Diemen, the Netherlands, August 13, 2008 – The first half-year results demonstrate the increasing strength of CSM in its major markets. Underlying sales growth was 11%, and price increases fully offset the impact of higher raw material costs. PURAC in particular performed well. EBITA was held back by adverse currency movements and further restructuring costs, which masked an underlying improvement in profitability.
Key Facts First Half 2008
• Net sales increased from € 1,206.5 million to € 1,247.2 million (at constant exchange rates an increase of 11.4%). Autonomous sales growth was 11.2%.
• EBITA from continuing operations before exceptional items amounted to € 68.8 million compared with € 69.7 million in the first half of 2007 (at constant exchange rates: € 75.1 million, an increase of 7.7%).
• Further restructuring in Germany and in North America has slowed down the growth in profitability. Our restructuring is going beyond our 3-S Program and will go deeper and take additional time.
• The 3-S Program savings in the first half of 2008 were € 14 million higher than in the same period last year, bringing the total run-rate savings to € 112 million, already exceeding the 2008 target of € 110 million.
• The result before taxes from continuing operations increased by 6.2% to € 49.7 million.
• As a result of the positive outcome of a dispute with a foreign tax authority, a tax provision of € 38.7 million has been released.
• Implementation of the PURAC manufacturing footprint and bio-plastics strategy is on schedule.
• In a generally difficult financial climate, an additional financing arrangement of US$ 385 million was concluded with a syndication of banks at attractive conditions, to finance further growth.
• Worse than expected economic and market conditions invalidate ROS comparisons and delay attainment of our ROCE target.
Gerard Hoetmer, CEO of CSM, on Strategy and the Market:
“I am pleased with the progress CSM has made in this volatile economic climate. We have been able to meet the short term challenges whilst working on our longer term strategic initiatives.
We have taken a leading role in implementing price increases, which were necessary to offset unprecedented increases in raw material costs. This often involved advising our customers on reformulations and different product designs.
At the same time our innovation centers worked hard on strategic innovations, resulting in the successful launch of amongst others a premium high quality croissant in Europe, the Hispanic range in BakeMark USA and in the further development of bio-plastics at PURAC. All in all, CSM has developed a more professional presence in the market, is more responsive to customer needs and hence is strengthening relationships with its customers.
The constant fine-tuning of our organization has considerably strengthened the foundation of our company, but we still have work to do. We are going to continue with our restructuring, beyond what was envisaged in our 3-S Program in order to ensure that we deliver on our strategic goals on being cost competitive and fulfill our growth ambitions. We are currently reorganizing at H.C. Brill in North America and at our German bakery organization in order to bring their performance up to company requirements. We expect to see clear improvements in the results at Brill in the second half of this year. The measures that we have taken in our German bakery organization are expected to lead to an improvement of the results in 2009 and beyond.
A good example of a successful restructuring is the turn-around at PURAC, with which I am very pleased. PURAC is clearly showing market leadership in new product launches, in continuously lowering the cost base, and implementing break-through changes in the production and product quality of bio-plastics. PURAC has proved to be able to increase prices to the required levels and is substantially improving profitability.
CSM is currently showing a strong performance under difficult market circumstances, which is an achievement our entire organization should be proud of. Continuing high raw material cost levels, negative currency effects and an economy that starts to show symptoms of a recession, create an even more difficult environment. We are nevertheless determined to further improve our activities, and consequently, improve our bottom line.”