CSM Posts Lower Than Expected Profitability for Q1

CSM increased its sales by 5.1%. Organic growth in the first quarter of 2012 increased with 1.8% mainly by further improving pricing to cover raw material cost increases. Volumes in Bakery Supplies were lower compared to the same quarter last year, due to continuing weakness in consumer spending.

24 April 2012 --- CSM NV, the world's largest bakery products supplier, posted lower-than-expected first-quarter profits and said it did not expect the current trading environment to improve for the remainder of the year.

CSM increased its sales by 5.1%. Organic growth in the first quarter of 2012 increased with 1.8% mainly by further improving pricing to cover raw material cost increases. Volumes in Bakery Supplies were lower compared to the same quarter last year, due to continuing weakness in consumer spending.

Earnings before interest, tax and amortization (EBITA) and before one-off costs for the first quarter were €32.3 million ($42.39 million), well below analyst expectations.

Sales for the first quarter were €798.7 million compared with €759.8 million in 2011; organic sales growth amounted to 1.8% (€13.4 million). Pricing increased by 5.1% while volumes declined by 3.3%.

In the first quarter of 2012, volumes were lower in both Bakery Supplies divisions, although the rate of decline was less than in the second half of last year.

Commenting on the first quarter results, Gerard Hoetmer, CEO of CSM, said: “The actions we announced at our full year results in February 2012 following our Business review are being implemented with vigor. The changes to the Bakery Supplies portfolio in Europe are being executed on schedule. We are monitoring closely the progress being made to restore margins, particularly in Bakery Supplies Europe where results have not progressed satisfactorily.

“We are not satisfied with the development of the results in BSEU. In particular, we had to contend with lower volumes in both the artisan bakery and the industry channels. These negative developments have further strengthened our commitment to a significant and necessary reshaping of our BSEU business portfolio.

“Meanwhile, we continue to strengthen our presence in the strategically important out-of-home/in-store channels by rebalancing activities and resources. Two small add-on acquisitions in these channels were made since the start of 2012 for a total cash cost of approximately €6 million, which will contribute around €25 million in annual sales.”

He also said that CSM’s cost-cutting project was on track and would exceed the estimated €30 million in savings for 2012.

CSM said in February it would divest or restructure up to 30 percent of its European bakery supply business, squeezed by weak consumer demand and high raw material costs.