Danisco results show trickle down of consumer savings strategies

23-Jun-2009 - Last updated on 25-Jun-2009 at 08:02 GMT

Related tags Food Danisco

Danisco latest results bear testament to the responses of consumers to the economic crisis around the world – with very different shifts taking place in the US and Europe.

Food ingredients revenue rose from DKK2174m to DKK2285m over the last year; its Genecor division, which includes enzymes for food, saw revenue increase from DKK936m to DKK1037m.

But despite this growth in a touch economy, Danish ingredients company said that consumer reactions to having less ready cash in the recession have differed dramatically on either side of the Atlantic – and that has had a trickle-down effect to its ingredients business.

In Western Europe, demand for ingredients has dropped as consumers have stopped eating so much processed food and taken a “back to basics” approach to home cooking.

In North America, on the other hand, consumers have tended to stay overall in processed foods, but the shift has been from “eat out” to “take home” foods. The result for Danisco means that volume sales have remained quite strong.

In Asia, the company saw the effects of a different crisis taking its toll: The melamine milk crisis in China vastly increased suspicion and scrutiny of ingredients from that country – even from companies that had no part at all in the problem.

For Danisco, its emulsifier and cultures businesses saw a negative impact as a result.

Also in Asia the company has also been affected by falling xylitol sales; this prompted the decision to ‘mothball’ its production site in China.

Results

Overall, margin improvements in enablers and cultures have helped Danisco towards a full year EBIT of DKK1248m; however margin declines have been seen in Genencor and sweeteners.

Restoring profitability in sweeteners and raising Genencor margins remain highest priorities for management.

CEO Tom Knutzen said that the company is sticking with its strategic priorities and has the right platform to meet future opportunities and challenges. But it also recognises “the necessity to improve our performance through higher earnings, better utilisation of capital employed and reductions in our net working capital”.

“These are all prerequisites for meeting the demands of our stakeholders going forward and to deliver superior value creation.”