Foreign grain-based foods performance disappoints in 2008

by Eric Schroeder
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While a somewhat softer tone in share price performance held sway in 2007, things took a downright nasty turn for the worse in 2008 as economic uncertainty weighed on financials worldwide. Most publicly-owned grain-based foods companies outside of North America not only sustained declines, but many experienced double-digit losses. Only a few scattered gains could be found among the companies tracked by Milling & Baking News.

On the London Stock Exchange, Associated British Foods finished the year at 721.5p, down 20% from 899.5p in 2007. The company’s profit fell 2% during the fiscal year ended Sept. 13 to £391 million, but excluding the businesses that were affected by the E.U. sugar regime change adjusted profit actually rose 18%. Sales increased 21% to £8,235 million behind the company’s ability to recover rising input costs as well as acquisitions. In December, A.B.F. took a step toward boosting its sugar presence, agreeing to acquire Azucarera Ebro S.L.U., the Spanish sugar business of Madrid-based Ebro Puleva. In a recap of fiscal 2008 results, George Weston, chief executive officer, said the results demonstrated "the resilience" of the group.

Northern Foods P.L.C., a miller and a major manufacturer of private label foods, finished 2008 at 56.75p, down 40% from 94p a year earlier. Like A.B.F., resiliency was the term used by Stefan Barden, c.e.o. of Northern Foods, to describe his company’s performance during 2008. In its bakery business, the company exited unprofitable or low margin retailer own brand lines and instilled a greater focus on its Fox’s brand, which now comprises nearly two-thirds of its biscuit category revenue.

Carr’s Milling Industries P.L.C. closed at 422.5p, down 95p, or 19%, for the year.

Tate & Lyle P.L.C., the global sweetener and ingredients company, had a 52-week high of 590p, but ultimately ended the year down 10%, closing at 400.75p. During the year the company reached agreement to sell its international sugar trading and marketing division to Bunge. The move allows Tate & Lyle to continue to sharpen its focus on exiting volatile commodity markets and refocusing on core sugar refining operations.

Greggs P.L.C., an operator of retail bakery shops and cafes in the United Kingdom, finished 2008 at 3360p, down 1340p, or 29%, from 4700p in 2007. Last month, Ken McMeikan, chief executive officer of Greggs, said the U.K.-based bakery retailer is focused on simplifying the business to prepare for accelerated expansion.

All three of the leading U.K. retail chains posted share price declines in the past year. Tesco, the leader in U.K. food retailing, closed at 360p, down 25% from a year earlier. Sainsbury, P.L.C. finished the year at 328.5p, down 96.75p, or 23%, from the 2007 close. Marks & Spencer, the retail giant that has an important stake in food, finished the year at 214.75, down 345.25p, or 62%, from the 2007 close.

In Ireland, Greencore Group P.L.C., a European maker of convenience food and malt products, finished at €0.94p, down 79% from the 2007 close. Despite the sharp decline, the company was encouraged by the start of its U.S. business, which received a boost from the acquisition of Home Made Brand Foods Inc. (H.M.B.F.) in April 2008. Based in Newburyport, Mass., H.M.B.F. manufactures and supplies a range of fresh food products, including fresh prepared meals and salads, sandwiches and quiche.

Meanwhile, Kerry Group finished the year at €13.10, down 40%. The decline comes despite what the company called "excellent growth" within its American ingredients markets during the first half of fiscal 2008. The company said it continued to see strong demand for its all-natural, organic, valued-added offerings and complete systems within the food and beverage industry. Also during the year, Kerry entered a long-term strategic partnership with Dierbergers Oleos Essencias S.A. in San Paulo, Brazil. The company said the partnership will expand its portfolio of certified organic ingredients, including lemon, mandarin, bitter orange, cypress, citronella and eucalyptus.

In Australia, GrainCorp Ltd. closed the year at A$5.80, down 41% from 2007, while AWB Ltd. closed the year at A$2.54, down 11% from the 2007 finish of A$2.85.

Goodman Fielder Ltd. finished 2008 at A$1.33, down 30% from 2007. Goodman, which has been trying to expand into the biscuit market, succeeded with the March 2008 acquisition of Brisbane-based Paradise Foods. Peter Margin, managing director at Goodman Fielder, said the acquisition opens the door for further growth in Australia as well as the biscuit market in the broader Pacific region.

In France, Groupe Danone S.A., the country’s largest food and beverage company, closed 2008 at €43.43, down 30% for the year. A year removed from the sale of its global biscuit business to Kraft Foods Inc. in late November 2007, Danone kept a lower profile in 2008. One of the company’s more significant moves during the year was the signing of a joint venture agreement with Weight Watchers International, Inc. establishing a weight management business in China. The joint venture will be 51% owned by Weight Watchers and 49% owned by Groupe Danone.

In The Netherlands, Unilever, the Anglo-Dutch food and personal products business, closed 2008 at €17.68, down 29% from €25.01 per share in 2007. Patrick Cescau ended a 35-year career with Unilever at year’s end, including the past three and a half years as group chief executive. He was succeeded by Paul Polman, who earlier was executive vice-president and zone director of the Americas for Nestle S.A. On the business front, Unilever continued to be active in shedding non-strategic brands. The company completed the previously announced sale of the Lawry’s and Adolph’s seasoning blends and marinades business in the United States and Canada to McCormick & Co., Inc., and just this past month finalized the sale of its Bertolli olive oil and vinegar business to Grupo SOS.

Ahold, the Dutch-based company with global food retailing and food service operations, finished the year at €8.79, down 9% from €9.53. The company has seen sales climb following price cuts in North America that helped attract more U.S. consumers.

DSM, the Dutch chemical company with food ingredient interests, fell 44% for the year, closing at €18.235. The company in mid-December said it is cutting 1,000 jobs, or approximately 5% of its work force, in an effort to "strengthen the profitability and future competitiveness" of the company. The job cuts are expected to save the company up to €100 million ($136 million) per year by 2010, DSM said.

CSM, the Dutch company with a strong presence in baking ingredients in North America and in Europe, also finished lower at €11.50, down 50% from the 2007 close. One of the more active companies in regards to acquisitions during 2007, CSM scaled back its activity in 2008. The company did acquire Harden Fine Foods for £6.4 million.

In Switzerland, Nestle S.A., the world’s largest food company, closed at 41.60 Swiss francs, down 21% for the year.

Aryzta, which was created in mid-August following the merger of Hiestand and IAWS Group P.L.C., closed 2008 at 34.2 Swiss francs, down from the high of 64 Swiss francs on Aug. 22 but above the low of 28.6 Swiss francs recorded twice in late November. The new company has been billed as the world’s largest frozen baked foods maker and is expected to serve baked goods to more than 200,000 customers across the globe from North America through Europe to South East Asia and Australia.

Danisco A/S in Denmark also fell, closing at DK214.5 after finishing at DK361.5 in 2007.

Nisshin Seifun, the Japanese holding company that includes Nisshin Milling, Japan’s largest flour miller, closed at Y1172, up 4% from a year earlier. Nippon Flour Milling rose 15% for the year, closing at Y494, compared with the year’s low of Y365 and the high of Y544.

Nissin Food Products, a leading manufacturer of instant noodles, sustained a loss of 14%, closing at Y3120. On Dec. 26, Nissin said it has agreed to acquire a 33.5% stake in Angleside Ltd. for approximately 26.8 billion yen ($296 million). Angleside is the holding company for LLC Mareven Food Central, Russia’s largest instant noodle maker. Nissin is expected to complete the acquisition in steps, first by investing 9.3 billion yen in January to buy a 14.99% stake in Angleside, then by raising its stake to 33.5% by September 2010.

Baking leaders Yamazaki Baking and First Baking were a mixed bag in 2008. Yamazaki closed at Y1379, up 26% from Y1094 in 2007; First Baking, meanwhile, finished at Y91, down 26% from Y123 in 2007.

Indonesia’s Indofood, one of the largest food producers in Asia, closed the year at R930, down 64% from R2575 in 2007. The loss followed up a 90% gain in 2007 and 48% advance in 2006.

In South Africa, Tiger Brands Ltd. finished lower for the second consecutive year, following up a 2% decline in 2007 by dropping 15% in 2008 to R14344. The company had posted gains of 18% in 2006, 50% in 2005 and 57% in 2004.

Egyptian companies engaged in flour milling mostly were lower with the exception of South Cairo & Giza Flour Mills, which rose 42%. Egyptian Starch shares fell 9%, Middle and West Delta Flour Co. fell 13%, Alexandria Flour fell 24% after a 3% decline in 2007, and North Cairo Flour eased 14% following a drop of 10% in 2007.

In Africa, Flour Mills Nigeria P.L.C. dropped 58%. The decline followed gains of 27% in 2007 and 231% in 2006. Flour Mills Nigeria is primarily involved in flour milling, pasta production and cements production.

In Spain, Ebro Puleva S.A., shares fell 22% to €9.8. In recent years the company has been heavily involved in acquisitions in the international market, including the 2006 purchases of New World Pasta and Minute Rice.

In Chile, Quinenco closed the year down 12%. Molinos Rio Plata in Argentina closed at $10.20, down 3% from its 2007 finish. The company’s stock had gained 151% in 2007.

This article can also be found in the digital edition of Milling and Baking News, January 13, 2008, starting on Page 22. Click here to search that archive.

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