CSM Expects Higher Commodity Prices

Sales for the 3rd quarter were €783.7 million compared with €634.5 million in 2009. The increase of €149.2 million is attributable to the Best Brands acquisition with an effect of €95.2 million, positive currency effects of €45.1 million and organic growth of €8.9 million realized by all three divisions.

Oct 27 2010 --- CSM has delivered a 19% increase in underlying EBITA in Q3 2010 compared to Q3 2009. All three divisions posted organic sales growth in a challenging market. The integration of Best Brands is progressing according to plan, the company reported.

Sales for the 3rd quarter were €783.7 million compared with €634.5 million in 2009. The increase of €149.2 million is attributable to the Best Brands acquisition with an effect of €95.2 million, positive currency effects of €45.1 million and organic growth of €8.9 million realized by all three divisions.

EBITA in the 3rd quarter, excluding one-off integration costs, amounted to €56.7 million, up €9.1 million compared with the same period in 2009. Currency effects impacted results positively by €5.1 million.

The Best Brands acquisition impacted EBITA in the 3rd quarter by €3.8 million, including
integration costs of €3.4 million.
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Commenting on the third quarter results, Gerard Hoetmer, CEO of CSM, said: "We have delivered another quarter with substantial EBITA growth; an increase of 19% in the 3rd quarter 2010 against the strong comparison base of last year. I am even more pleased to report organic sales growth for all our activities, demonstrating CSM’s ability to show positive momentum in a challenging market environment, in which our continued innovation investments proved to be valued by our customers. The acquisition of Best Brands and ongoing strict cost management also contributed to these improved results. Across all our divisions we see raw material markets increasing substantially. We have taken the first steps to increase the selling prices to compensate for this. At Bakery Supplies we continue our strategic journey to deliver ROS targets of 8-10% and above market growth.

“In Europe the strategic investments in frozen products are delivering increased volumes. Together with cost management, these higher volumes contributed to the improvement in EBITA. At Bakery Supplies North America we remain focused on the swift integration of Best Brands, allowing the organization to maximize its combined potential as soon as possible. We have put our focus and energy on integrating the commercial organization to best serve our customers and enabling revenue synergies. In parallel, we are integrating our operations to deliver on our cost synergies. With the swift integration we are aware that we are stretching our organization. Our focus is on achieving long term synergies and getting the fundamentals right, rather than focusing on short term gains. Best Brands proves to be a perfect strategic fit and we see the integration effects becoming more visible, on which we will give an update in the presentation of our full year 2010 results.”

“Purac retains its long term focus on volume growth, whilst maintaining healthy margins. We are continuing to invest in our bio-plastic capabilities and strengthening our partnership approach. Much progress has been made, but the long-term strategic nature of the projects and partnerships has given no opportunity for new announcements, other than our partnership with Arkema," Hoetmer concluded

CSM remain cautiously optimistic for the 4th quarter of 2010, expecting investments in the organization and innovation to continue to create growth opportunities. The main contributor to market growth is consumer confidence, which is still weak in a number of markets. “Our raw material positions are carefully managed by our procurement organization and are sufficiently covered, although at a somewhat higher price level for the remainder of the year. At Purac we expect to see continuing growth whilst investing in the organization to support future growth as previously announced, this will as a consequence have a moderating impact on our short-term EBITA. Overall, we expect again a substantial EBITA increase in the 4th quarter over the 4th quarter compared with the same quarter last year.”

Sales in Bakery Supplies Europe increased in the 3rd quarter by €5.2 million (2.0%) compared to last year. Organic growth was 1.0%, driven by higher volumes in frozen products. Currency effects, due to a stronger pound sterling, had a positive effect on sales of €2.7 million (1.0%). Bakery Supplies Europe delivered an increase of 31% in EBITA compared with the 3rd quarter in 2009. Higher volumes and cost control were the main contributors to the improved performance. We are pleased to announce that Herman Verstraeten will head our European businesses as the new president of Bakery Supply Europe. Marco Bertacca, as Vice President Global Bakery Expansion Strategy, will support the Board of Management in CSM's expansion in new regions. Herman Verstraeten joins us from Unilever where he has built a great track record in driving growth strategies across Eastern-Europe and Russia, bringing many years of management experience in food, including bakery.

Purac increased its sales by 13% in the 3rd quarter. Currency effects, mainly the stronger US dollar, contributed positively to sales by €8.4 million. Purac showed an organic sales growth of 3.9%, driven by higher volumes sold (7.9%) and offset by a negative price/mix effect (4%). Purac's EBITA increased by €0.2 million compared with a very strong quarter in 2009, driven by the volume increase and offset by mix-effects and lower pricing. In addition, raw material costs increased against last year. “We are actively working to translate this into our pricing with the intention to fully compensate for higher input costs,” the company reported.