CSM to increase prices in 2011 due to hike in commodity costs

By Helen Glaberson

- Last updated on GMT

Related tags Material Csm

CSM will be forced to increase prices and reformulate products in 2011 due to the “dramatic increase” in commodity costs said the Dutch firm as it posted its full year results.

The firm estimated further challenges in 2011 due to the hike in raw material costs, which it expects to rise by at least €200m.

CSM, which supplies ingredients to semi-finished and frozen almost-ready and ready-made products to artisan and industrial bakeries, posted a 42.9 per cent increase in EBITA before integration & acquisition charges to €215.2m in 2010.

EBITA (before one-off costs) in the fourth quarter amounted to €56m, up €13.7m (32.4 per cent) compared with the same period in 2009.

Margins hit by costs

Gerard Hoetmer, CSM CEO, said​margins for the fourth quarter were hit by the rise in costs. These increases unavoidably led to a lagging effect in adjusting selling prices in the earlier period of last year, said the company.

“We remain focused on translating this into our pricing, in parallel with closely managing cost volatility through our procurement strategies,”​ said Hoetmer.

However, despite the price increases CSM implemented in its bakery division during the second half of 2010, the company reported a bakery volume increase by 0.5 per cent.

The supplier said this was a promising positive trend, compared to the first half of the year and was mainly a result of the investments made over the last year to improve the company’s competitiveness.

Further acquisitions

CSM said it was considering further acquisitions in order to drive market growth in 2011, particularly in the company’s bakery supplies division, such as the recently announced acquisition of Classic Cakes this month.

The most important milestone in 2010 was the acquisition of Best Brands in 2010 said CSM. The division contributed €310.6m (12.2 per cent) to net sales of € 2,990, an increase of 17.0 per cent from 2009 of € 2,555.9m in sales.

Effective cost and raw materials management, an improving growth trend at bakery supplies and solid growth at Purac, the company’s bioplastics arm, were the other main contributors to its increase in sales, said CSM.

Factory closures and emerging markets

Whilst outlining its future plans, the firm said it would be closing two manufacturing facilities in to improve utilization and maintain the geographic footprint of CSM Bakery Products, the resulting merger of Best Brands with CSM's sweet ingredients and bakery products arm HC Brill.

CSM said it will also be focusing on strengthening its presence in emerging markets.

The supplier has operations in 16 countries in Europe, the US and Asia and generates annual sales of €3bn (pro forma 2009) and has a workforce of around 10,000 employees in 25 countries.

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