Rhodia boosts challenging Q1 for Danisco

Related tags Cent Danisco Low-carbohydrate diet Carbohydrate

The recent bolt on acquisition of Rhodia Food Ingredients lifted
sales for Danisco in an otherwise challenging first quarter for
2004/2005 but efforts to improve margins appear to be paying off,
writes Lindsey Partos.

The €2.2 billion food ingredients firm said yesterday that despite an organic growth of 1 per cent for the quarter to 31 July, the Danish company has kept the outlook of 4 to 5 per cent growth for the year.

Leapfrogging into the number two cultures slot and the number three enzymes position in June this year Danisco closed on the €320m buy out of leading French ingredients supplier RFI. And the 10 per cent growth in sales for the quarter is almost exclusively due to the RFI integration.

But steps by the Copenhagen-based number one maker of emulsifiers to achieve higher margins are slated to contribute to the bottom line.

"As a result of slipping margins in the last eight quarters during the financial year 02/03, that saw average growth of 5 to 6 per cent, we decided to try to get better prices and improve cost efficiencies,"​ Alf Duch-Pedersen, CEO of Danisco told FoodNavigator.com​ yesterday.

The CEO said that a number of commercial decisions and internal cost decisions had led to lower growth.

Sales volumes for the texturants business dropped by 2 per cent compared to last year on the back of increased price competition in the marketplace, particularly in Europe, reported the firm. With the RFI purchase included, sales came in at €145 million (DKK1084m), a 7 per cent rise on the previous quarter. Strong growth in dairy and ice cream in Latin America also contributed to the lift in sales.

In real terms sales were also down for the flavours, cultures and enzymes business run under the speciality products unit but once again, the RFI purchase lifted the figures to DKK 986 (€132.5m), up a considerable 19 per cent. Now number two, prior to the acquisition Danisco held the number four cultures position.

European flavour sales were disappointing and will be a knock back for the firm which has vaunted its ambitions to be one of the top five global flavours suppliers. Total sales development was unsatisfactory and could not be totally offset by the outstanding sales growth in Asia, reported the firm.

Signs that interest in the cult low-carb diet may have reached its peak were evident with Danisco reporting for its sweeteners unit that compared to the very strong growth rates seen in previous quarters, due to new product innovation for low carb products, US food and beverage makers are starting to buy less.

In addition, the firm said that Q1 sales in the uni were hit by price competition for its sugar replacer polyol, xylitol, with sales volumes falling 3 per cent. The figures were hit considerably by increasing price pressures from Asia, notably one suspects with China.

But growth in the firm's Litesse and Lactitol products for low-carb applications helped offset the drop. Sales for the sweetener unit dipped slightly to DKK410m, down from DKK411 for the comparable period in 2003/2004.

News that pectin leader Citrico International is now in liquidation​ means imminent change in the hydrocolloid industry. Danisco's Alf Duch-Pederson declined to comment on the firm's ambitions in the hydrocolloid sector.

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