Diemen, April 21, 2009 – CSM, the world's leading Bakery Supplies and Lactic Acid business, reports a sales growth of 2.9% for Q1 2009. EBITA of Euro 20.1 million in Q1 was impacted by a decline in volumes of 4.2%, a consequence of the current negative economic climate. Continuing actions to reduce cost and working capital will provide increasing support to results in the remainder of the year.
Headlines:
• Sales were €636.1 million compared to €618.2 million in Q1 2008. Currency effects on balance had a positive impact of €32.7 million, due to the stronger US dollar mitigated by the weaker pound sterling. Autonomous sales growth was 2.8% negative, caused by lower sales volumes.
• Volumes in Bakery Supplies were 3.8% lower than in Q1 2008. Sales were lower in all segments of the business, with the more luxury pastry items particularly affected.
• PURAC’s volumes were down 10.4% compared with Q1 2008. Approximately 75% of this decline occurred in the potassium-based products, following the supply interruption in the 2nd half of last year. We have been regaining some of the potassium-based business through the first quarter.
• EBITA was €20.1 million compared with €32.5 million Q1 2008 (at constant currency €17.9 million vs €32.5 million).
• EBITA was negatively impacted by our decision to reduce finished goods inventories, which fell by €23.8 million. We estimate the negative impact to EBITA to be approximately €6 million.
• Pressure to reduce selling prices at Bakery Supplies led to slightly lower pricing and expensive forward raw material contracts had to be absorbed in Q1 2009. This led to a decrease in return on sales, in an order of magnitude of 1 percentage point, compared with the last quarter of 2008.
• US-based bakery organization Brill exceeded expectations, profiting from increased efficiencies, and our German bakery business succeeded in maintaining volumes despite the difficult economic conditions.
Commenting on the first quarter results, Gerard Hoetmer, CEO of CSM, said:
“In our annual year results statement we said to expect the economic climate to remain unchanged compared with the fourth quarter of 2008. This became a reality and impacted CSM with lower volumes in the first quarter.
The initiatives taken over the last years to strengthen our organization in R&D, customer intimacy and marketing are helping to limit the effects of the economic crisis and allowing us to increase share in specific markets. Customers are choosing reliable partners to support them in creating organic growth and as a result we are winning new business. The reorganizations at Brill and in our German business are proving to be successful; the operational improvements at Brill are having substantial impact.
Our short term responses to mitigate the effects of the economic crisis have allowed us to reduce costs in line with our plan to save €25 million in 2009. We have taken actions that show immediate effect, such as reductions of FTE’s, limiting salary costs, and scrutinizing all expenses. Restructurings to a structurally lower cost base are ongoing, as evidenced by the announced reorganizations in the UK and Belgium, the restructuring of the PURAC supply chain and continuing procurement savings.
With our focus on generating cash we have aggressively reduced inventories, accepting a negative impact on EBITA in the first quarter, and have temporarily closed down a number of production lines.
We believe our business compares favourably with last year, keeping in mind that the effects of the recession became visible only from the second quarter of 2008, making the year-on-year comparison for the first quarter challenging. We see positive underlying trends in market share, cost levels and raw material costs, even though there is price pressure in various customer channels. We have a good pipeline of innovations and customer projects in all our businesses and, although recognizing that our potential customer base is also confronted with the harsh economic climate, we continue to be very excited about the development of our bioplastics proposition at PURAC.
We do not see an improvement in the economic climate yet but we do expect our measures to have an increasing effect through the second quarter, bringing EBITA of the second quarter closer to that of last year’s second quarter.”