CSM Net Sales Up 4.6% in 08

CSM reported that net sales increased by 4.6% in 2008 to € 2,599.3 million (2007: € 2,485.6 million). The 2008 sales figures were impacted by exchange rate differences to an amount of € 120.8 million negative, especially due to the weaker US dollar.

25/02/09 CSM has said that a combination of fluctuating raw material prices and recessionary pressures meant that EBITA fell by 13% to €133.1 million in 2008. “In the fourth quarter we experienced a decline in our volumes. Being an ingredient supplier for a large number of product categories, from cleaning products to animal feed, food and pharmaceutical products, we were affected to various degrees by the economic downturn. Based on our growth rates until the fourth quarter of around 6% we do expect that the impact in the fourth quarter has been close to 8% of our volume leading to a lower volume in Q4 of approximately 2%, part of which we assume is due to a one time decrease in inventories at our customers”, the company said in a statement.

CSM reported that net sales increased by 4.6% in 2008 to € 2,599.3 million (2007: € 2,485.6 million). The 2008 sales figures were impacted by exchange rate differences to an amount of € 120.8 million negative, especially due to the weaker US dollar. The net effect of acquisitions and divestments was € 13.6 million positive, mainly due to the 2008 acquisition of Harden Fine Foods and the various acquisitions and divestments in 2007. Adjusted for currency effects and acquisitions/divestments, autonomous growth was 9.7%. Breakdown of autonomous growth: Bakery Supplies North America 14.0%, Bakery Supplies Europe 5.7%, PURAC 8.2%.

Gerard Hoetmer, CEO, comments “The current worldwide economic environment has impacted the overall growth of our business, in particular in the second half of 2008. Lower demand was caused by a recessionary effect of down scaling and a one-off effect of de-stocking. PURAC was particularly impacted in the fourth quarter by the lower demand in some of its more cyclical end user markets. In the unfavorable market conditions we did not manage to improve on our results for 2007. However our business foundations are solid and we improved our competitive position”.

“At this moment, it is difficult to see how long this trend of recessionary volume decline of the latter part of 2008 will continue. Although we will not be able to mitigate the full effect of the economic downturn in the short term, we have two important instruments at our disposal – flexibility in bringing down cost level  and adjustments to our product offering to meet changing demands – to reduce significantly the negative impact. Also, raw material prices have fallen sharply from the peaks seen in 2008, which should be beneficial for our margin development”, Hoetmer added.

CSM said that in view of these uncertain economic times they cannot give specific guidance for their 2009 results. The company said that while 2009 will be a difficult year results will benefit from a number of actions that they have put in place. These include investments in Research & Development and marketing, leading to more innovative products that meet consumer demand. The reorganizations at Brill and CSM’s German bakery operation will have a positive effect on our results in 2009. Also, the restructuring of the bakery activities in the UK and Belgium announced in December 2008 should make its first contribution. PURAC will benefit from a full year’s savings in its supply chain as a result of the major restructuring that took place in 2008. “Further, we expect only limited ongoing negative effects from the serious supply disruption of potassium lactate due to a strike in the largest potassium mine in 2008”, the company said. These and other initiatives are expected to lead to additional cost savings of approx. € 25 million, more than compensating the normal cost of inflation.

“So far it looks like that 2009 will not see the raw material rollercoaster ride as in 2008, which should be beneficial to our margin recovery. Nevertheless it is clear that the challenges of the current environment will continue. It is difficult to see whether the volume decline and price pressure of especially the fourth quarter of 2008 will further continue. We do not expect the economic climate to change in the first quarter of 2009 compared to the fourth quarter of 2008. In 2009 we will issue quarterly financial updates which will increase transparency of developments in our results. “We expect ordinary capital expenditure to be below depreciation, with the exception of a potential large investment in lactide capacity for PURAC. Working capital as a percentage of sales is expected to improve,” the company said.

Meanwhile PURAC, a CSM company, and TOYOBO, a Japanese leading specialty chemicals, film & fiber company, announced that they have formed a strategic partnership for the production of renewable materials. These will be produced from the non-GMO lactides monomers of PURAC and will be broadly introduced into the European market by TOYOBO in March 2009 under the brand name VYLOECOL.

VYLOECOL is a patented amorphous and biodegradable poly lactic acid (PLA) and is soluble in standard organic solvents. The intended applications are as coatings or adhesives for packaging films and materials. Interest in biobased and biodegradable packaging materials is increasing rapidly. Using VYLOECOL offers the opportunity to develop fully biobased and biodegradable materials.

VYLOECOL is made from lactides supplied by PURAC. PURAC markets these lactides, under the brand name PURALACT, to a select group of partners who convert the monomers into specialty value added polymers. The unique D- Lactide technology of PURAC enables these partners to develop innovative solutions to improve temperature resistance, one of the main features limiting application of regular PLA.