• Revenue: EUR1.86 billion, a decrease of 5% in the first six months.

• EBITDA: EUR107.6 million, a decline of 34.3%.

• Operating Profit: EUR55.3 million, down 50.9%.

• EBIT: EUR56.6 million, a decrease of 49% compared to the previous year.

• Earnings Per Share: EUR0.35.

• Fruit Segment Revenue: EUR824.5 million, an increase of 4.2%.

• Sugar Segment Revenue: Decline of 8.9%.

• Net Debt: EUR621.2 million.

• Equity Ratio: 46.3%.

• Gearing Ratio: 50.9%.

• Cash Flow from Operating Activities: EUR118.3 million.

• Investment: EUR47.1 million in the first half.

• Tax Rate: 36.8%.

• Warning! GuruFocus has detected 4 Warning Sign with WBO:AGR.

Release Date: October 10, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• The fruit segment delivered a strong performance in the first half of the year, with a 4.2% increase in revenue.

• Agrana Beteiligungs AG is making good progress on its corporate strategy, focusing on cost savings and market synergies.

• The company is actively working on emission reduction targets, including transitioning its last charcoal-fired sugar factory to natural gas.

• Investments in the first half amounted to EUR47.1 million, with significant projects in the fruit, starch, and sugar segments.

• The company expects a slight increase in revenue and a significant increase in EBIT for the fruit segment for the full year '24, '25.

Negative Points

• The second quarter was significantly weaker than the previous year, with a 5% decrease in revenue and a 49% drop in EBIT.

• The starch segment remains weak, facing challenges from the paper, construction, and food industries.

• The sugar segment is under heavy price pressure due to high inventories in the EU and lower world market prices.

• Floods in Central and Eastern Europe have impacted operations, particularly at the starch site in Pischelsdorf.

• The company expects a significant reduction in EBIT for the full year '24, '25, with the third quarter performance anticipated to be very significantly below the previous year.

Q & A Highlights

Q: Can you quantify the impact of the recent floods on your financials, and which divisions were most affected? A: We cannot yet quantify the negative impact on our P&L, but the starch segment is likely the most affected. We do not expect a significant financial impact, and we have insurance coverage. The timing of insurance payments could affect the financial year they are recorded in. The sugar segment faced transport delays, but these are not expected to be material.

Q: What is your outlook for the third quarter, and do you see any recovery in the sugar segment? A: The third quarter is expected to be significantly below last year's performance, driven mainly by the sugar segment. We believe we have reached the bottom in terms of price development and expect a faster recovery than in previous downturns, but it will take 6 to 12 months. Factors such as demand, import regulations, and world market prices will play crucial roles.

Q: How do you expect the fruit and starch segments to perform in the third quarter? A: The fruit segment is expected to perform better year-on-year, remaining stable. The starch segment will face challenges due to the balance between output and input prices, similar to the second quarter. Sugar will be significantly lower.

Q: Given the momentum in the third quarter, what makes you optimistic about the fourth quarter? Does your EBIT guidance include flood impacts? A: We expect the full-year EBIT to be no lower than EUR76-77 million, which includes a potential slight negative impact from the floods, estimated at EUR3-5 million. We are still confident in reaching this target, but it depends on factors like sugar volume marketing and production costs.

Q: How are you managing the challenges in the sugar segment, and what are the key factors affecting its recovery? A: We expect lower acreage for sugar beets next year, which should positively impact prices. However, recovery depends on demand, import regulations, and world market prices. We anticipate a faster recovery than in previous years, but it remains a challenging situation.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.