Ter Beke, which operates in 10 EU countries, is facing the same pressures as its competitors and is having to make adjustments to cope with the reduced returns from its sales activities.
Ter Beke's operating margins fell to 7.4 per cent in the first half of 2006, compared to 8 per cent in the same period last year, the company reported. The fall occurred even though total turnover rose by 29.2 per cent to €149.2m from €115.5m over the two periods. Operating profit rose by 7.1 per cent to €4.192m from €3.913m.
The sharp increase in the turnover was mainly achieved by the merger of the company's processed meat division with the Pluma Group, which was announced in the first quarter this year. However some organic sales growth occurred but was not reflected in the operating profit, the company noted.
"The major retailers maintain pressure on the prices, and thus on the margins of the producers/suppliers," the company stated. "This explains in part why the turnover increase does not translate into a proportional increase in results."
Other factors which influenced the result are the In addition to rising raw material prices and energy costs, Ter Beke also faced extra costs resulting from investments in the technical reliability of its plant in Wanze.
In line with the trend of recent years, the company believes it is on track for further sales growth for its pre-packaged processed meats. Ter Beke plans to continue focusing on its slicing and packaging activities, paying special attention to product development and innovation. For example, in the spring Ter Beke launched a line of processed meats coming from free-range animals under the name "Plainair".
In the company's ready meals division, higher sales are being achieved over the same period of 2005. The company has expanded its Come a Casa "Naturalmente" product line in Belgium. It has also introduced a line of Come a Casa produces in Belgium and France, helping it to further increase its market share in the segment of fresh Mediterranean ready meals.
During the second half of the year Ter Beke plans to continue investing heavily in maintaining its market position.
"Unless the market environment deteriorates, and taking into account a number of one time costs, such as the costs of the merger of the processed meats division with Pluma, the group expects the result for the full year 2006 to match the 2005 result," the company stated.
The merger with Pluma created the largest processed meats group in Belgium and a powerhouse in the Benelux region, a strategy Ter Beke hopes will counteract the effects of growing retailer power, declining margins and high input costs.
Through the merger, the division becomes the market leader in processed meats in Belgium and the third largest producer of processed meats in the Benelux. The merger will give the company a 17 per cent market share in Belgium. The company will become the number three processed meats supplier in the Benelux level. In the UK, the merged group is number one in the pâtés segment.
The Belgian processed meat market is only partially consolidated, with the three largest producers together holding a market share of about 30 per cent. In the Netherlands, the top three companies together account for 70 per cent of the market.
Belgium's food market is currently stable and consolidating. Meanwhile the Netherlands market is in the processing of consolidating, according to a statement from Ter Beke earlier this year.
Ter Beke currently operates in ten European countries. Its processed meats division has five production sites in Belgium, and three plants for slicing and packaging.
The fresh ready meals division had three plants, two in Belgium, and one in France.