Chr Hansen: low US earnings knock H1 profit for ingredients

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Low growth and higher production costs in the US knock first half
profit for Chr Hansen's ingredients business, that posted a 9 per
cent fall in profit for the first six months of the year.

On sales of DKK1.64 billion (€220m/$285.47m), the ingredients sector, up for sale since November last year, brought in profit of DKK133 million (€17m/$22m) for the first half, down from DKK148 million for the same period the previous year.

Chr Hansen cited disappointing figures from the US as largely contributing to the fall in profits. Low organic growth rates at just one per cent, higher than expected production costs, severance payments, and currency conversions all played a role in reducing the bottom, said the Danish firm.

At one per cent, Europe - knocked by lower rennet prices - also fell short of the target organic growth of 5 to 6 per cent, set by the company for the financial year.

But the number one global cultures supplier, Chr Hansen said its culture business continued to win market share in the six month period, boosted by new products for yoghurt and cheese industries.

Growth rates were above average in North and East Europe, with a further boost for the firm from strong double digit growth (20 per cent) in South America, and 13 per cent for Asia Pacific and the Middle East.

The ingredients division at Chr. Hansen, that combined with the ALK-Abello allergy unit makes up the group, came up for sale​ in November last year after its major stakeholder, the Lundbeck Foundation, decided to pull away from the ingredients slice of the company to focus on the pharmaceutical unit.

A sale has yet to go through, but recent reports suggest the unit could fetch nearly a €1 billion.

Citing an un-attributable source, the Danish daily newspaper Jyllands-Posten​ said last month that following initial interest from about 20 to 25 investment funds and firms in the Danish firm's ingredients business, now there are about 7 to 8 bidders left in the running.

The Danish paper suggested the unit is likely to end up in foreign hands after fellow ingredients and enzymes firms Danisco and Novozymes opt out of the purchase.

The ingredients operations of Chr. Hansen include cultures, enzymes, colours - where it is the number one natural colour supplier - flavours, seasonings and sweeteners. Industry players with the clout to acquire Chr Hansen may well meet with competition concerns. As such, observers could suspect the group will be broken up into units.

But the CEO of Chr Hansen, Erik Soerensen told at the time of the sale notice that this is definitely not the case: "The ingredients business will not be split up, it is all or nothing."

Industry reports rumour that DSM, the Dutch chemicals group, has entered the frame to bid for the ingredients unit. Irish food group Kerry, could be another strategic bidder.

For the six months to February 2005, on sales of DKK1.64 billion ALK-Abello, that focuses on allergy treatment and asthma prevention products, brought in an operating profit of DKK60 million compared to DKK133 million for the ingredients unit.

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