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CSM responds to shareholder criticism

By Anthony Fletcher , 18-Nov-2005

Dutch ingredients firm CSM has responding swiftly to shareholder concerns over the firm's "poor operational and financial performance".

"As we remarked in August, for CSM 2005 is a transition year," said the firm in a press statement.

"The cost-cutting programme is well on the way, and part of the proceeds are being used in our expenditure on sales, marketing, and R&D to bolster our competitive position and maintain market leadership.

"In addition, we have returned over €167 million to shareholders this year."

CSM was responding to a shareholders statement issued this week that called on the company to address concerns over under-performance and unfocused strategy. The investors, representing more than one-third of shares in CSM, are worried that current strategies are not turning the business around quick enough.

Some analysts suggest that such statements are likely to again fuel speculation of a break-up of the company.

In any case, it has certainly been an eventful year for CSM. The group's beet processing operations in Breda, Netherlands, have been closed down, Purac and some parts of bakery supplies in North America and Europe have been reorganised, and some other on-core businesses have been sold.

CSM however remains confident that such initiatives will yield results. A programme aimed at further margin improvement was launched in August, aims to achieve substantial cost savings in 2006, gradually leading to an annual improvement in the operating result of at least €50 million as of 2008.

"At the same time we are increasing expenditure on sales, marketing and R&D," said the company. "Overall, this programme will create a solid platform for profitable long-term organic growth."

And earlier this week, the company announced that it has reduced its long-term debt byprepayment of the US Private Placement Notes 2003. After a partial prepayment of €115 million on the 2003 Notes earlier this year, long-term debt has now further been reduced by €221 million.

In March of next year, the new management team will provide an update on the progress made in2005 and outline their plans for the subsequent phases of the implementation and execution ofCSM's repositioning strategy.

"In the interim CSM remains, as always, receptive to the views of its shareholders," said the company.

CSM is a global producer and distributor of bakery supplies and food ingredients. The group has an annual turnover of €2.8 billion and a workforce of approximately 8,900.

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