Multinational food giant Wessanen has recorded sales of €1,449.5m (US$1,422.56m) in the H1 2002, more or less equal compared with the H1 2001.
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The EBITA of current activities fell to €36.6m in the H1 2002 (H1 2001: €43.2m), and the earnings per share (EPS) amount fell to €0.31 (2001: €0.49). The balance sheet however was enhanced as a result of a strong cash-flow.
Chairman Mac Zondervan commented: “As we announced in February, the results for the H1 have been clearly influenced by the divestment of our US dairy companies, GFI, and our participation in Campari.
“When I look further at the results of the current activities, I am generally satisfied with regard to our European activities. The growth of our strong natural food brands, in particular, shows that we are operating with the right brands in the right market. In the US, however, the situation is different. Here we are under pressure. The continuing economic recession is prompting US retailers to look for cost reductions. This is causing loss of sales and pressure on profit margins.
“To deal with this, we shall intensify the current reorganisation process; this will lower our cost base and enable us to focus even more on being a competitive and innovative supply chain partner.”
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By GlobalDataOutlook for 2002
Wessanen still expects growth in its European core operations in 2002. However, with no signs of the US economy recovering in the H2 2002, some pressure will be put on results. Based on these factors Wessanen has lowered its EPS guidance from €0.85 to €0.71 for the H2, based upon a net profit before goodwill of €50m for current activities for the FY 2002. Long-term strategy and 2003 outlook
The Wessanen strategy focuses primarily on strengthening its market positions by investing in strong brands, expanding the distribution network in natural and specialty foods, and product innovation.
Since the implementation of the wellness strategy in October 2000 Wessanen has built a European natural and specialty foods platform based on strong brands and market positions.
Also, the company has successfully divested its US dairies, GFI, Telford Foods and its share in Campari, resulting in a strong balance sheet and thus enabling Wessanen to further execute its wellness strategy. Furthermore, the existing activities have made important steps towards a successful future in wellness. Currently, the US business is being reorganised, focusing on cost control and marketing effectiveness. As a result of internal measures taken, such as regionalisation savings at Tree of Life US and the absence of one-off costs, combined with further integration at Tree of Life Europe, specific profit improvement plans for Cereals and new sales through Wild Oats, Wessanen expects its 2003 EPS before goodwill amortization up at least 15% to €0.82.
Interim dividend and quarterly reports
The interim dividend over the H1 2002 remains unchanged at €0.15. The dividend for the whole of 2002 should also remain unchanged at €0.58. To further improve the transparancy of the development of the results and strategic actions, Wessanen said it will start publishing quarterly reports in the Q3 2002.
Operating results per group over the H1 2002
Natural & Specialty Foods
Results total group
in €m, unless stated otherwise
H1 2002 H1 2001
Net sales 1,112.3 1,117.1
EBITA 32.6 33.4
ROS 2.9% 3.0%
Average capital employed 521.0 507.4
ROI 12.5% 13.2%
Increase in economic premium (5.4) (14.3)
Average goodwill 390.1 320.1
ROIC 7.2% 8.1%
In the H1 2002 the combined sales of the companies in this group totalled €1,112.3m, more or less equal year on year. The EBITA fell by 2.4% from €33.4m in the H1 2001 to €32.6m in the H1 2002.
Results Tree of Life Europe
Despite difficult market conditions, particularly in Germany, Tree of Life Europe recorded a satisfying result. Sales increased by 24.1% through acquisitions, against a negative autonomous growth of -1%. The ROS increased from 5.3% to 5.6%. The most important brands developed positively, with growing sales and consumer appreciation. The integration of the European natural and specialty foods operations which were acquired in 2000 and 2001, into a streamlined European wellness platform is proceeding according to plan. The UK distribution company, Nature’s Store, which was acquired in March, has made a positive contribution to the operating results of Tree of Life Europe. The acquisition of Kallo Foods in July of this year will further strengthen its UK position.
Results Tree of Life US
The results of Tree of Life US were disappointing. Though the sales of natural foods increased by 4%, autonomous sales fell by 5% due to the pressure on the specialty food sales in the supermarket channel. Accordingly, it expects a sales loss of €50m in the H2 2002. An additional reorganisation has been initiated to mitigate the effect of the sales loss. This will involve an additional cut-back of some 200 positions in the H2 2002 and another 200 jobs in the H1 2003.
In order to respond better to the difficult market conditions Tree of Life North America will focus more on the strong growth in the sales channel of ‘supernaturals’. A contract has therefore been signed with Wild Oats Market, Inc. (effective 1 September 2002) for the distribution of natural and organic foods and specialties in the US. As the primary distribution partner of Wild Oats, which runs chains of specialty stores for natural and organic foods, Tree of Life US is now strongly represented in the US ‘supernaturals’ as well as in the sales channels of independent health food stores and the mainstream supermarkets. The distribution agreement is expected to generate annual sales of more than €150m.
In 2002, Tree of Life US started optimizing the efficiency of its distribution network by merging distribution centers and reducing its workforce by 400 to 500 jobs. Provisions were already in place for this in 2001. The regionalisation is on track to deliver savings of €3m by the end of 2002 and a total of €9m by 2003. All the regional management teams are installed, part of the staff cuts have been implemented and two distribution centers have been merged. The remaining implementation of the regionalisation process will be intensified in response to the economic situation and the prospective loss of specialty food sales. These measures will structurally reposition the company’s supply chain role and should be completed at the end of 2003.
Cereals
Results in €m, unless stated otherwise
H1 2002 H1 2001
Net sales 121.8 113.8
EBITA 4.6 6.5
ROS 3.8% 5.7%
Average capital employed 100.8 98.1
ROI 9.1% 13.2%
Increase in economic premium (1.9) (2.1)
Average goodwill 81.1 81.1
ROIC 5.1% 7.3%
The sales volumes for breakfast cereals were higher than anticipated, especially on the European continent. But higher production costs in the UK, higher prices for raw materials and losses at Telford Foods caused the EBITA of cereals to fall to €4.6m in the H1 2002 (H1 2001: €6.5m). In the meantime, steps are being taken to lower the production costs and improve efficiency.
In July of this year, UK-based Telford Foods was sold with a limited book loss to Brand Partnership Ltd, Leeds, UK. The production of dry soups no longer fits in with Wessanen’s strategic focus on wellness.
Convenience Food
Results in €m, unless stated otherwise
H1 2002 H1 2001*
Net sales 81.8 80.9
EBITA 4.6 3.9
ROS 5.6% 4.8%
Average capital employed 54.8 52.9
ROI 16.8% 14.7%
Increase in economic premium 0.7 (1.4)
Average goodwill 90.1 90.1
ROIC 6.3% 5.5%
*These figures do not include GFI, the Thai producer of chicken products, which was divested in December 2001.
In the H1 2002 CFG recorded a limited autonomous growth despite a difficult German market. The results were positively influenced by a reduction in the costs of raw materials. Both the ROS and ROIC developed positively.
Dairy Europe
Results in €m, unless stated otherwise
H1 2002 H1 2001
Net sales 133.6 146.3
EBITA 1.4 3.1
ROS 1.0% 2.1%
Average capital employed 62.5 80.6
ROI 4.5% 7.7%
Increase in economic premium (0.7) (4.1)
Average goodwill 7.3 7.3
ROIC 4.0% 7.1%
In line with expectations, the results for the H1 2002 show a structural improvement compared with the H2 2001. This positive trend is expected to continue in the H2 2002.
However, compared with the H1 2001, the sales of Leerdammer Company showed a strong decrease because of the discontinuation of the sales of unbranded products and divestments of some minor brands.
