DLG: COMPANY REPORT - FIRST HALF OF 2014 With turnover of

With turnover of DKK 59.1 billion in 2013, the DLG Group realised its ambitious turnover target for the 2016 Strategy earlier than expected. The groundwork for DLG's business up until 2016 has thus been laid and the prime focus in H1 2014 onwards is to exploit synergies between the Group's business areas to ensure the necessary efficiency improvements. An important element in these efforts is to ensure an ever-increasing degree of integration between the Group's farm-supply activities in Denmark, Germany and Sweden. Securing this integration is notably a main objective of the management changes implemented in HaGe and Svenska Foder in February 2014. In H1 2014, DLG generated turnover of DKK 30.3 billion and a profit before tax of DKK 21.6 million. The level of activity in H1 2014 was on a par with forecasts. The turnover increase relative to H1 2013 is mainly due to Team AG being fully recognised in the Group turnover in H1 2014. The loss after tax of DKK -70.4 million is satisfactory and better than budgeted. The performance is below that of the same period last year, mainly due to an expected and budgeted timing difference between H1 and H2 within grain and raw materials. The Group balance sheet totalled DKK 21.9 billion at the end of H1 2014 and the solvency ratio was 21.5%, an improvement of 0.4 percentage points compared to the closing of H1 2013. In H1, the DLG Group expanded its vitamin and mineral activities with the acquisition of a minority shareholding in the Chinese feed company PUAI Feed. The acquisition in China is not of material significance to the performance in H1 2014, but the investment sows the seeds for future growth and earnings for DLG on the Chinese market. For the DLG Group's farm-supply activities, all three main markets (Denmark, Germany and Sweden) experienced satisfactory sales of and earnings on seed grain, plant protection and fertilizer, well supported by the mild spring weather that ensured an early start to the growing season. Farm-supply activities in Denmark generally developed highly satisfactory in H1 2014. The important factors for this success include structural changes in the retail structure and the implemented efficiency improvements of transport, logistics and production which are now beginning to impact the bottom line. In addition, earnings in the grain area improved significantly compared to the same period last year. The farm-supply activities in Germany failed to achieve the budgeted improvement in H1 2014. Intensified competition in the German market is a particular reason for the insufficient earnings for HaGe's feed and grain activities. The Group's Swedish farm-supply activities performed to expectation in H1 and the existing earnings levels were maintained. For the Vilofoss group, the Group's vitamin and mineral activities, H1 2014 developed satisfactorily in terms of production and sale of premixes and minerals. This is attributable, in part, to the ability in H1 2014 to maintain the growth of the Vilofoss group's activities on the German and Swedish markets seen in 2013. In 2013, the DLG Group's Service & Energy activities were expanded with the share-capital increase in Team AG, the German energy and DIY company, making DLG the majority shareholder. Team AG finished H1 2014 with a satisfactory performance above the budgeted level. The first six months of the year went very well for DIY-store activities. A contributing factor to the satisfactory performance was the mild spring that gave an early start to the season with an ensuing high level of activity. On the other hand, the energy business was under pressure. Particularly the sale of heating oil failed to meet expectations, also due to the mild weather. Kongskilde Industries, manufacturer of agricultural equipment and implements, went through difficult times in 2013. A turnaround process was consequently launched for the company. In H1 2014, Kongskilde satisfactorily followed the envisaged plan which will contribute to reversing the trend in the company. As part of the turnaround process, a number of investments will be made totalling DKK 73 million. The investments aim to support Kongskilde's growing sales on the North American market as well as to help ensure the necessary efficiency improvements of the European production. Both DLG Food and GASA Bøg developed satisfactorily in H1 and improved their earnings compared to the same period last year. For H2 2014, it is expected that the DLG Group will reach the budgeted earnings so that the forecast annual performance will be met and exceed the 2013 level. Kristian Hundebøll Lars Sørensen Group CEO Deputy CEO/CFO INCOME STATEMENT FOR THE PERIOD 1 JANUARY TO 30 JUNE 2014   1/1 - 30/6 1/1 - 30/6 1/1 - 31/12 (DKK. 1.000) 2014 2013 2013 ------------------------------------------------------------------------------- Net turnover 30.265.673 24.739.961 59.103.398 Production costs -28.146.673 -22.717.771 -54.306.707 ------------------------------------------------------------------------------- Gross Profit 2.119.000 2.022.190 4.796.691 Distribution costs -1.571.637 -1.501.496 -3.302.969 Administrative costs -441.827 -366.229 -844.528 Other operating income 115.844 94.685 338.640 Other operating costs -39.667 -56.473 -97.324 ------------------------------------------------------------------------------- Operating profit 181.713 192.677 890.510 Income from investments in associated 4.242 47.959 25.190 companies Income from other investments and 9.954 2.695 27.115 securities Net financial costs -174.312 -186.894 -405.235 ------------------------------------------------------------------------------- Profit before tax 21.597 56.437 537.580 Tax on profit for the period -57.433 -38.887 -106.336 ------------------------------------------------------------------------------- Group profit -35.836 17.550 431.244 ------------------------------------------------------------------------------- Minority interests' share of the profit -54.468 -48.684 -210.122 Minority interest' share of tax 19.928 10.034 40.934 ------------------------------------------------------------------------------- Net profit for the period -70.376 -21.100 262.056 BALANCE SHEET, ASSETS AS AT 30 JUNE 2014   1/1 - 30/6 1/1 - 30/6 1/1 - 31/12 (DKK 1.000) 2014 2013 2013 ------------------------------------------------------------------------------- Completed development projects & Acquired 466.446 424.083 483.666 intangible fixed assets Goodwill 832.475 160.716 756.644 Development projects in progress 132.055 136.375 119.888 ------------------------------------------------------------------------------- Intangible fixed assets 1.430.976 721.174 1.360.198 ------------------------------------------------------------------------------- Land and buildings 5.371.748 4.268.360 5.251.663 Plant and machinery 1.905.603 1.628.779 1.918.094 Other plants, fixtures and operating 472.358 268.436 449.609 material Property, plant and equipment in progress 334.093 238.027 331.476 ------------------------------------------------------------------------------- Property, plant and equipment 8.083.802 6.403.602 7.950.842 ------------------------------------------------------------------------------- Investments in associated companies 995.978 1.569.042 770.525 Other securities and investments 292.243 266.379 264.656 Other receivables 178.135 160.931 202.540 Deferred tax assets 170.535 155.410 158.764 ------------------------------------------------------------------------------- Fixed asset investment 1.636.891 2.151.762 1.396.485 ------------------------------------------------------------------------------- Total fixed assets 11.151.669 9.276.538 10.707.525 ------------------------------------------------------------------------------- Raw materials and consumables 1.336.217 1.548.466 1.264.503 Manufactured goods and goods for resale 3.126.047 2.860.168 3.660.705 ------------------------------------------------------------------------------- Total inventories 4.462.264 4.408.634 4.925.208 ------------------------------------------------------------------------------- Trade receivables 5.303.782 4.749.412 3.394.733 Receivables from associated companies 104.069 112.480 317.516 Other receivables 661.604 367.005 672.570 Prepayments 126.535 337.155 192.979 ------------------------------------------------------------------------------- Total receivables 6.195.990 5.566.052 4.577.798 ------------------------------------------------------------------------------- Liquid assets 116.760 86.928 97.730 ------------------------------------------------------------------------------- Total current assets 10.775.014 10.061.614 9.600.736 ------------------------------------------------------------------------------- Total assets 21.926.683 19.338.152 20.308.261 ------------------------------------------------------------------------------- BALANCE SHEET, LIABILITIES AS AT 30 JUNE 2014   1/1 - 30/6 1/1 - 30/6 1/1 - 31/12 (DKK 1.000) 2014 2013 2013 ------------------------------------------------------------------------------- Membership capital 923.547 829.233 826.318 Revaluation reserve 217.680 232.680 217.680 Reserves according to the bylaws & Fair 1.779.301 1.771.711 1.857.143 value adjustment of hedging instruments Proposed dividend and profit shares 28 0 121.500 ------------------------------------------------------------------------------- Equity 2.920.556 2.833.624 3.022.641 ------------------------------------------------------------------------------- Minority interests 1.788.349 1.241.006 1.812.847 ------------------------------------------------------------------------------- Consolidated equity 4.708.905 4.074.630 4.835.488 ------------------------------------------------------------------------------- Deferred tax liabilities 380.367 257.665 371.850 Other provisions 454.955 237.656 372.670 ------------------------------------------------------------------------------- Provisions 835.322 495.321 744.520 ------------------------------------------------------------------------------- Subordinate loan capital 25.010 1.625 8.294 ------------------------------------------------------------------------------- Payables to mortgage credit institutions 2.216.979 2.197.080 2.510.327 Issued bonds 1.000.000 993.750 993.894 Lease commitments 100.201 117.604 101.158 Credit institutions, other 778.598 475.132 420.135 Other payables 36.151 80.108 64.201 ------------------------------------------------------------------------------- Long-term debt 4.131.929 3.863.674 4.089.715 ------------------------------------------------------------------------------- Current maturities of long-term debt 128.595 181.631 282.981 Credit institutions, other 4.140.000 4.034.256 3.072.666 Prepayment from customers 3.034.750 2.404.954 2.705.510 Trade payables 2.797.553 2.237.650 2.622.432 Payables to associated companies 109.843 142.568 140.035 Corporate tax 89.489 43.860 92.748 Negative goodwill 10.863 37.088 6.850 Other payables 1.841.189 1.690.580 1.655.320 Deferred income 73.235 130.315 51.702 ------------------------------------------------------------------------------- Short-term debt 12.225.517 10.902.902 10.630.244 ------------------------------------------------------------------------------- Total debt 16.357.446 14.766.576 14.719.959 ------------------------------------------------------------------------------- Total equity and liabilities 21.926.683 19.338.152 20.308.261 ------------------------------------------------------------------------------- KEYFIGURES AS AT 30 JUNE 2014   1/1 - 30/6 1/1 - 30/6 1/1 - 31/12 (DKK million) 2014 2013 2013 ------------------------------------------------------------------------------- Net turnover 30.265,7 24.740,0 59.103,4 Earnings before interest, tax, depreciation 476,4 398,5 1.418,2 and amortisation/EBITDA Operating profit/EBIT 181,7 192,7 890,5 Profit before tax / EBT 21,6 56,4 537,6 Group profit -35,8 17,6 431,2 Net profit for the period / EAT -70,4 -21,1 262,1 Total assets 21.926,7 19.338,1 20.308,3 Equity ratio 21,5 21,1 23,8 Consolidated equity x 100 Total assets Tangible equity ratio 16,0 18,0 18,3 (Consolidated equity - Intangible fixed assets) x 100 Total assets - Intangible fixed assets DLG Telf + 45 33 68 30 00 information@dlg.dk www.dlg.dk [HUG#1851140]