Pre-treatment investment in raw materials to bring savings for Karlshamns

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Competition continues to bite for Swedish speciality fats and oils
business Karlshamns with the firm announcing it will pour Euros
6.68 million (SEK60m) into cost-cutting measures.

The Karlshamn-based firm that announced some 50 job cuts in October to reap savings after disappointing sales said the funds will go towards a new pre-treatment process for raw materials and to convert current fuel boilers to using wooden pellets.

"These proactive investments, all of which are part of our SEK 100 million programme, will make us substantially better equipped to handle the exceptional upsurge in competitiveness throughout our industry,"​ said Karlshamns CEO Jerker Hartwall.

Hardening competition, particularly from across the Atlantic, has seen US giants eating into the European market for oils and fats. Last year the world's number one oilseed processor US Bunge acquired French rival oilseed processor Cereol - the parent of ingredients company Central Soya providing it with immediate access to key European markets.

Karlshamns, currently bearing the negative impact of squeezed oils and fats margins, said this week its subsidiary Tefac should soon benefit from the SEK 25 million (€2.78m) cash injection into the new pre-treatment process for raw materials.

"As a result, production capacity for high value-added speciality products will increase at the same time as the consumption of additives and energy will decrease,"​ the firm comments.

Bringing some SEK10 million (€1.1m) of capital to the firm, Karlshamns also announced this month that it will sell its 20 per cent stake in Swiss sales company Akoleo, to the company's main shareholder Oleotrading.

The Swedish firm that supplies a raft of oils and fats to confectionery and chocolate producers, said at the end of last year it would be looking to focus on high-margin, value-added products to lift the bottom line.

In September the company acquired UK flaked fats company Kelanco, and with it a drive into value-added speciality fats for the booming UK convenience food market.

The deal gives Karlshamns-based its first production facility for flaked fats, adding to the flaked fatty acids and flake feed materials currently in the Swedish company's portfolio.

"We already have a plant for powdered fats, the Kelanco purchase and its UK production base complement this,"​ a spokesperson for Karlshamns told at the time.

The firm hopes the acquisition - the UK business has an annual SK15 million turnover - will generate much needed profit in 2004.

Karlshamns saw operating profit in the oils and fats business area drop to SEK134 million (€14.8million) for 2003, down from SEK146 million on the previous year.

The firm said recently it aims to save some SEK100 million from 2006 onwards through the cost cuts.

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