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Ingredients crucial to Raisio's FY 2005

By Jess Halliday , 10-Feb-2006

Raisio has reported results for full year 2005 that are more or less on a par with the previous year. While Raisio Nutrition was impacted by one-off costs and write-downs, Life Sciences performed better as ingredients showed respectable growth.

Turnover for the group at large was €424.6 million, compared to €437.9 in 2004, whereas the recorded operating result, including one-off items, was -€10.9 million (an improvement, nonetheless, on -€18.4 million in 2004).

"The first part of the year promised good performance, but the market outlook grew bleaker in many of our business areas toward the end of the year," said CEO Rabbe Klemets.

In particular, profitability took a downturn in the malt, potato and food diagnostics segments, leading to write-downs totalling €21 million in 4Q.

Profitability was impaired at Raisio Nutrition, where turnover dropped 2.4 per cent to €380.6 million compared to the prior year.

While margarine sales were strong and particular growth was seen in the Polish market, a decreased turnover in food, feed and malt operations in other markets led to an operating result excluding one-off items of €8.6 million - the same as 2004.

The actual operating result was -€7.3 million (compared to -€9.8 million last year), including a €15.9 million write down in fixed assets of malt and food potato business operations.

The segment also bore the €1.5 million one-off start up costs of Raisio's new oat and soy plant, which started supplying products to the Finnish market under the GoGreen label at in January. They are seen as one of the key growth areas for the company in 2006, and are instrumental to its renewal plants.

Executive VP, communications and investor relations, Taru Narvanmaa told NutraIngredients.com that the growth potential from Russia is also well defined. While production and marketing costs mean it is still in the red, the company has been selling margarine in Russia for a year now and is on the point of launching its Benecol brand there in the spring.

Benecol is currently Raisio's only global brand, although GoGreen may gain a foothold in the wider Scandinavian and Eastern European markets with time.

"The Benecol market has been improving," said Naravanmaa. "Raisio has a market share of almost 50 percent of the Finnish functional margarine market."

It has also given a functional spin to its Keiju margerine brand in Finland with the use of camelina oil, a source of omega-3. While it is too early to see the precise results of that, the perception has been very good, both at retail and with consumers. The company is looking at applying the same innovation in Poland, and may also consider supplying camelina oil as an ingredient in the future.

Life Sciences segment, meanwhile, under which the ingredients fall, experienced a 10.7 percent increase in turnover in 2005 to €59 million and the operating result excluding one-off items was 7.5 million.

"Growth in the life sciences business has been on a totally different level to the rest of the company," said Naravanmaa. "It gives a good image to be a forerunner in the functional food sector."

Much of the company's R&D has been focused in this area, including variants on the Benecol to make it suitable for more food applications, and camelina oil. R&D is also underway in the field of oat beta glucan, probiotic bacteria and prebiotics.

Markets for sterol-based ingredients have been developing, and Raisio's ingredients sales growth has mirrored that of the European market at large (11 per cent to €50.2 million). This is attributed to rising awareness of health issues amongst consumers, and the launch of new, user-friendly products.

Expansion of Raisio's stanol ester plant in Raisio, Finland, is expected to be completed in the early part of this year.

The outlook for the coming year, then, is far from glum - although the current dip is expected to last into the early part of 2006 due to growth inputs and marketing spend. But the company said: "Growth and enhancement of operations will improve the outlook for the latter part of the year, and the overall operating result for 2006 is expected to improve over the previous year."

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