Danish Crown has said its ability to serve markets around the world helped the meat group in a fiscal first half that saw Russia ban imports from the EU and the PEDV virus hit US production.

The co-op reported a fall in sales and operating profit for the six months to the end of March. Revenue dropped 1% to DKK28.21bn (US$5.18bn) amid lower market prices for pork.

Operating profit was down 11.2% at DKK864m, although Danish Crown pointed to costs linked to the closure of a facility in Faaborg in Denmark. However, without those charges, operating profit was still down 3.1%.

Net profit rose 14% thanks to lower interest charges and income from disposals.

"The world market has, for the past six months, been characterised by the Russian import ban on pork from the EU as well as the PEDV virus which has hit the US pig production hard. In such a difficult market, Danish Crown's strength is its wide market access globally," CEO Kjeld Johannesen said.

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Solid half-year in difficult market

Despite weaker demand in Europe and lack of access to the Russian market, Danish Crown is posting an operating profit before special items on a par with the prior-year period.


Randers, 12. May 2014
 

- The world market has, for the past six months, been characterised by the Russian import ban on pork from the EU as well as the PEDV virus which has hit the US pig production hard. In such a difficult market, Danish Crown's strength is its wide market access globally. It gives us room for manoeuvre, for the benefit of our owners, says Danish Crown's Group CEO, Kjeld Johannesen.

In the first half of FY 2013/14, the group generated revenue of DKK 28.2 billion. Despite organic growth of 3.1%, this represents a fall of DKK 0.3 billion relative to the prior-year period. The decline is attributable to lower market prices for pork. The results are negatively affected by provisions for the closure of the department in Faaborg, which are, however, more than compensated for by lower interest expenses and income from the sale of ownership interests in associates, resulting in a net profit for the period of DKK 813 million against DKK 713 million for the first half of DKK 2013/14.

- The interim results can be ascribed to the stable operations of a company which is successfully navigating a market with strong fluctuations, says Kjeld Johannesen.

In February, Danish Crown entered into an agreement on the acquisition of HK Scan's 50% ownership stake in Sokolów, Poland's leading producer of processed meat products. Danish Crown already owns 50% of the company, and the transaction is currently being considered by the EU competition authorities.

- Sokolów is a growth company, and with full ownership we will be able to further strengthen our efforts to exploit the synergies which can be realised within the group. This is perfectly in line with the overall strategy for Danish Crown's processing companies, says Flemming Enevoldsen, Group Executive Vice President of DC Foods, which comprises the processing companies in the Danish Crown group.

Among Danish Crown's owners, the pig producers have in recent years seen declining prices in the market. This is due to the outbreaks of swine fever in wild boar in Poland and Lithuania, as a result of which Russia introduced a ban on pork imports from the EU in February. 

- This is an extremely unfortunate situation. The outlook for the first half of 2014 was pretty good for the Danish pig producers, but the situation has now grown quite a lot more challenging. Despite the very difficult market situation, Danish Crown is paying very competitive prices compared with the rest of Europe, says Erik Bredholt, Chairman of the Board of Directors of Danish Crown. 

Financial highlights for Danish Crown AmbA

DKKm

H1
2013/14

H1
2012/13

Revenue

28,212

28,509

Operating profit before special items

944

974

Operating profit

864

974

Profit for the period

813

713

Balance sheet

24,973

26,309

Equity

5,560

5,240

Capital base including subordinated loans

6,064

5,745

Cash flows from operating activities

848

526

Cash flows from investing activities

-395

-612

Supplies by members, millions of kg

672

676

No. of employees

22,469

23,036

Original source: Danish Crown