Royal Cosun: Significant upturn of results in turbulent 2022 Dirk de Lugt, Chairman of the Board of Royal Cosun

Dirk de Lugt, Chairman of the Board of Royal Cosun:
 

"The year 2022 will go down in the books as a challenging year for our members. Costs in the fields rose sharply and our earnings model is under pressure."

"The combination of the operating results and the adjustment to the members’ bonus system resulted in a beet price in 2022 that is needed to mitigate the cost increases for our farmers."

"Structural improvements in results and further enhancing sustainability in the fields are crucial for the long-term earnings model of beet growing. With our Unlock 25 strategy and cooperation with our growers in Groeikracht Cosun, we are on track to achieve this in the long term."

Hans Meeuwis, CEO of Royal Cosun:
 

"We look back on a turbulent 2022. With the war in Ukraine, the related energy crisis, steep inflation and challenges in our agri sector, we live in a new reality."

"Nevertheless, we are posting a substantial recovery in results and achieving a beet price that helps members absorb increased costs in the fields. We have made good strides in the necessary improvement of underlying results and the fulfilment of our ambitious growth agenda."

"Last year’s turbulence will also provide challenges this year. Despite this, we are positive about the development of the company in 2023. We will adhere to our strategic course Unlock 25 and continue to drive our plant-based ambiton future and future-proof earning model. Providing prospects for our members and for our sector."

Preliminary results 2022

Cosun’s consolidated turnover increased from EUR 2,287 million (USD 2448 million) to EUR 3,047 million (USD 3262 million) in 2022.

The 33% increase is primarily driven by positive price growth (+28%) and volume growth (+5%). Operating income, including non-recurring results, increased by EUR 153 million (USD million) to EUR 196 million (USD 209 million) in 2022. All business groups contributed to this improvement.

As a result of the higher financial result in 2022 and an adjustment to the members’ bonus system, an excellent beet price of EUR 68.75 (USD 73.61) was achieved (in 2021: EUR 40 (USD 42)) and a consolidated members’ bonus EUR 235 million (USD 251 million) will be paid.

In 2022, it was decided to determine the members’ bonus partly on the results of the closed financial year and partly based on the expected sugar results in the following year. This will ensure that the members’ bonus is more closely linked to the results realised from the delivered beet volume.

As a result, the sharply higher sugar price in 2023 will contribute substantially to the members’ bonus and beet price. The higher beet price contributes to the profitability of the beet crop, which is under pressure due to cost increases in the fields.

The member beet price of EUR 68.75 (USD 73.61) was set based on a standard content of 17% and an extractability of 91. For crops of average quality with a sugar content of 16.5% and extractability of 90.4, this is equal to EUR 65.30 (USD 66) per ton.

The average yield per hectare is EUR 5,505 (USD 5,893) (2021: EUR 3,114 (USD 3333)). For Cosun, this means that a net result of EUR 75 million remains (2021: EUR -/- 8 million (USD -/- 8.5 million)) after distribution of the members’ bonus.
 
Strategy Unlock 25

Cosun’s mission is to unlock the full potential of plants and co-products in a transparent and circular way, and turn them into valuable, plant-based solutions.

In doing so, Cosun is responding to social challenges as the growing demand for food and food ingredients, the need for plant-based alternatives to fossil raw materials and the protein transition– The Plant Positive Way.

Cosun’s strategy is focused on improving results in the short and medium term, profitable growth in four selected core areas (sugar beets, potatoes, co-products and green & health-promoting ingredients) and the realisation of a future-proof, sustainable chain.

In this way maximum value will be created for Cosun’s members and other stakeholders with the best possible long-term impact of Cosun on society and the environment.

Strategy progress in 2022

The priority in 2022 was, first and foremost, to achieve the improvement in results that our members needed. All Cosun’s business groups contributed to the profit recovery in 2022. Higher costs across the board have been successfully passed on to the market, thereby maintaining margins.

Group-wide initiatives on operational efficiency, in addition to strong turnover growth, also contributed to further improve the underlying results. Within the framework of Cosun’s Unlock 25 strategy, various improvement programmes were launched in 2022 and astute choices were made in investments and business expansions.

The focus on four core areas has also led to choices about the portfolio. For example, at the end of 2022, MijnVoer was divested, and a partnership strategy was implemented for SVZ. All divisions of SVZ posted a good improvement in results. The announced partnership strategy is expected to be completed in the first half of 2023.

The organisation was further strengthened to facilitate profitable growth towards 2025 and a number of promising plant-based innovations were launched in 2022.

Cosun’s sustainability goals and plans have been refined further. New investments have been made in energy efficiency, such as the new 8-stage evaporation at the Cosun Beet Company factory in Vierverlaten and the Cosun Solar Park in Puttershoek with 67,000 solar panels, which are contributing to the realisation of a sustainable, future-proof chain with a goal of achieving -/- 45% CO2eq emissions in scope 1 and 2 by 2030 (vs 2018).

The Groeikracht Cosun programme focuses on supporting sustainability initiatives in the fields in cooperation with growers. The programme was refined last year with a focus on three themes: support on improving nitrate and water quality, crop protection and climate. Green funding was raised in 2022 to further implement the Unlock 25 strategy.

Explanation of key result areas 2022

Sugar beets

Cosun Beet Company posted a good result for the year 2022 with higher turnover despite high energy prices. The sugar beet campaign went reasonably well despite the December frost period in the Netherlands, which had an impact on the quality of the beet at the end of the campaign.

The European sugar market is experiencing scarcity with high prices, low stocks and expected EU sugar production revised downwards. In 2022, Cosun Beet Company benefited from high gas prices for its green gas operations.

Cosun Beet Company is making extensive efforts to valorise sugar beet with joint projects, such as with Avantium, but also with its own developments, such as the market launch of Fidesse® (ingredient for meat substitutes from beet pulp) at the end of 2022.

Potatoes

The market for frozen and dried potato products is growing worldwide, making Aviko one of the strategic growth platforms within Unlock 25. Geographic focus here is on Europe and Asia, coupled with growth in value-added products. The opening of the new French fries plant at Poperinge in Belgium is an important step in further organic growth.

At Aviko, sales in frozen and chilled potato products grew strongly, partly due to the recovering foodservice market after Covid. The new Aviko factory in Poperinge in West Flanders, which opened last year, and Aviko’s operations in China are contributing to this growth in turnover.

Aviko Rixona also realised a recovery in results due to higher sales and prices after a difficult 2021. Implementation of the capacity expansion is proceeding according to plan. The development of PotatoCheezz® (plant-based cheese substitute) is in line with Cosun’s growth strategy for plant-based solutions.

In 2022, Aviko and Aviko Rixona made significant strides in structural efficiency improvements in their current factories and in the overall production chain. This should also contribute to further improvements in results in the coming years.

Green and health-promoting ingredients

Sensus (active in inulin, a dietary fibre made from chicory) posted good results on increased turnover in 2022 in its markets in Europe and the USA.

The cultivation and supply of chicory roots was somewhat disappointing in volume in 2022 – despite better contract terms for growers – while Sensus saw global demand for inulin rise, fuelled by health trends and increasing demand for sugar substitutes.

The implementation of the capacity increase in Roosendaal is going according to plan. Towards 2023, Sensus envisages pressure on demand for ingredients for premium consumer products.

Green and health-promoting ingredients

Sensus (active in inulin, a dietary fibre made from chicory) posted good results on increased turnover in 2022 in its markets in Europe and the USA.

The cultivation and supply of chicory roots was somewhat disappointing in volume in 2022 – despite better contract terms for growers – while Sensus saw global demand for inulin rise, fuelled by health trends and increasing demand for sugar substitutes.

The implementation of the capacity increase in Roosendaal is going according to plan. Towards 2023, Sensus envisages pressure on demand for ingredients for premium consumer products.

Cosun Protein successfully introduced Tendra® (plant-based protein isolate from fava beans) to the market in 2022; its unique properties make this protein very suitable for use in ice cream, dairy and meat substitutes.

Cosun Biobased Experts continued to focus on developing the market for Betafib® (biobased ingredient in Personal & Home care products) in 2022 and preparing for a factory investment, which will be decided in 2023.

Co-products

Duynie Group is expanding rapidly in animal nutrition within Europe through a number of good partnerships and optimal value creation of co-products, including sugar beet pulp. All divisions of Duynie Group posted better results.

Duynie Feed further expanded its market position in Italy and the Balkans. The market for modified starch for technical applications performed well in 2022. Duynie Ingredients (active in pet food ingredients) managed to post a positive result after two years of losses.

Beet price 2022: substantial increase compared to the previous year

The 2022 base price is set at EUR 32.50 (USD 34) per ton of beet. The members’ bonus rises to EUR 36.25 (USD 38) per ton of beet (2021: EUR 7.50 (USD 8)).

For the standard quality of member’s beet delivered (sugar content of 17% and 91 extractability), the beet price per ton is EUR 68.75 (USD 73) (basic price of EUR 32.50 (USD 34) + EUR 36.25 (USD 38) members’ bonus). In 2021, this standard beet price was EUR 40(USD 42)(base price of EUR 32.50 (USD 34) + EUR 7.50 (USD 8) members’ bonus).

The price of the average quality of beets delivered in 2022 is EUR 65.30 compared to EUR 38.91 in 2021. This increase is the result of a higher members’ bonus of EUR 36.25 (USD 38) (2021: EUR 7.50 (USD 8)).

The growing season was characterised by drought, warm weather, above average aftergrowth and a short frost in December, and good yields of tons of beet per hectare on average. The average sugar content in 2022 was 16.5% (2021: 16.7%) and extractability was also slightly lower 90.4 (2021: 90.7).

The price for surplus beet at standard quality is set at EUR 30 per ton (2021: EUR 27.50). At the average quality delivered, this amounts to EUR 28.49 (USD 30) (2021: EUR 26.75 (USD 28) per ton.

A yield of 14.5 ton of sugar per hectare was achieved in the Netherlands in the 2022 season (2021: 13.8 ton). The average financial return per hectare for the grower in 2022 reached EUR 5,505 (USD 5876) (2021: EUR 3,114 (USD 3327).