CSM feels the pinch from uneven recovery across Europe

10-Aug-2010 - Last updated on 11-Aug-2010 at 10:11 GMT

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The struggling economies of Southern and Eastern European countries marred the sales figures of CSM’s bakery supplies division over the last six months, which growth from the UK and Germany could not offset.

Since the crash of October 2008 some European economies have been worse hit than others. Greece has required a huge bail out package from the EU and the IMF, and Spain, Portugal and Ireland have also been badly hit.

This patchy tale of recovery has meant the Dutch bakery specialist reported a dip in sales for the European ingredients division to €491.4m, down from €500.09 in H1 2009.

“Maintaining our profitability in those countries whose economies are severely hit is our main objective,” said CEO Gerard Hoetmer. He cited volatile consumer behaviour as taking a toll, but signalled a way forward by adding: “Innovations are essential for the future”.

Despite the uneven geographical recovery, the division did achieve EBITDA of €30.2m in European bakery supplies, compared to €18m last year.

Overall, it was able to report sales growth in H1, achieving €1415.8m compared to €1283.7m last year.

Best Brands forward

In the US, the big news this year so far has been the acquisition of Best Brands, which mostly serves the US in-store bakery sector, in March, and its subsequent integration with HC Brill under CSM Bakery Products North America.

Net sales for bakery supplies North America, which also includes Caravan Ingredients, were €962.2m, up from €807.3m last year. EBITDA was slightly up at €62.2m, but this included a €14m one-off hit from the costs of acquiring and integrating Best Brands.

Purac, CSM’s lactic acid division geared towards natural preservation and development of sustainable packaging solutions, saw higher volume sales and 13.7 per cent in value terms to €199.2m – as well as a €20.3m increase in EBITDA.

Cost concerns

The company has signalled that it has spied potential raw material cost issues on the horizon through its early warning system – and the indication is that it could lead to price hikes.

“We have developed a highly professional procurement organisation which allows us to mitigate volatility in raw material costs with our cover positions and allows us to manage the effects of raw material price variances in our pricing strategy,” the company said – but did not reveal what raw materials are causing concern at the moment.

It emphasised the need for such advance warning systems due to the volatile market situation in recent years.

“Scarceness of raw materials due to excessive demand or production interruption at suppliers can also impact our results due to sales declines and additional costs required to satisfy our raw material needs.”