (Hamburg, Germany) ATV 25
Other non-consolidated investments
Tereos TTD, a.s. (Dobrovice, Czech Republic) TTD 35.38
Tropical Cubes Co. Ltd. (Morcellement St André, Mauritius) TC 12.5 ATZU
C.I. Food Colombia S.A.S. (Yumbo, Colombia) CIF 12.5 ATZU
H.S.T. Hamburg Sugar Terminal GmbH & Co. KG (Hamburg, Germany) HST 16.668 ATZU
Verwaltungsgesellschaft H.S.T. Hamburg Sugar Terminal mbH (Hamburg, Germany) VHST 16.668 ATZU
ANNUAL REPORT 2016 | 2017 Nordzucker AG 144 MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS AUDIT OPINION GLOSSARY
AUDIT OPINION
We have audited the consolidated financial statements assessing the annual financial statements of those enti- prepared by Nordzucker AG, Braunschweig, compris- ties included in consolidation, the determination of ing the balance sheet, the income statement, the notes entities to be included in consolidation, the account- to the consolidated financial statements, the cash flow ing and consolidation principles used and significant statement, and the statement of changes in equity [and estimates made by management, as well as evaluating segment reporting], together with the group manage- the overall presentation of the consolidated financial ment report for the fiscal year from 1 March 2016 to statements and the group management report. We 28 February 2017. The preparation of the consolidat- believe that our audit provides a reasonable basis for ed financial statements and the group management our opinion. report in accordance with IFRS as adopted by the EUR, and the additional requirements of German commer- Our audit has not led to any reservations. cial law pursuant to Sec. 315a (1) HGB are the responsi- bility of the Company’s management. Our responsibili- In our opinion, based on the findings of our audit, the ty is to express an opinion on the consolidated financial consolidated financial statements comply with IFRS statements and the group management report based as adopted by the EU, the additional requirements of on our audit. German commercial law pursuant to Sec. 315a (1) HGB and give a true and fair view of the net assets, finan- We conducted our audit of the consolidated finan- cial position and results of operations of the Group in cial statements in accordance with Sec. 317 HGB and accordance with German principles of proper account- German generally accepted standards for the audit of ing. The group management report is consistent with financial statements promulgated by the Institut der the consolidated financial statements and as a whole Wirtschaftsprüfer [Institute of Public Auditors in Ger- provides a suitable view of the Group’s position and many] (IDW). Those standards require that we plan and suitably presents the opportunities and risks relating perform the audit such that misstatements materially to future development. affecting the presentation of the net assets, financial position and results of operations in the consolidated Hanover, 28 of April 2017 financial statements in accordance with [German] prin- ciples of proper accounting and in the group manage- ment report are detected with reasonable assurance. Knowledge of the business activities and the economic Ernst & Young GmbH and legal environment of the Group and expectations Wirtschaftsprüfungsgesellschaft as to possible misstatements are taken into account in the determination of audit procedures. The effective- ness of the accounting-related internal control system and the evidence supporting the disclosures in the Dr Janze Bienen consolidated financial statements and the group man- Wirtschaftsprüfer Wirtschaftsprüferin agement report are examined primarily on a test basis [German Public Auditor] [German Public Auditor] within the framework of the audit. The audit includes
Nordzucker AG ANNUAL REPORT 2016 | 2017 145
GLOSSARY
FINANCE EBIT (earnings before interest and taxes) This describes the profit from operations before the Cash flow deduction of interest and taxes. Net inflow of cash funds. Difference between cash received and cash paid out in a reporting period. The EBITDA (earnings before interest, taxes, deprecia cash flow is available to the company for investment, tion and amortization) the repayment of liabilities and the distribution of This describes the profit from operations before profits. the deduction of interest, taxes, depreciation and amortization. German Corporate Governance Code (GCGC) www.dcgk.de Equity ratio A code drawn up in 2002, dealing with the manage- This expresses shareholders’ equity as a percentage of ment and supervision of publicly listed companies in total assets. Germany. The GCGC includes nationally and inter- nationally accepted standards of responsible corpo- Statement of compliance rate governance, primarily aimed at transparency and Statement to be issued and published every financial accountability. They define the responsibilities of Exec- year by the Executive and Supervisory Boards of pub- utive and Supervisory Boards and lay down rules and licly listed companies as required by Sec. 161 AktG recommendations to protect shareholder rights, on the (German Stock Corporation Act), stating the extent appointment of members of management and supervi- to which the company complies with the recommen- sory bodies, and their remuneration. Companies that dations of the Government Commission German Cor- are not publicly listed are also recommended to follow porate Governance Code, and any recommendations the GCGC. which are not followed.
Dividend Future The amount of a stock corporation’s distributable prof- A binding contract between two parties (in contrast it attributable to an individual share. The dividend is to an option, which only binds one of the parties) to expressed either as a percentage of the nominal value be executed at some point in the future. This type of or in currency units per share (dividend per share). The contract is characterized by the binding supply (for the Annual General Meeting decides on the distribution of seller) and the acceptance (for the buyer) of a precisely a dividend. In Germany, the dividend is paid annually. defined asset (underlying) in a certain volume (contract amount) and quality at a fixed point in the future (date) and at a price set when the contract is signed.
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Net debt Thick juice Financial liabilities less cash and cash equivalents. A purified sugar juice reduced to around 70 to 75 per cent dry content. Thick juice is produced at the end of Syndicated loan the evaporation plant, before the sugar is finally crys- A loan extended by several banks (syndicate, consor tallized by boiling in the sugar house. tium) on the basis of uniform contractual documenta- tion and on the same terms and conditions. Isoglucose Sugar made primarily from corn starch and used in bev- erages and preserved fruit. Isoglucose is a regulated SUGAR AND BIOETHANOL market product.
Bioethanol Molasses Bioethanol refers to ethanol which has been manufac- Syrupy by-product of sugar production, which is used tured exclusively from biomass and is primarily intend- to make yeasts and animal feed. ed for use as biofuel. The production of ethanol from sugar beet involves converting primarily the interme- Pellets or dried pulp pellets diate products of the sugar-making process into alco- By-product of sugar production. Pellets consist of hol through fermentation, which is then concentrated extracted, dried sugar beet cossettes, which are sold to form bioethanol through thermal and physical sep- as animal feed, with or without molasses. arating processes (distillation and dehydration). Laws and regulations in Germany (since 2007) and at the Raw cane sugar European level specify “additive quotients”, which the Sugar made from sugar cane. This can then be refined distributors of fuels are required to adhere to when to convert it into white sugar. using biofuels. Stevia CO2 (carbon dioxide, greenhouse gas) A sweetener made from the plant Stevia rebaudiana Chemical compound of carbon and oxygen, which (known as sweetleaf or sugar leaf), which consists belongs to the group of oxocarbons, along with car- mainly of steviol glycosides. Steviol glycosides have bon monoxide. The colourless, odourless gas is a nat- been approved in the EU as a food additive (E960) ural component of air. It is created by the combustion since 2 December 2011. of substances containing carbon, and during cellular respiration. Plants and some bacteria convert CO2 into biomass.
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SUGAR INDUSTRY SweetFamily, www.sweet-family.de The international umbrella brand of the Nordzucker ACP countries (Africa, Caribbean and Pacific) Group. Beet sugar products for consumers, bakers Seventy-seven mostly former French and British col- and the food industry have been marketed under the onies, with which the EU negotiates economic part- SweetFamily brand in Germany, Poland, Slovakia and nership agreements (EPAs). In terms of sugar, these Hungary since November 2004. countries will then be treated equally with the least developed countries (LDC), i. e. have access to the EU WTO (World Trade Organization) market free of customs duties and quotas. A multinational organization based in Geneva, in which 150 member states negotiate the liberalization of glo CXL imports bal trade. The “CXL quota” applies to Australia, Brazil, Cuba, India and other third countries (“erga omnes”). Each of these Sugar market regime countries has quotas for importing sugar into the Euro- A common market regime for sugar in the EEC/EC/EU pean Union with a combined total of 676,925 tonnes at since 1968, which governs the prices for sugar and a reduced rate of customs duties. sugar beet, maximum production volumes for sugar and import restrictions. The previous regulation (EC) Dansukker, www.dansukker.com; No. 1234/2007 was replaced in 2013 by regulation (EC) www.nordicsugar.com No. 1308/2013. The sugar market regime in its current Nordic Sugar, part of the Nordzucker Group, offers form expires on 30 September 2017. consumers a wide range of sweet sugar products from sugar beet and sugar cane under the brand name of Sugar quota Dansukker. The assortment is refined continuously in Sugar quotas were introduced in the EU to limit sugar keeping with the needs of modern households, and production and prevent surpluses. Volumes produced includes, for example, various types of granulated within these quotas benefit from a sales and price sugar, sugar cubes and icing sugar, brown sugar and guarantee. syrups as well as organic and fair trade products. Sugar marketing year Fair trade The financial year for the common sugar market The core of the fair trade standard is the payment of a regime in the EU starts on 1 October and ends on guaranteed minimum price, which is above the world 30 September. market price and covers the producers’ cost of living and cultivation.
LDC (least developed countries) The least developed countries in the world. This term is used in an EU resolution from 2001 by which “everything but arms” may be imported into the EU from the 50 least developed countries free of customs duties. A transitional period up to 2009 was agreed for sugar. Since 1 July 2009, sugar exports from LDCs to the EU have been not subject to customs duties or volume restrictions.
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CERTIFICATION, QUALITY GMP B2 (Good Manufacturing Practice B2) ASSURANCE AND Dutch quality management standard for foreign CONSUMER PROTECTION suppliers of animal feed.
DIN EN ISO 9001 IFS Standard (International Food Standard) This standard is part of the EN ISO 9000 series, which This standard covers food safety and consumer documents the principles of quality management. EN protection. ISO 9001 deals specifically with the requirements of a quality management system, by which an organization OHSAS 18001 (Occupational Health and Safety must demonstrate its ability to supply products that Assessment Series) meet the specifications of its customers and any regu- Not a norm, but can be used as a certification basis for latory requirements. management systems relating to health and safety at work. The structure of OHSAS is oriented towards DIN DIN EN ISO 14001 EN ISO 14001. This makes it suitable for use as an inte- This international standard defines accepted require- grated management system. ments for environmental management systems. PAS 220 (Publicly Available Specification 220) DIN EN ISO 22000 Certification standard developed to define basic This standard covers requirements for an international- requirements for the certification of production pro- ly accepted management system for food safety. cesses within the food supply chain and intended to assist in ensuring adherence with food safety stand- DIN EN ISO 50001 ards. It is intended to be used in conjunction with DIN A certifiable ISO (International Organization for Stand- EN ISO 22000. ISO 22000 and PAS 220 are generally ardization) standard that defines the requirements for known as FSSC 22000. the establishment, implementation, maintenance and improvement of an energy management system.
EMAS III (Eco-Management and Audit Scheme) Voluntary EU system for environmental management and the promotion of environmental protection.
FSSC 22000 The first global food safety norm covering food pro- duction. The standard was developed specially for companies producing or processing animal or plant- based products or ingredients.
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FINANCIAL CALENDAR
Shareholder meeting Union-Zucker Südhannover GmbH 22 June 2017 in Nörten-Hardenberg
Annual General Meeting Nordzucker 5 July 2017 Holding AG, Stadthalle Braunschweig
Annual General Meeting Nordzucker AG, 6 July 2017 Stadthalle Braunschweig
ONLINE PUBLICATIONS
The following publications can be downloaded from www.nordzucker.de/en
• Annual Reports and Interim Reports • Declaration of compliance • Letter to shareholders
Printed copies of this Annual Report for the Nordzucker Group are also available in German.
The report is available online as an HTML version in German at geschaeftsbericht.nordzucker.de or in Eng- lish at annual-report.nordzucker.com, and it can be downloaded as a PDF from the Download Centre.
Please also visit our sustainability website: sustainability.nordzucker.com/en/
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IMPRINT
Nordzucker AG Küchenstrasse 9 38100 Braunschweig Germany Telephone: +49 (0) 531 2411-0 Fax: +49 (0) 531 2411-100 [email protected] www.nordzucker.de
Communications & Public Affairs Christian Kionka Telephone: +49 (0) 531 2411-173 [email protected]
Investor Relations Bianca Deppe-Leickel Telephone: +49 (0) 531 2411-335 [email protected]
Share register Nicole Riedel-Elias Telephone: +49 (0) 531 2411-163 [email protected]
Concept, consulting, design Kirchhoff Consult AG, Hamburg, Germany
Photography Nils Hendrik Mueller Nordzucker archive
Print Leinebergland Druck, Alfeld, Germany
Nordzucker AG ANNUAL REPORT 2016 | 2017 Nordzucker has produced this annual report in the interests of sustainable environmental protection. It was printed in a climate-neutral manner in accordance with the Arktik process. All CO2 emissions which occur directly or indirectly during printing were calculated and offset by investments in renowned climate protection projects.