Chr. Hansen narrows growth forecast on carmine prices and customer loss

02-Jul-2013 - Last updated on 03-Jul-2013 at 11:12 GMT

Chr. Hansen has narrowed its growth forecast for 2012-13 after a major natural colour customer in South America chose to return to synthetics, and carmine prices declined.

Excluding carmine prices, Chr. Hansen narrowed its organic growth forecast from 8-10% to 8-9%. Including the effect of carmine prices – which have fallen back to about $15 per kilo from historic highs – the company revised its growth forecast from 7-9% to 6-7%.

CFO Klaus Pedersen said that the South American customer’s decision to revert to synthetics was for “customer-specific reasons”.

“We would not expect that this will be a risk that spreads to other customers,” he said. “…Of course we cannot rule out that some customers will think that they have accepted a price-up to go to natural colours, and they want to reassess…but we do not see a new trend.”

As for carmine, raw material prices fell during the year and average sales prices for carmine also declined, the company said.

Pedersen said: “We had a very tough start to the year. We were not sharp enough with our pricing.”

He added that when prices are relatively high, and shift from $90 to $80 a kilo for instance, it is not so important to be sharp with pricing. However, it becomes more important when the price shifts from, say, $16 to $15.

“We have the carmine business back on track on a volume basis,” he said.

Chr. Hansen reported a 6% increase in sales for the first nine months of the year compared to the prior year period, to €545m. Meanwhile, profit fell 4.3% to €88m during the first nine months.

When asked about the decline in the EU probiotics market, Pedersen said: “We do believe that this pressure on the probiotic category will continue.”

However, despite difficulties in Europe, the company still sees potential in emerging markets, and is confident in the functionality of probiotics and its capabilities in the sector, he added.

Turkish acquisition

The company also announced that it had agreed to acquire the remaining 50% stake in its Turkish subsidiary, Peyma Chr. Hansen’s AS.

“Turkey is one of the biggest dairy markets in the world,” Pedersen said. “They have a big cheese market as well, and it’s a quite strong gateway into the Middle East. In the colours and beverages market it is strong too.”

The company did not disclose financial terms of the deal, which is expected to conclude by the end of the year.