ANALYSIS
Danish Crown blames Tulip UK for disappointing results
In its annual results for 2017/18, Danish Crown reported total profit for the year of DKK1,361m, a decrease of DKK151m compared to the profit for 2016/17 while its revenue also declined from DKK62bn to DKK61bn.
Honing in on the UK division, Tulip recorded a net operating loss of DK260m for the 12 months, higher than the DKK231m loss posted the previous year. Tulip has undergone some significant changes over the past year, with Steve Francis stepping down from the chief executive role during the summer and only being properly replaced this month by Andrew Cracknell.
Group CEO Jais Valeur, who temporarily took over the running of Tulip, didn’t hold back in his opinion of the division’s performance.
“We’re definitely not happy with the financial statements,” he said. “We’re still badly affected by the problems in our UK business. At the same time, 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 business claims the performance has led to a delay in Danish Crown’s growth strategy and job cuts at Tulip. “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 DKK200m from the 2018/19 financial year.”
Valeur also highlighted successes within other Danish Crown divisions.
Its Polish company Sokołów’s earnings are up 26% year-on-year 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.
Valeur said: “During the year, both companies have implemented significant acquisitions, which will contribute to boosting earnings in the two businesses in the future.
“DAT-Schaub is again posting strong earnings, once again confirming the company’s potential. DAT-Schaub is developing strongly. The offensive strategy that we adopted after acquiring all the shares in the company almost three years ago is spot on. Today, we are a global market leader in natural casings, and our set-up is geared for further growth.”
Just as telling was the lack of mention of Tulip by name as Danish Crown outlined future expectations.
“In Denmark, it has been possible to strengthen the supply of slaughter animals for our abattoirs. During the year, 4% more pigs and 2% more cattle were slaughtered,” added Valeur. “This has created more jobs at the abattoirs, and at the end of the financial year Danish Crown had 236 more employees in Denmark than a year ago, representing an increase of 2.8%. At the same time, we have won significant market shares on the Danish market for both beef and pork.
“Our growth in Denmark is explained by our unswerving focus on quality and the Danish origin of the animals. Overall, 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.”
