Cosun predicts tough times despite solid results

By staff reporter

- Last updated on GMT

Related tags: European union

Royal Cosun has put a slight increase in profit down to the
contribution from Nedalco, but anticipates challenging times ahead.

The Dutch ingredients group was able to report a consolidated net turnover of 1,339 million last year.

Overall the group reported an operating profit increase before goodwill amortisation and incidental items from € 51 million in 2004 to € 61 million in 2005.

Operating profit including incidental items came to € 53 million and the result for the year to € 24 million.

Nedalco, which was consolidated in full for the first time in 2005, reported higher turnover, partly as a result of a modest recovery in selling prices in the alcohol market.

In addition, the basic ingredients group turned in higher results despite the less favourable development of the sugar market, where the supply of sugar in Europe was higher than demand.

Suiker Unie reported a good result, thanks chiefly to efficiency improvements. Beet processing at one of the three sugar factories was terminated at the end of 2004. This led to substantial cost reductions and simultaneously increased productivity.

The current organisation of the EU sugar market is about to end. Cosun anticipates that the new regime, which will come into force in July 2006, will have a negative impact on the income of beet growers, who are members of the cooperative, and on the profitability of the sugar industry.

The company however believes there are still opportunities for beet and sugar production in the Netherlands, though the production chain's overall cost base will have to be cut further.

In potato products (Aviko) the results were disappointing. The company claimed that a combination of overcapacity in pre-fried products and a further decline in west European consumption exerted strong pressure on prices.

As a result, the increase in the cost of raw materials in the second half of the year could not be passed on in full to customers.

The compound ingredients activities turned in the same result as in 2004. In the European fine bakery market, Unifine Food & Bake Ingredients' improvement measures led to a wider margin and growth in central and eastern Europe.

Looking ahead, the company predicts a great deal of turbulence within the sugar market in the first years of the new market organisation. The success of the European quota purchase scheme will also determine the pressure exerted on prices. EU levies will be very high in 2006 and subsequent years.

As a result of this and the declassification in 2006, sugar results will be lower.

The market for pre-fried potato products will also remain difficult but the cost saving measures and the efficiency improvements brought about by targeted investments will make a positive contribution to the result. Cosun also expects its other activities to make a higher contribution to results in 2006.

Related topics: Market Trends

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