Danisco takes looming sugar reform in its stride

By Anthony Fletcher

- Last updated on GMT

Related tags: Dkk, Denmark, Euro, Eu

As expected, restructuring costs within Danisco's sugar division
have impacted full year results, though organic growth was
'satisfactory under the given trading conditions'.

The Danish ingredients group reported revenue of DKK 20,912 million. EBIT before special items and share-based payments rose 7 per cent to DKK 2,372 million.

Danisco believes that the restructuring of its sugar business, in consequence of the EU sugar reform, has softened the financial impact of changes.

The company recently initiated a restructuring plan for the sugar business in response to the EU sugar reform. In addition, the net restructuring cost of DKK 506 million was expensed in 2005/06, in line with the firm's earlier announcement.

The firm is currently in the process of closing factories in Denmark, Sweden and Finland, with a total staff cut of around 350 employees.

In addition, the company said that the integration of Genencor is progressing as planned. Of the DKK 3.1 billion growth, Genencor represented DKK 2.5 billion, and the firm's ingredients division DKK 0.9 billion.

Nonetheless, the anticipated impact of the EU sugar reforms, which come into effect in a few weeks, continue to cast a shadow over the firm's outlook for 2006/07. Danisco says that revenue is expected at around DKK 21.0 billion with DKK 13.5 billion in ingredients and DKK 7.5 billion in sugar.

EBITDA before special items and share-based payments is expected at around DKK 3,250 million with DKK 2,550 million in ingredients and DKK 850 million in sugar after payment of the earlier announced production levy of DKK 100 million in 2006/07.

EBIT before special items and share-based payments is expected at around DKK 2,100 million with around DKK 1,800 million in ingredients and DKK 450-500 million in sugar after payment of the earlier announced production levy of DKK 100 million in 2006/07.

Special items are expected to be an expense of DKK 100-150 million.Consolidated profit before share-based payments and after special items is expected at around DKK 1.0 billion.

EU sugar reforms, which come into effect on 1 July 2006, feature a number of concessions designed to give European sugar producers a viable future. First there was the climb-down from the original proposed 39 per cent price cut to a figure of 36 per cent, and most significantly for sugar producers, there was agreement the sector would be compensated for, on average, 64.2 per cent of this price cut.

This has given the sugar industry reasons to be hopeful. A recent Standard & Poor's Ratings Services study, entitled 'Sweet'N Slow: Gradual Liberalisation Of EU Sugar Regime Preserves Credit Quality',​ said that the gradual nature of the reform should provide a fairly protected environment for European manufacturers over the next four years.

Reform of the EU sugar regime has been a long time coming. There has been intense pressure for years on the EU, the world's third-largest sugar producer, to change its heavily criticised regime that artificially which supported internal prices at three times the world level.

Related topics: Market Trends

Related news

Show more

Follow us

Products

View more

Webinars