Dutch bakery supplies business CSM has announced that it will cut 200 jobs from its workforce across Germany, France and the US in the next two months in response to plummeting sales and falling consumer confidence.
The cuts were announced in its third quarter trading results, issued on Monday, as part a wider strategy to deal with growing recessionary trends. The company said it would also focus on customer-oriented organisation and greater product innovation.
CSM chief executive officer Gerard Hoetmer said: “The bakery supplies businesses particularly in Europe – in Germany and the UK – are facing difficult market conditions. In these countries consumer confidence has fallen sharply…This drive for improved efficiency will continue in 2009.”
CSM said that European bakery supplies sales volumes are particularly affected, having fallen six per cent during the quarter. Meanwhile, there was growth of 9.5 per cent in its organic sector, although much of this was due to price increases – of 11.5 per cent – while sales volumes were actually down 2 per cent.
Hoetmer said: “We have accelerated our launches of innovative new products to respond to the changes in consumer behaviour. We are adapting our product portfolio including more value for money propositions reflecting the changing trends.”
Raw material costs
In its first half-year results, the company had noted downward pressure on its bakery supplies markets as hefty price increases for raw materials began to influence consumer behaviour. The update said that this trend had intensified over the third quarter and that the company is predicting lower demand for its products as this recessionary environment deepens.
The cost of raw materials has come down in recent weeks, but CSM has so far also failed to reap the benefits due to the timing of its prearranged contracts. As a result, it predicts that higher costs will continue to impact on the business for the rest of the year.
Hoetmer said: “We see raw material prices weakening significantly over the last few weeks, which due to timing differences with our existing cover positions is likely to negatively affect our results in the fourth quarter.”
Lactic acid growth
The only area in which CSM saw volume growth was its PURAC subsidiary, a global market leader in the production of lactic acid, lactic acid derivatives and gluconates, which was up six per cent.
The company claimed that currency movements also had a strong negative impact on the company’s earnings, which it predicts will be 10 to 15 per cent lower than its 2007 results of €153.7m.
CSM said: “Currency translation has a significant impact on our reported results…Approximately half the decline in EBITA [earnings before interest, tax and amortisation] is due to currency movements.”
The company’s total EBITA for the first three quarters of 2008 stood at €95.7m, down from €104.8m for the same period last year.
CSM provides a wide range of ingredients for the bakery sector including food preservatives, baking fats and lactic acid.