Rabo Securities has downgraded Dutch food group CSM to Hold. Although CSM's annual figures, published on 7 December, were in line with expectations, analysts at Rabo have become less positive on CSM's organic sales growth outlook. They have lowered CSM's organic sales growth projections for the next years from 3% to 2.5%.

The main reason is their lower organic sales expectations for the Bakery Ingredients division, which accounts for 64% of CSM's total sales. CSM acquired Unilever's European Bakery Supply activities on 1 October 2000.

The European market grows at an estimated 2% per annum. CSM's business is growing faster as it is active in the convenience/higher added value segment of the market (such as bake-off and frozen products), which is growing at 5% per annum. CSM's European Bakery Ingredients business, which recorded sales of €872m in the financial year 1999/2000, is therefore expected to grow at 2-3% annually in the next five years.

In contrast, the US bakery ingredients market is growing by 1% per annum. CSM also plans to start selling in the faster-growing segments of the American market, but the results of this change in strategy will take more time to impact on figures than was expected. In the US, CSM has integrated the many (mainly family) businesses it has acquired over the last few years into one production and one distribution company. The full integration of the US operations, which recorded sales of €845m last year, will take longer than expected and will also have a negative impact on operating profits, according to Rabo Securities.

Rabo shows itself more positive about CSM's Dutch mid-cap food peers Nutreco and Wessanen, which it recommends to buy.

By Karel Beckman, just-food.com correspondent