Denmark-based meat co-operative Danish Crown has booked a slight fall in first-half earnings but said revenue was at a record high, as a result of “good market conditions and a strong sales performance” boosted by Asian demand for pork.
Net profit for the first six months of Danish Crown’s 2016-17 financial year was DKK812m (US$121.5m), versus DKK819m over the year-ago period, which the group said was “considered acceptable given market conditions”. EBIT for the period was down to DKK1.02bn from DKK1.11 previously, which Danish Crown described as “an acceptable level” achieved by “keeping costs stable”.
Danish Crown said pork price increases had “challenged” earnings through processing companies. “Pork is the raw material in the main part of the companies’ products and the companies purchase it at market price. Therefore, the total production costs have increased significantly and it takes time to pass on price increases of this level to the retail customers. Consequently, earnings in the processing companies for the first half-year are below earnings for the same period last year.”
However, increasing prices raised the group’s revenue to exceed DKK30.7bn for the period “for the first time in history”, compared to DKK29.4bn in the corresponding period a year ago.
“The strong demand, especially on the Asian markets, combined with decreasing supply of slaughter animals in northern Europe have created the basis for the sharp price increase on pork,” the group said.
Increased sales could largely be ascribed to acquired companies, Danish Crown said. “Good market conditions and a strong sales performance have ensured good earnings on sales of fresh meat, while earnings in the processing companies have been affected by the sharply increasing raw material prices. On the other hand, DAT-Schaub has succeeded in improving their earnings significantly, in a market where prices on both sheep and hog casings are increasing.”
Last January, Danish Crown acquired German beef processor Teterower Fleisch in a move the company said would make it a “major player” in the northern European market for organic beef. In March, the group snapped up UK foodservice company Leivers Brothers for an undisclosed sum.