CSM Sales Slightly Up, But Uncertain on Outlook

Sales for the first quarter were € 644.4 million compared with € 636.1 million in 2009; organic growth was slightly positive by 0.6% (€ 4.0 million). Volumes sold increased by 1.1% whereas pricing was slightly negative.

28 Apr 2010 --- CSM has reported substantially improved Q1 EBITA compared to last year, with EBITA more than doubling to € 40.5 million. EBITA margins recovered to 6.3%. The improvements compared to 2009 Q1 resulted from higher volumes at Purac and a better raw material cost base.

Sales for the first quarter were € 644.4 million compared with € 636.1 million in 2009; organic growth was slightly positive by 0.6% (€ 4.0 million). Volumes sold increased by 1.1% whereas pricing was slightly negative. Currency effects had a negative impact of € 14.1 million (-2.2%) due to the weaker US dollar. Best Brands, consolidated as per March 19, contributed € 17.7 million.

EBITA in the first quarter amounted to € 40.5 million, an increase of € 20.4 million compared with the same period in 2009. This increase included acquisition costs of US$ 6.5 million for Best Brands. Currency had a negative impact of € 1.5 million.

Demand in Bakery Supplies remained slighty negative, with a 1.2% decrease in volume compared to Q1 2009. Margin recovery combined with a clear focus on operational efficiency led to strongly improved EBITA by 45%.

Net Sales of Purac were 13% higher, mainly driven by higher volumes, benefiting from the recovery of customers in cyclical industries. EBITA improved by € 11.3 million to € 14.8 million.

Commenting on the first quarter results, Gerard Hoetmer, CEO of CSM, said: "All our businesses continued the trend of improving results, mainly driven by sustained margin recovery and for Purac supported by volume growth. Our Bakery Supplies activities are still facing a challenging market climate, although we have seen the declining volume trend leveling out. Purac showed a strong performance in both volume and EBITA, especially benefiting from a recovery in demand from customers in cyclical industries. Although I am very pleased to present this strong improvement compared to last year we should take into account that Q1 2009 was a weak comparator for both Bakery Supplies and Purac.”

“In March we have started the integration process of Best Brands, following the closure of the transaction on March 19 2010. The integration process kicked off successfully and runs according to plan, whilst we remain focused on delivery of the business opportunities. The underlying business trend in Best Brands is in line with our other North American activities. We see the business benefits as expressed in our earlier announcements confirmed, being supported by bringing these two great companies and their management together.”

“The construction of the Lactide plant in Thailand started early in 2010, but was officially kicked off by a traditional Thai ground breaking ceremony in March. The facility will become operational mid 2011, in line with earlier guidance. In accelerating our bioplastics strategy, we continue to invest in additional capabilities for the organization, like Marketing and Business Development which will impact the organizational costs in Purac by a few million euros in the coming year.”

“The recovery of volumes is key for our results, but as the economic climate remains volatile, the visibility for the full year 2010 is still limited. We are cautiously optimistic about continuing the underlying trend into the second quarter, although we realize that the comparison base for the coming quarters will become more challenging."

CSM reported that due to the continuing volatile economic climate in the main markets the company operates in, they still lack visibility to clearly forecast the development of sales volume going forward. “In Bakery Supplies, both in Europe and North America, we are seeing the negative growth trend leveling out, but there are no immediate signs that markets are definitely picking up. We remain focused on maintaining our margins and on managing our cost base and continue our efforts to stimulate growth through innovation. We expect Best Brands to contribute, including non-recurring acquisition costs, in line with their 2009 EBITA (pro rata for the period consolidated excluding non-cash IFRS purchase accounting adjustments), with the expected integration costs being compensated by synergy benefits. For Purac we remain positive about the development of sales and EBITA; however we do expect that the volume growth rate will moderate in the 2nd quarter as first quarter volume benefited from customers increasing stock levels. For both activities we expect some upward pressure in raw materials costs, which we, in line with earlier practice, intend to pass on in our selling prices. Although the comparison base in the 2nd quarter will be more challenging, we expect a good improvement in EBITA compared with the second quarter of 2009.