Swedish food-to-ethanol group Lantmannen has said that "weaker demand" in "several food categories" dented its half-year results.
Announcing that the company's first-half figures were down year-on-year, Lantmannen said its food business had felt the negative impact of increased competition from private label and growing demand for low-proce products. The company said that the majority of its food categories booked "negative growth" in the period.
Like others in the food sector, Lantmannen is increasing its focus on cost control. In particular, the group said that it is looking to strip costs out down the supply chain.
Continuing ethanol and food challenges depress Lantmännen's results
Lantmännen's results for the first half of 2012 are lower than the previous year:
MSEK 222, compared to MSEK 506 during the same period in 2011. The main explanations for the weaker results are the persisting and very unfavorable ethanol-grain price relation, and weaker demand in several food categories. The Agriculture and Machinery Sectors show slightly weaker results than the previous year, but Lantmännen Lantbruk's contribution-related operations continue to develop in a positive way.
"The trend from the beginning of the year persists. The weak global financial situation dampens the economic development, and growth projections for our main markets are still low - which can be seen also in our results, which are not satisfactory. In addition to our ongoing structural adjustments and savings programs, we have also launched a number of other measures to reverse the trend," says Per Olof Nyman, Group President and CEO of Lantmännen.
The Agriculture Sector's profit in the first six months amounted to MSEK 9 (compared to MSEK 20 the previous year). The lower results were mainly due to a weaker performance in the international operations. The Swedish contribution-related business continues to perform well, and showed an improvement in its results: MSEK 9 (MSEK 2). The improvements are primarily the results of Lantmännen Lantbruk's action program.
The Machinery Sector's profit for the first six months amounted to MSEK 91 (MSEK 179). The decline is partly due to less activity on the machinery market compared to last year, but primarily due to delivery problems for some of Lantmännen Maskin's and Swecon's sub contractors and component suppliers. This has led to a challenging delivery and sales situation.
Within the Energy Sector, the unfavorable price relation between ethanol and grain remains a major challenge. The sector's results for the first half amounted to MSEK -101 (MSEK 5), and Lantmännen Agroetanol continues to report heavy losses.
"The decrease of imports of subsidized ethanol from the U.S. has recently contributed to the ethanol price rising, but the price relation is still unfavorable. We are working to reduce the costs that are within our control, and to increase other revenue streams from production," says Per Olof Nyman.
The results for the Food Sector in the first six months amounted to MSEK 207 (MSEK 304). Competition from private labels remains tough, and the demand for low-price products remains high. Most of Lantmännen's food categories have a negative growth.
"We have taken strong measures to improve profitability, specifically in the form of several new projects that will increase efficiency in the supply chain, and by increasing the pace of our structure rationalizations. We are also reviewing and implementing changes to our organizational structure in parts of the business, in order to have the most-cost effective organization possible," concludes Per-Olof Nyman.
