The global market for pork has undergone an unprecedented recovery, which boosted Danish Crown’s earnings significantly in the last weeks of the first half-year 2018/19. A total profit from continuing operations before special items of almost 1.1 billion DKK was posted, which is marginally better than last year.
- All in all, it is an acceptable result, but it has been a challenging six months. The first quarter was weak, and we therefore presented a comprehensive cost-cutting plan which will reduce costs by 385 million DKK across the group. We are now beginning to see the results of this, and following the recovery of the market, things are finally moving in the right direction, says Jais Valeur, Group CEO of Danish Crown.
Despite lower raw material prices for both pork and beef, Danish Crown’s revenue increased by 1.5 per cent from 30.1 to 30.6 billion DKK. This is explained by a number of acquisitions, the largest of which are in Denmark, the Netherlands and Poland, and which all, as expected, are making positive contributions to earnings.
Our UK business Tulip Ltd still presents the biggest challenge. Following capacity adjustments and an extreme cost focus, the business is now moving in the right direction.
- We still have a long hard journey ahead of us to get the UK business back on track, but the plan we devised over the summer and autumn of 2018 has the desired effect. Our focus is now on staying on course and winning new business to ensure that Tulip Ltd can once again start contributing positively to earnings in Danish Crown, says Jais Valeur.
Since the end of the first half-year, the pig price has increased by 2,30 DKK (+25 per cent), and Danish Crown expects the payment per kg paid to farmers to increase further over the summer.
Having posted extremely strong results last year, earnings in DAT-Schaub have normalised. Overall, earnings in the processing companies are on a par with last year, but the challenge at the moment is converting the dramatically increasing raw material prices for pork into higher consumer prices.
- It is very satisfying to see that pig prices are increasing, because it is good for our owners’ businesses. On the other hand, it is a huge task for our processing companies to pass on such significant price increases in a market where the retail chains – particularly in the mid-range segment – are experiencing stiff competition from the discount chains, says Jais Valeur.
The cattle price peaked in summer 2018, after which prices saw a declining trend in the first half-year 2018/19. Compared to the prior-year period, cattle are being traded at an average price of almost 2 DKK less per kg, which corresponds to a decrease of 8 per cent.
The strategic decision to pool procurement across the group is contributing as planned despite external price increases for energy and transport, among other things. Based on our experience, there is money to be saved from implementing such initiatives across the group. Therefore, the Executive Board now includes a Chief Operating Officer (COO) who will focus on continuing this work as well as on realising Danish Crown’s sustainability strategy towards 2030.
- Unfortunately, we are falling some way short of our strategic target of delivering a settlement price to our owners that is 0.60 DKK better than the EU index. However, this does not change the fact that we have set a clear course for Danish Crown.
Operating profit for the full year is expected to be above last year’s result.
Keyfigures for Danish Crown*
|
mDKK |
First half 2018/19 |
First half 2017/18 |
|
Revenue |
30.567 |
30.118 |
|
Operating profit before special items |
1.082 |
1.041 |
|
Operating profit |
1.070 |
1.263 |
|
Net profit for the period |
786 |
1.024 |
|
Total assets |
29.648 |
26.540 |
|
Equity |
7.195 |
7.155 |
|
Cash flow from operating activities |
437 |
524 |
|
Cash flow from investing activities |
-760 |
-1.486 |
|
Supplies from members (millions kg) |
631 |
642 |
|
No. of employees |
29.825 |
26.320 |
* Group consolidated figures including Leverandørselskabet Danish Crown AmbA