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Chr Hansen shares jump 9% on strong H1 profits

By Shane Starling , 19-Apr-2012

First half EBIT profits for 2011-12 surged 19% to €83m at Chr Hansen as it shrugged off the effects of severe fluctuations in the price of red colorant carmine, and ongoing probiotic health claim uncertainty in Europe – its biggest yet most stagnant market.

The announcement sent its share price up almost 8.91% to 157.6 Danish kroners at the time of going to press.

Company-wide organic growth was 11% for the half ended February 29 which meant revenues reached €332.5m for the half compared to €304.2m in the first half of 2010-2011.

CEO Lars Frederiksen told this publication the carmine situation saw prices peak at about €90 a kilogram a year ago compared to around €27/kg today.

“We have been forced to pass through pricing to customers,” he said, but noted that most of that extreme pricing had occurred in 2011.

With more stable carmine prices, strong growth in emerging markets, and some reality-checking in the European regulatory scene in regard to probiotic claims especially, the company had upped its revenue growth forecasts from 7-10% to 8-10%.

It has also engaged in a share buy-back scheme to the tune of €80m over the next six months, with further investment possible later in the year. “We have a lot of options,” said Frederiksen in a webcast this morning.

He added of the buy-back that its, “pure purpose is to adjust the capital structure.”

Divisions, regions, regulations

The Danish natural colours, enzymes and cultures specialist’s Health and Nutrition division grew fastest at 16% with good gains in Asia and South America, especially in infant formulas, fermented milks and probiotics along with animal feed. Cultures and Enzymes grew 9%; Natural Colours 8%.

In North America enzymes had performed well in the cheese and fermented drinks sector while probiotics had declined.

But Health and Nutrition (€47.4m) represented only 14% of overall revenues compared to 26% for Colours (€86.8m) and 60% for Cultures and Enzymes (€198.3m).

South America registered the strongest organic growth at 26% compared to 15% for North America, 8% for Asia Pacific and the Middle East and 4% for Europe.

In the morning’s webcast chief financial officer, Klaus Pederson, said the company was investing in at least two clinical trials for its probiotic strains in the gastro-immunity area, with results expected by the end of the year.

R&D spend stayed stable at €24 or 7% of revenue.

Frederiksen said the ambiguity and negativity around probiotics created by the EU nutrition and health claim regulation (NHCR) that has not yet approved a single probiotic health claim, was tapering as the market adjusted to the new realities.

“The probiotics market is flat now but that is after three quarters of negative growth and perhaps that is proof that the whole issue has been over-exaggerated. Most of our customers have removed their claims already so there is no significant impact of this.”

Q2 revenues came in at €165m – a 9% organic growth.

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