Finland's chemical and food ingredients group Raisio, facing a strike from its food workers this week, has warned that it will make a loss in the first quarter of the year, impacted largely by problems at the chemicals unit.
The group did, however, report continued growth at its life sciences unit, which makes the cholesterol-lowering ingredient Benecol, and is now in profit after a long loss-making period. Good 2002 results at the unit (turnover grew 27 per cent to €30.3 million) failed, however, to make up for the weaker trends in the bigger business sectors, chemcials and Raisio Nutrition, during the year.
Turnover in 2002 was up 2.5 per cent to €843.1 million, mainly due to the acquisition of the Latexia chemicals business, the company's biggest to date, and the good sales trend in Raisio Life Sciences. Consolidated operating profit was down however to €20.6 million from €25 million last year.
Raisio Life Sciences on the other hand showed a profit of €0.5 million for the year, a definite improvement from the loss of €3.5 million in 2001. The increase was due to higher sales and greater cost efficiency, said the group. Stanol ester was sold to new market areas such as the Middle East and Continental Europe during 2002.
Interest in cholesterol-lowering functional foods increased over the year, particularly in Central and Southern Europe, said Raisio, although Finland continues to be a pioneer in this sector. The range of products containing the Benecol ingredient, stanol ester, was expanded last year with a number of products and extended 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 permits for end-product markets, boosting sales of Benecol in the long-term, although the regulatory approval processes are long and varying in different countries.
Raisio Group and McNeil Nutritionals agreed on new marketing responsibility areas for Benecol products and stanol ester in February 2002. 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.
The agreement also 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.
"Raisio Life Sciences is growing steadily, but we plan to boost growth further by acquiring new ingredients customers and a diagnostics company. The public offer to acquire all shares in the Swedish company Diffchamb is the first step for us towards the interesting food diagnostics market," said CEO Rabbe Klemets, referring to the Swedish biotechnology company.
Sustained weak demand of paper chemicals, as well as further rising petrochemical raw material prices, have pushed the Raisio Chemicals unit into the red, and this market is expected to cause further problems into 2003, despite improved turnover from Latexia.
This current strike at Raisio Nutrition, where development has already been weaker than expected, will also affect first quarter results, according to the company. The strike is expected to cost, including indirect losses, up to €3 million. Along with losses in the Swedish margarine business and one-off expenses for the production rationalisation, this unit reported turnover level with 2001, but operating profit fell to €10.7 million from €13.4 million last year.
Raisio group said that while the chemicals market continues to be challenging, and sale of the ice-cream business will reduce Raisio Nutrition turnover by some €10 million, strong growth is expected to continue in Raisio Life Sciences. New customers will bring opportunities for selling functional ingredients to new countries and for new product applications. Profit trend prospects look encouraging.