CSM half-year results feel the price hike strain

By Lynda Searby

- Last updated on GMT

Related tags: Bakery ingredients supplier, Supply and demand

Dutch bakery ingredients supplier CSM is feeling the impact of rising raw material costs, with its first-half 2011 results hit by the price increases the company has been forced to pass on to customers this year.

CSM reported last Wednesday first-half earnings before interest, tax and amortisation (EBITA) and one-off costs of €80.2 million, 21.8 per cent down from the €102.6 million it reported last year, on a 7.7 per cent rise in net sales to €1.53 billion.

The company claims that as market leader it moved first on implementing price rises, which affected volumes in the first half of the year.

“We have seen some short term shifts in volumes while the market was migrating to higher pricing levels. This has led to some loss of volume across our businesses, mainly in the US, and has unfortunately led to a second quarter result lower than last year,” ​said CSM CEO Gerard Hoetmer in a statement.

CSM’s European bakery supplies business wasn’t as badly hit by the price increases, and its performance was broadly in line with last year’s as a result of changes to the company’s product mix and growth in the out-of-home / in-store market. The company also won a number of new contracts with retail customers, particularly in continental Europe, which boosted business in this channel.

The pricing challenge has not, however, thwarted CSM’s expansion plans. In May the firm opened its first bakery ingredients facility in Asia. The Shanghai factory is producing dry bakery mixes for bread, cakes and muffins, to enable CSM to meet growing demand from Asia.

CSM also entered the African market at the start of the year via a new joint venture with Tunisian bakery ingredients supplier GIAS.

Although it expects the bakery supplies markets to remain volatile, the Dutch company is now confident that having completed ‘the required additional pricing actions’, in the second half of the year, its focus will be on growth.

In fact, the company says it is already seeing ‘encouraging signs’ and expects a gradual recovery of volumes during the second half of the year.

“This will be supported by innovations, our strategic initiatives and the fact that the whole market has migrated to higher pricing levels,”​ said Hoetmer. “We continue with our strategic focus of growing our bakery supplies activities, exploiting growth opportunities in today’s Purac business as well as unlocking the considerable potential in bioplastics.”

Related topics: Ingredients

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