CSM North America results hold firm

by Josh Sosland
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DIEMEN, THE NETHERLANDS — The Bakery Supplies North America division of CSM n.v. achieved higher EBITDA and higher sales in the third quarter ended Sept. 30. The positive results were not mirrored by the Bakery Supplies Europe business of Diemen-based CSM.

EBITDA of Bakery Supplies North America was $23.1 million, up 1% from $22.9 million in the third quarter last year. Sales were $432.8 million, up 11%. Reported in Euros, CSM said EBITDA fell 8% and sales were up 1%.

Bakery Supplies Europe EBITDA was €10.1 million in the period, down 45% from €18.3 million in the third quarter last year. Sales were €269.9 million, up 1.7%.

CSM said results were consistent with the company’s analysis after the first half of the year, anticipating a darker economic picture for the months ahead.

"At our first half year results statement we indicated that we would be affected by the developing recessionary environment," the company said. "We see evidence of downscaling and down trading by customers as well as de-stocking effects. Our pricing power has helped us to deliver an organic sales growth of 9.5% in the year to date. We see raw material prices weakening significantly over the last few weeks, which due to timing differences with our existing cover positions is likely to negatively affect our results in the fourth quarter. We believe that CSM is continuing to gain share in many of our markets, but clearly we have to cope with negative economic trends. The Bakery Supplies businesses particularly in Europe in Germany and the U.K. are facing difficult market conditions; in these countries consumer confidence has fallen sharply. Consequently, profitability in the third quarter has been below the level achieved in the corresponding period in 2007 and we expect a similar pattern in the fourth quarter."

Commenting on third-quarter results in North America, CSM said "corrective action" taken at its H.C. Brill Division helped lift EBITDA.

"Our other companies in North America continue to develop well given the challenging environment," CSM said.

Still, the company said North America will be part of a company-wide cost-cutting effort that will result in a reduction in 200 employees before the end of 2008.

"This drive for continued efficiency will continue in 2009," CSM said. "The purchasing savings programs also continue to deliver improvements. These cost savings will accelerate in 2009 and beyond as we speed up the process of driving efficiency improvements."

Overall, CSM EBITDA was €27 million ($34.6 million) in the third quarter, down 23% from €35 million in the third quarter last year. Sales were €639.5 million ($819.1 million), up 7%.

CSM predicted full year EBITDA down 10% to 15% from €153.7 million in 2007. Roughly half the projected decline was attributed to currency movements.

In trading on Euronext Amsterdam, shares of CSM tumbled after the financial update. Closing Nov. 4 at €10.99 ($14.08), down 24% from the Oct. 31 close. Bloomberg News said the decline was the widest for a single day in 19 years at CSM.

The company said it would be issuing financial updates on a quarterly basis in the future.

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