Benecol becomes Raisio's profit engine

Related tags Marketing

Raisio's Benecol products are emerging as the major driver of
profits at the firm, following many years as a loss-making
activity, reports Dominique Patton.

The firm said today that its Life Sciences unit, which now includes a small diagnostics business as well as the stanol ester (Benecol) sales, generated €3.9 million in operating profit for the first six months of the year, up from €2 million in the prior same period, excluding one-off items.

The unit has benefited from a 15 per cent increase in sales to €29.5 million, particularly thanks to good demand for the cholesterol-lowering yoghurt drink in Europe. Greater expenditure on sales and marketing activities for the products has however resulted in a slightly weaker result in the second quarter compared with the first.

Nevertheless the growing profits at this unit now account for 40 per cent of the company's total, on just 14 per cent of its turnover.

In comparison with Raisio's significantly larger unit, Nutrition, which produces a range of food and feed products including margarine, processed potato and malt, the Life Sciences unit is achieving margins of 13.3 per cent against a mere 3.1 per cent in Nutrition.

In the Nutrition unit sales fell 5 per cent on the 2004 first half, attributed to slack domestic trade for consumer goods. Margarine sales fell in Sweden but grew in Poland, a new target market for the firm.

The unit has significantly improved its profitability, to €5.8 million from €2million in the first half of 2004, excluding one-off items, thanks to cost-saving measures implemented last year.

In addition, Raisio​ is looking to add value to the business, recently investing in new ventures including the development of 'pure oat' products for people with celiac disease in collaboration with Finn Cereal, and the GoGreen business, a joint venture with Cerealia.

But improvement in the food business is expected to be 'smaller than earlier anticipated', said Raisio, and the falling demand for malt and the drop in malt prices is expected to eat further into profits, with restructuring planned if the market does not change.

Life Sciences remains the jewel in the crown of the group, which has recently expanded stanol ester production and is now also looking at production and marketing of the ingredient in Russia and new EU member states.

The company said today that it has decided to start a share repurchase programme, on 10 August at the earliest, to develop capital "for funding or implementing acquisitions or other arrangements".

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