CSM Reports Sales Boost in Q2, Warns of Price Increases

The improved EBITA resulted from the acquisition of Best Brands, a favorable underlying margin development, and currency effects. Sales increased by 19%, driven by growth at Purac and the acquisition of Best Brands.

Aug 11 2010 --- Bakery ingredients supplier CSM has delivered an increased EBITA of € 55.8 million (+37%) in the second quarter of 2010, excluding one-off acquisition and integration costs (€ 4.4 million). The improved EBITA resulted from the acquisition of Best Brands, a favorable underlying margin development, and currency effects. Sales increased by 19%, driven by growth at Purac and the acquisition of Best Brands.

Sales for the second quarter increased by approx. 19% to € 771.7 million (2009: € 647.6 million). The acquisition of Best Brands contributed strongly with € 100.3 million. Organic growth was -0.8% due to a lower sales volume. Sales for the first half-year were up by approx. 10% at € 1,415.8 million (2009: € 1,283.7 million). The acquisition effect was € 118.7 million; organic sales growth was virtually flat at -0.1%, due to a lower volume at Bakery Supplies.

EBITA in the second quarter amounted to € 55.8 million, excluding one-off integration and acquisition costs of Best Brands, up € 15.2 million compared with the same period in 2009. For the first half-year EBITA amounted to € 102.5 million (2009: € 60.7 million). Net debt at the end of June amounted to € 761.5 million, an increase of € 433.2 million compared with December 31, 2009, largely due to the Best Brands acquisition.

Commenting on the second quarter results, Gerard Hoetmer, CEO of CSM, said: "We are proud to see, in line with our expectations, our businesses continuing their positive underlying profit trend during the second quarter. Purac continued its strong ongoing performance showing substantial organic growth and contributing strongly to a more than doubled EBITA. Although the markets of our Bakery Supplies activities were impacted by volatile consumer behavior, our bakery supplies activities improved EBITA as a result of good margin and cost management.”

“In Bakery Supplies, growth in core countries such as the UK and Germany was not enough to compensate for declining sales in Southern and Eastern European countries. Maintaining our profitability in those countries whose economies are severely hit is our main objective. Innovations are essential for the future. We see it as recognition of our continued investments that our US ingredient business Caravan has received the prestigious IFT food innovation award. The integration of Best Brands is progressing according to plan. The two merged businesses continue their operations under the name of CSM Bakery Products North America, which further leverages the commercial exposure of CSM being the leader in its industry. The progress of our integration plan strengthened our confidence that we will certainly realize the communicated savings. In addition, during the integration process our belief is reinforced that the new entity will have an additional organic growth opportunity from its enhanced product and client offering. This will result in additional profitable sales opportunities, underpinning our ambition to grow our sales at 1-2% above market growth”, Hoetmer added. 

CSM reported that after the good performance in the first half of 2010 the company remains cautiously optimistic for the second half of 2010. “We expect to see a continuing challenging economic environment. In addition, we expect to see cost increases in a number of our raw materials. We have developed a highly professional procurement organization which enables us to mitigate volatility in raw material costs with our cover positions and allows us to manage the effects of raw material price variances in our pricing strategy,” a statement read.

“At the same time, we expect to see the benefits of our actions in innovation and marketing as well as the positive effect of our acquisition strategy. We remain optimistic about both the short-term and long-term growth opportunities for Purac. However, these opportunities will require additional investments in our organization and innovation for projects such as bio-plastics which will affect the EBITA increase at Purac in the second half of 2010. Furthermore, we expect consumer confidence, one of the drivers of volume growth at Bakery Supplies, to remain under pressure,” the company noted.

Overall, CSM expect EBITA in the second half of 2010 to show an improvement compared with the second half-year of 2009. The improvement will be less significant compared to the first half-year results due to a stronger comparison base in the second half of 2009.”