Chr. Hansen claims 'solid performance' allows hike in R&D investments

By Jane Byrne

- Last updated on GMT

Related tags Raw material prices Yoghurt Dairy product Hansen

H1 revenues jumped 15% to €636m for Chr Hansen. EBIT is expected to be above 26%
H1 revenues jumped 15% to €636m for Chr Hansen. EBIT is expected to be above 26%
Chr. Hansen’s full-year results are in line with expectations, says an analyst, but positives noted were the suppliers’ expectations for its EBIT margin growth and the better performance for its probiotics division in Q4.

Lars Topholm, analyst with Carnegie, told this publication that the Nordic-focused investment bank is leaving its estimates for the Danish enzymes, cultures and colours supplier unchanged.

“The one negative we see is the slightly higher guidance on R&D expenditure, expected now to be between 6-7%, whereas one month ago this was determined to be 6%.

We put this revised projected investment for 2011/2012 down to anticipated extra costs for clinical trials, with Chr. Hansen perhaps better informed in recent weeks on the actual expenses it may incur around documentation needed to support health claims for its core probiotic cultures.”

However, Lars Frederiksen, CEO of Chr. Hansen, in an interview with this morning said the core of the matter was that the supplier was investing in both R&D and capital expenditure in the year ahead based on “such a solid performance​” for the company over the financial year 2010/11.

The Danish group reported organic growth of 14% in that period with revenues up 15% on 2009/10 at €636m. It said its EBIT margin is expected to be above 26% driven by its business model and the impact from decreasing raw material prices for carmine.

“Our anticipated expenditure in R&D of 6% to 7%, a slight increase from our predictions of 4 weeks ago, is enabled by our resilience and scalability - we always aim to get even more out of the existing business structure,”​ explained Frederiksen.

All three of its divisions contributed to the strong earnings, said Chr. Hansen.

Cheese and fermented milk growth

Cultures and enzymes delivered stable organic growth of 6%, which solid performance from dairy cultures for the production of cheese and fermented milk products, said the Danish firm.

The natural colours division delivered organic growth of 40% (19% adjusted for increased sales prices to reflect higher raw material prices for carmine), significantly above historical performance, while health and nutrition, said the company, continued to benefit from the increased health awareness.

Topholm noted that while revenue from the supplier’s yoghurt probiotic category contracted in Q3, there was a marginal improvement in performance from the segment in Q4, and he reports that consumer sentiment might still favour probiotics in dairy despite the lack of health claims.

But the Chr. Hansen CEO confirmed that continued uncertainty surrounding regulation of health claims in the EU affected the performance of probiotic cultures negatively, and he was hesitant to make any predictions around the growth of the sector in the next financial year.

Noting volatility in carmine prices, Frederiksen remarked that research is still ongoing to find alternatives to the natural colour through either alternative sourcing or innovation in production methods. “We are also exploring the possibility of producing carmine through fermentation but the outcome of such research is a few years off yet,” ​added the CEO.

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