CSM First Half Results Slightly Up on Cost Cuts

The company reported a turnover of 1.2 billion euros in comparison to 1.18 billion euros in the same period last year. This result does not include CSM’s sugar division, which recorded a profit of 38.8 million euros.

31/08/06 Cost-cutting Dutch bakery ingredients supplier CSM says that its recent wave of strategic actions have been well on track, as the company reported a strong improvement in its first-half result. The company reported a turnover of 1.2 billion euros in comparison to 1.18 billion euros in the same period last year. This result does not include CSM’s sugar division, which recorded a profit of 38.8 million euros, in comparison to 365 million euros last year, as the European sugar reforms begin to bite. CSM said that a ‘structural solution’ is being sought for the under-performing Délices de la Tour division.

CSM CEO Gerard Hoetmer said that the recently announced sale of CSM Sugar to Cosun will enable the two organizations to join forces and will bolster the entire chain. “It will also secure long-term continuity for the Dutch sugar sector in the rapidly changing European sugar market. In short, though the visible recovery still has to gain further momentum, the company is well on track with the strategic initiatives we have taken. I am fully confident that we will achieve the targets set for 2008,” he added.

“We have made good progress with our restructuring program and the implementation of the various projects. The 3S savings amounted to € 23 million in the first half-year, up € 16 million compared to the same period in 2005. Of these savings around € 3 million has been spent on projects to realize future growth through innovation and market development. The savings also enabled us to offset rises in the price of fuel and sugar in particular which, for market-strategic reasons, have not been fully passed on to the customers”, said Hoetmer.

Hoetmer said that Bakery Supplies North America continued its healthy growth in turnover and profit. Most of the restructuring projects are well underway. This is the signal to start reinforcing the organic growth with bolt-on acquisitions. The acquisition of CGI is a clear step in this direction underscoring our commitment to strengthen our positions in selected segments.

Bakery Supplies Europe has made good progress. As planned, fundamental strategic improvements are being resolutely implemented through restructuring and optimization. BakeMark UK successfully implemented its restructuring initiatives and performed well in the first half of the year. “Délices de la Tour however, showed disappointing results. Despite significant efforts by all parties involved and the measures taken in past years, we must face the fact that there is no prospect of sustainable improvement especially in the viennoiserie market. The impairment charge taken in HY1 is the consequence We cannot afford to have long-term underperformers in our portfolio, therefore we are investigating the possibility of a more permanent solution for Délices de la Tour. Each business unit has to contribute to achieving our 2008 targets”, he said.

Hoetmer said that PURAC has made progress in implementing its strategic plan. Prices in a number of segments have been increased to offset the rise in the price of raw materials, the restructuring program is on schedule, and savings of € 5 million have been realized. Acceptable volume growth has been generated in this phase of restructuring. “The combination of PURAC as a new market-oriented organization and innovation will enable us to leverage profitable growth opportunities in the various markets”, Hoetmer pointed out.

CSM reiterated its prospects as stated in the 2005 Annual Report. For Bakery Supplies Europe sales growth is expected to be limited. Benefiting from the cost improvement projects, an improvement in operating result (before exceptional items) is expected in 2006. For Bakery Supplies North America, building on initiatives started in 2005, the trend of sales growth and improving margins is expected to continue in 2006. An increase in operating result is expected in 2006, the company reported. For PURAC, a tighter strategic focus, geared at product innovation and new applications is expected to drive sales volume growth close to historical growth rates. In combination with price increases and ongoing aggressive cost cutting measures, a substantial increase in operating result is expected in 2006.

For the Sugar division changes in the EU sugar regime are expected to lower the operating result in 2006. CSM said that they expect to complete the announced intended sale of CSM Sugar to Royal Cosun in the fourth quarter of this year. For the total group CSM has targeted additional savings for 2006, bringing total savings from the improvement plan to € 55 million, of which half will contribute directly to the operating result. Building on the initiated measures and given the prospects for the divisions as outlined above, we are confident on improving the results of the continuing operations in 2006.