CSM battles costs, but H1 profits still down

By Rod Addy

- Last updated on GMT

Related tags: Raw material costs, Material

CSM battles costs, but H1 profits still down
CSM clawed back some pre-tax profit losses from higher raw material costs and falling demand in its second financial quarter, but pre-tax profits remain down for the half year (H1).

Chief executive Gerard Hoetmer said sales volumes for the bakery products and lactic acid processor had remained down for the six months to June 30, although he was pleased with performance in its second quarter.

“As I mentioned in February, the acceleration in both the increase in raw material costs and the decline in consumer demand in the course of 2011 meant that the comparison between the first half of 2012 and the first half of 2011 would be tough,”​ said Hoemer.

“I am therefore pleased that despite the ongoing difficult market situation we have been able to improve on our EBITA [pre-tax profit] of the second quarter of 2011. This has been the result of a combination of margin and cost improvements supported by currency effects.

Negative volume trend

“So far our efforts have led to a lessening of the negative volume trend of the previous quarters, however, not yet to absolute volume growth.”

He added that CSM had managed to offset raw material costs in its second financial quarter. “As we have covered most of our raw materials for the remainder of 2012, we are confident that this increased margin will also benefit our second half 2012 results.”

In addition to its struggles with market forces, CSM is in the process of divesting its North American and European bakery supplies business and focusing on bio-based ingredients. There was a risk that this could hit short term financial performance as well, it stated. It was trying to minimise the impact on employees caused by the restructure, it said.

Future CSM, comprising Purac and Caravan Ingredients “continued to record a satisfactory performance in the light of the current economic climate”,​ said Hoemer.

European volume sales fell

European volume sales for its European bakery supplies division fell in its second quarter, driven by artisan and industry channels, reported CSM. However, value sales rose by 3.6% to €545.9m, boosted by the acquisitions of The Cookie Man and Promocook, positive currency effects and organic growth.

In addition, frozen products sold to supermarkets (in-store bakeries) and the out-of-home segment showed growth in the second quarter, as did emerging market sales, albeit from a small base.

Pre-tax profits for Purac for the first half of 2012 and the second quarter were down, mainly due to ploughing cash into innovation, CSM reported. In meat preservation products, Purac continued to face challenges in terms of increasing prices while maintaining volumes. The firm said it faced declining value in the field of both low cost and high quality fully natural meat preservatives.

Overall net value sales for CSM rose in the half year to June 30, from €1.53bn to €1.63bn, while pre-tax profits including one-off costs fell from €74.5m to €66.7m. However, second quarter sales rose from €765.5m in the second quarter of 2011 to €827m and pre-tax profit increased from €36.4m to €37.7m in the same period of comparison.

Related topics: Business, Cereals and bakery preparations

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