Danisco eyes 2006/2007 EBIT of 2.1 bln dkr

20/06/06 Danisco recorded revenue of DKK 20,912 million for the 2005/06 financial year, up 17% on the prior year. Ingredients (63% of revenue) contributed growth of DKK 3,414 million broken down on 5% organic growth, 4% currency effect and 26% from acquisitions. Sugar (37% of revenue) recorded a 3% decline in revenue to DKK 7,881 million because of difficult trading conditions ahead of the EU sugar reform.

Gross profit for 2005/06 rose 26% to DKK 7,240 million, corresponding to a gross margin of 34.6% versus 32.2% the year before. The positive trend is mainly attributable to the consolidation of Genencor and growth in Ingredients, whereas the performance in Sugar had a slightly negative impact.

The company reported that EBITDA before special items and share-based payments was up 10% to DKK 3,502 million in 2005/06 with the EBITDA margin at 16.7% against 17.8% the year before. Including share-based payments EBITDA before special items rose 8% to DKK 3,289 million in 2005/06 with the EBITDA margin at 15.7% against 17.1% the year before. The margin performance was due to the market conditions for Sugar just as Ingredients was impacted by higher R&D spending particularly in enzymes and by rising energy and raw material expenses.

Ordinary depreciation was DKK 1,130 million in 2005/06 against DKK 964 million the prior year. In addition, special items in 2005/06 include writedowns in Sugar of DKK 747 million in connection with the restructuring ahead of the EU sugar reform. Excluding share-based payments EBIT rose 7% to DKK 2,372 million, equivalent to an EBIT margin of 11.3% against 12.4% the year before. Including share-based payments EBIT before special items rose 3% to DKK 2,159 million in 2005/06 with the EBIT margin at 10.3% against 11.7% the year before. Expenses for share-based payments were DKK 213 million in 2005/06 against DKK 127 million in 2004/05. The increase may chiefly be ascribed to the rise in Danisco's stock price in the course of the financial year.

Special items came to an expense of DKK 768 million of which DKK 506 million concerned the restructuring in Sugar with the remaining part relating to Ingredients, including the integration of Genencor.

Interest expenses etc. were DKK 497 million in 2005/06 against DKK 309 million the prior year. The increase mainly relates to the acquisition of Genencor. Taxes in 2005/06 came to DKK 261 million. This includes reversal of deferred tax of DKK 38 million attributable to the reduction in Danish corporation tax. Special items include a tax-exempt income of DKK 60 million. Discontinued operations, the Health Care activities in Genencor, produced a negative profit after tax of DKK 11 million.

Consolidated profit was down 50% to DKK 622 million, mainly because the previously announced restructuring costs of DKK 506 million in Sugar was expensed in Q4 of 2005/06. Profit before share-based payments and after special items but before adjusting for the announced consequences of the EU sugar reform was DKK 1,214 million against DKK 1,344 million the year before, which is in line with expectations.

Danisco said the long-term target for Ingredients is to achieve organic growth exceeding market growth by 30-50%. The long-term target for the EBIT margin before special items is at least 15%. In Sugar, the target is to optimise cash flows from the sugar production. For acquisitions, Danisco seeks to ensure that the return on investment exceeds the capital cost (WACC) no later than in the third full financial year after the acquisition.