Danisco Q1 Profits Down on Sugar

19/09/07 Danish sugar and ingredients maker Danisco AS posted a first quarter operating profit before special items of 599 mln dkr, down 6 pct from a year earlier with the result negatively affected by a sales decline at the group's sugar division.

Group EBIT before share-based payments remains stable year-on-year, at DKK 578 million, despite the anticipated 13% decrease in Sugar sales. Ingredients margin expansion was driven by advances in both Bio Ingredients and Texturants & Sweeteners thanks to strict cost discipline and the company’s decision to improve our average selling price at the expense of short-term volume. We expect this price and margin momentum to gradually accelerate over the remainder of the current financial year.

Danisco said that the company continues to improve its key financial ratios in line with the targets signalled to the market. For Q1 2007/08, Ingredients posted an EBIT margin of 14.7%, an expansion of 0.4 percentage points year-on-year, while RONOA increased by 1.2 percentage points to 18.4% and organic growth reached 3%. Danisco’s Sugar division also got off to a good start as lower costs and a better sales mix partly compensated for the expected decrease in sales.

Danisco said that it is upgrading its 2007/08 outlook for profit for the year before share-based payments to over DKK 1,350 million (previously at over DKK 1,300 million). The upgrade is related to a property gain in Copenhagen and the divestment of Flavours.

Tom Knutzen, CEO of Danisco, says: “We are faced with challenging market conditions in some key business areas, but we remain confident that Danisco will maintain its value enhancement momentum in 2007/08. The growth in margins and RONOA in Ingredients reinforces our confidence in the strategy that we announced one year ago today. We reconfirm our operational outlook for the full year”.

For full year 2007/08, Danisco maintains its guidance for revenue. EBIT is now expected at the level of DKK 1,800 million (previously slightly under DKK 1,800 million). Profit from discontinued operations is now estimated to be DKK 430 million (previously expected at over DKK 400 million). Profit for the year before share-based payments is subsequently expected at over DKK 1,350 million (previously at over DKK 1,300 million).