DSM: low margin food ingredients climb in tough climate

Related tags Bakery ingredients Bread

DSM, the largest food fermentation company in the world (in value
terms) sees its combined food units beating industry growth for the
year, but bakery still under pressure, reports Lindsey

The bakery ingredients and food speciality arms contributed more than a third of sales (€762m) to the larger life science unit that includes pharma and antibiotic products, up from 7 per cent on 2003.

But these low margin businesses were not enough to soften the impact of the massive 50 per cent fall in operating profit for the unit as a whole, that dropped from €164 million in 2003 to €84 million for 2004.

The key culprit for the fall was the high margin antibiotics business.

Overall, food ingredients brought about 17 per cent of sales to the group's €7.75 billion turnover, a rise of five cent per cent on the 12 per cent contribution in 2003.

Reporting on 2004 figures, the Dutch firm said this morning that sales at its food speciality unit - that sells dairy, savoury, beverage and nutritional ingredients - had risen by about 10 per cent.

Highlights were stronger volume sales of rennet, special yeast extracts and cheese coatings.

Increasing pressure on prices knocked the beverage unit, particularly enzymes for alcoholic beverages.

At a wisp of 2.8 per cent growth, bakery ingredients fell below the global ingredients market, currently growing at about 4 per cent.

But the company claims new products launched, and those in the pipeline, will ease persistent pressure in the bakery ingredients segment.

"The successful launch of a bread improver for Fibra Vital bread, a prebiotic concept, and the way in which we managed to build on last year's launch of a functional-food improver for Vitafit breads,"​ said the firm, today the world's number three supplier of yeast and other bakery ingredients.

Operating profit (€83m) from life sciences in 2004 brought about 8 per cent to the group's overall €489 million and contributed about 25 per cent to group sales.

In 2005 health and nutrition will continue to dominate the agenda for the entire group. In a statement today DSM confirmed its building blocks would feed demand for healthier food products, population growth and an ageing population.

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