Continued improvement in margins and returns
We continue to improve our key financial ratios in line with the targets we
have signalled to the market. For Q1 2007/08, Ingredients posted an EBIT margin
of 14.7%, an expansion of 0.4 percentage points year-on-year, while RONOA
increased by 1.2 percentage points to 18.4% and organic growth reached 3%.
Danisco's Sugar division also got off to a good start as lower costs and a
better sales mix partly compensated for the expected decrease in sales.
Tom Knutzen, CEO of Danisco, says: “Thanks to our “Unfolding the potential”
strategy we continue to deliver earnings improvements that are bringing us
closer to our financial targets - including higher RONOA, higher EBIT margin
and organic growth in Ingredients. We are faced with challenging market
conditions in some key business areas, but we remain confident that Danisco
will maintain its value enhancement momentum in 2007/08. The growth in margins
and RONOA in Ingredients reinforces our confidence in the strategy that we
announced one year ago today. We reconfirm our operational outlook for the full
year”.
Highlights
·Group EBIT before share-based payments remains stable year-on-year, at DKK 578
million, despite the anticipated 13% decrease in Sugar sales.
·Our Ingredients margin expansion was driven by advances in both Bio
Ingredients and Texturants & Sweeteners thanks to strict cost discipline and
our decision to improve our average selling price at the expense of short-term
volume. We expect this price and margin momentum to gradually accelerate over
the remainder of the current financial year.
·During Q1, our new expanded state-of-the-art xylose plant in Lenzing came on
stream, and we opened our new enzymes plant in Wuxi, China. We continue to
upgrade our R&D and production platform for cultures and enzymes.
·Following a good start to the year, Sugar is well on track to meet its
earnings expectations for 2007/08.
·At our recent AGM, we announced our intention to work towards a demerger of
Danisco Sugar.
·The Flavours divestment was successfully closed in July. We have restated all
2006/07 figures for Ingredients to reflect the continuing business.
·Since we commenced our share buyback programme in July, Danisco has
repurchased treasury shares at a value of DKK 274 million.
·We are upgrading our 2007/08 outlook for profit for the year before
share-based payments to over DKK 1,350 million (previously at over DKK 1,300
million). The upgrade is related to a property gain in Copenhagen and the
divestment of Flavours.
Outlook for 2007/08
For full year 2007/08, Danisco maintains its guidance for revenue. EBIT is now
expected at the level of DKK 1,800 million (previously slightly under DKK 1,800
million). Profit from discontinued operations is now estimated to be DKK 430
million (previously expected at over DKK 400 million). Profit for the year
before share-based payments is subsequently expected at over DKK 1,350 million
(previously at over DKK 1,300 million).
Full release attached.
