Corbion’s Year Ends on ‘Very Solid Note’ And Its Strategy Remains on Track For 2014
27 Feb 2014 --- Corbion delivered organic sales growth of 4.2% in last quarter of 2013, driven by volume growth of 5.7%. This is offset against challenges in the largest sector of its Biobased Food Ingredients division, bakery, which suffered in 2013 due to a decline in the consumption of bakery products in the company’s biggest end market, North America.
"Conditions in our main US and European markets remained difficult in 2013, with subdued economic growth and flat or slightly lower food consumption,” said ceo Gerard Hoetmer. “In this environment we were capable of delivering organic sales growth of 1.5% and volume growth of 3% during the year.”
The global macroeconomic conditions continued to be a challenge in 2013 and consumer confidence, especially in the US and Europe, remained subdued. This held back demand in both of Corbion’s segments, but particularly in the largest segment, Biobased Food Ingredients. Currency developments also had a negative impact.
“The reported EBITDA before one-off costs for the full year 2013 was stable at €99 million, but would have grown to €104 million excluding negative currency effects,” said Hoetmer. “We completed the divestment of the Bakery Supplies businesses in July and returned €250 million of the proceeds to our shareholders. As the new company, Corbion, we have made solid progress on our strategic priorities, with increased investments in innovation-focused R&D by €6 million.”
North America, the company’s largest end market – representing 64.5% of sales – saw the consumption of bakery products decline by 0.5% last year, albeit with a small improvement towards the end of the year. In Europe, data from the European Commission shows a drop in beef production which was offset by an increase in poultry production. Corbion performed well in both markets by growing revenues and volumes in 2013.
Organic growth in the Biobased Food Ingredients segment was the result of almost 1% higher volumes sold with increased demand for our biobased products in most geographical markets. This growth was achieved despite the continued weak economic climate, the bankruptcy of a major customer in the Bakery market unit, which we reported in Q1, and the ongoing impact of the earlier legislative change in the USA on the Meat & Culinary market unit. Volume growth was offset by lower average sales prices (-0.7%) reflecting the lowering of raw material prices during the year.
Its largest market in Biobased Food Ingredients, Bakery, showed a slight volume decline in 2013, in line or better than the North American bakery market. The bankruptcy of one of our largest baking customers, towards the end of 2012, caused some loss of volume. Over the course of 2013 this volume loss was mostly absorbed by other industrial bakers and the restarted from bankruptcy restarted company. In the second half of the year we shipped the first batches of our new Ultra Fresh® product line, which has generated positive feedback.
The other Biobased Food Ingredients market units, Meat & Culinary and Foods, showed good volume developments in 2013. In Meat in North America we grew our volumes again after two years of declines caused by the substitution with chemically derived preservation products following a legislative change in 2011. The sales of our low-cost-in-use product line which we introduced in response to this change is growing well, thereby mitigating the substitution effect. We also successfully expanded our premium ferments line, our clean label solutions.
During 2013 there was a reduction in volatility in global agricultural commodity markets. Bumper crops in 2013 supported inventory levels, which, along with large export supplies, saw international prices of cereals and sugar fall to levels well below their highs in 2012 and early 2013. Our most important input cost is sugar; average sugar prices fell in 2013 for the third successive year. Given the time lag inherent to our cover positions, the positive effect on our margins was limited.
Corbion noted that its financing ratios have improved, mainly due to the lower debt levels following the divestment of the Bakery Supplies Business last year. Part of the proceeds from the sale was used to redeem short-term debt.
The company also noted that as a result of the transformation of CSM into Corbion last year, approximately 40% of central staff were released during 2013, which was a major contributor to the decrease in central costs.
Looking ahead, the company said it has tailor-made strategies in place for both its Biobased Food Ingredients and Biochemicals segments. For 2014 it said it expects the current macroeconomic environment to continue to be challenging including some headwind from the strong Euro.
