Chairman of the board and ceo2019-04-25T16:12:00+02:00

Letter from the chairman and the CEO

In line with expectations, in 2018 Cosun was unable to hold on to the upward trend in results seen in previous years. The group profit was substantially lower. The decisive factor proved to be the very low selling prices quoted on the international sugar market. The disappointing results have forced us to take extra measures in our sales markets and to exercise even stricter cost control. There is no reason, however, to postpone or cancel planned investments in efficiency improvements and innovation, but we will be extra judicious about their timing and size.

Sugar prices on the world market fell to their lowest level in decades in 2018. European sugar prices accordingly also came under pressure. The exceptionally high 2017 campaign had created substantial surplus stocks in the European Union, which placed additional pressure on selling prices from the very beginning of 2018. Prices fell to unprecedented levels as the year progressed. Exports to the world market, where prices were already exceptionally low, offered no relief. This combination of setbacks forced Suiker Unie to report a loss for the first time in its history. As Suiker Unie still accounts for the lion’s share of the group result, Cosun’s profit for the year was substantially lower than in the past.

Cosun is a cooperative of Dutch sugar beet farmers and believes its members should receive a fair price for the sugar beet they supply. That, after all, was one of the reasons to establish the original cooperative sugar factories. Growers deserve a fair price for their sugar and Suiker Unie must have enough sugar to satisfy its customers’ needs. This is why Cosun offers its members a guaranteed minimum beet price. The minimum beet price is relatively high, especially in relation to European selling prices, meaning that Suiker Unie was unable to cover its costs from the sales contracts it fulfilled in 2018.

             Dirk de Lugt                                                Albert Markusse
Chairman of the Board                                           President & CEO

2018 was an exceptional year in many respects. Weather conditions during the growing season in the Netherlands and large parts of Europe affected not only the cooperative’s results but also the profitability of arable farming itself. The drought has led to extra costs, for example for field irrigation, or substantially reduced the yield per hectare, and thus the farmers income. Cosun had promised its growers a minimum price of EUR 32.50 per tonne of beet. The disappointing results for the year were reflected in the very modest bonus Cosun paid to its members. The beet price for 2018 was set at EUR 35.59 per tonne of beet of average quality, significantly less than in previous years.

Aviko turned in a good financial result. The protracted drought in the summer months meant fewer potatoes were available, which drove up the cost of sales. The outlook is favourable, however, because the world market for French fries is still growing by three to four per cent per annum. The closure of Aviko’s factory in Amberger (Germany) in order to stem its losses could not be avoided. The Snow Valley joint venture in China was dissolved towards the end of 2018. The relationship with the Chinese partner was too unsteady to continue the partnership and Aviko is now exploring other avenues to continue its activities in and for China.

Sensus and SVZ had a difficult 12 months and their results were lower than in the previous year. Both business groups are having to cope with wider fluctuations in prices and pressure on margins. Duynie Group is growing and turned in stable results. On balance we have had to accept a significantly lower profit for the year and Cosun will not see an improvement in its results until selling prices on the international sugar markets pick up again. Our strategy of spreading risks across several activities has again proved its value. But we must also conclude that the results of our other activities cannot make up for the decline in the sugar result. Low sugar prices will again have an impact on Cosun’s results in the current financial year. Some of the pressure on prices will be relieved by a reduction in the substantial sugar stocks. The size and quality of the harvests will be determined in part by weather conditions. We trust that the market and selling prices will show signs of recovery again.

Harvests and selling prices are not the only factors to influence Cosun’s results. In the Netherlands, the Climate Agreement will introduce measures to green the economy, chiefly by replacing natural gas from Groningen with alternative energy sources. Cosun is studying opportunities to make its own energy supplies more sustainable and is taking measures to reduce its CO2 emissions wherever possible. The Cosun business groups have taken meaningful steps towards energy transition and will continue to do so. The Netherlands must take care, however, that it doesn’t price itself out of the market to neighbouring countries. The Brexit situation is currently so speculative that little can be said about it except that uncertainty about the consequences is restraining growth. Despite the decline in financial results in 2018, we will continue our investment programme. We will invest in efficiency measures, such as Aviko’s new cold store at its factory in Steenderen, and in organic growth, such as at Duynie’s production facility for pet food ingredients, and in research and development with a view to developing innovative products and applications for the longer term. Precisely because of the uncertainty and volatility in our main markets, we are not wavering from our strategy and its execution. As a major arable cooperative in the Netherlands, we recognise our responsibility to our members, staff, customers and other partners.