Completely in line with the company strategy Danish Crown has for the first half of the financial year 2023/24 increased sales to European retail and food service customers. Market shares have been gained and at the same time earnings have improved by making production more efficient.
Progress of the core business is, however, outweighed by increased interest rate costs and declined earnings in DAT-Schaub. Following solid growth for a number of years DAT-Schaub was hit by a strained natural casings market for sausage production as inflation to a large extent caused consumers to buy cheaper sausages made with artificial casings. At the same time heparin prices for the pharma industry have decreased as health services across the world reduced their stock on the back of COVID-19.
- These results show that many areas of our business point in the right direction. We are focused on delivering improvements. Our efficiency plan Horizon presently contributes app. half a billion DKK, and in that respect, we still need to pursue an additional one billion DKK – or the equivalent of app. one DKK per kg pork – over the coming 18 months. It is unfortunate that DAT-Schaub presently is up against a strong tide because together with increased interest rate costs this prevents us from making a significant step forward, says Jais Valeur, Group CEO of Danish Crown.
Decreased inflation means that packaging and energy costs have dropped compared to the same period last year. Conversely, wage costs have increased significantly while operating income (EBIT) increased by two percent.
Revenue decreased from 34.5 billion DKK to 33.5 billion DKK compared to the first half of 2022/23. The lower revenue is mainly due to a decline in the supply of slaughter animals from the cooperative owners and in terms of cooperative owner kg operation income has actually increased by 11 percent over the period.
Financial costs increased by 54 percent to net 338 million DKK and tax payments are, after carry-back of a tax allocation of 80 million DKK last year, back to a normal level. Therefore, the net result decreased from 902 million DKK to 764 million DKK.
- Despite progress in our core business our competitiveness is still not where it should be when it comes to paying the cooperative owners a competitive payment for their pigs. This does however not alter the situation; we have confirmation that the strategic direction is not only right but also necessary for Danish Crown, says Jais Valeur.
In Danish Crown BEEF sales to retail and food service continued to increase. Conversely, competition is fierce in the German market, where Danish Crown operates two cattle abattoirs, and this impacts earnings. Parallel to this the global high quality leather market is stricken by recession affecting Scan-Hide, which is among the world leading supplier of premium hides for the leather industry.
Swedish KLS provides a stable result and in Polish Sokolów the trend towards the end of the half year is more positive with declining inflation and improved purchasing power among Polish consumers. Earnings continue to be unsatisfactory and were over the period negatively affected by a large abattoir fire in November. The trading company ESS-FOOD performs well. A clear strategy to work targeted with the best customers ensures stable earnings.
- Looking ahead it is positive for business that inflation has peaked. This does, however, not change our continued work to streamline in order to increase earnings, a reflection hereof is the decision to close the Ringsted abattoir after the end of the half year. We should not have our arms above our head but running-in of our new bacon plant in Rochdale in the UK continues as planned. Heavy British customers are on board, and we will be on full capacity before Christmas. We also look forward to a summer when the European Football Championship in Germany and Olympics in Paris are expected to stimulate consumption of our products and simultaneously, we see signs of an improvement of our exports to high price markets outside of Europe; all in all, we see reason for moderate optimism.