CSM targets key food sectors for future growth

By Anthony Fletcher

- Last updated on GMT

Related tags: Better

Poor 2005 results could mark a watershed for ingredients giant CSM,
which is in the process of refocusing its business strategy.

"CSM's conglomerate days are clearly over following the sale of sugar confectionery early 2005 and assuming the sale of the sugar division in the course of 2006,"​ said chief executive Gerard Hoetmer.

"We will forcefully exploit our leadership positions."

Hoetmers statement comes as the Netherlands-based company reported that net sales from continuing operations decreased last year by 4.2 per cent to € 2.618,0 million.

Operating result from continuing operations before exceptional items amounted to € 169.1 million, a decrease of 12 per cent.

The total net income of € 423.4 million, was also negatively impacted by numerous restructuring charges.

These figures are a symptom of the major upheaval CSM has experienced in some key sectors, such as its European sugar business. "CSM does not see itself as the consolidator of the European sugar market,"​ said Hoetmer last month.

The company is currently looking for a buyer for its sugar division, which produces and sells between 350,000 and 380,000 tons of sugar every year.

The firm says it is committed to focusing on its core strengths in the bakery ingredient sector, and also plans to undertake significant streamlining measures.

"Our 3S-program will see us drive down our costs by € 110 million in 2008,"​ said Hoetmer.

"We will intensify our innovation rate; tripling our sales of new products to 15 per cent in bakery supplies. Purac will continue to lead the growth and development of the lactic acid markets.

"Our strong competitive advantages, combined with a commercial focus on targeted growth segments will drive strong organic growth."

Hoetmer said that the first results of the firms restructuring initiatives amounted to € 19 million last year, with the majority of the 2005 projects materialising in 2006.

"We are confident on improving our performance of continuing operations in 2006,"​ he said. "Last year we started to optimise our capital structure and have returned over € 200 million to our shareholders by dividends and share buy backs.

"We intend to return up to € 250 million to our shareholders in 2006, consisting of dividends and share buy backs. These planned strategic initiatives together with the actions already taken in the last six months, clearly show our intention to drive forward shareholder value in the short and long term."

Sales growth this year is expected to be limited, though the benefits from various cost improvement projects are expected to begin to kick in.

In North America, the trend of sales growth in bakery suppliers is expected to improve. An increase in operating result is expected in 2006.

For the group as a whole, Hoetmer believes that restructuring could bring total savings of up to € 55 million, of which half will contribute directly to the operating result.

"Building on the initiated measures and given the prospects for the divisions as outlined above, we are confident on improving the results of the continuing operations in 2006,"​ he said.

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