September 14, 2007

 

Tight margin profits for Provimi

 

 

Despite the boost in turnover through higher prices for raw materials, profit margins are under pressure for French feed maker Provimi Group.

 

Sales increased by 13.9 percent to 976.5 million euros with most countries showing sales growth through increased volumes.

 

The net impact of acquisitions and divestments contributed 39.8 million euros to sales, while exchange rates, mainly the US dollar and the Chilean peso, had a negative effect of 13.0 million euros. On a like-for-like basis, sales growth was 10.8 percent.

 

Profit from operations before other income/expenses slightly decreased by 0.8 percent to 50.0 million euros. The net impact of acquisitions and divestments contributed to 0.2 million euros while exchange rates had a negative effect of 0.8 million euros. On a like-for-like basis, profit from operations increased by 0.4 percent over the period.

 

Results per region:

 

France

 

Despite the fact that gross margin was under pressure because of increased raw material costs, results increased by 12.7 percent thanks to higher exports and a stronger domestic market.

 

Poland

 

Results recovered well from the difficult market conditions in the second half of 2006. However, an unfavourable product mix negatively impacted results compared to the same period last year.

 

Rest of Europe

 

Overall results were below the same period last year, with a good performance in animal nutrition, especially in the Netherlands, Spain, Russia and Bulgaria and Pet food in Central and Eastern Europe.

 

However, a slow down in Pet food activities in Western Europe and a delay in passing on raw material price increases to supermarket chains held back results.

 

North America

 

Profit increased by 11.4 percent due to continued strong performance and the contribution from new product introductions.

 

Rest of the world

 

Results were well above those in the same period last year, notably in Brazil, India, Vietnam and South Africa. China's activities were affected by difficult market conditions in the swine market. Fish feed activities in Chile continued their strong performance.

 

Lower profit

 

Profit from operations after other income and expenses decreased by 15.1 percent (7.9 million euros) over nonrecurring items mainly related to restructuring costs for the Group's complete feed activities and the change in shareholding of the Provimi Group -- a subsequently organized and launched strategic review of Provimi's operations.

 

Consequently, net income -- Group share dropped by 26.6 percent over higher net financial costs as a result of the write-off of capitalised cost (4.2 million euros) of the previous financing facility, higher indebtedness due to acquisitions and by a higher tax rate due to higher results in high income tax countries.

 

Net debt increased to 461.3 million euros after deducting 29.2 million euros for deferred financing charges related to the new financing facility. The increase was due to acquisitions of minority shares in Poland, the higher working capital due to increased raw material costs and selling prices and exchange rate effects.

 

For the rest of 2007, ongoing raw material price increases will continue to affect market conditions in the second half of the year. The Group will continue its restructuring activities to improve efficiency and to adapt the organisation to the changing market conditions.