For Cosun, 2004 was a year of good operating results and the highest net profit ever: EUR 114 million (2003: EUR 31 million). Despite the sale of several non-core activities, consolidated turnover remained at the same level as in 2003. After adjustment for incidental items, on balance the core activities improved their operating profits. More details are available in the key figures.

The main disposal in 2004 was the unconsolidated interest in Advanta. The profit realised on this transaction was a significant factor in 2004 being the most profitable year in Cosun’s history The business groups’ operating results should be considered after adjustment for the substantial net incidental income of EUR 59 million. Before incidental items, operating profit increased from EUR 59 million to EUR 65 million

Business groups
All the Basic ingredients activities reported higher operating profits before incidental items. Suiker Unie and Sensus profited in full from the good sugar beet and chicory harvests in combination with efficiency gains at the production sites. Production levies were again lower than normal in 2004. In comparison with the previous year, EU measures had a limited impact on the result. The Slovenian sugar company, TSO, realised good margins on the sale of sugar produced in 2003 before Slovenia joined the EU. The reform of the EU sugar market organisation, however, is placing serious pressure on the results of all three operations. In response, incidental expenses were recognised to end sugar production at the Puttershoek factory and to write down tangible fixed assets at TSO. As in 2003, Nedalco again had to contend with narrow margins brought about by the oversupply of alcohol on the EU market in 2004.

Aviko reported a slight decline in its profit owing to a combination of overcapacity among producers, greater consolidation among customers and a flat market. Cosun accordingly accelerated the amortisation of part of the goodwill obtained on the purchase of Aviko in 2002. The good harvest in 2004, which benefited the sugar and chicory activities, forced down potato prices and thus exerted pressure on prices and margins in the French fries segment.

On balance, the compound ingredients activities turned in higher operating profits. Unifine Food & Bake Ingredients had its profitability boosted by improvements in its production system, an effective pricing policy, further streamlining of the range and higher efficiency. Unifine Sauces & Spices continued the process of cost savings and quality improvements, but its profit was depressed slightly by weaker turnover. SVZ had a good year even though market prices came under increasing pressure. Its operating profit before incidental items was higher. With the accession of Poland to the EU, and thus the removal of import duties, and to keep fruit processing costs low, it was decided to close the facility at Hien-Dodewaard. A large part of its production will be transferred to Poland. The associated closure costs have been recognised as an incidental item in the profit and loss account.

Prospects
Cosun expects its operating profit before incidental items to be slightly lower in 2005. As in 2003, the 2004 sugar beet harvest was exceptionally good. If the harvest and production levies return to normal in 2005, Suiker Unie’s results will be lower than in 2004. Sensus expects higher inulin sales to increase its result further. In the second year since Slovenia joined the EU, TSO’s sales margin will be slightly narrower. Nedalco is looking forward to a better balance between supply and demand on the EU alcohol market.

Both Aviko and SVZ will face low selling prices in 2005 on account of the ample harvest in 2004. Unifine Food & Bake Ingredients and Unifine Sauces & Spices expect an increase in their results. There is some uncertainty about the effects of the proposed reform of the European sugar market organisation and the outcome of the WTO panel. Furthermore, of course, the disposal of Advanta will not contribute to results in 2005.

No significant changes are expected in the number of staff in 2005. Capital expenditure will be far higher than depreciation on account of substantial outlays at Nedalco, Aviko and SVZ. No significant changes are expected in the group’s long-term financing in the year ahead.