CSM to Cut 5 Percent of Workforce in Restructuring

A restructuring program has started to adapt the organization to the changed consumer environment and to structurally reduce its cost base by € 50 million by the end of 2013 on a run-rate basis, of which at least € 30 million is targeted to be achieved in 2012.

Oct 27 2011 --- CSM, the world's largest bakery products supplier will cut 500 jobs, or 5 percent of its total workforce, to offset high raw material costs, and warned it does not see any improvement in the trading environment this year. CSM had previously announced a cost reduction program for Bakery Products North America which for practical purposes will now become part of the wider cost reduction activities.

CSM reported that sales for the 3rd quarter were € 784.8 million compared with € 783.7 million in 2010 with an organic growth of € 40.7 million (5.2%). Compared to Q3 2010 pricing increased by 10.8% while volumes declined by 5.6%. The acquisition impact was € 3.1 million, the currency effect was € 42.7 million negative.

EBITA in the 3rd quarter, excluding one-off integration costs, amounted to € 30.3 million, compared to € 56.7 million in the same period in 2010.

A restructuring program has started to adapt the organization to the changed consumer environment and to structurally reduce its cost base by € 50 million by the end of 2013 on a run-rate basis, of which at least € 30 million is targeted to be achieved in 2012. The corresponding one off cost amounts to approx. € 35 million which will be largely spent in 2012.

Commenting on the third quarter results, Gerard Hoetmer, CEO of CSM, said: “The third quarter has been extremely challenging for the food industry. The industry had already been battling to increase prices to compensate for higher raw material prices and had to do so at a time when consumer confidence was under pressure. This resulted in lower volumes sold, while all players in the food value-chain are struggling to maintain their profitability.

“In Purac, the food activities were also impacted by the lower consumer demand affecting the whole food industry, while Chemical & Pharma continued its positive performance. The growth in the existing business together with the aspiration to assume a 50% market share of a fast growing PLA market, which has been estimated to reach 550,000 tons by 2015, will underpin the ability for Purac to deliver substantial growth. Our lactide plant in Thailand will be operational at year end, on time and on budget.”

“In our Bakery Supplies activities, the volume pressure due to significantly lower consumer demand led to increased price competition and promotional actions particularly in the retail channel. These actions have partly offset our earlier implemented price increases to compensate for the higher input costs and required continuous trade-offs between margins and volumes. It has been appropriate to engage in promotional activity in the shortterm, protecting our leadership position in the market and leaving us well placed to drive growth in the future, particularly when raw material cost pressure moderates. In Europe we continued to strengthen our position in the Out-of-home/ In-store channel, although in the short-term this does not fully compensate for the pressure in the artisan channel.”

“We address this new consumer and market reality by initiating a business review, a reassessment of market developments and our current business plans. As part of this, we have already announced a CSM wide restructuring program, targeting a total cost reduction of € 50 million by end 2013 on a run rate basis. The restructuring program will also entail that we need less people, which I highly regret but which is inevitable in order to achieve a more lean and agile operating model.”