Danisco performance impacted by 'eventful' year

By Anthony Fletcher

- Last updated on GMT

Related tags: Cent, United states, Europe, Eastern europe, Danisco

Danisco's takeover of Genencor International, the EU sugar reform
and rising raw material prices feature prominently in the group's
recently published annual report.

These factors impacted on a relatively strong financial performance, though the company believes that acquisitive activity should ensure that the group starts the new financial year in a strong position.

"The rising energy and raw material prices have produced a new challenge for Danisco as the market situation makes it hard to fully offset rising costs by price increases,"​ said CEO Tom Knutzen.

"This will put greater demands on Daniscos innovation capabilitiesand business process efficiencies going forward. Daniscos organisation musttherefore be able to effectively adjust to the ever more changeable tradingconditions while maintaining a high level of competitive power."

Overall, the company recorded revenue of DKK 20,912 million in the 2005/06 financial year, up 17 per cent on the prior year.

Ingredients (63 per cent of revenue) contributed growth of DKK 3,414 million broken down on 5 per cent organic growth, 4 per cent currency effect and 26 per cent from acquisitions.

Texturant products and sweeteners generated the highest organic growth in the year, while the geographic areas Latin America and Asia Pacific showed the highest growth rates. Europe and North America grew 2 per cent and 4 per cent, but at an uneven rate through the year.

What's more, Genencor has followed the planned integration plans in2005/06. The main part of the integration package has been initiated, which corresponds to more than 85 per cent of the estimated synergies of DKK 200 million to be realised over a three-year period.

Genencor achieved 8 per cent organic growth in the year.

"The takeover of Genencor has extended the ingredients business to other industries than foods in that industrial ingredients including technical enzyme - today represent around one fourth of revenue in ingredients,"​ said Knutzen.

Sugar however (37 per cent of revenue) recorded a 3 per cent decline in revenue to DKK 7,881 million because of difficult trading conditions ahead of the EUsugar reform. The slightly lower revenue compared with the announcement inDecember 2005 may be attributed to the tough trading conditions and price pressure on quota sugar, whereas exports of C-sugar contributed favourably on account of the rising world market sugar price.

"The EU sugar reform largely turned out as expected although the financialimpact in the short term has been bigger than anticipated,"​ said Knutzen.

"Danisco is well into the process of adjusting the production structure and continues its efforts to be among the most efficient sugar producers in Europe once the reform is fully implemented over the next couple of years."

Geographically, Europe represented 41per cent of revenue in ingredients and recorded 2 per cent organic growth in 2005/06. Growth rates were uneven across the quarters, attributable mainly to Western Europe where there are as yet no signs of a more permanent market upturn.

Growth in Eastern Europe was more stable and exceeded 10 per cent for the full year. Latin America showed 10 per cent organic growth.

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