Growth slows, but Hiestand remains optimistic

Swiss bakery group Hiestand Holding has reported a 5.4 per cent rise in organic sales growth in the first half of the year to SF144.9 million (€99.3m) in local currency terms, a slight downturn compared to the previous year. But the group said it was happy with the developments over the first half of the year, in particular a new agreement with the Swiss Coop retail chain.

Operating profits during the half increased to SF10.4 million from SF6.7 million a year earlier, the group said, adding that it would continue to pursue its current business strategy and focus more on qualitative growth.

The company's performance varied greatly from country to country. In Switzerland, sales rose by nearly 20 per cent in the first half of 2002, driven by volumes sold through convenience outlets, including service stations, and major retail chains.

On the other hand, business in Germany was less brisk than expected, with a slowdown in sales though the bakery channel offset slightly by a recovery in other outlets, in particular service stations. Initial turbulence caused by the introduction of the Euro took its tool in the early part of the year, but by May and June, the market had had begun to recover company said.

Sales in Poland, Hiestand's third most important market, suffered from the effects of the recession, which impacted the retail business, although the business-to-business activities remained successful and posted a growth rate of nearly 10 per cent. Earnings remained strong in Poland, despite the recession, because the company had reacted quickly to market trends, it said. The integration of the Fleury Michon business in Poland also helped generate synergies.

Elsewhere in Europe, Hiestand Austria expanded sales by 25 per cent, although the group said it remained unhappy with the Austrian performance. UK results were in line with expectations, with sales rising 30 per cent in the first half.

Asian sales, meanwhile, were impacted by the recent nitrofen scandal in Germany (when traces of the herbicide were found in a number of products made from contaminated grain). Japan banned imports of any products containing milk, eggs, and butter from Germany to Japan in the month of June, although once the company had proved its products were nitrofen-free it was able to resume sales there. In Malaysia, results were better than expected, but the Singapore operations were disappointing.

Commenting on the new joint venture between Hiestand and Coop, the company said it would focus on deep-frozen bakery goods, and that a new company would be created to this end, 60 per cent controlled by Hiestand and 40 per cent by Coop. The new company, HiCoPain, will be based near Lucerne, conveniently next to the logistics firm used by both companies.

HiCoPain will invest some SF40 million in the facility which is scheduled to go online in 2005. With a production area of around 12,000 square metres, the new facility is expected to turn out products worth SF70 million each year. Hiestand will supply some of Coop's bakery goods requirements with its existing production facilities until the new plant is ready.

Hiestand said the new venture, which will run until 2015, would help safeguard its capacities for future growth, allowing it to build on its own experiences as well as benefiting from that of its partner. In the short term, HiCoPain will produce exclusively for Coop's outlets, but will eventually sell its produce through Hiestand's distribution channels as well.