Danisco suffers loss in quarter

by Jeff Gelski
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COPENHAGEN, DENMARK – Danisco A/S will take action to restore the level of profitability in its Sweeteners division after suffering a loss of DKK698 million ($129 million) in the third quarter ended Jan. 31, the company said March 18. Danisco attributed the loss to previously announced impairment charges, asset write-downs and loss on discountinued business. The loss compared to a profit of DKK264 million ($49 million) in the previous year’s third quarter.

Third-quarter revenue growth of 4% to DKK3.1 billion from DKK3 billion reflected negative organic growth of 2%, an increase from currencies of 3% and a positive impact from acquisitions of 3%. The global economic downturn slowed food ingredient volumes, particularly in Enablers and Sweeteners. Danisco also completed the sale of its Sugar business to Nordzucker in the third quarter.

On March 2, Danisco announced it was lowering its fiscal year outlook, changing its outlook for operating profit before special items (EBIT) to DKK1.15 billion from DKK1.3 billion. The expected year-to-year decline of about DKK300 million from the previous fiscal year’s EBIT overwhelmingly is made up of expected declining earnings of DKK175 million in Sweeteners. Xylitol specifically experienced weakness in volume and price in the third quarter.

In targeting current excess capacity in Sweeteners, Danisco mothballed the production site in Anyang, The People’s Republic of China. Danisco also announced Stephane Constant will head Sweeteners. He previously was vice-president for food protection in Danisco’s Cultures division.

"As part of our efforts to restore profitability in Sweeteners we have announced structural initiatives, allowing us to take concrete action for the division," said Tom Knutzen, chief executive officer of Copenhagen-based Danisco, on March 18. "And despite Danisco’s relatively defensive nature, we have felt the impact of the current economic downturn and are suffering from the lower short-term earnings visibility.

"This has led to initiatives, including staff reductions, a salary freeze for 2009 and hiring restrictions across the organization, as we act swiftly to defend our short-term profitability. However, this does not alter our strategic priorities nor challenge the fundamental strength of Danisco."

Third-quarter revenue for Food Ingredients rose 2% to DKK2,113 million from DKK2,065 million, which reflected a decline in organic growth of 3%, a positive currency impact of 2% and an effect from acquisitions of 3%. Destocking and cost containment efforts among its customers combined with sluggish consumer demand to contribute to the volume slowdown, according to Danisco. The EBIT was DKK160 million, down from DKK211 million in the previous year’s third quarter.

Within Food Ingredients, the Bio Actives business, which includes Sweeteners, reported third-quarter revenue of DKK803 million, down from DKK829 million in the previous year’s third quarter, and EBIT of DKK67 million, down from DKK106 million. Also within Food Ingredients, Enablers reported third-quarter revenue of DKK1,310 million, up from DKK1,236 million, and EBIT of DKK93 million, down from DKK105 million.

Genencor reported third-quarter revenue of DKK1,006 million, up from DKK929 million, and EBIT of DKK94 million, down from DKK131 million.

For the first six months of the fiscal year, Danisco companywide reported revenue of DKK9,681 million, up from DKK9,115 million, and a loss of DKK88 million, compared to a profit of DKK1,385 million in the first six months of the previous fiscal year.

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