Danisco counts cost of ingredient sales slowdown

By Jess Halliday

- Last updated on GMT

Related tags Danisco Vice president

Danisco has reported a slowdown in food ingredient volume sales in Q3 as the economic downturn kicks in; sweeteners and enablers are worst hit, but growth rates in cultures ‘satisfactory’.

In revenue terms the Danish firm actually reported growth in ingredients compared to the same period of last year, from DKK2065m (c €277.13m at today’s exchange rates) to DKK2113m (€283.6m). But in EBIT terms (before special items) the result was DKK160m (€21.47m), down from DKK211m (€28.32m).

Enablers

In enablers, organic growth was described as “flat”​ year-on-year as volume growth slowed towards the end of 2008 “and came to a virtual halt early in 2009”.

However the acquisition of the Abitec emulsifiers business from ABF last summer turned out in Danisco’s favour, adding some growth value. The rationale for the buy was access to more markets, although ABF’s US emulsifiers business was not included in the deal.

The integration is said to be progressing well, and Danisco will speed up its planned closure of the Abitec site in Northampton, UK.

The company did also have some positive news on enablers during the quarter, as it sealed a strategic partnership with Mingtai of Taiwan to develop microcrystalline cellulose for the food industry.

The partnership is expected to yield new products, and lets Danisco market its Grinstead MMC offering.

Sweeteners

Danisco has been struggling with sweeteners over a number of quarters, especially in xylitol sales, which have not lived up to expectations.

In early March the company announced measures to reduce the impact of poor performance in sweeteners on its performance, mothballing its xylose production in China and reducing its xylitol capacity.

A management change is also expected to help effect a turnaround, as Nicholas Dunning hangs up his hat as executive vice president and Stephane Constant, previously in charge of cultures, puts his on.

Xylitol aside, a “deterioration in revenue” ​from fructose is noted; while Litesse is said to be performing well since FDA approval in the US in 2007.

Cultures

Cultures were said to still be growing at satisfactory levels, albeit at “slightly lower organic growth rates than we have witnessed in recent quarters”.

In China, the company says it has “further enhanced” ​its position in the yoghurt sector with the acquisition of Beijing Ferment, a small biotech, in October 2008; it is also integrating another recent cultures buy, Agtech, which is involved in animal nutrition.

Overall results

Overall Danisco reported an increase in revenue compared to the same three month period of last year – from DKK2986m (€400.72m) to DKK3098m (€415.74m). But EBITDA (before special items) took a hit, dropping from DKK537m (€72.06m) to DKK384m (€51.53m).

And when special items, such as impairment charges, asset write-downs and loss on discontinued operations are taken into account, the result for the quarter was a loss of DKK698m (€93.67m).

Q3 has been an important period for Danisco. At the beginning of the month it realised the sale of its sugar business to Nordzucker, the culmination of a strategic move to focus on bioactives and value added ingredients.

CEO Tom Knutzen said today that the projections given at the beginning of March still hold. The company expects to break even this year, but is lowering its EBIT outlook from DKK1.3bn (€0.174bn) to DKK1.15bn (€0.154bn).

The firm is also taking defensive measures to reduce the impact of the economic crisis, such as staff cut-backs, a hiring freeze, and a salary freeze.

Related news

Show more

Related products

show more

Enhance Your Product Line with Non-GMO Lecithin

Enhance Your Product Line with Non-GMO Lecithin

Content provided by ADM | 09-May-2024 | Product Brochure

Unlock the full potential of your formulations with ADM's plant-based lecithins! Our diverse product range delivers the consistent functionality you...

Life is better with more fizz

Life is better with more fizz

Content provided by CO2Sustain | 19-Apr-2024 | Product Brochure

We make carbonated soft drinks fizzier for longer, so your consumers enjoy the best possible drink experience from their first to very last sip.

Related suppliers

Follow us

Products

View more

Webinars