|Marketing relationship B2B||Products General division into food, non-food and feed sectors; native and modified starches, saccharification products, alcohols/bio-ethanol, by-products (feedstuffs and fertilisers)||Raw materials processed Corn (maize), wheat, potatoes|
|Key markets Central and Eastern Europe, principally Austria and Germany; also specialty markets, e. g., in USA and UAE||Customers Food sector: food industry; Non-food sector: paper, textile, construction chemicals, pharmaceutical, cosmetics and petroleum industries; Feed sector: feed industry||Special strengths GM-free and strong organic focus|
Revenue in the Starch segment in 2018|19 was € 762.7 million, up slightly by 1.4% from the previous year. While revenue growth was seen in native and modified starches (mostly for price reasons), significant revenue decreases occurred in saccharification products as a result of the high competitive pressure in the European sugar market. Bioethanol revenue showed a price-driven decrease from the prior year, amid high volatility in the Platts quotations. Positive revenue trends were achieved in organic and specialty products, particularly infant formula. Revenue from animal feed sales rose slightly. The Starch segment accounted for 31.2% of the Group’s revenue (prior year: 29.3%).
The segment’s EBIT of € 51.2 million was well below the prior year’s record result of € 80.2 million and translated into an EBIT margin of 6.7% (prior year: 10.7%). Most of this reduction was attributable to the significantly lower market prices for bioethanol. On the cost side, the significant energy price increases and the higher overall prices of grain from the 2018 crop weighed on earnings. As a result of the strong expansion activities, staff costs and depreciation were also up significantly. The profit contribution from the equity-accounted HUNGRANA facility was € 16.2 million, versus € 30.5 million in the prior year. Volume and margin reductions in saccharification products and bioethanol were the key reasons for this lower result.
Sales volumes of native and modified starches into the food industry were stable. Higher selling prices were realised in the market as a result of cost increases for raw materials and energy.
An upside driver in industrial starches (i.e., non-food starches) remained the lasting high demand from the paper and corrugated board industry. Potato starch has been in short supply throughout Europe since the last campaign.
In the conventional infant formula segment, more volume was sold than in the previous year. Further increases in sales volume are planned through the implementation of several projects in the area of organic and specialty-milk-based infant formula.
The markets for by-products varied, depending on the product category. Prices for high-protein products (corn gluten, vital wheat gluten and potato protein) remained stable overall and in some cases even exceeded the prior year’s level. Aside from the bakery industry, impetus for demand in this segment also came from the pet food and fish feed market.
The environment for starch-based saccharification products, especially the isoglucose business, is determined mainly by the trajectory of the sugar market and sugar prices.
The liberalisation of the European sugar market in October 2017 caused significant market disruption not just for sugar but also for isoglucose and starch saccharification products. Historic-low sugar prices and intense competition among starch companies were key parameters in the contract negotiations with customers. Unused capacity at both established and new market participants will continue to keep syrup market prices low.
Spray-dried saccharification products, on the other hand, presented a gratifying picture. Through intensive marketing and customer acquisition programmes, market share was expanded in maltodextrins and dried glucose syrups, particularly in organic grades.
The volatility in the European market for bioethanol remained at a significant level in the 2018|19 financial year. In the first half of 2018|19, ethanol quotations were well below the year-earlier level, as greater supply in the EU and higher imports from overseas coincided with only moderately increased demand. From their low spring levels, ethanol prices then recovered in the summer months as a consequence both of logistical delivery difficulties in Europe that resulted from low river levels on the Rhine and Danube over the summer, and of higher raw material prices for wheat. After a renewed price decline in October, ethanol quotations regained stability at a higher level, thanks especially to capacity reductions in the UK, where one ethanol plant was closed and another temporarily halted production.
June 2018 saw the conclusion of the tripartite negotiations between the European Commission, the Council of the European Union and the European Parliament for the revision of the Renewable Energy Directive (RED II) from 2020. The revised directive was published on 21 December 2018. The EU member states must transpose it into national law by 30 June 2021.
The new directive sets a minimum requirement of 14% renewable energy in the transport sector by 2030. The share of cereal-based biofuels was capped at the level of the national share as of 2020, up to a maximum of 7%. Furthermore, a sub-target of at least a 3.5% share by 2030 was set for so-called advanced biofuels (“second-generation” biofuels). The list of raw materials qualifying for advanced biofuels is given in Annex IX of the directive and can be added to by the European Commission.
Biofuels from so-called high ILUC risk1 raw materials are being capped at their 2019 share and are to be phased out completely from 2023 to 2030. This includes, for example, biodiesel from palm oil.
The share of individual biofuels counted towards the 14% transport target can be increased with the aid of multipliers. Thus, Annex IX biofuels (advanced biofuels) can be double-counted.
In Austria the target for the biofuel share under the fuel regulation currently in force is 5.75% (based on RED I), of which 3.4% is the target for bioethanol (measured by energy content in both cases). The introduction of E10 would raise the biofuel content directly to the 7% target, at the existing production capacities. At the national level, this would not only meet the RED II requirements but also allow the demonstrable reduction of particle emissions and enable a further increase in the production of GMO-free protein feed and fermentation-derived CO2 as by-products.
World grain production in the 2018|19 grain marketing year (1 July to 30 June) is estimated by the International Grains Council (IGC) at 2.12 billion tonnes1, which marks a small decrease from the prior year’s level and is less than the expected consumption. Global wheat production is forecast at 735 million tonnes (prior year: 764 million tonnes), compared to expected consumption of 744 million tonnes. The world’s corn production is projected at 1,109 million tonnes (prior year: 1,090 million tonnes), versus expected consumption of 1,147 million tonnes. Total grain stocks at the end of the marketing year are estimated to decline to about 593 million tonnes, a reduction of 53 million tonnes from one year earlier.
Buoyed by tighter supply, grain futures prices rose strongly in the first half of the financial year. From September to the end of the financial year, futures then moved sideways. On 28 February 2019 the prices on the NYSE Euronext Liffe commodity derivatives exchange in Paris were € 193 per tonne for wheat (prior year: € 167 per tonne) and € 164 per tonne for corn (prior year: € 156 per tonne).
In the 2018|19 campaign the potato starch plant in Gmünd, Austria, in a campaign lasting 172 days (prior year: 164 days), processed about 264,000 tonnes of starch potatoes, slightly more than in the previous year. The processing of approximately 25,000 tonnes of food potatoes for the production of long-life potato products was in line with the prior-year volume.
The corn processing volume of AGRANA Stärke GmbH in Austria at the sites in Aschach and Pischelsdorf increased in the 2018|19 financial year to about 763,000 tonnes (prior year: 668,000 tonnes) due to the expansion of the corn processing capacity in Aschach and the relative cost advantage of corn over wheat in bioethanol production. The share of specialty corn (notably waxy corn and organic corn) was about 19%.
Wheat grinding volume at the Pischelsdorf facility for the production of wheat starch and bioethanol was about 541,000 tonnes in 2018|19, or around 7% less than in the year before. Of the 2018 crop, about 83,000 tonnes of ethanol wheat and ethanol triticale were secured in advance through delivery contracts with growers. As in the prior years, cultivation contracts for ethanol grains were offered for the 2019 crop.
At the HUNGRANA plant in Hungary, a total of about 1.0 million tonnes of corn was processed in 2018|19, down moderately from the prior year; the amounts for this equity-accounted joint venture are stated at 100% of the respective total. The plant in Romania processed about 71,000 tonnes of corn, a 2% increase from the year before.
1 IGC estimate from 21 February 2019.
The Starch segment invested € 97.0 million (prior year: € 59.4 million) during the 2018|19 financial year. The most significant projects included the following:
Additionally, € 19.2 million (prior year: € 14.8 million) was invested in 2018|19 in the HUNGRANA companies (amounts for these equity-accounted entities are stated at 100% of the total).