CSM B.S.N.A. division sustains sharp loss in Q3

by Eric Schroeder
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DIEMEN, THE NETHERLANDS — EBITA of the Bakery Supplies North America division of CSM n.v. in the third quarter of fiscal 2011 was $23.7 million, down 38% from $38.5 million in the third quarter last year.

Excluding the integration and acquisition costs related to the March 19, 2010, acquisition of U.S. premium bakery products manufacturer Best Brands, EBITA in the division fell 38% to $26.6 million from $42.9 million. Sales in the division totaled $572.3 million, up 6% from $540.9 million in the same period a year ago.

For the first nine months of fiscal 2011, EBITA at Bakery Supplies North America totaled $90.3 million, down 10% from $100.6 million. Excluding costs related to Best Brands, EBITA in the first nine months totaled $99.6 million, down 16% from $119 million. Net sales were $1,684.7 million, up 12% from $1,503.1 million.

Reported in euros, CSM said EBITA at Bakery Supplies North America fell 44% and sales decreased 3% in the third quarter. For the first nine months, EBITA was down 16% while sales rose 5%.

Bakery Supplies Europe EBITA was €7 million ($9.6 million), down 56% from €16 million in the third quarter last year. Sales were €276.7 million ($381.4 million), up 6% from €260.9 million. For the first nine months, EBITA fell 45% to €25.6 million ($35.3 million) while sales rose 7% to €803.6 million ($1,108 million).

Overall, CSM EBITA was €28.3 million ($39 million) in the third quarter, down 47% from €53.3 million in the third quarter last year. Excluding costs related to Best Brands, EBITA in the quarter was €30.3 million ($41.8 million), down 47% from €56.7 million. Sales were €784.8 million ($1,082.1 million), up narrowly from €783.7 million. For the first nine months, EBITA totaled €102.8 million ($141.8 million), down 29% from €145.2 million in the same period of 2010. Sales for the first nine months climbed 5% to €2,310.1 million ($3,186.9 million) from €2,199.5 million.

“The third quarter has been extremely challenging for the food industry,” said Gerard Hoetmer, chief executive officer. “The industry had already been battling to increase prices to compensate for higher raw material prices and had to do so at a time when consumer confidence was under pressure. This resulted in lower volumes sold, while all players in the food value-chain are struggling to maintain their profitability.

“In Purac, the food activities were also impacted by the lower consumer demand affecting the whole food industry, while Chemical & Pharma continued its positive performance. The growth in the existing business together with the aspiration to assume a 50% market share of a fast growing PLA market, which has been estimated to reach 550,000 tons by 2015, will underpin the ability for Purac to deliver substantial growth. Our lactide plant in Thailand will be operational at year end, on time and on budget.

“In our Bakery Supplies activities, the volume pressure due to significantly lower consumer demand led to increased price competition and promotional actions particularly in the retail channel. These actions have partly offset our earlier implemented price increases to compensate for the higher input costs and required continuous trade-offs between margins and volumes. It has been appropriate to engage in promotional activity in the short term, protecting our leadership position in the market and leaving us well placed to drive growth in the future, particularly when raw material cost pressure moderates. In Europe we continued to strengthen our position in the out-of-home/in-store channel, although in the short term this does not fully compensate for the pressure in the artisan channel.”

As part of its company-wide restructuring program, CSM said it will eliminate approximately 500 jobs.

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