Flat Bakery Segment Bites into Corbion’s Q1 Results

25 Apr 2017 --- Corbion has reported sales of €229.9 million (US$250.3 million) in the first quarter of 2017, an increase of just 0.7%, with the bakery segment falling short of expectations. And this will impact future financial results for 2017 with the company claiming that the losses in Bakery will dampen growth.

While organic sales growth was down 2.3%, mostly due to a volume decrease in food, partly offset by an increase in Biochemicals, EBITDA excluding one-off items increased by 9.4% to €47.8 million (US$520 million).

“The start of the year has been encouraging in all segments, except for Bakery, which fell short of our expectations. Profitability exceeded expectations as mix improvements continued to push underlying margins higher. The PLA joint venture with Total became operational in early March,”
commented Tjerk de Ruiter, CEO.

Corbion’s key financial highlights for the first quarter of 2017 also include an operating result of €41.0 million (US$44.6 million), an organic increase of 28.6%.

Biobased Ingredients
Net sales in Biobased Ingredients, which encompasses food, biochemicals, and central costs, increased by 1.6%, mostly driven by a positive currency contribution of 3.8%, offset by an organic decrease of 1.5%, according to Corbion.

The EBITDA margin excluding one-off items increased from 19.6% to 21.9%, as both the food and biochemicals business segments managed to improve their margins, mostly driven by positive portfolio mix effects and lower input costs.

Business segment Food
Net sales for the Business segment Food decreased organically by 3.5% and Corbion says that a “decrease in sales was expected for the first quarter as we lost some volumes in more commoditized parts of the US meat market and optimized the customer and SKU portfolio in Bakery in Q2 2016.”

However, the sales reduction was more pronounced than originally anticipated due to losses at frozen dough, and challenges in Corbion executing its Bakery channel strategy. 

As a result Corbion is speeding up its overhaul of the commercial organization in Bakery and is taking measures to improve customer service levels. 

Meanwhile in Meat in the US Corbion regained some of the lost volume from last year, but more importantly, it says, the portfolio mix shift towards natural preservation solutions continues to support margin improvements. 

Meat sales growth outside the US was mainly driven by Latin America. In other markets (Beverages, Confectionery, Dairy), sales increased slightly. The EBITDA margin improved from 20.3% to 22.2% due to mix improvements and lower input costs.

And in the Biochemicals segment, net sales increased organically by 5.3%. All markets grew except for a small decrease in animal health. Agrochemicals returned to modest growth after a very difficult 2016. 

Corbion also points out that From early March when the PLA joint venture with Total became operational, lactide and PLA sales were no longer recorded in Biobased Innovations but rather in the PLA joint venture with Total. The joint venture will continue to seed the market.

Looking ahead for the rest of 2017, Corbion expects quarterly sales to improve but stresses the losses in Bakery will dampen growth. 

“We now expect 2017 net sales growth in Biobased Ingredients to end up below the multi-year guidance bandwidth of 2-4%. Nevertheless, given the positive portfolio mix developments in the first months of the year, we continue to expect our total Corbion EBITDA excluding one-off items for 2017 to be slightly below that of 2016 (€ 170.1 million),” concludes the company in its Q1 report.