Post-restructure Purac brings results for CSM

By Jess Halliday

- Last updated on GMT

Related tags: Lactic acid, United states dollar, Csm

CSM is counting the returns from its restructuring programme, with an increase in sales for the first half of 2008 and strong performance from its Purac business.

The Dutch bakery ingredient and lactic acid firm, which initiated a restructuring programme in 2005, reported an increase in net sales of 11.4 per cent in constant exchange rates to €1247.2m in H1. The weak the US dollar and British pound took their toll on earnings, however, with EBIT for the six months coming in at €58.4m, down from €61.0m last year.

Purac is being seen as a success story in the 3-S restructuring programme (‘strong company, sharp team, solid performance’), which has so far yielded savings of €112m.

The division, which is active in the areas of lactic acid, lactates and gluconates, reported net sales in H1 of €162.6m, – up from €157.4m – and a 60 per cent increase in EBITA to €17.5m.

CEO Gerard Hoetmer called Purac “a good example of a successful restructuring”. ​He claimed: “Purac is clearly showing market leadership in new product launches, in continuously lowering the cost base, and implementing break-through changes in the production and product quality of bioplastics.

“Purac has proved to be able to increase prices to the required levels and is substantially improving profitability.”

The most recent restructuring news from Purac came last month, when CSM said it had signed a heads of agreement with Avebe to sell it its Dutch gluconic acid activities.

Although this represents a new move to exit non-strategic activities, spokesperson Mirko Creyghton told FoodNavigator.com that the sale is not expected to have a great affect on gluconate customers, as CSM/Purac will still carry out marketing and sales of the products.

Hoetmer said that globally the economic environment is “volatile” – but said that CSM overall has managed the short term challenges – while at the same time keeping an eye on its longer-term goals.

To the longer-term end, CSM is looking to apply the Purac treatment to some of its weaker business divisions, going beyond the scope of the original 3-S plan.

These are the HC Brill division in the US and the German bakery organisation, with the aim “to bring their performance up to company requirements.

For the Brill business, Hoetmer is expecting the measures to yield an improvement in results in the second half of this year. Although the US bakery supplies business saw an increase in sales of 17 per cent, to US$845.8m, this was in spite of Brill.

In fact, Brill was blamed for the dip in EBITA from €51.0m to €48.6m, including the $5m write down of “slow moving and obsolete inventory”.

As for the German bakery business, improvements are expected from 2009 and beyond.

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