AGRANA Beteiligungs-Aktiengesellschaft (AGR) Earnings Call Transcript

Ladies and gentlemen, welcome to the AGRANA Results for the First Half of 2026-'27 Conference Call. I'm Moritz, the Chorus Call operator. The conference is being recorded. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Hannes Haider. Please go ahead, sir.

Good morning, ladies and gentlemen, and welcome to AGRANA's conference call presenting our results for the first half '26-'27. You already got some insights in our figures when we published an ad hoc announcement regarding our full year guidance revised on the 28th of September. Today, we will provide you with more details also on the segments. As announced in our invitation, a presentation is available in reference to this call, and you can find this presentation as always, in the IR section of our website. Our CEO, Stephan Buttner; and our COO, Franz Ennser, will hold today's presentation, which is divided into 3 parts. We will start with an introduction and we'll focus on the highlights of the first half. We will go on then with a segment overview, also referring on the key financial KPIs. And finally, we'll conclude with an outlook for the remaining financial year. The presentation will take about 20 to 25 minutes. And afterwards, the lines will be opened to answer your questions. And now I may pass over to our CEO, who will start this presentation with Slide #4.

Thank you, Hannes. Good morning, ladies and gentlemen. Welcome to our conference call for the first half of the '26-'27 business year. Yes, overall, performance in the second quarter and also in the first half of the business year according to our expectations despite the fact that the market environment is still very challenging. So we see, again, an increase in energy prices, also raw material prices, especially wheat and corn. But despite this very challenging environment, we were able to improve our operating performance versus prior year, and we're also consistently working on our strategic projects. When we look at the key figures, our revenue, EUR 1.7 billion in the first 6 months of the business year. operating profit amounted to EUR 57.4 million. Exceptional items significantly decreased to EUR 1.2 million and the EBIT, therefore, EUR 63.5 million versus EUR 28 million in the previous year. Free cash flow was stable in the first half of the year, minus EUR 9.2 million. This is significantly decreased versus prior year. So due to an increase of working capital on one hand, higher stock levels in sugar. And on the other hand, the cash out for the acquisition of the Ember company Net debt, therefore, EUR 464.1 million versus EUR 421 million in the previous year. Gearing 41.2% still in an acceptable range and equity ratio increased to 46.2%. Focus still in the current business year is the integration of Austria Juice and Mercator-Emba, the 2 acquisitions that we recently made. Both companies are more or less developing according to plan. only issue that we are facing right now in the operating performance in Austria Juice is that we have the second year in a row of frost in Hungary, resulting in a, let's say, 90% loss of the apple harvest, causing us significant utilization rate losses, and this is, at the moment, difficult to compensate. We also signed the purchase agreement of on the 9th of September 2026, a further step in our portfolio strategy. We think that this is a very important acquisition. Yes, is well established company developing flavors, beverage compounds, spaces, powders, emulsions, functional and stabilizers for the beverage industry. Yes, with a very long history, a very traditional company with a lot of expertise and complementary sales regions more oriented in the eastern part of Europe. The company operates 2 production sites, one in Austria with around 400 employees and the revenue that they generated in the previous year was EUR 112 million. So now we are in the process of the merger control, so we are waiting for the anti-graft approval. We hope that this will be finished maybe in the first quarter of the next business year, so around March or April 2027. Purchase price, so the evaluation of the company was a factor 9 EBITDA, the enterprise value, so this amounts to EUR 150 million. We're already starting, of course, let's say, with reflecting the guardrails concerning antitrust with the preparation of the integration of esarom. We have a constant exchange with the actual management there. So here we are making good progress as well. So let me please now hand over to Franz Ennser, and he will inform you about the raw material situation.

Yes. Thank you very much. Good morning, everyone. Yes, basically, the framework conditions for our industry, in the food and agricultural sector, they are really highly volatile. I think everybody is well aware of the war situation, especially in Central Western and Eastern European areas, and this is affecting both availability, but also the price trends for the key raw material meaning talking about wheats, talking about corn. Also related to energy, energy markets of court now, which is the logic effect of the ongoing war situation, both in the Middle East area, but also in Ukraine and Russia. We have been able to perform in our biorefinery in the first half of the year better than the year before. So we were able to process even higher volumes for the products of wheat. And of course, although we starch and also ethanol. We have started up our factory in Lower Austria and Kun -- by the end of August, our contracted volume, which was around 164,000 tonnes will only lead to a crop of estimated 70,000 tonnes to 80,000 tonnes of starch as a result of the growth were conditional dry weather, especially during the summer months. Yesterday evening, we have started up also the Austrian Sugar Factory in while the factories in the countries, Slovakia, have already started up as well as the Romania and Hungary will start most likely by the end of next week. In total, we have contracted close to 60,000 hectares of sugar beets. Unfortunately, the yields this year will be significantly impacted, of course, also by the dryer weather conditional and lack of rainfall. So for Austria, our best guess is that the crop will result in yields of 55 tonnes to 60 tonnes per hectare, meaning that we will most likely finish our campaign in early January 2027. In our Sugar segment, the total volume of processed sugar beet will be in the dimension of 3.2 million tonnes to 3.3 million tonnes of sugar beet. As already mentioned by Stephan Buttner, we have an impact in terms of our raw material availability in the Austria juice business area of the juice concentrate, especially in Hungary, but also partly in Poland. We had impact also on the lack of soft fruits like raspberry, black current and aronia berries where we have seen tremendous price increases versus the prior year. But basically, this increase in costs could be forwarded to the customers. In terms of our energy costs, on Page 13, I think this graph just illustrates that the levels which we had before the Ukrainian war started in '21-'22. These levels, we will most likely not be able to reach any more. So we do expect, of course, all the impacts due to the impact of energy prices compared with the prior year. In terms of our investments, we have been investing close to EUR 45 million in the -- EUR 43 million compared to the EUR 45 million, pretty much in line with the previous year. The majority of our investment has been done in the Food & Beverage Solutions segment. So we basically focused on some investments into the food service business, but also given the rising demand, especially for protein containing yogurt in the U.S., we have our -- we increased our capacity in our food preparation plant in the State of New York. In the start of the year, we have basically focused on higher capacity expansion, but also sustainability investments, including into, also here, efficiency projects for improving our yields and our overall, let's say, production excellence activities. Our plan for the total year, '26-'27 amounts around EUR 110 million to EUR 130 million, the majority will be invested into the Food & Beverage Solutions business, but this overall investment sum is slightly below our budgeted depreciation of around EUR 117 million. So this is in a nutshell about raw materials and investments.

Yes. Thank you, Franz. So let's have a look at the financials. I already mentioned group revenue of EUR 1.7 billion, a slight increase of 0.5% versus prior year, mainly resulting of the increase in revenue in our Food & Beverage Solutions segment, the increase is 4.3%. And stable revenue in starch and the further decline in sugar mainly driven by the lower sales prices in average. When we look at the development here of the quotations, world market sugar prices. So we see and we think that the bottom line was reached in the previous month. Now we see -- we will start to see an increase in quotations as already mentioned or Franz already mentioned also across the whole Europe, we expect significantly smaller crop in sugar beets, therefore, the overstocks -- let's say, we will get rid of the overstocks leading to a more balanced market situation in sugar, and this will also lead in the coming months to increase in sugar prices. So when we look at the EBIT development by segment, we see a decrease of 11% in our Food & Beverage Solutions segment. This is really driven by the crop failure in Hungary, in Austria This is a concentrate business, more commodity type of the business. We cannot compensate that this cost us around EUR 10 million and could only partly be compensated by our recipes business which had a very solid performance in the first half of the business year and could also further improve the performance versus prior year. So here, we are absolutely on the right track. And in part, we also see an improvement versus prior year mainly coming from the ethanol business, which is showing quite a solid and good performance in the first half. And when we look at our sugar business, here, you can see, of course, on the EBIT level, a very significant improvement, but it's not only on EBIT because we also here had extraordinary items of the -- still of the closure of our 2 factories in which amounted to approximately EUR 20 million. But when we deduct this, so you can still see that our operating performance is significantly improving also when we compare to our competitors which clearly shows that we made our own work in the last 3 years. Let's have a look at the outlook. So as we already reported, we expect a very significant increase in EBIT and also an increase in revenue for '26-'27 versus prior year. We are also on track with our savings all of our Horizon program. Outlook by segment. Food & Beverage Solutions revenue moderate increase, EBIT moderate reduction due to the challenges in Austria juice with the apple juice concentrate production, starch steady development in revenue and a significant increase in the EBIT. And in sugar, a moderate reduction in revenue due to the decrease in price levels, especially in the first half of the business year and a very significant improvement on EBIT level. Outlook for the third quarter. So last year, we had an EBIT of EUR 28.4 million for the actual third quarter in this business year, we expect it to be very significantly above this EUR 20.4 million. Thank you very much for your attention. I hand back to Hannes Haider who will inform you about the financial

Thank you. Before we go on with the Q&A session, I just wanted to point out that end of September, we published our financial calendar for the next financial year '27-'28, and you can find all the relevant IR dates also on our website. . We will now go on with the Q&A session.

[Operator Instructions] And the first question comes from [ Fatma Hamdani ] from ODDO BHF.

Yes. I have 3 questions on my side. So could you explain the main drivers of the working capital outflow? This is the first one. The second one, could you give us more details on what you expect in synergy from the [indiscernible] and provide an indication of the frontier require to capture this on your stretch EBIT increase in Q2. So could you [indiscernible] versus the underlying stretch [Technical Difficulty]

Sorry, we have a connection problem. We cannot understand you.

Okay. So the first one is, can you explain what are the main drivers of the working capital outflow in Q2?

Yes.

Okay. The second one is on the synergy from esarom acquisition. So could you provide an indication of the time frame required to capture these benefits? Okay. Then the third one is regarding the stretch EBIT increase in Q2 also. So could you explain how much of this improvement comes from ethanol margins versus underlying stretch profitability.