Refocus and innovation lift Avebe out of the red

By Laura Crowley

- Last updated on GMT

Related tags: Potato starch, Potato, Avebe

Dutch potato starch group Avebe has moved into the black this year
after suffering a significant loss in the previous financial year,
as a result of a three pillar strategy.

Despite a challenging harvest, the company's financial situation improved considerably following its shift in focus to potato starch in Europe, its cost management, and its innovation. The company reported a net profit of €25.2m for this financial year - a massive leap from last year's loss of €4.6m. It had an operational cash flow of €25.7m, compared to €35.8m the previous year, and its net turnover was €615.7, decreased from €633.7m. Three pillar strategy ​Avebe now only has operating facilities in the Netherlands, Germany and Sweden. This is a result of a complete restructuring the company embarked on two years ago amid its financial loss. It simplified the organisation and shifted all focus to the core potato starch in Europe by disinvesting non-core activities outside Europe. It had to let go of the divisions that were less profitable, selling the interest in tapioca starch in Thailand and the production companies in Brazil and China. The company also looked to cost management, saving money through the sale of the other divisions and the reduction of employees worldwide. Avebe then invested in production efficiency methods by introducing new technologies to increase its production facilities. The third strategy implemented by Avebe was encouraging growth through innovation. In February, it launched Solanic, a new subsidiary designed to develop more added value potato-based ingredients. The division was intended to create new value from potatoes by refining, developing and marketing non-starch based ingredients from potatoes with a higher added value. Then in August, it launched a new range of starch ingredients called Etenia, intended to be used as gelling agents in gelling agents in dairy and other food products, with the added benefit of being clean-label and vegetarian. Increase in grain prices ​ Avebe took advantage of the massive hikes in the cost of feed to increase its competitiveness. Since the end of 2006, poor harvests in key producing countries and a fast-growing demand for biofuel production have driven up grain prices. As a result, manufacturers of grain starches have had to raise their prices. As a producer of potato starch, Avebe could also raise its prices to match the competition, without suffering from the increase in the cost of grain. Environmental factors ​ The good profit Avebe experienced came after a bad start to the year, with a bad summer providing unfavourable farming conditions. Avebe spokesperson Johan Russchen told FoodNavigator.com that a very dry spell followed by a very wet spell limited product supply, with only 76 per cent of potato starch being produced. Acting chairman of the board and CFO Ed Kraaijenzank said: "The 2006/2007 annual results show that, despite the less favourable harvest, Avebe has created a solid foundation for renewed growth in profits." ​ Avebe said it will now be in a position to pay a good price to the growers for the current campaign for the next financial year. Growers can expect to The board of directors also proposed paying a dividend from the net profit €10.1m to the members. This is equal to over €4.5 per ton, and this will be referred to Avebe's members' council for approval.

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