Bioscience brings growth for Chr Hansen

By Jess Halliday

- Last updated on GMT

Related tags: Chr hansen, Immune system

Chr Hansen’s refocus on bioscience over the last four years, and a pipeline of new products, has yielded yet another year of growth in both sales and profits that defies the economic downturn.

The Danish company today reported revenue of €511m for the financial year 2008/9, up 10 per cent on last year in local currencies. Operating profit (EBITDA before special items) was €155m, up 9.4 per cent.

In an interview with this morning, CEO Lars Frederiksen attributed the impressive results, at a time of economic slump, to three main factors: “It is a lot to do with the organisation and the focus we have,”​ he said.

“Second, we focus on areas where we know we are leaders, and in understanding those markets.”

Finally, the company has a strong focus on innovation and efficiency. In the last year it invested 6 per cent of revenue in R&D – but Frederiksen said that the results of the process, rather than the amount that goes in, that are most important.

New cultures for yoghurt and cheese production, and new probiotics for supplements, have made a significant contribution to the growth this year, as have a range of ‘lean’ projects in the innovation departments to smooth efficiency.

Private-equity ownership

Chr Hansen is owned by PAI Private Equity, which acquired it for a €1100m in 2005. Since then, the company has implemented a change in focus, from being a one-stop ingredient supplier to specialising in bioscience.

This management strategy, which is supported by the owners, has brought organic growth of around 10 per cent each year (exchange rates notwithstanding), and profits have swelled from €80m in 2005 to €150m (EBITDA after special items) this year.

This latest set of results is the “continuation of a trend”, ​said Frederiksen. “In an otherwise difficult environment, we are please to see investment in health and nutrition is paying off.”

He acknowledged that in general food and food ingredients are less affected by the recession that other industries, like construction and cars.

But he also gave some insights into the drivers behind Chr Hansen’s star performers.

In the health and nutrition division, probiotics sales to food supplement and agricultural industries grew by almost 27 per cent. This is due to much higher interest from the pharmaceutical and fast moving consumer goods manufacturers, because the science behind their efficacy is more substantiated.

“As science progresses, we learn more about the old statement ‘you are what you eat’”. We are starting to understand much better, and if we know a certain strain has an effect on the immune system or on weight, maybe we could tailor make products.”

Sales of natural colours grew by 7.9 per cent. As a result of studies on synthetic and azo colours, the company has seen more interest from major food manufacturers in shifting to natural colour solutions.

And in cultures and enzymes, there has been continuous expansion for direct inoculation cultures, which improve stability and cost efficiency for cheese and yoghurt.

Future plans

Frederiksen said the company’s immediate plans are to continue expanding. While he is pleased with the level of investment in R&D at the moment – the 6 per cent of revenue is higher than in previous years – he signalled that he “would like to see it grow”.

And what of the longer term?

“It is clear there will be a change of ownership some time in the future, but when that will be it is impossible to say. What is important is that we run a pretty tight ship and have good performance,” ​he said, adding​that it would not make sense for a future owner to tear it all apart.

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