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April 24, 2012

On the money: CSM looks to more cuts to revive profits

Dutch ingredients group CSM has confirmed it is looking at cuts above and beyond the disposals it announced in February in order to improve profitability.

Dutch ingredients group CSM has confirmed it is looking at cuts above and beyond the disposals it announced in February in order to improve profitability.

In an announcement today (24 April), CSM said EBITA excluding one-off costs in the first quarter totalled EUR32.3m (US$42.5m), a decline of 26.3% on the first quarter of 2011. 

SNS Securities analyst Richard Withagen said the result was “substantially short” of market expectations due to a decline in profits from CSM’s European bakery supplies division. 

However, Withagen added the outlook for CSM in the second half of 2012 is better as cost savings take effect and the group looks to ramp up its disposal programme in order to address long-term issues and improve the product mix in its European bakery unit. 

“CSM management continues to expect challenging trading conditions. Results are expected to improve as the year progresses due to a more favourable comparison base and cost savings (EUR7.8m in Q1),” he wrote in a note to investors. 

In order to address long-term product mix issues and improve its performance in European bakery, CSM revealed it is considering further “strategic action” in addition to a swathe of planned disposals it announced earlier this year.

In February, CSM revealed around 30% of its bakery supplies Europe business did “not match our criteria”. 

“This means that these businesses should either enhance their performance or strategic action will follow,” management warned. 

The group revealed that it has already earmarked “at least” EUR100m of sales to be divested.

A spokesperson for the company today confirmed the group is mulling additional strategic action in addition to these planned divestitures.  

“To address the challenges to improve long term profitability, we are considering further actions beyond the disposals announced in February. It is too early to go into details. What is important here is that we will do what is necessary to restore the long-term profitability of this company,” the spokesperson emphasised.  

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