CSM predicts narrowing of bakery ingredient supplier base

By Jane Byrne

- Last updated on GMT

Related tags Mergers and acquisitions Csm

Dutch bakery ingredients supplier CSM, in releasing its 2009 full year results, said it saw more consolidation in the industry with the expected narrower supplier base leading to synergy savings and thus lower costs for the industrial, artisan and in-store baked good sector.

The group posted a 13 per cent increase in 2009 operating profit to €150.6m which it said was partly generated by lower prices for raw materials and cost cutting.

Gerard Hoetmer, CEO of CSM, in a conference call on the results, predicted a flurry of mergers and acquisitions in the bakery ingredients sector and he said the group, as market leader, would continue to play its part in this respect.

Earlier this month, CSM agreed to buy US frozen bakery manufacturer Best Brands for $510m (€376m), with the Dutch firm saying at the time that the acquisition would fit with a strategy it launched in 2005 to target growth in the in-store bakery market.

Chief financial officer at CSM Koos Kramer explained that the impact of the recession on volumes lessened after the first quarter of 2009 but that there remained a degree of volatility in demand.

Koos explained that the higher sales volumes in Q4 of 2008 led to the build up of stock which negatively impacted sales in Q1 of 2009, but that the first month of Q1 2010 saw sales volumes return to a normal pattern.

For the full year, the supplier said that net sales were slightly lower than in 2008, down 1.7 per cent to €2,555.9m, and adjusted for currency effects and acquisitions and divestments, organic growth was down 3.3 per cent.

CMS added that it does not see any real improvement in the economic climate this year, with unstable employment prospects leading to fragile consumer confidence in its main markets.

According to the results for last year, the group’s green chemicals division Purac along with its North American bakery suppliers unit showed a strong performance and delivered substantially improved results but the European bakery supplies unit had disappointed in the fourth quarter.

But Hoetmer said strict working capital management improved the group’s free cash flow and net debt position, delivering the financing to fund both its organic and acquisition growth strategy, with the investment in a new lactide plant in Thailand, as well as renewed focus on marketing and innovation the fundamentals behind that objective, going forward.

He also said that CSM expected to manage high sugar prices through a timely procurement strategy and that it already had hedges in place that would offset the current market highs in terms of that ingredient.

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