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Danisco blames revenue dip on EU sugar reform

By Philippa Jones , 21-Jun-2007

Danisco suffered a 3 per cent drop in revenue in the 12 months to 30 April, blaming the fall on the EU's decision to cut subsidies for sugar.

The company's revenue fell to DKK20.362 billion (€2.74bn) in the financial year just ended, from the DKK20.912 billion (€2.81bn) recorded in the previous year. Dansico attributed the slide to the negative impact of EU sugar reform, which resulted in its sugar unit suffering an 11 per cent drop in revenue. The sugar unit contributed 34 per cent to the company's overall revenues compared to 37 per cent in the previous year. The ingredients division contributed to 66 per cent of the company's revenues this year, compared to 63 per cent in the previous financial year. Meanwhile, the company's ingredients division recorded organic revenue growth of 5 per cent. The exchange rates translation into Danish currency for accounting purposes brings this growth down to 3 per cent on paper. The improved performance of the ingredient's division helped push up total profit for the year to DKK1.079 billion (€0.14bn). Operating profit rose 7 per cent with margin up 0.8 percentage points to at 18.5 per cent in the financial year ended 30 April. Bio ingredients, texturants and sweeteners recorded the strongest growth rates in the division. Growth was declining and fluctuating in Europe and North America during the second half of the year. The company said growth rates were generally "satisfactory" in the rest of the world. Due to increasing raw material and energy costs, texturants and sweeteners only achieved a positive operating margin in the second half of the financial year, the company said. This performance was "an improvement against expectations at the start of the financial year", the company said. Sales of feed enzymes, cultures, functional systems and sweeteners led the way. Of the product segments, confectionery, dairy and oils and fats grew the most, the company said. The bio ingredients division, which includes the Genencor enzymes ranges and the cultures and food safety unit, experienced a 6 per cent organic growth rate during the year, double the rate of the year before. Texturants and sweeteners recorded organic growth in line with the previous year of 6 per cent. The increased production of biofuels means that the ingredients sector will have to adapt its organisation to cope with hefty price increases and a volatile price development, the company noted. Danisco expects revenue for the current financial year to stabilise at about DKK19 billion (€2.55 bn), when the sale of its flavours division to Firmenich is taken into consideration. It forecasts profit for the year to surpass DKK 1.3 billion (€0.17bn). The company plans to achieve such results by benefiting from three trends -- the move towards healthier food, the increasing frequency with which food producers collaborate with ingredients producers on product development, and the growing demand for biobased industrial solutions. The sugar sector can also benefit from new demands, such as the production of bioethanol, Danisco said.


The company expects the sugar division to generate revenue of around DKK5.5 billion (€0.74bn) once the market has fully adapted to the EU's reforms.

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