Raisio is less optimistic over 2006 outlook

By staff reporter

- Last updated on GMT

Related tags: Investment, Vice president

Finnish food group Raisio has downgrades its expectations for
full-year 2006 as it grapples with the weak performance by its
Finnish, Swedish and Russian food business and diagnostics, and
carries the costs of restructuring.

Financial news from powerhouse behind the Benecol brand has been down-beat so far this year - yet the top brass has retained a modicum of optimism. CEO Rabbe Klemets said at the time of the Q1 and H1 results in May and August that he expected the operating result for full year 2006 to fall only slightly short of 2005, excluding one-off items.

Now, however, the company has adjusted its expectations, stating that operating result excluding one-off items for the group will be "clearly"​ lower than 2005's €9.1m.

However when one-off items - such as €3.6m income from a compensation claim related to the explosion damage at the divested chemicals plant in Toulouse - are taken into account, the full year result should exceed last year's €5.4m.

Operating profit for the first six months of 2006 slipped €1.8m into the red (excluding one-off items), from profit of €7m in the comparable period of last year.

"Significant inputs in product development and numerous product launches, all of which aim to secure Raisio's future business opportunities, weakened the company's profit development,"​ said Klemets last month, adding that he expected latter part of the year estimated to improve considerably from early part of the year.

Communication of the forecast downgrade comes two weeks after the Finnish company unveiled new cost-cutting measures aimed at mitigating the effects of slower-than-expected growth, resulting in temporary or permanent losses of around 65 jobs.

Taru Narvanmaa, executive vice president of communications, has attributed the slow growth in part to intense competition in markets such as margarine. The company has also found it difficult to find a suitable market for its new soy and oat products, and sales have been limited to the domestic (Scandinavian) market.

The group initiated to programme to streamline its overall structure in the spring, and is now turning its attention to reorganisation of the food division, which accounted for half the group's turnover in 2005, with sales of $210m.

According to Klemets, Raisio's renewal is expected to stem from its emphasis on research and product development.

Narvanmaa said that the benefits of the most recent cost saving measures would probably start to be seen in 2007.

Despite the challenges it faces, Raisio continues to look to the future with investments totalling €30m in Q2: a commitment to construct an oat meal plant in Tatarstan, Russia; and the transfer its northernmost feed plant in Finland from Oulu to Ylivieska, doubling capacity.

Expected to be completed in 2007 and 2008 respectively, these investments, according to Klemets, will "enable enhanced production and provide logistical benefits".

Related topics: Market Trends

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