CSM Reports Rise in Q1 Sales as Costs Passed on

Sales for the first quarter were € 759.8 million compared with € 644.1 million in 2010; organic growth was 3.4% (€ 22.0 million). Pricing increased by 6.2% while volumes declined by 2.8%.

4/27/2011 --- CSM has reported in its Q1 results that increasing selling prices to compensate for higher costs has been an important focus, as is reflected by an average price increase of 6.2%. Sales increased substantially by 18.0% as a result of higher sales prices and acquisitions. CSM posted a decline in EBITA, which is mainly caused, as expected, by a short term lagging effect in passing on higher costs in increased selling prices.

Sales for the first quarter were € 759.8 million compared with € 644.1 million in 2010; organic growth was 3.4% (€ 22.0 million). Pricing increased by 6.2% while volumes declined by 2.8%. Currency effects had a positive impact of € 8.9 million (1.4%) largely due to a stronger US dollar. Acquisition effect amounted to € 84.8 million (13.2%) of which Best Brands, consolidated as per March 19, 2010, contributed € 82.5 million.

EBITA excluding one-off costs in the first quarter amounted to € 43.8 million, which compares to € 46.7 million last year. This decline is mainly the result of the lagging effect in passing on increased costs in selling prices and lower volumes. The one-off costs relate to the integration costs of Best Brands and the effects of a fire in an electrical station at Purac Brazil.

Sales volume at Bakery Supplies was negatively impacted by initiatives to fully pass on cost increases and an early Easter in 2010 compared to 2011. Volumes decreased by 3.1% compared to Q1 2010. Despite significant price increases, EBITA development was, as anticipated, impacted by the short-term lagging effect in fully passing on higher costs.

Net sales of Purac were 6.1% higher, driven by higher selling prices to compensate for increased costs. Volumes were 1.3% below last year. EBITA before one-offs declined by € 2.1 million due to higher costs not yet fully recovered in increased pricing and lower volumes.

Commenting on the first quarter results, Gerard Hoetmer, CEO of CSM, said: "The first quarter has been dominated by our commitment to increase prices in the market to compensate for higher costs. As market leader we have continued to show leadership, demonstrated by an average 6.4% and 5.2% price increase in Bakery Supplies and Purac respectively, compared to the first quarter of 2010. Our increase in product pricing, where we have responded to protect our profitability, affected our volume growth, while our sales continued to grow. Our commitment to driving growth initiatives and the strength of our product offering will improve growth over the coming periods.”

“The developments in the first quarter are consistent with our expectations as indicated by our outlook statement in our full year 2010 press release. Both sales and EBITA were impacted by a slow start of the year and reflect the anticipated short term lagging effect in passing on increased costs in selling prices. We expect to further recover increased input costs through price increases in the coming quarters. Furthermore, the first quarter of 2010 is a strong comparator due to Easter falling early in 2010 and strong volume growth at Purac driven by pipeline filling (16.3% in Q1 2010) after the financial crisis.”

“In our initiatives to protect profitability over volume at Bakery Supplies, we increased our sales by 18.0% through increased pricing (6.2%), albeit at the cost of volume (-2.8%). In addition, the acquisition of Best Brands and Classic Cakes contributed 13.2%.”

“In Purac the year started slowly but we witnessed demand increasing in the latter part of the quarter. Price increases drove a sales increase of 6.1% over a slightly declining volume. In line with our strategy, we continued our progress in bio-plastics and invested further in the organization to fuel future growth.”

“As stated with our full year 2010 results we look forward to 2011 with confidence despite the fact that we see a persisting volatile year ahead of us. We are optimistic to improve our results in 2011, although it is too early to give a specific forecast for the year," Hoetmer concluded.