CSM Reports Strong Rise in Q4 Profits, Remains Confident on Future Outlook

In the fourth quarter of 2010, net sales increased by € 152.9 million to € 790.6 million. Best Brands contributed € 96.7 million and currency effect amounted to € 38.9 million, mainly driven by a stronger US dollar.

2/23/2011 --- CSM delivered a 42.9% increase in EBITA before integration & acquisition charges to € 215.2 million in 2010, with sales up by 17% to € 2,990.1 million. The acquisition of Best Brands, effective cost and raw materials management, an improving growth trend at Bakery Supplies and solid growth at Purac were the main contributors to this improved performance. Despite an ongoing economic challenging environment, the company returned to organic sales growth in the second half of the year, “clearly showing that our competitive strength and strategic capabilities are delivering results.”

Sales increased by 24% to € 790.6 million. Organic sales growth contributed by all divisions was € 17.4 million (2.7%) and currency effect was € 38.9 million, mainly driven by the US dollar. Volumes sold increased by 0.7% as a result of volume growth at Purac and Bakery Supplies Europe.

Margins were negatively impacted by a rise in raw material costs, which have not been fully absorbed yet by increased selling prices or reformulations of our products. We remain focused on translating this into our pricing, in parallel with closely managing cost volatility through our procurement strategies. EBITA (before one-off costs) in the fourth quarter amounted to € 56.0 million, up € 13.7 million (32.4%) compared with the same period in 2009. Currency, mainly US dollar, contributed € 2.2 million.

In the fourth quarter of 2010, net sales increased by € 152.9 million to € 790.6 million. Best Brands contributed € 96.7 million and currency effect amounted to € 38.9 million, mainly driven by a stronger US dollar. Organic sales growth was 2.7% (€ 17.4 million), which is the result of increased sales volumes by 0.7% and 2.0% by increased sales pricing compared to Q4 2009. BSEU sustained its improving organic sales development in Q4 (4.0%), mainly driven by a strong performance in OoH/In Store and continued strong performance in Germany and the UK. BSNA delivered 1.6% and Purac 2.9% organic growth. EBITA (before one-off costs) in the fourth quarter increased to € 56.0 million compared to € 42.3 million in 2009. Excluding integration costs, BSNA showed an increase in EBITA of € 11.7 million (55.2%) to € 32.9 million, of which € 8.8 million was contributed by Best Brands. In BSEU, EBITA showed a limited increase of € 0.5 million to € 15.6 million. Despite sales price increases initiated in Q4, margins were negatively impacted by raw material costs and promotional activities in OoH/In Store. Purac recorded a decrease in EBITA of € 1.8 million to € 12.0 million, due to higher raw material costs, price and mix changes as well as costs to build our organization.

Gerard Hoetmer, CEO of CSM, comments on results 2010: "I am pleased to report another successful year for CSM. We delivered good progress in our EBITA performance combined with an encouraging sales trend which accelerated over the course of the year. Our results are achieved in the context of a highly challenging economic environment, demonstrating our competitive strengths resulting from the investments in our capabilities over the last few years. Our global procurement capability has been crucial to our ability to navigate through volatile commodity markets. We improved our EBITA, excluding one-off costs, significantly, rising by 43 % to € 215 million and sales increasing by 17% to almost € 3 billion. Bakery Supplies activities continued to face challenging market conditions and fragile consumer confidence. Our ongoing focus on innovation and marketing paid off, with an improved and positive organic sales development in the second half of the year. Purac sustained its impressive organic growth trend throughout the year whilst also making substantial progress in its bioplastics strategy, as demonstrated by the announcement of today. In addition the first production line at a customer producing PLA, using our high temperature stable products has become operational and the construction of our new lactides plant in Thailand is, as planned, expected to be completed by late 2011. Purac remains well placed to deliver significant growth over the coming years. The scale of these opportunities will require substantial investments to harvest the growth opportunity. During 2010, Best Bands has been successfully integrated in our operations. We now expect to significantly increase the total synergies to US$ 41 million by 2012, compared to US$ 21 million we anticipated at the time of the acquisition. The total costs involved to achieve these synergies are expected to be US$ 35 million, of which US$ 10 million is non-cash. We do not anticipate a significant change in the economic climate in 2011, but as demonstrated over the last few years, we will continue on our business strategy. We are well on track to deliver on our target of a ROCE of 12% on a sustainable basis. Our proposal to increase the dividend to € 0.90 reflects our solid balance sheet ratios and our confidence in the future."

In a separate announcemnt, CSM's subsidiary Purac and Indorama Ventures PLC (IVL) announced that they are in discussions to set up a Polylactic acid (PLA) manufacturing facility in Thailand, with an initial capacity of 10,000 tons per annum being raised to 100,000 tons per annum after developing application specific grades. This product will be based on high purity (GMO free) Lactides produced by Purac. The Lactide monomers for the production of PLA will be sourced from Purac’s Lactides production plant in Rayong, Thailand as well as from other Purac sites.

This PLA is GMO-free, natural, and biodegradable material that is a sustainable alternative to oil-based polymers. PLA has a lower carbon footprint than most other polymers and can be marketed as a green alternative for packaging materials, fibres and non-woven textiles. The products would be marketed by IVL through its existing global marketing and sales network.

The products made by the combination of unique Lactide raw materials and unique PLA production process are able to deliver a quality that is stable at much higher temperature ranges than other bioplastics. The properties of this polymer allow it to be used for a variety of textile and packaging applications which have not been possible with other bio-based products so far and will open a large latent demand. PLA has many uses, like upholstery, disposable garments, awnings, food packaging, and disposable tableware.

"This collaboration with IVL is an important step in the market development for PLA because in addition to being the largest polyester producer in the world, IVL is a leading manufacturer of raw materials for textiles and packaging” says Gerard Hoetmer, Chief Executive Officer of CSM. "This partnership will widen the scope of such biodegradable applications and accelerate our market development of PLA. It will be another milestone on the way towards providing an important role for bioplastics in the fastgrowing packaging and materials space.”

“We strongly believe in creating superior value for our customers by investing in sustainable products and technology.” says Aloke Lohia, Group CEO of Indorama Ventures. ”Purac gives us an opportunity to enter the space for a new generation of highly sustainable, biodegradable, low carbon footprint materials.”