Cloetta feels pinch in several EU markets

By Oliver Nieburg contact

- Last updated on GMT

Related tags: Sweden, European union, Norway

Cloetta sealed a $960 merger with Leaf International last year
Cloetta sealed a $960 merger with Leaf International last year
Sweden’s leading confectioner Cloetta has posted falling profits in the third quarter (Q3) as it struggled in several EU markets and was hit by higher raw material prices and restructuring costs from its Leaf merger.

Net sales for the quarter were down 3% to SEK 1.2bn ($171m), while operating profit nosedived 30% to SEK 90m ($13.3m).

The company, which sealed a €753m ($960) merger with Leaf International last year, blamed integration costs, lower volumes and raw material prices.

‘Challenging’ EU market

Cloetta CEO and president Bengt Baron said that the company picked up in Q3 after a weak start to the year, but found market conditions challenging in the EU with drops in volume growth in several markets.

“Sales in Italy fell sharply during the quarter as a result of the economic challenges in the country,“ ​he said.

“As in the previous quarter, Norway showed a decrease in sales which is primarily explained by a difficult market situation for us.”

Baron said a sales drop was also seen for products handled by third-party distributors in Finland, Denmark and Norway.

“On the other hand, sales increased in Sweden, Finland, the UK and in countries outside our main markets,” ​he continued.

Baron added that raw material prices were still at historic highs and had kept input costs high for Cloetta.

Restructuring after merger

When Cloetta merged with Dutch firm Leaf late last year it became the market leader in its home country, overtaking Mondelez International.

Under the merger, Cloetta has assumed sales responsibility from a third-party distributor in Norway and is planning a takeover from third party distributors in Finland and Norway markets by the end of the year.

Cloetta has already restarted producing Finish chocolate product Royal at its factory in Ljungsbro, Sweden, after ending an outsourcing agreement

The company has also negotiated new joint purchasing agreements for raw materials that will take effect in the next few quarter.

Baron said that Cloetta expects to achieve around SEK 65m ($9.6m) in synergies from the Leaf merger.

Cloetta added new products to its brands including Polly in Q3
Cloetta added new products to its brands including Polly in Q3

Site closures

In March, Cloetta announced that it would close two factories in Sweden and one in Finland, resulting in 345 job cuts.

 Cloetta has stopped producing at its factory in Alingsås, Sweden and will leave the site by the end of year. It has begun transferring production from the Finish factory in Aura and will close the other Swedish factory in Gävle by 2014.

“The overall factory restructuring is a large-scale project in which approximately 40 per cent of all products will be transferred in less than two years,” said Baron.

“This is obviously an ambitious undertaking that has impacted our production efficiency and costs in the short term, “ ​he said.

Related topics: Manufacturers

Related news