COPENHAGEN, DENMARKK — The Ingredients business of Danisco overcame rising raw material prices to post EBIT of DKK461 million ($86.3 million) for the first quarter ended July 31, which compared with DKK442 million ($82.7 million) in the previous year’s first quarter. First-quarter Ingredients revenue increased to DKK3,127 million from DKK3,085 million, Danisco said.
A sales increase of 1% year-on-year in Ingredients was driven by 3% organic growth, a negative currency effect of 3% and 1% acquired growth from a Chinese cellulose gum producer that Danisco purchased in August 2006.
"Within the Ingredients segment in particular, soaring raw material costs remain a challenge both for Danisco and our customers," Danisco said. "Our general approach is to seek compensation from our customers for these higher costs, which has a short-term negative effect on volume in some product categories, but which we feel confident will create increasing value for us looking forward. The general lag time in passing on price increases is 6 to 12 months on average.
"Meanwhile, the higher input costs that our customers are experiencing are increasing the demand for reformulations and other solutions, which is likely to have a positive impact on Danisco in the medium term."
Within the Ingredients business, advances in cultures and Genencor boosted the Bio Ingredients division to 6% organic growth. EBIT increased to DKK231 million from DKK219 million. Revenue rose to DKK1,364 million from DKK1,318 million.
"Food protectant cultures performed particularly well driven both by a favorable market and by improving production yields where we are capitalizing on Genencor’s fermentation know-how," Danisco said.
The Texturants & Sweeteners division reported 1% organic growth in the first quarter. EBIT was at DKK235 million in the first quarter, compared with DKK231 million in the previous year’s first quarter. Revenue in the division fell to DKK1,772 million from DKK1,773 million.
Companywide, Danisco reported EBIT of DKK599 million, down from DKK635 million in the first quarter and revenue of DKK4,672 million, down from DKK4,866 million. For this fiscal year, Danisco expects revenue of about DKK19,000 million, including DKK12,.250 million in Ingredients. EBIT is expected at the level of DKK1,800 million, including DKK1,650 million in Ingredients.