Weak Polish market hits Cloetta Fazer profits
market meant that Sweden's Cloetta Fazer fell foul of adverse
exchange rates in the first half of 2003.
A second quarter affected by lower volumes, currency translations and increased cocoa costs all took their toll on first half results at Swedish confectionery group Cloetta Fazer.
Sales for the six months to June were flat at SK1.38 billion (€149m) after the tough second quarter conditions offset a good sales performance in the company's core Nordic market. Both operating profits (SK143 million) and net profits (SK107 million) were also reduced because of the poor second half performance.
First half sales in Sweden and Finland reached SK1.2 billion, up SK17 million on the same period a year earlier, on the back of a 7 per cent increase in volumes for Kexchoklad in Sweden and a 9 per cent gain for Fazer Blå in Finland.
Sales outside the Nordic region, which make up around 12 per cent of total sales, refer primarily to Poland, the Baltic countries, Russia, the UK, Germany, the Czech Republic and the US. These declined by SK16 million to SK153 million, entirely due to currency translation. On a constant currency basis, sales were level with those of the previous year.
Sales in the second quarter also grew, rising by SK24 million to SK661 million. Sales in the Nordic market rose by 5 per cent to SK591 million. Sales on the two main markets, Sweden and Finland, showed strong development in relation to the other Nordic countries and grew over 5 per cent in volume. Other sales on the Nordic market, including those on ferries and at airports, were down somewhat compared with the preceding year.
Sales outside the Nordic region declined by 8 per cent to SK70 million during the quarter, again due to translation effects.
But the company's results were also affected by the expiration of forward contracts in the second quarter of 2003 which meant that Cloetta Fazer was forced to buy in its cocoa at the current high market price, a move which had a significant impact on the company's manufacturing expenses.
With the increasing emphasis on the Polish market, the company is keen to see that country's accession to the EU in 2004. This, it claimed, would change conditions on the Polish market and provide scope for better co-ordination in production, sales and marketing.
Cloetta Fazer said that planning for a new wafer line in Ljungsbro and a filled chocolate manufacturing facility in Vantaa were proceeding according to plan and that both were scheduled to go into operation next year. These investments will both raise the production capacity and contribute to higher cost-efficiency, the company said.