Financial performance Cosun performed better than expected and reported higher results in 2016 than in 2015. At EUR 1,988 million, turnover was 2% higher than in the previous year. Operating profit came to EUR 77 million. The expected fall in results at Suiker Unie was more than offset by higher results from all other activities. Aviko’s potato activities made a particularly strong contribution to the result.

RESULTS
Operating profit including non-recurring items came to EUR 77 million in 2016 (2015: EUR 59 million). Recurring EBITDA (earnings before interest, tax, depreciation and amortisation, excluding non-recurring items) increased by EUR 5 million to EUR 172 million, in comparison with EUR 167 million in 2015. The bonus paid to the cooperative’s members as part of the beet price rose 3% to EUR 71 million (2015: EUR 69 million). Despite the low sugar price levels in the EU, the members received a reasonable price for their beet. The members’ bonus is recognised in operating profit as a cost of raw materials. The net profit for the year came to EUR 56 million (2015: EUR 46 million).

PERFORMANCE OF THE BUSINESS GROUPS
Suiker Unie reported a modest result in comparison with previous years but it was nonetheless satisfactory in the circumstances. The lower profit was influenced mainly by the small campaign in 2015 and the downward trend in sugar prices due to high stock levels and weak prices on the world market at the beginning of 2016. Pulp prices were also lower. The fall in results was halted by a recovery in the world market price in the course of 2016 in combination with firmer European sugar prices in the fourth quarter, and strict cost control.

The yield in the Netherlands in the 2016 season amounted to 13.3 tonnes of sugar per hectare. This is less than in 2015 but still good in the circumstances. Sowing was later than customary and extremely heavy regional rainfall caused the loss of about 2,000 hectares of sugar beet. The Dutch sugar factories had an excellent campaign and processed a high volume of beet each day. The campaign in the Netherlands lasted 109 days, with about 5.6 million tonnes of beet being processed into 934,000 tonnes of sugar. A substantial volume of raw cane sugar was again refined into white sugar. The factory in Anklam, Germany, had an excellent and profitable campaign, processing a constant volume of beet each day.

Aviko made significant advances in its result in 2016, partly because of its prompt response to opportunities in the market and the increased efficiency of its activities. Following a disappointing harvest in 2015 and the expected low availability of potatoes from the early harvest in 2016, selling prices were firmer thanks to the good potato position. In addition to this one-off impact, a detailed multiyear cost saving programme, “Fit for Growth”, made a significant contribution to the higher profit. Market conditions are good. In Europe, sales of frozen fries were higher in central and southeast Europe. Outside Europe, sales grew particularly strongly in central Asia. The result on the granule and flake activities was higher than in the previous year. Results on the Chinese flake activity were lifted by a good return on the raw materials despite the greater competition on price on the Chinese market.

Inulin producer Sensus turned in a higher result than in 2015 on lower sales and turnover. Sales were weaker in the United States but stronger in Europe, buoyed by the trend in sugar reduction. Increased competition led to lower average selling prices than in 2015. Thanks to strict control of production costs, Sensus managed to widen its margin. More chicory was processed during the campaign than in 2015; both the root yield and the inulin content were higher than in the previous year. The quality of the inulin produced was good throughout the entire campaign.

SVZ’s result was in line with that for 2015. Better results were achieved on the European market owing to an improved product mix and higher efficiency. Results in America were lower on account of high stock levels, lower volumes and a series of non-recurring items. Demand for fruit juice was lower, as it had been in the previous year, but demand for vegetable juice was higher. Following the closure of the factory in Karczmiska in 2015, the site was sold in 2016. The factory’s production has been transferred to SVZ’s main production facility in Poland. With the exception of strawberries in Poland, harvests were reasonable to good.

Duynie Group was unable to improve on its result for 2015. A weak livestock market exerted pressure on animal feed margins. The group’s other activities turned in comparable or better results. Sales to the biogas industry were slightly lower but the margin was good. The result on starch activities was better. Prices were raised by quality improvements. Duynie increased the sales and results of its ingredients activity by responding to opportunities in the pet food market.

FINANCIAL INCOME AND EXPENSE
Total financial expense in 2016 amounted to EUR 3 million owing to the limited use of external finance. This is slightly lower than in the previous year. The repayment of the final tranche of the debt to institutional investors in mid-2015 had a positive impact in 2016. The amount paid to members under the beet delivery/business termination regulations was also lower. Investments for the year were again higher than depreciation. Production capacity was increased at both the sugar activities and the fries and flake activities. At the Nieuw Prinsenland business park being developed by Suiker Unie in Dinteloord, construction work continued on the new Cosun Innovation Center. Additional financing was also attracted in 2016 for the Cosun member loan programme introduced in 2015. Under this programme, members of Cosun can lend part of their beet delivery/business termination payments to the cooperative each year for a fixed term of between two and five years.

TAX BURDEN
The effective tax rate for the year was 24.2%. This is considerably higher than in the previous year (14.7%). In 2015 the tax burden had been reduced by tax facilities for innovation, research and development and environmental investments. Liquidation losses had also been responsible for a one-off reduction in the tax burden. Losses on certain foreign activities were not recognised in 2016.

CASH FLOW
Cosun generated a positive cash flow from operating activities of EUR 190 million in 2016 (2015: EUR 54 million). The increase for the year was due in part to the higher operating profit. Working capital, moreover, was reduced by lower stock levels and higher short-term debt. The cash flow for the year was more than adequate to finance investments and payments to members. The healthy cash flow and cash position provide a solid platform for the future.

INVESTMENTS
Investments in tangible and intangible fixed assets amounted to EUR 121 million (2015: EUR 104 million). Investments were made in the sugar activities chiefly to increase production capacity and make it more flexible. Regular replacement investments were also made. The sugar factory in Dinteloord invested in a thick juice tank and an increase in its evaporation capacity, and the factory in Anklam invested in its diffusion capacity. Aviko is implementing a multiyear investment master plan to increase the production capacity and flexibility of its fries factories. It also invested in additional capacity for specialities. Construction of the Cosun Innovation Center is expected to be completed in the summer of 2017. It will eventually also house the IRS (the Netherlands’ sugar beet knowledge and research institution). Other investment projects related chiefly to replacement investments at Sensus, SVZ and Duynie.

BALANCE SHEET
Total assets increased by EUR 17 million to EUR 1,790 million, chiefly because investments were higher than regular depreciation. A lower working capital requirement improved the cash position by EUR 20 million. The higher profit and lower payment under the beet delivery/business termination regulations increased group equity by EUR 13 million to EUR 1,178 million (2015: EUR 1,165 million). Group equity at 31 December 2016 was equal to 66% of total assets, the same percentage as at 31 December 2015. The group financing position remains strong and we expect no significant changes in it in 2017.

BEET PRICE
The members’ bonus for 2016 was set at EUR 71 million and was paid as part of the quota beet price. As part of the 2016 payment, members also received the quota beet price on 7% of their surplus beet. In 2015 they had received the quota beet price on 5% of the surplus beet. The basic price for quota beet of EUR 26.25 per tonne was based on the EU minimum price and was equal to that paid in 2015. The members’ bonus came to EUR 12.25 per tonne (2015: EUR 12.25). In total, the price paid to members per tonne of quota beet with 16% sugar content and an extractability rate of 87 came to EUR 38.50. The price paid to members per tonne of quota beet with average extractability and average sugar content was EUR 44.15. The average price paid for surplus beet was EUR 28.62. The average sugar yield per hectare was 13.3 tonnes; this is less than in 2015 (13.9 tonnes). The average financial yield per Dutch beet grower was EUR 3,317 per hectare. This is EUR 16 higher than in the previous year as the higher sugar content and reduced tare more than made up for the lower yield per hectare.