Danisco raises profit outlook after strong quarter

by Jeff Gelski
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COPENHAGEN, DENMARK — First-quarter growth in revenue and earnings before interest and taxes (before bio chemicals projects) led Danisco to increase its outlooks for the fiscal year. For the quarter ended July 31, the Copenhagen-based company had revenue of DKK3,914 million ($690 million), up 13% from DKK3,449 million ($608 million) in the previous year’s first quarter. Organic growth made up 5% of the revenue increase and positive currency effect made up the other 8%.

First-quarter EBIT (before bio chemicals projects) of DKK687 million was up 18% from DKK537 million. The bio chemicals projects, which cover Danisco collaborations with DuPont and Goodyear, had total costs of DKK45 million in the first quarter.

Danisco for the fiscal year expects revenue of DKK15 billion, up from a previous estimate of more than DKK14.5 billion, and EBIT (before bio chemicals projects) of DKK2.1 billion to DKK2.2 billion, up from a previous estimate of about DKK2.0 billion.

“Already this quarter, we achieved our long-term financial ambitions, including a 12-month average EBIT margin (before BCP) of 13.7%,” said Tom Knutzen, chief executive officer, when first-quarter results were given Sept. 21. “This was driven by good progression in all four divisions, including a recovery in Sweeteners, as well as a positive currency impact. We are currently addressing our new financial ambitions for the future and expect to communicate on these on Oct. 8, 2010, in connection with our planned capital markets day.”

In the first quarter Danisco’s Food Ingredients business had revenue of DKK2,658 million, up from DKK2,360 million in the previous year’s first quarter.

Within Food Ingredients, the Sweeteners division had first-quarter revenue of DKK420 million, up from DKK376 million, and EBIT of DKK35 million, up from DKK9 million.

“We have experienced improved plant load for xylitol and felt the effect of last year’s restructuring initiatives,” Danisco said. “We are currently seeing an improvement in our underlying cost competitiveness due to a positive currency development as well as a more challenging Chinese input cost environment.”

Enablers, a division that encompasses emulsifiers, gums and systems, in the first quarter had revenue of DKK1,633 million, up from DKK1,447 million, and EBIT of DKK295 million, up from DKK257 million.

“We have been responding swiftly to the prospect of rising grain prices in the wake of Russia’s grain export ban, gathering a broad portfolio to soften the impact on food manufacturers’ budgets,” Danisco said. “Bakery and brewing are two of the main food sectors affected by the forecasted price rise due to their high dependence on, particularly, wheat and barley. Many of our blending solutions are developed by combining our competencies in emulsifiers and enzymes, thus leveraging our capabilities in both of these areas.”

The Cultures division in the first-quarter had revenue of DKK605 million, up from DKK537 million, and EBIT of DKK147 million, up from DKK107 million.

Danisco’s Genencor business in the first quarter had revenue of DKK1,268 million, up from DKK1,104 million, and EBIT of DKK232 million, up from DKK190 million.

“Sales of enzymes for grain processing, including bio-ethanol production, continued at a very high level,” Danisco said. “Enzymes for both food and animal nutrition solutions progressed well, and we saw continued growth for Fabric & Household Care.”

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