Danisco confirms record sugar outlook

By staff reporter

- Last updated on GMT

Related tags Denmark Danisco

Danisco has confirmed its positive outlook for this year's sugar
harvest following second field samples, thanks to favourable
weather conditions in Europe.

The company first said last month that it was expecting a good year, with expectations that the harvest should "significantly exceed"​ the group's total EU quota of 929,000 tonnes. The firm has now reaffirmed that expectation, but because of the new EU sugar regime means that it is not altering its outlook on earnings from sugar for the current year. Under the new sugar regime rules, which came into effect last year, sugar produced over and above the quota is either transferred to the quota for the following year, or used for non-food purposes. Danisco says it has been increasing its focus on sugar for non-food uses, such as pharmaceuticals and animal feed. A spokesperson for the company could not say last month whether less beet will be planted next year as a result of the high yield this year, as it depends how much is channelled to these non-food areas. The spokesperson said that since Danisco is currently in a quiet period up to announcement of its Q1 results in the middle of this month, it was not able to comment in more detail on Danisco's strategic focus at this time. However one possible strategy move that has been mooted is splitting the company into two, with one company focused on sugar and the other on ingredients. This would enable shareholders to target their investments. However following the Annual General Meeting last week, it was announced that this move will not be made for the time being, and until the dust has settled on the new sugar regime in about two years' time. Danisco said today that it will be kicking off its 2007 sugar campaign in the next few weeks, gaining the first experience from the sugar division's new factory structure, which has production in fewer units. As a result of the reforms, it closed three of its factories in Denmark, Sweden and Finland, sold parts of its quotas in Sweden and Finland, and purchased extra quota in Germany. It also optimised shared functions. These measures resulted in the loss of 350 jobs. In full year 2006/7 Danisco reported revenue of DKK 6,995m from its sugar division, compared to DKK 7,881m in 2005/6 and DKK 8,155m in 2004/5. The decline is seen most sharply in the division's margins, which plummeted from DKK 1,035m in 2004/5, to DKK 898m in 2005/6, to DKK 581m in 2006/7.

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