Sponsored Post – The fruit processing company VOG Products is the world’s largest producer of organic apple juice, concentrate and purée at one location. This year’s harvest in South Tyrol and Trentino provides outstanding conditions for premium quality and high-value products.
The Trentino-South Tyrol region on the southern side of the Alps looks back at a long tradition of fruit cultivation. With 300 sunny days per year and cool nights, the climate there is ideal. This is reflected in the taste and aroma of the fruit that VOG Products processes and refines.
2021 has proven to be an excellent year for apple quality in South Tyrol and Trentino. The weather conditions are currently optimal for the harvest. During the day, the sun shines down on the apple fields and the cool nights ensure that the colour will be intense. The Gala apples harvested this year are a brilliant red colour that is seldom seen – even the apples from areas where colouring does not easily develop are bright red.
VOG Products, the modern fruit processing company headquartered in Laives, belongs to 4 producers’ organisations from South Tyrol and Trentino and 18 cooperatives from South Tyrol with more than 10,000 members. Most of them are small family operations that care for their apple orchards with love and devotion.
Pioneer in Europe
Agriculture is acknowledged for its great importance throughout the region. After all, dealing with land and its resources respectfully is firmly embedded in the culture there. In this spirit, sustainable production is a matter of course for local fruit growers, many of whom have embraced organic cultivation. “Biosüdtirol and Bio Vinschgau have now become the largest organic producers in Europe,” explained Senior Key Account Manager Martin Bristot, who is responsible for the organic sector at VOG Products.
Organic apples now make up around 10 % of the total harvest in South Tyrol. Despite frosty nights in the spring, the official harvest forecasts indicate that the organic proportion in South Tyrol will remain constant in 2021. As compared to the previous year, in Trentino organically cultivated apples should record growth of around 20 %.
The figures show a trend: in three years, the quantity of organic raw goods delivered to VOG Products has more than trebled. As a result, the fruit processing company from Laives is now the world’s largest producer of organic apple juice, concentrate and purée at one location. VOG Products continues to source its organic goods exclusively from its members’ members: the around 10,000 farmers from the growing area.
Bioland: a guarantee of quality
Top conditions at the location, tightly meshed quality control and traceability back to the farmers are particularly valuable in the organic sector. But VOG Products goes a step farther. “VOG Products is Bioland-certified or rather, a portion of our suppliers provide Bioland goods,” said Bristot. The seal has more stringent guidelines than those laid down in the EU regulation on organic production. “In Germany, the most important market for apple juice, the organic niche is growing: the quantities demanded are increasing significantly,” Bristot added.
“In combination with South Tyrol as the region of origin, these quality aspects are important for many purchasers and during the COVID-19 pandemic, they have become even more important.”
Renowned companies in food retailing have also recognised the potential and are jumping onto the organic bandwagon. “They aim to convert a certain percentage of their assortment from conventional to organic. We are primarily observing the trend in Germany, but France, Austria and the Scandinavian countries are all following suit,” explained Bristot. “That is giving the saleable quantities of direct apple juice an enormous boost.” But in the affluent exotic markets in Asia and the US as well, consumers are very aware of organic quality.
Forecast: EBIT at least matching prior-year level
AGRANA, the fruit, starch and sugar company, generated operating profit (EBIT) of € 55.8 million in the first half of the 2020|21 financial year, a moderate increase of 7.9 % year-on-year (H1 prior year: € 51.7 million). The Group’s revenue rose slightly to € 1,309.3 million (H1 prior year: € 1,250.0 million).
AGRANA Chief Executive Officer Johann Marihart says: “Much of our positive business performance can be credited to the diversification of our business activities, which enables us to balance out fluctuating economic conditions in the various segments. Thus, in the first half of the year, the Starch segment was able to maintain the prior year’s EBIT earnings despite significantly weaker starch sales in the paper sector, thanks to the very strong performance in bioethanol especially in the second quarter.”
Helping make the year-on-year growth in Group EBIT possible was the Sugar segment, which, as in the first quarter, saw a year-on-year improvement in earnings in the second quarter as a result of higher sugar prices. The Sugar segment’s EBIT nonetheless remained negative. In the Fruit segment, AGRANA was able to hold earnings in the fruit preparations business in line with the first half of the prior year. The performance of the fruit juice concentrate business was down significantly due to lower available volumes from the 2019 apple crop.
Net financial items amounted to an expense of € 9.1 million (H1 prior year: expense of € 7.9 million). After an income tax expense of € 12.3 million, corresponding to a tax rate of about 26.3 % (H1 prior year: 34.0 %), profit for the period was € 34.4 million (H1 prior year: € 28.9 million). Earnings per share attributable to AGRANA shareholders increased to € 0.54 (H1 prior year: € 0.43).
Net debt at 31 August 2020 amounted to € 479.6 million, up € 15.6 million from the year-end level of 29 February 2020 (year-ago level of 31 August 2019: € 423.6 million). The gearing ratio rose accordingly to 36.1 % as of the quarterly balance sheet date (29 February 2020: 33.5 %; 31 August 2019: 31.2 %).
The Fruit segment’s revenue in the first half of 2020|21 rose slightly year-on-year, by 1.0 %. In the fruit preparations business, revenue remained stable despite somewhat lower sales volumes. Revenue in the fruit juice concentrate activities saw an increase from a year ago, thanks largely to higher prices for apple juice concentrate produced from the 2019 crop. EBIT of the Fruit segment was off 16.6 % from the first half of 2019|20. The reason for the deterioration lay in lower delivery volumes in the fruit juice concentrate business combined with reduced contribution margins for apple juice concentrate from the 2019 harvest.
Starch segment revenue in the first half of 2020|21 was steady at the prior-year level. With the full operation of the new, second wheat starch plant, sales volumes and revenues of the products manufactured in-house increased. At the same time, revenue from resold merchandise declined sharply, as the sale of sugar by-products is now charged on a commission basis and the corresponding sales are no longer included in the Starch segment’s revenue. Ethanol quotations, after collapsing in March 2020 amid the COVID-19 lockdown and the steep fall in demand for petrol, recovered again progressively especially in the second financial quarter and even reached a new all-time high in August. Sales volumes of saccharification products, on the other hand, were negatively affected by the COVID-19 crisis, particularly with the beverage industry.
EBIT in the Starch segment slightly exceeded the year-earlier result, by 1.2 %. The earnings were driven by the high selling prices for ethanol, which made up for the lower market demand for starch and starch products.
The Sugar segment’s revenue in the first half of 2020|21 was up 21.8 % from one year earlier. This growth was attributable both to higher sugar selling prices and increased sugar sales volumes, especially with food retailers. Although EBIT was still negative, it marked a substantial improvement from the same period of the prior year due to a more benign sales price environment.
Taking into account potential impacts of the coronavirus crisis, AGRANA expects Group EBIT for the full 2020|21 financial year to at least match the prior-year level. Group revenue is projected to show slight to moderate growth of up to 10%. Due to the ongoing COVID-19 pandemic and the associated high volatility in all business segments, this forecast remains characterised by a very high degree of uncertainty. It also does not yet include any financial effects of a possible closure of the sugar plant in Leopoldsdorf, Austria, after the 2020 campaign.
The drive to secure grower contracts with beet farmers is underway, with the aim of increasing next year’s beet cultivation area in Austria to at least 38,000 hectares by the middle of November 2020. With a three-year contract and guaranteed minimum prices, AGRANA is offering farmers long-term predictability for beet cultivation. Depending on the contracting status in mid-November, a decision will be made on whether to continue operations at the Leopoldsdorf factory or close it down after the end of the campaign.
In the 2020|21 financial year, the AGRANA Group’s investment is expected to amount to € 73 million, which is significantly below the year’s depreciation of about € 120 million following the very high capital expenditure of prior years.
In the first quarter of the 2020/21 financial year (ended 31 May 2020), AGRANA, the fruit, starch and sugar company, achieved a slight increase in both revenue and operating profit (EBIT) despite the COVID-19 crisis. AGRANA Chief Executive Officer Johann Marihart comments: “The key factor in the solid Group EBIT was a very significant profitability improvement in the Sugar segment compared to the same quarter last year. EBIT in the Starch segment was moderately below the year-earlier level, with the decline due mainly to a short-term slump in bioethanol prices at the beginning of the COVID-19 pandemic, which have since recovered again. Ethanol sales remained stable in volume terms despite the lockdown, thanks to the firm export market for bioethanol with high CO2 reductions and to the sale of 10 million litres into the disinfectant sector. In the Fruit segment, earnings were significantly below those of one year ago. Thus, the performance of the fruit juice concentrate activities was down as a result of the prior-year harvest and there were COVID-19-related decreases in the fruit preparations business.”
Results in each business segment in Q1 2020|21
Revenue in the Fruit segment, at € 303.7 million, was off slightly from one year earlier. Revenue from fruit preparations fell somewhat, as a result of lower sales volumes. In the fruit juice concentrate business as well, volumes were the reason for a moderate revenue decline relative to a year ago. EBIT in the Fruit segment was € 16.0 million in the first three months, a reduction of 26.6 % year-on-year. The causes of the deterioration lay primarily in the fruit juice concentrate business, which notably saw reduced delivery volumes in combination with lower contribution margins of apple juice concentrates produced from the 2019 crop.
The Starch segment’s revenue of CHF 204.4 million was slightly below the year-earlier level. The COVID-19 crisis had a negative impact on sales volumes of saccharification products, and initially also led to a drastic fall in bioethanol prices amid the lockdown and the sharp drop in demand for petrol. However, over the rest of the financial first quarter, bioethanol quotations rebounded again due to the resurgence in private transport. At € 17.0 million, EBIT of the Starch segment was moderately below the year-earlier amount. In the period under review, weaker market demand dampened prices and put pressure on margins.
The Sugar segment’s revenue of € 144.5 million in the first quarter was up significantly from one year before. Both higher sugar selling prices and increased sugar sales volumes led to this growth. Although EBIT was still negative at a deficit of € 1.0 million, it marked a substantial improvement compared to the same quarter of the previous year due to a more benign sales price environment.
The detailed financial results are provided in the interim statement for the first quarter of 2020|21 at www.agrana.com/en/investor.
A two-stage cartridge filtration system delivers a long service life and easy operation for sterile filtration of clear NFC juice
VOG Products uses a two-stage filtration system with BECO PROTECT CS depth filter cartridges as a pre-filter and BECO MEMBRAN PS Pure membrane filter cartridges as a final filter for the sterile filtration of apple juice. This combination not only removes microorganisms and their spores but also enables a long service life with no colloid clogging in the membrane filter cartridges.
An increasing number of consumers prefer high quality products when buying juice. NFC juice (not-from-concentrate juice) is becoming particularly popular and its market share is continuously expanding. VOG Products has benefitted from this rise in demand. The company operates state-of-the-art tank storage with a capacity of over 2.6 million gallons (10 million liters) dedicated to the storage of NFC juice.
Smurfit Kappa Bag-in Box® developed the Thermo Bag to meet the specifications of hot filling which is a commonly used processing method in the drinks industry. During hot filling, the product is pressed, filtered, pasteurised, heated and filled at a high temperature to facilitate sterilisation and then immediately cooled for preservation and taste. This method has the advantage of extending shelf life, removing any harmful microorganisms, reducing costs and simplifying the process.
Hot filling is widely used in the production of fresh (not from concentrate) apple juice which has grown increasingly popular due to its freshness and health benefits. Bag-in-Box® packaging is an attractive option for both consumers and producers because in addition to maintaining the product’s quality it is eco-friendly and cost-efficient.
Smurfit Kappa’s innovative new Thermo Bag is a barrier bag made from special coextruded PE film (MDPE for thermo-resistance and LLDPE for flexibility) and EVOH for oxygen barrier.
“Thanks to their low carbon footprint and extended shelf life, our Bag-in-Box® products offer a more sustainable choice of packaging for many industries and Smurfit Kappa relentlessly continues to develop higher performance materials for the drinks market,” said Thierry Minaud, CEO of Smurfit Kappa Bag-in-Box®.