Danisco sees shoots of recovery for sweeteners

18-Mar-2010 - Last updated on 18-Mar-2010 at 12:03 GMT

Danisco has reported the first quarter of year-on-year growth for its sweeteners division since xylitol problems struck two years, but staff reductions are on the cards to get a strong foothold on profitability.

The Danish food firm today reported revenues of DKK338m in sweeteners in Q3m. Organic growth on the same period of last year was 6 per cent organic growth, but negative currency impact wiped off 5 per cent of this off the balance sheet.

The company ramped up production in 2007, but a previous shortage meant some users had already reformulated to other sweeteners.

Danisco is now tackling this problem by reducing production rate at several of its plants, so as to reduce inventories. “The results of that initiative have been satisfactory,” said the company, which is aiming to create a positive free cash flow this year.

However ongoing restructuring initiatives in Q4 mean some reduction in staffing levels, as production levels are reduced at some sites and efficiency measures are introduced. A spokesperson fo rthe company was unable to reveal details of the job cuts to FoodNavigator.com, but said negotiations are underway and the two affected plants are in Kotka and Kantvik, both in Finland. The financial impact of these steps is expected to be around DKK100m.

Stephane Constant was appointed as the new executive vice president to head up its sweeteners division in March, following the resignation of Nicholas Dunning.

Health claims kick

Despite the austerity measures, having a health claim for xylitol approved by the European Food Safety Authority seems – one of very few to date – seems to be having a good effect on sales. Xylitol, like all the other major product categories, grew in Q3.

Business momentum is also said to be good for the fibre sweetener Litesse, and geographically-speaking Eastern Europe and the Americas showed growth while Asia Pacific looked to be stabilising.

Across all its business units, Danisco reported overall sales of DKK3293 in Q3, with 11 per cent organic growth. Due to a DKK700m impairment charge relating to sweeteners, however, overall the group reported a loss of DKK345m for the quarter.