Raisio Suspends Investment in Benemilk Licensing Business But Says Profits Will Improve in 2016

10 Aug 2016 --- Raisio is suspending investment in its Benemilk licensing business due to the "crisis facing the dairy market" but says it expects profits to improve in 2016.

Raisio has reported that sales fell from €264m ($295m) to €238m ($266m) in the six months but the Finnish food company pointed out that its "relative profitability" increased from 10 to 12 percent of net sales in the period.

Raisio also said it expects EBIT (earnings before interest and tax) to improve in 2016.

Benemilk was set up in 2013 and Raisio holds a majority 57 percent stake in the business, which is focused in two areas- an ingredients business which is based on the sale and marketing of palm oil-based raw material and a licensing business relating to innovation emanating from the business.

Raisio said that it is now taking "time out" from Benemilk's licensing business, which will impact two senior executives based in the US, though they will stay with the business in new roles.

Speaking to FoodIngredientsFirst, chief executive Matti Rihko said: "We are going to minimize the investment in operational business. It will be impacting two people. When the milk market is in crisis so there is no point invest in the coming one to two years for the commercial activity when the market simply is not ready for it at the moment.”

Rihko added: "Raisio continued to improve its operational result during the second quarter. Our comparable EBIT grew by 7 per cent totaling EUR 15 million. Our relative profitability increased from some 10 per cent to 12 per cent of net sales.”

“In April, we licensed our Honey Monster brand to the British cereal producer Brecks. Brecks started the production, marketing and sales of Honey Monster cereals on 1 July 2016. In July after the review period, we also divested our Newport snack bar business to the Dutch equity investor Nimbus. “

“Both Honey Monster and Newport were loss-making so the divestment will improve our operational cash flow. In Southall, we still own the land of over three hectares located in one of the most important urban development areas in London.”

“In the short term, Brexit affects particularly through exchange rates but the pound, even weakened, is still within its ten-year currency range. So it is essential to manage the company’s own operative business well. Long-term effects are difficult to predict and therefore, it is important to maintain the ability to be flexible in changing situations."

by John Reynolds