DIEMEN, THE NETHERLANDS — CSM n.v. said it was unable to fully pass on higher raw material costs to its customers during the second quarter as input costs increased more than expected.
“In Q2 raw material costs increased even further than expected and are now trending toward an increase of €240 million for the full year,” CSM said in a July 5 trading update. Earlier this year the company had projected raw material costs of more than €200 million.
“We have stepped up the level of price increases to compensate,” CSM said. “However, we have not yet been able to fully compensate the increased raw material cost in the quarter and also we have had some loss of volume as the market adjusted to higher prices. The EBITA trend was further exacerbated by the weaker U.S. dollar.”
While sales for the first half of 2011 are expected to be higher, EBITA before one-off costs is expected to be lower than last year when it was approximately €80 million, CSM said.
Going forward, CSM said it expects pricing will progressively balance the increase in raw material costs. The company also expects a gradual recovery of volumes during the second half of 2011.
“There is no indication that our competitive position has weakened in either Bakery Supplies or Purac,” CSM said. “Our businesses remain very much focused on delivering volume growth, cost reductions and realizing integration savings of Best Brands in the second half of 2011.
“Based on all measures taken and our planned initiatives, we expect EBITA before one-off costs and at constant currencies in the second half of 2011 to be broadly in line with the second half of 2010.”
CSM will release its first half results on Aug. 10.