Finland's Raisio Group today reported consolidated sales in 2002 of €843.1 million, up 2.5 per cent on last year, thanks largely to good sales in the Life Sciences unit, which makes cholesterol-lowering ingredient Benecol.
The acquisition of chemicals company Latexia at the beginning of August also drove the strong performance, reported the company.
Consolidated operating profit was €20.6 million, down from €25.0 million last year. This was due to several factors, said the company, noting that operations did not develop as expected. "The low business cycle had a particularly adverse effect on growth and profitability in Raisio Chemicals. Raisio Nutrition's result was in turn hampered by losses in the Swedish margarine business and one-off expenses for the production rationalisation," reported the board of directors. And the improved profit trend in Raisio Life Sciences was insufficient to offset the weaker trends in the bigger business sectors.
Raisio Life Sciences turnover grew 27 per cent, amounting to €30.3 million (up from €23.8 million last year). Stanol ester (the key ingredient in Benecol) was sold to new market areas such as the Middle East and Continental Europe.
The company said that interest in cholesterol-lowering functional foods increased, particularly in central and southern Europe, although Finland remains the sector's pioneering market. The range of products containing stanol ester was expanded with a number of new products added to existing lines and extended for the first time to grain-based products such as pasta.
In October 2002 the European Union Science Committee on Food approved a safety report concerning sterol- and stanol-based products. This is likely to allow the grant of new licences for end-product markets. However, the regulatory approval processes are long and vary in different countries.
Raisio Life Sciences operating profits reached €0.5 million, compared to losses of €3.5 million in the same period last year. The increase was due to higher sales and greater cost efficiency. The change in accounting practices due to IAS-based evaluation of inventories improved the figure by €0.2 million.
The company also outlined that a new agreement with US-based McNeil Nutritionals agreed new marketing responsibility areas for Benecol products and stanol ester in February 2002. Apart from areas referred to in previous agreements, Raisio Group can now sell stanol ester to the food industry in Germany, Italy, Spain, Portugal, Switzerland, Austria and Greece.
Raisio also gained the right to sell Benecol foods on these markets, although McNeil kept its sole right to certain Benecol-branded speciality products. Furthermore, the agreement allowed both parties to license the ingredient and brand to third parties in their respective territories.
Spanish and Greek authorities have granted permission to market Benecol products, and Benecol yoghurt was introduced on the Spanish market at the beginning of February 2003.
The Raisio Chemicals market situation continues to be challenging, particularly in the principal market area in Europe, said Raisio, but acquisition of Latexia and the speciality chemicals plant starting operations in China in the summer will make for significant growth in Raisio Chemicals turnover.
The intensification projects introduced are expected to improve cost efficiency towards the end of the year. The recent sale of the Carlshamns ice cream business will reduce Raisio Nutrition turnover by some €10 million.
The rationalisation of margarine production will be completed in the first quarter of 2003, the company said. Inputs in the product development and marketing of healthy, vegetable-based foods will continue, and the performance of the Foods business area is expected to develop favourably.
Vegetable oil pressing margins are at a record low, and this is expected to weaken the performance of the Animal Feeds business area slightly. The poor malting barley crops in the most recent growing season will reduce profits in the Malt business area. Strong growth is expected to continue in Raisio Life Sciences.
"Ongoing measures to improve efficiency and to reduce working capital will allow the group's profitability to improve towards the end of the year," promised the board of directors.