Danisco Reports Rise in Revenues, Sweeteners Recovers

EBIT (before BCP) came in at DKK 687 million, reflecting a margin of 17.6% for the quarter driven by all four divisions (Enablers 18.1%, Cultures 24.3%, Sweeteners 8.3% and Genencor 19.6%).

Sep 21 2010 --- In Q1 2010/11, Danisco recorded revenue of DKK 3.9 billion (EUR0.52 billion), a 13% increase Y/Y made up of 5% organic growth and 8% positive currency effect. Group EBIT (before Bio Chemicals Projects – BCP) was reported at DKK 687 million, reflecting a margin expansion of 2.0 percentage points Y/Y. All four divisions contributed to the higher margin. Profit for the Group came in at DKK 402 million against DKK 306 million in Q1 2009/10, an increase of 31%.
 
CEO Tom Knutzen commented: “Already this quarter, we achieved our long-term financial ambitions, including a 12-month average EBIT margin (before BCP) of 13.7%. This was driven by good progression in all four divisions, including a recovery in Sweeteners, as well as a positive currency impact. We are currently addressing our new financial ambitions for the future and expect to communicate on these on 8 October 2010 in connection with our planned Capital Markets Day. Furthermore, based on the solid start to the year, we lift our financial outlook for the year.”
 
The company reported that revenue and EBIT came in well ahead of last year, reflecting stronger performance in most business areas driven by factors such as a broad-based, improved product offering and production efficiencies.

Organic growth came in at 5% for the Group driven by all four divisions (Enablers 4%, Cultures 6%, Sweeteners 1% and Genencor 7%).

EBIT (before BCP) came in at DKK 687 million, reflecting a margin of 17.6% for the quarter driven by all four divisions (Enablers 18.1%, Cultures 24.3%, Sweeteners 8.3% and Genencor 19.6%).

Group RONOA reached 20.6%, up from 13.7% in Q1 last year, driven by improvements in all four divisions.

For FY 2010/11, the company now expects to realise revenue of around DKK 15 billion (previously more than DKK 14.5 billion) and EBIT (before BCP) of DKK 2.1-2.2 billion (previously around DKK 2.0 billion), resulting in an EBIT margin (before BCP) of around 14% (previously around 13.5%). “We expect profit for the year of around DKK 1.2 billion (previously more than DKK 1.0 billion),” the company reported.

Enablers encompasses Danisco’s emulsifiers, gums and systems activities and accounted for 42% of group revenue in Q1 2010/11. The segment recorded revenue of DKK 1.6 billion for the period against DKK 1.4 billion in 2009/10, up 13% Y/Y. Organic growth came in at 4%, while currency movements contributed a positive 9%.  Growth was broad-based, reflecting good demand in most of our major business areas. In terms of geography, growth was strongest in Europe, Latin America and RoW (Rest of the world). In Latin America, we saw growth coming back as we enhanced our product offering and capacity, thus strengthening our competitiveness and ability to offer locally produced goods.

Enablers posted EBIT of DKK 295 million for the period – a margin of 18.1% against 17.8% in the same period of last year, which was already a strong quarter. We continued to benefit from production efficiencies, whereas as expected a gradually more challenging input cost environment has so far been countered by a favourable currency translation effect. Enablers reached a RONOA of 26.6% for the quarter against 19.8% in the same period of last year.

Cultures – accounting for 15% of group revenue in Q1 2010/11 – saw revenue coming in at DKK 605 million, up 13% Y/Y – of which 6% was organic growth and 7% was a positive currency impact.

Growth was fairly broad-based, benefiting both from continued penetration of DVI technology and from strong demand for our market-leading food protection offering. The pricing environment was fairly stable. Cultures continued to focus on enhancing its health & nutrition claims and offering. In terms of geographies, growth was strongest in North America and in many of the emerging markets.

EBIT for the segment came in at DKK 147 million, resulting in a margin of 24.3% for the quarter against 19.9% in the same period of last year – an increase of 4.4 percentage points Y/Y. Cultures lifted its RONOA from 25.6% to 34.1% Y/Y.

Danisco’s Sweeteners division accounted for 11% of group revenue in Q1 2010/11. Sweeteners recorded revenue of DKK 420 million, up 12% Y/Y, driven by 1% organic growth and 11% positive currency impact. This was the third consecutive quarter with a stable topline for Sweeteners.

Sweeteners posted EBIT of DKK 35 million, reflecting a margin of 8.3% against 2.4% last year – a Y/Y margin expansion of 5.9 percentage points. This was ahead of our own expectations. Sweeteners increased its RONOA from 2.5% to 3.5% Y/Y and continued to generate a positive cash flow.

Danisco said that as part of its continued efforts to improve competitiveness and profitability in Sweeteners, the company implemented several restructuring initiatives during FY 2009/10. These initiatives focused on capacity reduction at certain sites as well as efficiency measures resulting in staff reductions. "In Q1 2010/11, we have experienced improved plant load for xylitol and felt the effect of last year’s restructuring initiatives. We are currently seeing an improvement in our underlying cost competitiveness due to positive currency development as well as a more challenging Chinese input cost environment," the company reported.