Danisco Not to Split its Sugar and Ingredients Businesses Yet

31/08/07 Danisco will not split its ingredients and sugar businesses into two separate companies at this stage. “We agree that the proposed model is workable but that the timing is wrong. We need time to gain an overview to ensure the best result,” Danisco CEO Tom Knutzen said at the company’s AGM. Developments in recent years have supported the view that Danisco’s shareholders would benefit from separating the company into two independent companies: an ingredients business and a sugar business, Knutzen noted.

He revealed that the Board will therefore continue to work for Danisco Sugar’s independence. “With two independent companies we will ensure the best future development opportunities while at the same time enabling the shareholders to target their investments at either a global ingredient business and/or a European sugar business. There are several ways of doing this, but the basic aim must be to obtain an independent listing of Danisco Sugar”, he added. This does not rule out other solutions offering more perspective and value creation, for instance that the sugar division becomes part of a conglomerate tying growers and sugar production closer together or by taking active part in a consolidation of the European sugar industry, he noted.

Considerations about the future of Sugar are nothing new. “We have prepared for this development by separating Danisco Sugar into an independent company in 2006 to improve our scope of action. The reason why timing is so decisive is that we have to secure the values of the sugar activities and to set up the most favourable framework for the future development of the activities”, he said. He noted that we are now in the midst of the EU sugar reform and the future structure of the industry has not yet been established. “However, we expect this to happen in the course of the next 1-2 years, and that is exactly the time frame we have set for changing the ownership structure of the sugar business. Put differently, there must be no doubt about the objective of the Board”, he noted.

Knutzen said in his speech that just a few years ago, Danisco was an entirely different business than today. It was a distillery and some factories producing jam, crispy onions and packaging – apart from sugar and a few ingredients. Today, the company is a focused ingredients company comprising enzymes, cultures, emulsifiers, pectin and sugar just to mention a few. The company’s ingredients are eaten around the clock by a multitude of people because they are used in everyday food. Our global ingredients business has factories and sales offices in more than 40 countries as well as comprehensive research and development activities.

Knutzen said that the company is currently looking into the possibilities of creating additional growth through acquisitions in the company’s present activity areas, but Danisco is also working actively to broaden its platform in the health and nutrition segment. “Finally, we are investigating possibilities within white or industrial biotechnology. Through the Genencor division we currently have key competencies in R&D and production to create competitive solutions for our customers in the food and home care industries and in the energy segment”, he added. Knutzen said that the sale of the Flavours division and plans for its sugar activities present new opportunities and require adjustment. “We are putting even more focus on our corporate strategy work in the current financial year”, he added.

In order to create value we need to be successful in our markets, i.e. with our customers. Once we are successful, we will achieve our financial targets and create value. Or in other words, our share price will start heading in the right direction. We are already on our way. But if we really want to see some positive long-term results, we need to grow continuously and faster. Organically and through acquisitions. And it is this element we are putting on the strategy agenda, even though you can rest assured that we will not lose focus on the present targets.