Sales slip but profit rises in Corbion's Food segment

by Jeff Gelski
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Corbion food
Food segment recorded EBITDA of $150.9 million, up 10% from the previous fiscal year.

AMSTERDAM, THE NETHERLANDS — A focus on portfolio profitability in its Food business segment started paying off for Corbion nv in fiscal-year 2016 even though it led to a dip in sales.

The Food segment recorded EBITDA of 142.5 million ($150.9 million), up 10% from 129.2 million in the previous fiscal year. Net sales of 676.6 million ($716.7 million) were down 1.6% from 687.8 million. Amsterdam-based Corbion said it started to improve the profitability of the Food segment portfolio in the second quarter, which had a positive impact on the price/mix of the portfolio but a negative effect on volumes sold.

Within the Food segment, sales decreased in bakery in a stable U.S. bread market. Closing a plant in Kansas in the second quarter, which was part of plant consolidation, decreased the number of stock-keeping units (s.k.u.s) and moved smaller customers to an indirect delivery model, which negatively impacted volumes. A negative comparison to 2015 came because in mid-2015 Corbion was able to accommodate a surge in demand for higher priced egg-containing products due to an avian influenza outbreak in the United States.

Meat sales in the Food segment decreased slightly in 2016. Sales in Asia and Latin America continued to grow as demand for preservation systems increased. Customer consolidation in the United States put pressure on volumes and prices for more commoditized parts of the market. Natural vinegar-based products continued to show growth in the United States.

Corbion food
Meat sales in Corbion's Food segment decreased slightly in 2016.

Corbion said it expects the 2016 adverse sales growth effects from optimizing its portfolio in the Food business segment to fade out in the first half of 2017, leading to sales growth. Corbion said the price of sugar cane increased over the course of 2016, which will have an adverse effect on EBITDA margin in 2017.

Companywide, Corbion’s EBITDA, excluding one-off items, was €170.1 million, up 13% from €150.3 million. Net sales in the fiscal year slipped 0.8% to €911.3 million from €918.3 million. Sales volume declined 1.2% as the company increased focus on portfolio profitability. Currencies and acquisitions each had a positive impact of 0.2% on net sales.

In Corbion’s Biobased Ingredients, which includes Food and Biochemicals, EBITDA, excluding one-off items, was 176.5 million in the fiscal year, up 14% from 155 million in the previous fiscal year. Net sales of 889.6 million were down 0.7% from 895.9 million.

EBITDA, excluding one-off items, in Biochemicals was 53.4 million, up 17% from 45.5 million in the previous fiscal year. Net sales of €213 million were up 2.4% from 208.1 million.

In Biobased Innovations, losses before interest, taxes, depreciation and amortization, excluding one-off items, were €6.4 million, which compared to losses before interest, taxes, depreciation and amortization, excluding one-off items, of €4.7 million in the previous year. Net sales of €21.7 million were down 3.1% from 22.4 million. Corbion expects a new polylactic acid (P.L.A.) plant to be operational in the second half of 2018.

Tjerk De Ruiter, Corbion
Tjerk de Ruiter, c.e.o. of Corbion

“In 2016 we continued to make good progress in executing our strategy, and we are well on track to deliver on our 2015-2018 targets,” said Tjerk de Ruiter, chief executive officer of Corbion, when financial results were given March 6. “In the past year we have made strategic choices involving our customer and product portfolios. These choices resulted in a significant margin improvement, but at the same time had an adverse, albeit temporary, impact on our top-line growth in the year. For 2017, we are confident top-line growth will return to our guidance range.”

In the fourth quarter, Corbion’s EBITDA, excluding one-off items, was 35.3 million, up 6.3% from 33.2 million. Fourth-quarter net sales of 226.1 million were down 1.9% from 230.4 million. 
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