Difficult market puts a damper on earnings

Transition was the key word for Danish Crown during the first half of the 2021/22 financial year. After 2½ years of huge demand from China in particular, sales and production capabilities have been redirected to meet demand in Europa and from countries such as the USA, Australia and Japan.

“Let it be no secret that the transition has been a challenging task because it coincided with a growing supply of pigs from our cooperative owners. Our employees have delivered a tremendous effort, working their way through the challenges, and that enables us to report solid and acceptable financial results today,” says Jais Valeur, Group CEO of Danish Crown.

Danish Crown recorded a 3.6% increase in revenue in the first half of the financial year from DKK 28.9 billion to DKK 29.9 billion. However, as costs of production and distribution rose by 4.8 per cent to DKK 27.7 billion, profit after tax was reduced from DKK 1.3 billion to DKK 1.1 billion. At the same time, the inflationary pressure currently at the top of the global economic agenda and also impacting on Danish Crown has proven to be far greater than expected over the course of the half-year period. Costs of primarily transport, packaging and energy have increased by close to half a billion Danish kroner.

“The combination of rising costs and sluggish markets was the reality we faced during the initial months of the financial year. Obviously, this made it difficult for us to effect the necessary price increases. While this has gradually changed with COVID-19 pressures easing across Europe, we still have some way to go because more or less all costs moved another notch higher after Russia’s invasion of Ukraine,” says Jais Valeur.

While earnings in Danish Crown’s processing companies were reduced due to rising costs of raw materials, packaging, transport and energy, we continue to record progress in DAT-Schaub, which processes parts of the pig for food ingredients and raw materials for the pharmaceutical industry. With growing activities and revenue, DAT-Schaub again reports record-high earnings and an improvement of 17 per cent.

The price of beef rose considerably during the half-year period with positive operational developments and a low supply of beef in Europe driving prices higher. Positive developments for our two cattle abattoirs in Germany and for Scan-Hide, which processes cattle hides for the leather industry, contribute to a strong overall performance for Danish Crown Beef.

In January, Danish Crown successfully launched its first major series of plant-based products under the brand Den Grønne Slagter. Sokolõw in Poland and KLS in Sweden have also gained a solid foothold in the market for plant-based food in their domestic markets, and they plan to expand their product ranges in the coming autumn.

“Our strong set-up provides a basis for optimism going forward, but we still have some way to go. For the first time in two years, we fail to deliver a payment for pigs that is DKK 0.60 higher than the EU index. Farm finances are currently under pressure due to soaring prices of feed and energy, so the principal task is to restore our competitive strength,” says Jais Valeur.

During the first half of the financial year, Danish Crown was DKK 0.20 ahead of the EU index assuming a supplementary payment on a level with last year.

* Consolidated financial figures incl. Leverandørselskabet Danish Crown AmbA

Read more about the half-year results in Friland and Danish Crown Beef below:

Danish Crown Beef growing on the back of solid demand

Friland growth driven by increasing preference for organic