Danisco Reports Margin Expansion Despite Challenging Markets

Ingredients’ topline grew organically by 3% in H1 2007/08 driven by higher prices. The Bio Ingredients division was the main growth contributor with 5%. The company expects organic topline growth to increase for Ingredients.

17/12/07 Danisco has reported that both Ingredients and Sugar achieved EBIT margin expansion Y/Y, thus enabling the company to report 5% growth in EBIT before special items in the face of challenging market conditions, particularly higher raw material costs and a weakened USD.

CEO Tom Knutzen comments: ‘We have reported another quarter of expansion in the underlying EBIT margin of our Ingredients business despite soaring input costs, and we will continue our focus on value creation. As a result of our decision to demerge Sugar, we are currently also reviewing the strategic direction and priorities of our core Ingredients business, including a review of our capital structure.’

Ingredients’ topline grew organically by 3% in H1 2007/08 driven by higher prices. The Bio Ingredients division was the main growth contributor with 5%. The company expects organic topline growth to increase for Ingredients over the coming quarters.

The Ingredients business achieved an EBIT margin of 14.2% in H1 2007/08 against 13.5% in H1 2006/07 driven by advances in both Bio Ingredients and Texturants & Sweeteners.

Sugar’s good start to the year continued, and cost containment efforts and an improved sales mix further enhance our confidence in this year’s earnings potential. The EU sugar reform remains a challenge until fully implemented, but we maintain our confidence in our long-term financial targets for Sugar.

Danisco said that they are continuing to work towards independence for Sugar. In October, we appointed Deutsche Bank to be its advisors in this process.

In terms of outlook for 07/08, for the Group, Danisco still expects an EBIT of at least DKK 1.95 billion. As a result of the weakening USD, Danisco is lowering its EBIT outlook for Ingredients by approximately DKK 50 million to around DKK 1.6 billion.

For Sugar, Danisco is upgrading its EBIT by DKK 50 million, to around DKK 500 million, after satisfactory operating performance in H1. For the group, Danisco now expects to report profit for the year before share-based payments of around DKK 1.5 billion (previously at least DKK 1.45 billion).