Speciality starches lift National Starch Q1
food and ingredients firm Kerry to shed the struggling ingredients
arm of its flavours subsidiary Quest International. In the same
week, the ICI group - that includes National Starch - reports a
slight improvement in trading performance for the first quarter of
2004.
Free of the ingredients operations ICI - knocked last year by weaker earnings from both the flavours and starch businesses - said that Quest can now focus on the core business - flavours.
The flavours company has been troubled by lost business dating back to 2002 and the impact of software problems. But results for the first quarter of 2004 announced last week show a 4 per cent rise in profit, helped by improved margins, for Quest, from £9 million last year to £13 million. Although sales slipped to £162 million, down from £170 million for the quarter in 2003.
This sales descent was echoed at the UK-based starch firm National Starch that saw sales dropping just over 2 per cent to £436 million, from £447 million in 2003. But as for Quest, trading profit clawed up, coming in at a considerable 28 per cent rise on the previous year, from £39 million to £50 million in 2004.
Value-added products helped to bring in the returns. Specialty starch sales were 5 per cent ahead of last year and all regions delivered good growth, with food starch sales particularly strong in the US. Gross margin percentages were above last year due to improved sales mix and the absence of one-off freight costs in Brazil that impacted Q1 last year, said ICI.
New business is in order as ICI reports that flavour sales for food at Quest 'were similar to last year'. Any growth was offset by lower sales for food ingredients although spinning these operations off to Kerry last week means that the obstacle has since been removed for Quest and should herald a growth in profits.
"Flavour sales were slightly ahead in all regions and improved product mix, transactional currency impacts, and the absence of one-off costs contributed to gross margin percentages for the division significantly above last year," said the firm.
Rising raw material prices, currently squeezing food ingredients firms and food processors across the globe, remain a key unknown factor in future balance sheets. ICI chief executive John McAdam said: "Looking forward, the demand outlook continues to be generally good although the outlook for raw material costs - which did not rise significantly from Q4 to Q1 - remains uncertain."
