A wonderful good afternoon, ladies and gentlemen. Welcome to the Südzucker AG Analyst Audio Webcast. My name is Francie, the correspondence operator. I would like to remind you that all participants will be in a listen-only mode, and the conference is being recorded. The presentation will be followed by a question-and-answer session. You can register for question at any time by pressing star and one. For operator assistant, please press star and zero. At this time, it is my pleasure to hand over to Nikolai Baltruschat. Please go ahead, sir.
Thank you, Francie, and good afternoon, ladies and gentlemen. Welcome and thank you for your participation in today's Audio Webcast of Südzucker AG. As mentioned in the invitation, the underlying presentation has been published on our homepage today. You can also follow the slideshow via the distributed webcast link. Today, we release the report for the financial year ending 29th of February 2024. We are going to explain the highlights of the year and give details about the guidance for the current financial year, 2024-2025. We're happy to take your questions following the presentation of Niels Pörksen, Thomas Kölbl, and Stephan Meeder. A recording of this call will be available on our homepage for those who are not able to participate. Now, I would like to hand over to our CEO, Niels Pörksen. Niels, please go ahead.
Thank you, Nikolai. Good afternoon, ladies and gentlemen, and on behalf of my colleagues on the executive board, it gives me great pleasure to welcome you to this year's Analyst and Investors Conference. Let's start with page four. Before we got into the details, I would like to take a general look at the past 2023/2024 financial year. This year went exceptionally well for Südzucker Group. We can be very satisfied and proud of what we as team have achieved, especially because the general conditions were once again very challenging. Many external factors have had an impact on our business. I'm thinking, for example, of the effect of the wars in Ukraine and Middle East. Nevertheless, our business has developed positively. We were able to reduce our level of debt despite high investments, and continue to strategically position the company for the future.
We are consistently following the path set by the Group Strategy 2026+. It has become part of our day-to-day work and determines our actions and decisions in many areas. It shows that we have successfully laid the foundation for our future. We want to further strengthen our existing business and organize it efficiently, so that it can continue to compete in the future. As our backbone, at the same time, provides the tailwind we need to develop new innovative business areas. This involves, for example, plant-based proteins as a component and solution for the growing demand for vegetarian or vegan diets. We have invested in the construction of a plant in Offstein to process pulses containing protein, such as fava beans and peas, and intend to pursue further activities in this area. We also see great potential in bio-based chemicals.
CropEnergies has taken the first step here and started construction of the first plant in green ethyl acetate in Europe in Zeitz at the beginning of April 2024. Of course, sustainability also plays a very important role, especially for us as a supplier of plant-based solutions. Protecting the environment and the climate is a must if we want to maintain the basis of our business. Let us now take a brief look at the figures for the successful 2023/2024 financial year on page 6. Thomas and Stephan will go into the financial details later. At group level, we achieved a new revenue record of EUR 10.3 billion. This revenue growth and excellent consolidated earnings performance were largely driven by the sugar segment.
Here, we achieved an increase in revenues of almost EUR 1 billion and an increase in operating results of more than EUR 300 million. The result has thus more than doubled. The two other major movements in earnings took place in the special product and Crop Energies segments. As expected, Crop Energies was unable to match the previous year's exceptional result. The special product segment, on the other hand, recorded a very significant increase in earnings. Overall, consolidated operating results thus rose significantly again to around EUR 950 million. This almost equates the record results from the year 2012/2013. A direct comparison of these financial years also impressively demonstrates how successful the diversification of our business fields has been. At that time, the sugar segment still accounted for almost three-quarters of the earnings contribution.
The ratio of sugar to non-sugar business is now around 60/40, and the non-sugar segment now also contributes around 50% more to the group's operating results. Let's now move on to an overview of the individual non-sugar sectors. I would like to start on page 9 with the special products segment, and here with the BENEO division. BENEO primarily produces functional ingredients, has a global presence, and is therefore also a distribution partner for other Südzucker group companies. This gives us an excellent starting position for further synergies within the group, which we are continuously expanding. The trend towards health-conscious and plant-based nutrition continues. BENEO serves this trend, for example, with soluble fiber from chicory, texturizing rice ingredients, functional carbohydrates from sugar, and textured vegetable proteins.
These ingredients are obtained from natural raw materials and are used in a wide variety of foods, such as dairy products, cereals, baked goods, baby food, and spreads. At BENEO, we are working on expanding capacity and also increasingly on expanding international sales and adapting them at regional level. On page 10, we focus on the Freiberger division, which offers frozen and chilled pizza and pasta dishes in particular. Even after the corona pandemic, consumer demand for convenience products remains high. We were therefore able to achieve further increases in sales volumes. The trends I have just mentioned at BENEO are also having an impact on Freiberger. This results in new potential, which Freiberger continuously analyzes and consistently incorporates into its product portfolio. In addition to product development, Freiberger is expanding the marketing concepts that have already been successfully extended in recent years.
Overall, Freiberger is operating from a market position of strength. The market in Europe and North America are established and continue to grow. New future markets are being investigated. On page 11, the special product segment's smallest unit, the PortionPack group, is next. PortionPack produces portion packs for the food and non-food sectors. Its customers traditionally come from the so-called HORECA sector, which includes hotels, restaurants, and catering. This market was hit hardest by the corona pandemic, but has largely recovered since its end. PortionPack has also recently invested against this backdrop. The aim is to reduce dependencies and generate growth through co-packaging and co-manufacturing. Sustainability also plays a major role at PortionPack, and we take it very seriously. Overall, PortionPack is following our divisional strategy of expanding sales activities according to target groups and target markets.
Let's move on to page 13 and have a look at the CropEnergies segment. CropEnergies is the leading European producer of renewable ethanol for the fuel sector, and thus makes a significant contribution to the urgently needed reduction of greenhouse gases in road transport. The product portfolio also includes the production of neutral alcohol, protein food, and animal feed products, liquid CO2, and in future, bio-based chemicals. In financial year 2023/2024, CropEnergies was unable to match the exceptional record year, 2022/2023. The main reason for this was a decline in European ethanol prices, which was due to high import volumes. Grain prices also declined. However, this cost reduction was unfortunately not sufficient as a counterweight to prevent the expected significant decline in earnings. This is another reason why CropEnergies is positioning itself even more broadly in the future, and is systematically implementing the bio-based chemical segment.
The groundbreaking ceremony for the first ethyl acetate plant took place in April 2024, with commissioning scheduled for 2025. We now continue with the starch segment, page 15. In the starch segment, our Austrian subsidiary, Agrana, produces starches, starch saccharification products, ethanol, and byproducts from various raw materials. These are used for various applications in the food and animal feed sector and as fuel. Unfortunately, the partly cyclical market weakness continued and led to a decline in demand in the market as a whole. This was not without consequences for the price environment. As a result, the price and volume factor led to a decline in earnings, which could not be offset by the lower raw material costs. I would now like to say a few words about the Fruit segment on page 17. We are very satisfied with the Fruit segment's business performance in 2023/2024.
Revenues and earnings increased. The result was made possible by the positive margin development in both areas, fruit preparations and fruit juice concentrates. So let's conclude the segment overview with the sugar segment on page 20. The sugar segment can look back on an extremely successful financial year, 2023, 2024, with an operating result that more than doubled. Various factors contributed to this. Internally, the efforts made as a result of the 2019 restructuring plan are playing off, as is the realignment of the sugar division in 2021, in combination with the group strategy 2026+. And of course, we are benefiting from the tailwind provided by the favorable market environment. The sugar segment was therefore the driving force behind the group's success in the past financial year. The last processing campaign, in particular, was unusually challenging because a new sugar beet disease unexpectedly emerged.
The so-called Stolbur is transmitted to the beet by cicadas. The disease causes so-called rubber beets. The consequences are low sugar content and difficulties in processing the beet. The both major challenges for everyone involved in the campaign, from cultivation to processing. It can be assumed that this issue will continue to occupy us in the current financial year as well. Let us now turn on page 22 to a transaction that is important for the further development of the group, the successful delisting tender offer for CropEnergies shareholders. We made the decision in late autumn 2023. All the sugar and CropEnergies committees fully supported the transaction. The predominantly very positive market response also vindicated us.
At the end of the offer period, we had achieved a pleasing acceptance rate and were thus able to increase our stake in CropEnergies from around 69% to over 94%. This highly complex, complex transaction went completely smoothly within the planned timeframe. We have thus achieved our goal of delisting CropEnergies from the stock exchange, at the same time increasing our stakes as extensively as possible. As outlined on page 23, we would therefore like to express our sincere thanks to our shareholders for the trust they have placed in us. Let me briefly explain the reasons for our decision. Südzucker shareholders are among our most important stakeholders. They are always at the center of our decision-making in all efforts. Increasing the attractiveness of Südzucker shares is therefore in the interest of all of us.
With the delisting tender offer, we are simplifying the group and capital structure and thus also fulfilling a concern of our stakeholders. Our profile on the capital market is sustainably sharpened. The transaction also fits in perfectly with our group strategy. It emphasizes that CropEnergies is an important pillar within the Südzucker group. This is because we can now bundle the expansion of the bio-based chemicals business segment there. We attach great importance to the development of this area and are now entrusting its realization entirely to CropEnergies. The delisting gives us greater flexibility and speed in decision-making, while at the same time reducing risk. The financial background is also positive. We were in a good position to finance the transaction, thanks to the group's high cash flow quantity, quality.
In addition, we were able to reduce the group net financial debts at the end of the financial year. The reduction in minority interests and the utilization of synergies will also benefit Südzucker shareholders, as this will sustainably increase the distributional potential. This leads me seamlessly on page 24 to one of the most important group projects that is directly related to CropEnergies and our strategic topic of bio-based chemicals. The construction of a production plant for sustainable ethyl acetate. It will be the first plant of its kind in Europe and is also to be supplied entirely with renewable energy. Based on renewable ethanol, it will produce sustainable ethyl acetate for the chemical industry. Renewable hydrogen is produced as a by-product, together with biogenic CO2 from the fermentation process of ethanol production.
This can form the basis for the further conversion of renewable energy in the so-called Power-to-X downstream processes. For example, for the production of e-fuels. We are investing around EUR 120 million-EUR 130 million in this over the next few years... The symbolic groundbreaking ceremony took place on site at the beginning of April this year. The plant is scheduled to go into operation at the end of 2025. Within the carbohydrate platform, we are already experts in sucrose, starches, and ethanol. This is an excellent starting point for us to further develop existing technologies, develop and utilize new technologies ourselves, or buy them in. Bio-based chemicals are obtained from renewable raw materials, from biomass. We produce them by utilizing the carbon bound in plants as a sustainable alternative to fossil carbon.
At Südzucker Group, we process sugar beet, chicory, rice, maize, potatoes, and wheat, so we are at the source of the raw material and have a wide range of renewable carbon sources at our disposal. As already mentioned, bio-based chemicals will therefore become a new business area for us, for which CropEnergies is responsible. We see great potential here because the chemical industry cannot do without carbon, in contrast to the energy sector. For example, where decarbonization is at least possible by switching to alternative energy sources, such as photovoltaics and wind. The chemical industry requires more than 550 million tons of carbon per year to manufacture its products, mostly in the form of oil, gas, and coal.
The end here must therefore be to utilize sustainable carbon, for example, in the form of biomass or CO2 instead of fossil carbon carriers, and we want to be a part of this contribution. Ladies and gentlemen, once again, this year, we take a look at the political environment, which is important for Südzucker. So let's move to page 26. Political conditions influence our business in many areas. With regard to agricultural policy, there have been notable developments in recent months, in particular. At the beginning of February, for example, the European Commission withdraw the proposal for the SUR pesticide regulation. The regulation would have entailed blanket bans on pesticides on considerable areas of cultivated land. Another issue is duty-free imports. Out of solidarity with Ukraine, there was talk of granting the country's agricultural products unlimited access to the European market.
This is understandable for reasons of solidarity, but also has massive consequences for the European farmers and producers. It is therefore positive that the European Parliament decided to impose restrictions on Ukrainian import on the twenty-third of April. With sugar, we now expect that significantly less sugar will be imported in 2024. A maximum of 265,000 tons of sugar in 2024, and a maximum of about 110,000 tons in 2025 is expected. There's also a need for political actions on new breeding techniques. In sugar beet cultivation, we are increasingly exposed to a new pest, a glassy-winged cicada. This is a cicada which transmits bacteria that causes the disease of Stolbur, and since the last campaign, Stolbur. This reduces the sugar content of the beet and makes processing more difficult.
The challenge is, there are no effective insecticides and economic measures which can have a mitigation effect, but they do not keep the cicada away from the beet. New breeding methods would provide a quicker remedy here. With regards to food policy, the EU is continuing to discuss the harmonization of food labeling and the possible introduction of nutritional profiles. The Belgian Council Presidency organized a symposium on this topic on the 25th of April. It continues to advocate the introduction of a front-of-pack labeling system. This is the system compared to the Nutri-Score in Germany. In Germany, the federal government is planning to introduce advertising bans for food that exceed certain limits of sugar, fat, and salt. As part of the federal government's nutrition strategy, this plan is currently being discussed in the German Bundestag, as is a reduction strategy for sugar, fat, and salt in food.
The strategy is not only being criticized by all parliamentary groups in the Bundestag. We are still not convinced that the ministry plans will help to prevent obesity in children. It is not individual nutrients or food that cause obesity in people, but an unbalanced calorie intake. Energy policy, both in Germany and in Europe, also has a significant impact on our company. Our long-term goal is to make our contribution to the target climate neutrality of the economy through climate neutral production. One promising approach is to produce biogas from beet pulp.... However, we need a suitable political framework for this. The EU has created the basis for this with the Renewable Energy Directive Three, the RED III.
For the utilization of biogas for self-supply, it is now crucial that the national implementation of this directive offer the industry the same opportunities as the European directive. We are therefore eagerly awaiting the official draft of the National Biomass Strategy, and hope to support for our contribution to achieving climate neutrality. Ladies and gentlemen, as I indicated at the beginning of my presentation, the Strategy 2026 Plus has now become part of our day-to-day business and is therefore a natural part of our actions and decision-making processes. I would like to conclude my presentation on page 29 by summarizing our priorities for the current 2024/2025 financial year from the perspective of the executive board. Our Group Strategy 2026 Plus, provides the framework within which we operate in all our actions and decisions.
We have a clear plan and are working to implement it in all key areas. Südzucker is in a comfortable starting position, with a tailwind of an excellent 2023/2024 financial year, and is shaping the future from a position of strength. We can make our decision on the basis of a further improved and broadly diversified high cash flow quality. The fundamental goals we have set ourselves have proven their worth and do not deviate from those of the previous years. The area of tension between the topics that we prioritize are fundamentally unchanged. On the one hand, this is the further reduction of the absolute level of debt, and on the other, strengthening the resilience of the sugar segment and the continued expansion of the non-sugar segments. We also want to ensure the company's profitable growth and must make the necessary investment in sustainability.
It is therefore important for us to continue to weigh up every decision, decision situation carefully. With a further increase in cash flow and earnings, we have left the peak, and that's the turning point of working capital requirements behind us in the 2023-2024 financial year. With our delisting tender offer for CropEnergies, that would have already fallen more sharply this year. In 2024-2025, we expect a significant release of funds from a reduction in working capital. This will play the decisive role in significantly reducing the level of debt. The diversification of the company, the expansion of the non-sugar segments, has proven successfully in the past. We intend to continue this course consistently. We expect a significant decline in earnings in the sugar segment in the current financial year. However, we have already taken measures to increase resilience.
We are therefore confident that we will be able to moderate the decline, and still be able to increase the segment's stability and sustainable earnings contribution again in the medium term. The area of sustainability poses some of the greatest challenges. On the one hand, there are our own ambitions and targets, while on the other hand, we are confronted with an extremely dynamic, normative environment that constantly presents us with new tasks and requires a very high degree of flexibility and adaptability. Overall, it is our task to harmonize the sometimes competing objectives, so that we can increase the value of the company across all fluctuations, which secure sustainable growth in the group. I would now like to take this opportunity to thank you for your attention, and hand over to my colleagues on the Executive Board, Thomas and Stephan.
Thank you, Niels. Ladies and gentlemen, on behalf of myself and my successor, Stephan Meeder, I would like to welcome you to this year's Annual Analysts and Investors Conference. We both will ensure that the overall presentation, which I will share with Stephan, is appropriately timed. We will therefore focus our presentation on the summarizing pages at the beginning, and the outlook at the end of the presentation. As you can see at a glance on page 31, we achieved all of our financial targets for the past financial year. In doing so, we significantly exceeded the targets we originally set in December 2022. The earning targets, which we have increased several times over the course of the year, were ultimately achieved. It's all the more remarkable as there were additional challenges on top of the existing ones.
These very good results are also reflected in the key figures on page 32. Cash flow exceeded the EUR 1 billion mark for the first time in the company's history, reaching a record level of EUR 1.046 billion.... As mentioned, there was no further increase in working capital. Remarkable is the reduction in net financial debt, despite a significant increase in investments in property, plant, and equipment to around EUR 550 million, and the payment for the delisting tender of the CropEnergies shareholders of around EUR 250 million, together totaling future investments of around EUR 800 million , which were fully covered by the cash flow. The ratio of net financial debt to cash flow fell further from 2.0 to 1.7. Without the delisting tender offer, we would have reached 1.5.
The solid equity ratio was also confirmed at over 40%. On page 33, we would like to highlight the long path of steady improvement in revenues and earnings in recent financial years on the one hand, and a further very significant improvement in the 2023, 2024 financial year on the other hand. The increase in revenues to EUR 10.3 billion was mainly driven by the sugar segment. Despite the earnings decline in the non-sugar segments compared to the previous year's high level, the very good earnings performance of the sugar segment led to a further significant increase in earnings and to a record EBITDA level of over EUR 1.3 billion in the group. Following from this, on page 34, you can see the broad earnings and cash flow diversification within the group and the further significant improvement in the financial ratios.
I would particularly like to emphasize at this point that structural cash flow has also increased significantly to around EUR 770 million. Other aspects worth mentioning are the continued very comfortable liquidity situation and our solid financial profile. As a result, the key financial ratios that are important for the rating assessment have once again improved significantly for the fifth year in a row. The very positive operating earnings performance is also reflected in a very marked increase in consolidated net income after minority interest, our key indicator for determining the proposed dividend of EUR 0.90 per share. Our unchanged dividend policy remains focused on continuity and sustainable earnings growth, and takes into account the significant improvement in operating earnings and cash flow, as well as the outlook for 2024, 2025 financial year, which Stephan will discuss later.
The resulting payout ratio of 33% is at the lower end of the targeted corridor of 30%-40% of consolidated net income after minority interest. As Niels has also analyzed the delisting tender offer from a financial perspective, I will not go into this again at this point. Just this, I'm very pleased that we were able to successfully complete this project during my last few meters at Südzucker. Before we move on to the group outlook, I would like to briefly mention on the last page of the summary, page 35, that we have had a solid start to the new 2024-2025 financial year that is fully in line with the annual forecast. Let me now jump straight to the outlook for the current financial year, 2024-2025, on page 67, and turn it over to my successor, Stephan.
Thank you, Thomas. Ladies and gentlemen, please let's move on to page 67, where we find the outlook for financial year 2024-25. I would like to start with at the bottom of the graph, where we see the group figures. We forecast the group revenues of Südzucker Group to range between EUR 10 billion and EUR 10.5 billion, and operating profit to range between EUR 500 million and EUR 600 million. As we are at the beginning of the financial year, it is important to point out that the risks that continue to exist and that may influence our expectations on planning. On the one side, they are on the political frame. One thing is for sure, Ukraine. The ongoing war in Ukraine continues to intensify the already high volatility on the sales and procurement markets.
The further course of the negative impact of the EU's extension of duty-free access for agricultural imports from Ukraine, which is now limited in terms of value, remains uncertain. The second point is, the Middle East, and for sure, the effects of the war that broke out in the Middle East last October are also difficult to assess. Overall, the economic and financial impact, as well as the duration of these temporary exceptional situations, are difficult to assess. On April 15, 2024, when we communicated preliminary figures, we also issued our first outlook for the financial year 2024-25, which we are confirming today. We expect group revenues between EUR 10 billion and EUR 10.5 billion, and the operating group results to range between EUR 500 million and EUR 600 million, as just mentioned.
You will find the details for the different segments on the pages 48-66, with the developments and the forecast. I will just now briefly go line by line through to the segments. So let's start with the sugar segment. For the sugar segment, we are expecting the operating results to range between EUR 200 million and EUR 300 million. So this is a significant decline also, as Niels just mentioned, and this is particularly due to production costs, which have risen significantly again in the 2023 campaign. We already pointed out this in our Q3 report, and we expect a decline in production costs for the 2024 campaign. Also, the expected decline in average sugar prices for the financial year will have a negative impact on earnings.
So meaning for the sugar segment, operating results to range between EUR 200 million and EUR 300 million. Let's continue with the special products segment. So the special product segment in the financial year that we just closed, 2023-2024, there it was largely possible to pass on the significant cost increases of the previous year to the market with a time lag. And for the financial year that has just started for 2024-2025, we expect costs to continue to rise, which in turn can only be passed on to the market with a time lag. Overall, we therefore expect a moderate decline in operating results for the full year 2024-2025, compared to previous years' levels. Next on the list is CropEnergies.
So in the CropEnergies segment, we expect ethanol prices to be lower again, despite stable demand for renewable ethanol, in particular, because high import volumes are expected to continue. The relief provided by lower raw material costs overall will be offset by significantly lower prices for the food and animal feed products produced. On this basis, we expect an operating profit for the CropEnergies segment to range between EUR 20 million and EUR 60 million. For the starch segment, we assume that production costs will not fall to the same extent than sales prices, and we are therefore anticipating a significant decline in operating results. Last but not least, the food segment. Here we are forecasting a significant decline in operating results, too.
The fruit preparations division anticipates negative effects from falling prices, and the fruit juice concentrates division's earnings are expected to remain at a good level due to the contracts concluded to date for the 2023 harvest. So all in all, for group, as I mentioned at the beginning, operating profit is predicted to be rolled out to range between EUR 500 million and EUR 600 million. On page 68, you will have an overview on the other key figures, financial key figures. Here, let's start with EBITDA. So the expected decline in EBITDA, as shown on page 68, follows the development of the consolidated operating results, expected then between EUR 900 million and EUR 1 billion. Investments in property, plant, and equipment are expected to remain at the previous year's level.
On the next page here, this starts with the return on capital employed, which we foresee a significant decline, and as mentioned by Niels at the beginning, we are aiming for an absolute reduction in net financial debt. The preconditions for this are very good, despite the expected decline in earnings, as we can assume a release of funds by reducing working capital levels. Of course, the financial year is still very young. We are just at the beginning, but we are in good spirits and are working hard to achieve this goal. So before we come to the Q&A section, let me briefly summarize this presentation with two slides. This is on page 70 and 71, ladies and gentlemen. So at the bottom, you can see what is worth mentioning.
What we have mentioned and outlined you together during this presentation is what is strong about Südzucker Group: our diversified portfolio. We have a high cash flow quality and solid financial key figures. We are investing into growth safeguarding and portfolio expansion. Yes, there are continued risks from Ukraine and increased volatility, which we see on all agricultural markets, but overall, we had a reasonable start into the 2024/25 financial year. So in a nutshell, yes, there are challenges ahead, but our broadly diversified portfolio will also help us to make the current financial year a successful one. We have our goals clearly in sight and are confident that we can reach them. Last but not least, page 71. So looking back, last year, we explained to you that the improvement in earnings and resulting free funds available create room for maneuver.
We did. We used that, as Niels and Thomas already explained, with the CropEnergies delisting tender offer. We have already utilized some of this in a timely manner. Despite the expected decline in earnings, the structural cash flow, as you can see here on this slide, it amounts to roughly EUR 400 million, is on a very good level, and we continue to see ourselves in a position to proactively shape future of a future with these resources. Also, as Niels mentioned in his presentation, we want to utilize the opportunities to consistently pursue our strategic goals. In this way, we can further secure what we have achieved, prepare the company even better for the challenges ahead, and contribute to a sustainable and profitable increase in the value of the company.
This having said, we close our presentations, and now, frankly, we are looking to your questions. Thank you very much.
... Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one. If you wish to remove yourself from the question queue, you may press star and two. Anyone who has a question may press star and one at this time. Our first question today comes from Alex Sloane from Barclays. Please go ahead with your question.
Yeah, hi. Thanks for taking the questions. I've got a couple around sugar and the outlook, if that's okay. Just firstly, in terms of the, I think at the midpoint, the sort of, you know, around EUR 300 million expected decline in sugar EBIT this year. I wonder if you could, you know, break out how much of that you see as coming from higher costs, versus how much of that is the expectations of lower prices? And I guess on that second point, it'd be great to have any color, if you're able to provide it, in terms of your base case thinking around contracting this summer, in terms of what's embedded in that guidance.
And finally, I mean, obviously, you mentioned actually in the presentation, you know, there's been several upgrades over the past year or so, as the tailwinds to sugar have been, you know, stronger than you initially anticipated in guidance. Is there any risk that the reverse could be true as we now see some headwinds to European sugar, or do you feel the EUR 200 million-EUR 300 million guide is adequately conservative? Thanks.
Thank you, Alex. I think that they are all the questions you would like to raise, then we would start with answering. I think the first one, with the decline of EUR 300 million guidance against last midpoint guidance against last year, will take Stephan. I think the second part, the base case contracting, Niels, I think this one for you, if okay.
Mm-hmm.
The third one, I think is if there is a risk to the, let me say, to the guidance for 2024, 2025 in the financial sugar financial 2024, 2025. I think Stephan, it's also one for you.
Thank you. Yeah. Let me start, you're fully right. I mean, given the starting point of roughly EUR 550 million operating profit in the last financial year, going to the forecast 200-300 million midpoint, is a delta of EUR 300 million. The main driver for the declining profit are the increased production costs. Cost increase in campaign 2023 on average was more than EUR 100 per ton. It means with an expected sales volumes of 4 million tons, this explains by far the most profit decline that we see so far.
Thank you, Stephan. Then this, please take the second.
Yeah, I would rather like to answer that, Alex. So let me go back a bit in the history. So about two years ago, we had a strong decline in yields and a reduction in volumes. Last year, we had a normal harvest with normal sugar yields, and therefore, the year before last year, last year, we increased a bit our contractual areas. In the new contractual period, where we are in at the moment, where we don't have yet a contract signed with our farmers, we see a further stabilization to a slightly downturn in hectares of contracting sugar beet, so that we can level out the sugar demand in the entire European area where we are in.
So therefore, I would say that it's more stabilized, and therefore, the sugar amount will equal the demand, probably slightly less. What we have had last year, this is probably one specific topic, we had some imports from other areas, specifically from the Ukraine, which is also now limited. So therefore, we see here with the contractual situation and the sugar production, a more equalized market than it probably is at the moment.
The third one was the question of more or less, Alex, about if there a contrary risk that there might be some downward revisions of our initial guidance, which we said today, of this EUR 200 million-EUR 300 million. And, and maybe, Alex, really, there are assumptions behind that first guidance. Stephan said something about production costs. They are fixed up to September, but nobody knows today what is the campaign output for 2024, how will be the cost for 2020, 2022, 2024. Then we set some assumption about world market pricing, about development in the world market.
In principle, we have the same situation about the grain imports, but it needs all the time that the market will be back in a more normalized situation. And then we set really some pricing assumptions for the period from October onwards, but with the time frame that we have today, we feel comfortable with this range of EUR 200 million-EUR 300 million. But clearly, you see this wide range. There are, from the midpoint, chances as well as risks.
... Thanks very much.
The next question comes from Oliver Schwarz, from Warburg Research. Please go ahead.
Hello, gentlemen. Thank you for taking my questions. I will ask them one by one if you don't mind. But,
Oliver, today we are here as three executives, and we distribute the questions and the answers in between of us. And so it would be really for the flow of the answering, et cetera, better if you this time, we got it right.
Okay.
Okay? Quarterly results-
Okay.
But now in the analyst conference with the CEO on the table, please do it, write all questions and we will answer.
Thank you for that. But before I do that, please let me quickly take the opportunity to thank you, Mr. Kölbl, for the many conversations over the year. I mean, the Chinese have a saying, "May you live in interesting times." Well, we most certainly did during your tenure as CFO of Südzucker. And so I'd like to thank you for the ride. It has been a blast, at least for me, hopefully for you as well. So with that out of the way, I will raise three questions for the time being and step back into the queue. Firstly, on CropEnergies, ethyl acetate plant that is going to be completed by the end of 2025.
Can you give us an indication whether your capacity is already being sold to the respective or prospective customers, or whether you're still looking for contracts to be struck? Is there some visibility in regards to a premium when compared to ethyl acetate? And how will the pricing work? Will that be, let's say, more like pegged to the raw materials, and that, in your case, to grain? Or will that be rather pegged to the price of the fossil fuel-based ethyl acetate, which is currently the vast majority of the product sold to the chemical industry? That would be my second question in that regard.
Perhaps from a more, let's say, bird's-eye perspective, I would say, the arguments that you gave for the listing of CropEnergies, which you fleshed out on page 23 of your presentation, those arguments most likely also apply to your stake in Agrana. Any idea how you will deal with that in the future? That's it for me for the time being. Thank you.
Yeah, Oliver, thank you. Normally your analyses are really well received, but now you are really wrong. My CFO period was 20 years with Südzucker, not 10. But only by the way, from the answering, I would say that the questions to CropEnergies, ethyl acetate, I think you will take it, Stephan, all the stuff, capacity sold, visibility in premium pricing. And I think, Niels will answer your questions. You write, I think, several times, what's behind and what's the issue with Agrana.
Yeah, thank you again for this question, and I think what we have to consider is that the framework and the conditions around Agrana is not just slightly, it's I think, completely different to those of CropEnergies. So this will not mean that we are not considering to make our cooperation as line and slim and quick as possible, and that we are also doing our investment in the right thing. But I would say it's an interesting topic. We are always talking to Agrana, how we can make our corporations even more effective, and we are working there on a good way, but it's not really comparable to CropEnergies. It's much more complicated, it's much more difficult, and therefore, nothing we are really having in focus for the short term.
Stephan, go ahead.
When it comes to ethyl acetate, as we said, the commissioning. So the investment is EUR 120 million-EUR 130 million. And what about commissioning? You ask about the pricing. There are two options. One can be fossil plus premium, and the other one is to establish a completely new pricing, which is not dependent on fossil, but on the value creation of the product. So CropEnergies' team is working on both aspects. The customer from my knowledge is not as the latest news, but what was the discussions we had when I was working for CropEnergies, was discussions with the customers.
We got very good feedback from the customers and very high interest from the customer side for this product, so the total of all the interest expressed was far higher than the annual production capacity. But as to my knowledge, it's not yet decided upon how the pricing will at the end be, whether it will be a standalone pricing based on the CO2 value premiums of the product or based on the production cost pricing of compared to fossil with premium. But it's clear, if we want to fight climate change, we have to at least have green carbons, and this has by far a better product quality by value proposition than fossil ones. But it's still not finally decided.
... Okay, thank you very much. Thank you.
Thank you, Oliver. So we currently do not see any further questions in the queue, so maybe from my side here, last reminder, last call to anybody who is up for any questions. So we see Axel is going to have the next one. Thank you.
Yes. Hello, everybody. Thanks for taking my questions. I have three ones. First one is to Freiberger, I'd say. So can you say something a little bit about the situation in the US frozen food market? Nestlé recently presented weaker results here, pointing to aggressive pricing by a single competitor and the divided situation of US consumers, with significant downtrading of low-income consumers. The second would be on Crop Energies. So regarding the ethylene investment, when can an investment decision regarding renewable ethylene be expected? Because if I remember correctly, the fundamental decision was originally supposed to have made around the turn of the year 2023-2024.
The last one, also to CropEnergies, can you say a little bit about the scenarios on which the lower and upper ends of the EBIT guidance range of CropEnergies are based? Thank you very much.
I think, Stephan, you take the last one with the guidance Crop Energies. What are the assumptions behind the upper and lower point? I think you would also take the ethylene one on this-
No, I think-
Stephan. This would take the fiber, I think.
Mm-hmm.
You just start, Niels, or?
Yeah. Axel, thank you very much for this question. The U.S. market in pizza, from our Freiberger perspective, we cannot really confirm what you just referred from one of our competitors. So our business in the U.S. has been better than the year before, so we increased our position. We made a fortune out of increasing our volumes with stable prices. So therefore, from our perspective, it is an intact market at the moment. Yes, competition is high, as always, but we see a growth perspective for our business in the U.S. pizza market.
Okay, thanks.
Then I continue with the two questions on CropEnergies. One, your question was on eight. This is one, and this is part of the chemicals of the group. So we just started about ethyl acetate, so ethyl acetate is the second option for bio-based chemicals. And here therefore, we acquired 50% of Syclus. As you know, this is a project development company, developing a project idea in the Netherlands. So here, the company progresses well when it comes on technology selection, site development, CapEx estimation. But what we have to state is there's still a high uncertainty on the price of the product.
This is a little bit different to ethylene, because ethylene is a mass market, and here it's more, even more uncertain how, at the end, the pricing and the willingness of customers pay for the product will be. That means, we still need here more time to evaluate this project. When it comes to the EBIT guidance for the energies, as you saw, it's EUR 22 million-EUR 60 million, and we as we also in the prior years, there is always a high volatility on the ethanol pricing. So we have seen on contract on the last weeks and months, relatively stable ethanol prices, a good demand, but volatility cannot be excluded. And when it comes to wheat, there is also ...
We had seen a price decrease in the last months, bringing raw material wheat down to 200 EUR per ton. But it's volatile market, it's weather markets, and as we have seen in recent days, some news about droughts or harvest problems easily brought up the pricing to 250 EUR per ton on markets. But typically we see for the time being, the grain prices should be in a corridor between 200 and 250, and this is what is also reflected in the guidance.
Okay, thank you very much.
We have a question from Niklas Becker, from Deutsche Bank. Please go ahead.
Yes, good afternoon, gents. Also two questions from my side, please. The first one on sugar: Could you quantify if any volumes were sold on the world market, i.e., ex-EU, during the last year? And if you would expect any volumes to be sold outside the EU in the current financial year? And maybe just a brief comment, what, if any, what the average discount was compared to EU prices, which you realized. And then secondly, also on CropEnergies, could you just provide a bit of information on the current hedging book, i.e., how much of your production and output side is currently hedged, and also at what prices? Thank you.
Stephan, I think you take the energy hedging book, and for the volume side, you can say the last financial year, roughly, we sold 300,000 tons of sugar to the world market?
... And, and for this calendar year, with all the uncertainties we have today, the number will be higher, substantially higher. And the price gap, when you compare net, net after logistic cost, I would assume we talk about at least EUR 200 for 2023, 2024. So I think then we have answered the both parts.
Yes, that was-
For CropEnergies guidance, I mean, when the hedging book, we do not fully disclose all the details due to confidentiality reasons, but as a matter of a general answer to this, the wheat markets are very liquid, so on the market positions, you can hedge any volumes that you might need, and this is what we typically do. We do our overall analysis of wheat market, the weather market, harvesting situations, and based on that situations, we decide month by month or even week by week, whether we take repositionings on futures and options for the current financial year and also for the next year to come. Typically, there's a cost of carry.
That means the closer we come from quarter to quarter, the higher the hedging rate it comes, and as a rule of thumb, you could assume that for weeks, the coverage is roughly in a solid two-digit number, could be roughly half of the volumes needed at this time of the year. When it comes to ethanol, the hedging is also possible, but those markets are. It's still very young markets, and there's not the same, by far, not the same liquidity for hedging ethanol volumes. It is possible. We do also step by step, but to a much lower degree.
So it's also 2 digit, but it's much lower than the wheat are typically on the grain position hedging. Okay, done?
That was our last question.
Okay.
We'll hand back to Nikolai for closing comments.
Thank you, Francis. Thank you, everybody, participating in today's conference call. And, as always, we are very happy-
Oliver, coming back.
Oh, Oliver, some questions left here, so we're not gonna leave this call without your last questions. So you've calculated that it's actually 20 years with Thomas, right?
I didn't say 10 years. I said tenure . So you being-
Ah, okay.
in the position of the people.
Yeah, now you're trying to escape. I see that.
Yeah, absolutely. I tried to cover my... Coming back to the question, sorry for not stepping in earlier. A couple of them are remaining. Could you please highlight the use of tax loss carryforwards in the current annual year's results? How much of that will you probably employ, given that the position in Südzucker is that you'll be profitable to the amount of EUR 200 million-EUR 300 million? So obviously, most of your operations should be firmly in black figures, which should entitle you to make use of available tax loss carryforwards. How much might that have an impact when applied to the tax rate?
That should be substantially down from, let's say, the 30% that it is theoretically. That would be my first question. Second question would be, in regards to, your target of bringing the net debt down. I guess, a lot of that also comes from a reduction of working capital, but just to make sure, is there a target in regards to working capital? And I guess that's mostly inventory reduction in the current fiscal year. And perhaps also, looking at your operations in the US in the past fiscal year, sales were down by 8%. That was the most for any region. That's probably in connection with the closure of a plant by Richelieu in the year before.
But when you're talking about expanding your position in the US, is that based on current capacity, or are you implying that you might want to build up more capacity in the US? And, if so, what time frame are we talking about? Yes, and perhaps lastly, we talked about hedging of grains. Could we do the same exercise, not specifically on CropEnergies, but for Südzucker Group as a whole, could we do the same exercise for energy hedges, please?
Thank you, Oliver, for your questions. I think we take the five other question about the capacity, possible capacity expansion in U.S. Stephan will take the net debt question, and then I will take the tax rate, and the possible impact from our-
... tax losses carry forward, and then I will also take some words to the hedging position and actually on group level. Let me start with the tax rate, Oliver. In 2022-2023, we had started with a tax rate of 22%, and in the last fiscal, the tax rate went down to 17%. And the main point which positively influenced this tax rate was that we could, due to the new planning and the good development in the sugar operations, we could capitalize these tax losses carryforwards, and this is clearly a one-off effect in the short term in the tax position.
Going forward, we can say as of February 2024, the remaining potential capitalization of tax losses carried forward on group level is around EUR 150 million. But currently, the allocations, you can say, are roughly one-third in sugar and two-thirds in all other segments, mainly at Ensus in the U.K. With the current, let me say, expectations and current planning, we do not expect to use this, let's say, this remaining tax losses carried forward in the current fiscal year.
So, if you would calculate, you can use a tax rate normalized at 23%-25% for fiscal 2024, 2024, because we don't see the potential to further capitalize tax losses, tax losses carry forward. And then I go to the energy hedging position group wide for 2024 is roughly at 70%.
I take over your question to net financial debt. As you see on page 6 now, our starting point of net financial debt for the business year just closed, this is EUR 1.8 billion, and as we said, we have a strong commitment to reduce this. The corridor that we see is to bring down net financial debt into a corridor of EUR 1.4 billion-EUR 1.5 billion. That means a reduction level of EUR 300 million-EUR 400 million, and ceteris paribus, this is mainly to that working capital release on the inventory side, yes. This is also, I mean, this clear commitment to bring down overall net financial debt is also linked.
You have seen on page 46, the liquidity profile, so there are financial instruments coming to maturity next year, and then for sure, we also already prepare next financial steps.
Okay, coming to the question about capacity increase of Freiberger in the U.S. So we are not yet thinking about any increase, because we have just increased our capacity about three years ago, where we have invested in initial build. So the growth we are expecting to come is out of the current capacity.
Can you explain the shortfall in the last fiscal year in the U.S.?
So what we have done, we have reduced one of our capacity in sauce and dressing, where we have reduced our factory sites. And we could increase prices and increase our profitability, but the volumes at this time was not on the level we wanted it to be, so this is what we are working on for the current situation. And as I said before, we see that we are in a good way of materializing this.
Thank you very much for all your answers. Maybe, a short one. I saw that you had inventory writedowns in the last fiscal years. Is that to be expected to reoccur also in the current fiscal year, from your point of view?
It's clearly, Oliver, depending on the market development. When you look on the last fiscal year, the main portion was from writedown in our sugar segment, due to the export we decided to do. And so depending on the further market development, depending on the needs, we have to export, maybe there are some following writedowns in 2024-2025.
Okay. Thank you very much.
We have a follow-up question from Mr. Herlinghaus. Please go ahead.
Yes, sorry for the late question. So just a quick one: Could you please say something to the state of the business, the starch business, especially in the 4Q? And perhaps, what is to be expected in the first and the second half of the running fiscal year?
Yeah, maybe I start. Starch had, let me say, a difficult 2024 year due to several effects. One was that the first half year sales volumes were under pressure due to our customer problems in the construction industry, paper industry, et cetera. Volumes recovered in the second half of the year. But the main, let me say, negative influence was the pricing. Ethanol prices, we discussed it on the CropEnergies level. Second, was also the coarse starch prices were also in 2024 under pressure.
For the first half year 2024-2025, it's hard to predict, but with the current framework, we see a stabilization of sales volumes, and we see also a pressure on the margin side. So difficult environment for the starch operations, also in the first half year.
Okay. Thank you very much.
And now-
Okay.
There are no further questions.
Okay. So thank you again, and thank you everybody participating in today's call. And as you all know, we are around for further questions. Don't hesitate to give us a call, ring, email, whatever, and otherwise, yeah, have a nice day, and speak to you soon. Thank you, and goodbye.
Goodbye.
Thank you. Goodbye.