Revenue grows but EBIT dips for Danisco

by Jeff Gelski
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COPENHAGEN, DENMARK — Thanks to 11% organic revenue growth, including 9% in its Food Ingredients business, Danisco posted revenues of DKK3,348 million ($646 million) for the second quarter ended Oct. 31, up from DKK3,002 million ($579 million) in the previous year’s second quarter. Operating profit before special items (EBIT) fell to DKK254 million from DKK264 million.

"In spite of the tumultuous economic environment, we have so far been able to maneuver through the high waters without any dramatic impact on our activity level although we are witnessing shifting customer behavior patterns," said Tom Knutzen, chief executive officer, when second-quarter results were announced Dec. 16.

Copenhagen-based Danisco raised its 2008-09 revenue estimate outlook to DKK13.3 billion from DKK13 billion, but margin pressure caused Danisco to lower its bottom-line outlook. The 2008-09 EBIT outlook dropped to DKK1.3 billion from DKK1.4 billion. The estimate for profit after tax before share-based payments dipped to DKK950 million from DKK1 billion.

Within Food Ingredients, second-quarter revenue was DKK2,303 million, up from DKK2,091 million in the previous year’s second quarter, and EBIT was DKK254 million, down from DKK264 million.

"We estimate that the negative revenue impact caused by the Chinese melamine crisis amounted to around DKK25 million, primarily relating to Enablers, but also impacting Cultures," Danisco said. "We would expect a period of up to one year before the Chinese ingredients market is stabilized."

Within Food Ingredients, Enablers reported 15% organic growth in the second quarter with revenues of DKK1,429 million, up from DKK1,229 million in the previous year’s second quarter, and EBIT of DKK163 million, up from DKK130 million. Higher average prices led Emulsifiers to double-digit organic growth in the quarter.

"Looking ahead, we anticipate a gradually more challenging environment in view of the tougher economic climate as well as the continued steep decline in raw material costs," Danisco said of Emulsifiers.

Gums & Systems grew organically at high single-digit rates.

"In view of continued higher raw material costs within several Gums & Systems areas, we need to defend our profits, and thus we are forced to push for further price increases for this cluster over the coming quarters," Danisco said.

Also within Food Ingredients, Bio Actives posted 2% organic revenue growth in the second quarter. Sweeteners’ organic revenues declined by 9% with xylitol revenues decreasing by more than 20% because of a combination of price and volume. Good momentum continued for Litesse polydextrose.

In North America, Danisco second-quarter revenues climbed to DKK1,001 million, up from DKK815 million in the previous year’s second quarter.

For the first six months of the fiscal year, Danisco reported EBIT of DKK727 million, down from DKK824 million, and revenues of DKK6,583 million, up from DKK6,129 million. Food Ingredients had six-month EBIT of DKK590 million, up from DKK575 million, and six-month revenues of DKK4,577 million, up from DKK4,326 million.

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