Poor flavour performance knocks Danisco annual results

Related tags Danisco European union

Weak figures from the flavour division and a testing European and
North American market knock end of year results for Danish
ingredients and sugar player Danisco, but Rhodia acquisition starts
to pay off, reports Lindsey Partos.

On sales of DKK17.8 billion (€2.4 billion), that rose 8.8 per cent from the previous year, the number one emulsifier firm pulled in an operating profit of DKK1.9 billion, up from DKK1.7 billion in 2003/04.

But taking a closer look, operating profit before special items (EBIT) fell this year to DKK2.07 billion, down nearly two per cent from DKK2.1 billion in 2003/04.

Figures from the flavours business, in particular Europe, proved to disappoint, falling by a considerable 8 per cent in 2004/05.

The cold summer last year, declining citrus and vanilla prices and a fall in carbonate beverage sales due to obesity are concerns are all attributable, says Danisco.

Flavours contribute about 50 per cent of sales to the firm's speciality products business, that also includes enzymes and cultures.

Overall speciality products recorded zero per cent growth. Although knocked by flavours, the business gained significantly from Danisco's acquisition of French culture firm Rhodia for €320 million in June last year.

"Sales of cultures grew firmly driven by underlying market growth,"​ said the Danish firm yesterday.

But in general, Danisco felt the repercussions of a poorer performance in Europe. "Europe is weak, and we are exposed to the European market, particularly in flavours,"​a Danisco spokesperson tells FoodNavigator.com.

The company said an "extensive restructuring programme"​ should cut costs in the division by DKK75 million. So far the programme has resulted in the closure of four sites, reducing sites twelve.

The texturant products side of the business - emulsifiers, stabiliers and functional systems - fared better, recording a 3 per cent organic growth and pulling in sales of DKK4.31 billion, up 11 per cent on the year before.

But,"this covers a 1 per cent drop in sales volumes and higher sales prices due to higher raw material prices,"​ says Danisco.

Despite decent growth in the global sweeteners market today, boosted by consumer health concerns, the sweeteners division at Danisco pulled in organic growth of 1 per cent and sales volumes dropped by 3 per cent, attributed to "dampened sales of Litesse"​, the company's low-carb targeted products that lifted sales for the division last year.

Danisco is under pressure to build up its ingredients activities as new rules on the European sugar regime loom.

The firm needs to reduce it dependence on sugar which accounts for about half the company's sales, before the EU cuts prices guaranteed to producers.

The European Commission, the EU's executive arm, is due to publish its legislative proposals tomorrow (22 June) for overhauling protection of the sugar industry.

In addition to the Rhodia acquisition, Danisco, which supplies additives to food producers such as Nestle and Kraft Foods, recently paid about 3.5 billion kroner for the remaining 58 per cent of California-based food enzyme firm Genencor that it did not already own.

Steps have been taken to spin of the US firm's pharmaceutical activities, leaving a focus on technical enzymes.

"Focus is also on the development and production of bio-ingredients with food and feed applications being given priority," says the Copenhagen-based firm, now the number two global enzyme firm following the acquisition.

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