Frozen product sales drive sales growth at CSM Bakery Supplies N.A.

by Eric Schroeder
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DIEMEN, THE NETHERLANDS — Growth in all segments, but especially in frozen products, drove improved sales at CSM Bakery Supplies North America in fiscal 2006. Net sales in the year ended Dec. 31, 2006, totaled $1,361.5 million, up 7% from $1,273.6 million in fiscal 2005, parent company CSM n.v. said Feb. 28. Operating results in the year improved 9% to $85.7 million from $78.4 million in the previous year.

A considerable increase in the price of sugar on the U.S. market — primarily due to depressed supplies in the wake of Hurricane Katrina — had an adverse impact on growth in the bakery supplies unit, CSM said.

"To sustain our growth in the market we decided to raise our prices only slightly or not at all," CSM said. "As a result, the operating result for 2006 has been negatively affected to the value of $11 million."

CSM said its 3-S program, a plan put in place to create an efficient and effective organization, generated $14 million in savings during 2006, up $9 million from 2005 and in line with expectations.

"The artisan bakery segment remained stable," CSM said. "As in previous years, relatively fast growth occurred in the in-store bakery chains, largely due to the rising popularity of superstores and clubstores. This is the largest market segment for the division, where both Brill and the newly acquired CGI Desserts enjoy strong positions.

"The demand for frozen products, including cakes, cookies and almost-ready items increased in particular. The demand from the industrial bakeries remained at around the same level, but the trend toward healthy eating pushed up the demand for whole meal bread mixes."

The merger of two subsidiaries, American Ingredients Co. and Caravan Products, along with the closing of an Elk Grove Village, Ill., facility and investment in two innovation centers contributed to a net negative total of €7 million in exceptional items in the year. Costs arising from closing the H.C. Brill production facility in Elk Grove Village amounted to €9 million, while the Caravan and A.I.C. merger led to costs of €1.3 million. The sale of a BakeMark USA building brought a one-time profit of €0.7 million, while a change in the pension plan at Caravan Ingredients Co. yielded a gain of €2.6 million.

Looking ahead to 2007, CSM said organic growth in its Bakery Supplies North America business "may be at a slightly lower level," as the company deals with the integration programs at its ingredients businesses and the complex logistical project scheduled to start this year.

The company did note it should benefit from a full year of results from CGI Desserts, as well as the recently acquired bread improvers, bakery mixes and emulsifier operations of Archer Daniels Midland Co. Those two acquisitions are expected to generate $11 million in EBITA during 2007, CSM said.

CSM n.v., based in Diemen, companywide reported sales from continued operations of €2,421 million ($3,202 million) for fiscal 2006, an increase from €2,392 million for fiscal 2005. Operating results before exceptional items rose 21% to €155 million from €128 million. After figuring in exceptional items, operating results rose 17% to €122 million from €104 million.

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