Feedstuff pricing pressures Provimi margins

13-09-2007 | |

The Provimi Group has published its consolidated results for the first six months of the year. Despite the boost in turnover through higher prices for raw materials profit margins are under pressure.

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

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

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

Results per region:
Despite the fact that
gross margin was under pressure because of increased raw material costs, results
increased by 12.7% thanks to higher exports and a stronger domestic

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

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

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%, thanks
to the continued strong performance and the contribution from new product

Rest of the world
Most countries’ 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% due to nonrecurring items
(€ 7.9 million) mainly related to restructuring costs for the Group’s complete
feed activities, costs related to the change in shareholding of the Provimi
Group and a subsequently organized and launched strategic review of Provimi’s

Consequently, net income – Group share decreased by
26.6%, also impacted by higher net financial costs as a result of the write-off
of capitalised cost (€ 4.2 million) 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 (31 December 2006: €: 406.9 million), after deducting € 29.2 million 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

Outlook 2007
Ongoing raw material price increases
could continue to impact 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


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