Danish Crown to postpone strategic target
As a result of continued losses in UK company Tulip Ltd, Danish Crown has decided to postpone its strategic target by two years.
Jais Valeur, group CEO of Danish Crown.
In a report, Danish Crown says it is doing all it can to bolster earnings for the benefit of the group’s owners – the Danish farmers.
The company had hoped to raise the settlement price paid to cooperative members by 0.60 DKK per kg but this will take longer to implement that it anticipated.
The company states it is ‘definitely not happy with the financial statements’, explaining it is still badly affected by the problems in its UK business.
Due to declining pork and beef prices, Danish Crown’s revenue in the 2017/18 financial year has, in spite of acquisitions in the period, declined from 62 billion DKK (Danish krone) to 61 billion DKK.
On the other hand, the gross profit is up 146 million DKK at eight billion DKK, following the acquisition of DK-Foods in Denmark, Gzella in Poland and the Dutch company Baconspecialist Zandbergen.
Jais Valeur, group CEO of Danish Crown, says: “A combination of turbulence on the world market, generally low world market prices for pork and a strong euro has significantly undermined our profit in the past year.
“Contrary to expectations, we have therefore not managed to improve our overall performance but have instead gone into reverse. This is not good enough, and more than anything it is frustrating, because in most other respects our strategy is succeeding”
The group has posted a total profit for the year of 1,361 million DKK. This represents a decrease of 151 million DKK compared to the profit for 2016/17.
The board of directors recommends that supplementary payments of almost 1.1 billion DKK be disbursed.
Erik Bredholt, chairman of the board of Danish Crown, added: “After this summer’s drought, in the last three months of the financial year we have deliberately chosen to pay higher pig and cattle prices than warranted by the market.
“We have done so to meet the ongoing liquidity needs of our owners. This costs on the bottom line, and therefore we are ending the year with supplementary payments that are below what we have paid in recent years, but which are as high as is possible with a low but satisfactory level of consolidation”
Danish Crown explains it is primarily Tulip Ltd that is dragging down the results.
Valeur continues: “A detailed review and analysis of Tulip Ltd has revealed that we have been unable to fully optimise our UK supply chain, while operating costs are far too high.
“We have therefore launched a comprehensive cost-cutting plan, and in the past two months we had to say goodbye to more than 150 salaried employees in the UK business.
“Altogether, we expect to reduce costs by more than 200 million DKK from the 2018/19 financial year.”
Danish Crown’s Polish company Sokołów’s earnings are up 26% and Tulip Food Company in Denmark posted growth of 29% following a year of improved sales of bacon in Europe and growth in exports of canned meat.
During the year, both companies have implemented significant acquisitions, which will contribute to boosting earnings in the two businesses in the future.
In conclusion, Valeur commented: “Our growth in Denmark is explained by our unswerving focus on quality and the Danish origin of the animals.
“Generally speaking, our employees across the group have worked fantastically hard during the year, and so despite the disappointing financial results, I’ve been confirmed in my view that the course set by the 4WD strategy is right.
“We must continue to strengthen our four domestic markets in northern Europe and our Asian business, because it’s all about establishing the right positions in the market”
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