Savings for Aarhus as firm sheds jobs

- Last updated on GMT

Related tags: European union, Aarhus

Danish fats and oils firm Aarhus United will shed a spinkling of
jobs in an effort to curb costs in the face of intensified
competition and lower than expected sales.

The maker of cocoa butter equivalents warned investors this week that based on the disappointing results for 2003, an 'efficiency programme' had been built into the firms strategy for 2004-2006 to carve a deeper position in the chocolate market.

"In order to meet the highly intensified competition, the strategy will place increased emphasis on measures to enhance cost efficiency. This will involve both short and long-term cost optimisation, "​ said the company in a statement.

With 24 jobs earmarked to go by the end of the month, the firm that makes speciality fats said that annual savings of DKK10 million could be achieved with DKK5 million slated for 2004.

The move follows lower than expected earnings for 2003, hit by a cut in demand from the food industry for bulk oils, declining exchange rates that shaved margins and higher raw material prices.

The group, that in 2003 changed its 130-year-old company name from Aarhus Oliefabrik to Aarhus United, reported in March this year that while volume sales in Denmark of vegetable speciality fats for the chocolate industry were 'not quite as big as expected, largely because the EU's so-called 5 per cent rule, which permits the use of vegetable speciality fats in chocolate products, was not introduced by manufacturers as quickly as anticipated.'

The situation was exacerbated by an 'unusually hot European summer' that dampened the demand for chocolate products, added Aarhus. But the group remains optimistic that the demand will rise for vegetable speciality fats in the EU in the years ahead as the pace of uptake picks up.

The European Union's new chocolate law - enforced in August 2003 - sets in stone that up to 5 per cent of the cocoa butter in chocolate may be replaced by vegetable fats and still qualify as chocolate. A move that has opened up the market for CBE (Cocoa Butter Equivalents) sold by companies like Aarhus United and Swedish firm Karlshmans.

Aarhus had clearly anticipated stronger sales for its CBE's, particularly because vegetable fats are cheaper to use than cocoa butter and manufacturers can slice a considerable sum off production costs when replacing the cocoa butter thereby pitching their prices to the consumer below pure cocoa competitors.

But there are clear signs - notably in the balance sheet - that the company's efforts to concentrate on core business - chocolate and other confectionery fats - could offer stronger returns in the near future, if not in the present.

Related topics: Market Trends

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