Globus drops into the red

Globus reported operating losses of HUF161 million for the third quarter of the year, down from profits of HUF750 million a year earlier as a result of a sharp rise in vegetable prices and higher sales and distribution costs. For the first nine months of the year, profits were 86 per cent lower at HUF250.5 million.

While the company has recently moved westwards with the acquisition​ of Austrian distributor Vital Food, this came too late to have a positive impact on third quarter results, which instead were hit by the sale of the group's Bekescsabai Konzervgyar canning factory.

But it was a 29 per cent increase in the cost of sales - mainly due to higher vegetable prices caused by the reduction of agricultural subsidies as a result of EU accession - which had the biggest impact in the third quarter, despite a rise in sales of 18 per cent to HUF10.2 billion.

Export sales for the quarter were up 8 per cent at HUF3.5 billion, although they could have been higher if not for unfavourable exchange rates with the dollar, the currency in which the company conducts all of its business in the important Russian market. Domestic sales were up 23 per cent for the quarter at HUF6.7 billion, with consumers moving steadily towards higher added-value products such as canned meat and quick-frozen vegetables.

But the increasing importance of quick frozen products in the company's sales mix was also responsible for the rise in distribution costs, as these goods are more expensive to store and distribute than canned products.

Not surprisingly, perhaps, Globus is planning to concentrate on cost cutting measures in the coming year, reducing the size of its product portfolio to focus on more profitable goods and developing an integrated IT system which is expected to save it HUF100-120 million a year from 2005. Staff cuts could also save it up to HUF220 million a year from 2005.