CSM puts bakery supplies arm on the block to reposition as bio-ingredients firm

By Oliver Nieburg

- Last updated on GMT

CSM puts bakery supplies arm on the block to reposition as bio-ingredients firm

Related tags: Bakery supplies, North america

Ingredients supplier CSM has announced plans to sell its bakery supplies businesses and reposition itself as a bio-based ingredients company.

The firm will now concentrate on just two of its businesses that both supply bio-based ingredients: Caravan Ingredients and Purac.

All other businesses, which deal in European and North American bakery supplies, are up for sale.

Can’t grow both

CSM communications director Saskia Nuijten told BakeryAndSnacks.com​: “Both businesses​ [bio and bakery supplies] still have a growing market, but you really need funds to grow and CSM doesn’t have the funds.”

At year-end 2011, CSM had outstanding debts of € 616 million and suffered a 30% loss in profits on the previous year.

CSM chart

The company said that  the economic downturn and volatile raw material prices had hit its bakery supplies business and it anticipates further consolidation in the bakery supplies market that would require investment. It has chosen to focus instead on its bio-based ingredients businesses.

Divestments

The businesses up for sale, which include Cragmillar and BakeMark, recorded combined sales of €2.4bn and EBITDA of €128m.

Funds from the divestments will be used to extinguish debts and invest for organic growth including funding bolt-on acquisitions.

Nuijten was asked what the divestments would mean for existing customers of these businesses. She said that business operations would remain unaffected and no changes were expected in the short-term.

The divestment is expected to mean further job losses at CSM, beyond the 100 job cuts announced in February. Nuijten said it was “too early”​ to say how many more jobs would be lost.

CSM expects to have made progress with its divestments by early 2013.

It will hold a general meeting of shareholders on 3 July to agree on the proposed divestments.

Purac: new applications for lactic acid

The two businesses avoiding the chop, Purac and Caravan Ingredients, had combined 2011 sales of €704m and EBITDA of €123.5m.

Purac is a biotechnology company specialising in lactic acid and its derivatives, The company has plants in North America, South America and Asia.

CSM sees potential for Purac with new lactic acid applications in bioplastics, animal health and nutrition.

Caravan: international expansion

Caravan Ingredients is a North American specialty ingredients business that supplies lactic acid based emulsifiers, functional blends, and fortification ingredients.

Around 60% of Caravan’s sales are for bakery applications, which the business will continue to supply after CSM’s divestments.

Caravan’s five plants are all based in North America. However, CSM sees the restructuring as an opportunity for Caravan to expand globally.

Related topics: Ingredients, Bread

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