Chr. Hansen Could Benefit from “Turmoil” Amongst Companies Involved in Agrochemical Consolidation, Says Finance Chief
27 Oct 2016 --- The wave of big mergers across the agrochemical industry could cause turmoil within the companies involved and give smaller rivals a competitive advantage, according to a senior executive at Chr. Hansen. Speaking to FoodIngredientsFirst, Søren Westh Lonning, Chief Finance Officer, Chr. Hansen, said that such mergers can “divert some attention” and could present some “short-term benefits” for Chr. Hansen.
The consolidation in the sector has seen Bayer buy Monsanto, DuPont and Dow merge, and ChemChina try to acquire Syngenta, in a major shake-up across the sector.
The Danish developer of natural ingredient solutions for the food and agricultural industries is a direct competitor of DuPont.
While Lonning insisted the consolidation would not impact “us a whole lot”, he acknowledged it could present opportunities.
He added: “I would say, we have a benefit of being relatively small but very focused company in terms of what we do.”
“It is clear that when some of our much larger competitors are involved in big mergers then it can divert some attention and that may be able to give us a shot-term benefit as a lot of other priorities are going on within some of these companies.”
“We focus on what we can do something about, we try to do that as the best of our ability.”
“There can be a tendency when you have a big merger going on that you can become a little bit more internally focused, maybe you want to deliver some cost synergies and that can create a little bit of turmoil inside which can give us a little bit of room for us with certain customers.”
While not disclosing how Chr Hansen would maximise on such an opportunity, Looning suggested that a change in ownership across the sector might not lead to wholesale changes in the agrochemical landscape.
He pointed to the example of Chr. Hansen's Food Cultures & Enzymes division, which supplies enzymes and probiotics for the dairy and food industry, which has seen repeated changes in ownership in recent years but has “not really changed the industry”.
Lonning was speaking as Chr Hansen reported that its full-year profits were up year-on-year from €162.5m ($177m) to €183.8m ($201m), driven by its Food Cultures & Enzymes and Natural Colors units performing well.
Full-year revenues were up from €859m ($938m) to €949m ($1,036m) and were up in Q4 from €234m ($256m) to €256m ($280m).
However, its Health & Nutrition unit was hamstrung by commodity prices for milk and pork being at “extraordinary low levels” and well as more fierce competition.
Despite competing in a tough Health & Nutrition market, Lonning was optimistic about the future prospects of the probiotics market.
He said: “We are still very optimistic about the long-term growth prospects of this industry because we need to increase food production by 50 percent over the coming 25/30 years and when doing so we need to do it with less use of antibiotics and other chemicals and so on.”
“So you need to find more natural means of increasing efficiency in the livestock production.”
Across its Food Cultures and Enzymes unit, organic growth was up 12 percent in the period and Lonning singled out its performance in China, where the yogurt market is growing fast.
Across Natural Colors, where organic growth was up from nine percent to 19 percent, Looning said the shift from synthetic to natural color would accelerate over the coming years in the US, where penetration rates still lag behind the 50 percent plus penetration in Europe, the Middle East and Africa.
He said: “We are working with a lot of food players and helping them make the conversion.”
But he cautioned that the “conversion a bit slower than what some of the large food producers have been announcing.”
by John Reynolds
