Snack demand lifts Cosun results

- Last updated on GMT

Related tags: Profit, European union

Compound ingredients for the snack industry, inulin and sugar
activities lift operating profit in 2004 for Dutch ingredients and
foodstuffs group Royal Cosun.

The 11,500 members/shareholder strong co-operative reported a Euros 6 million rise in net operating profit on the year before, pulling in operating profit (EBITA) of Euros 72 million on a stagnant turnover of E1.3 billion.

"The improvement was due chiefly to the Dutch sugar activities, Sensus and the compound ingredients activities, in particular Unifine Food & Bake Ingredients and SVZ,"​ said the firm.

But Aviko, the group's potato ingredients arm saw a slight decline in profit, knocked by a combination of overcapacity among producers, greater consolidation among customers and a "flat market"​.

The good harvest in 2004, which benefited the sugar and chicory (the source of inulin) activities, forced down potato prices, "exerting pressure on prices and margins in the potato products segment,"​ said the Dutch ingredients group.

Building up potato ingredients operations, in January this year Aviko Rixona, a member of the Aviko group, expanded output through the acquisition of Nestle's potato flake and granulates activities in Venray, The Netherlands.

The new plant, in southern Netherlands, will compliment the firm's one other potato flake facility, located in the northern part of the country.

One of the largest manufacturers of potato products in Europe, the firm currently has a 20 per cent slice of the European market, particularly dominant in potato granules for the snack industry.

Reporting on the 2004 results this week, Royal Cosun said its compound ingredients activities turned in higher operating profits. Unifine Food & Bake Ingredients had profitability "boosted by improvements in its production system, an effective pricing policy, further streamlining of the range and higher efficiency,"​ said the firm.

But profit at Unifine Sauces & Spices "was depressed slightly by weaker turnover".

A player in the European sugar market, Royal Cosun cautioned that impending European sugar reform, slated for 2006, is likely to slice into future profits.

Taking the profit centre away from sugar and towards value added ingredients to bring sustainable growth is inevitable.

"The group must become more flexible and increase its earning capacity so that it is less reliant on income from the sugar activities,"​ the firm concluded.

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