DENMARK - Despite this past year being challenging, the strong demand for pork in China and other Asian markets has allowed Danish Crown to maintain a competitive settlement for its owners.
"The Chinese appetite for imported pork was exactly what was needed to lift prices in Europe. This was obviously positive for Danish Crown's sales, but what pleases me most is the fact that the higher prices have led to renewed optimism among the company’s owners," says Danish Crown’s Group CEO Jais Valeur.
Despite decreasing foreign exchange rates in some of the group’s main markets, Danish Crown’s sales for the first time topped DKK 60 billion, greatly helped by a Swedish acquisition in the beginning of the year, as well as generally increasing prices for pork.
A net profit of DKK 1.6 billion was posted for the year, compared to DKK 1.8 billion for the prior-year period.
Erik Bredholt, Chairman of Danish Crown’s Board of Directors, considers the overall result to be satisfactory: "It highlights the strength of being a group that rests on several legs, as we have had a year with declining earnings in the important UK market, which has, however, to a large extent been offset by increased earnings in other parts of the group."
The Board of Directors is recommending total supplementary payments of almost DKK 1.3 billion to the owners. This corresponds to DKK 1.00 per kg of pork, while the cooperative members supplying sows and cattle will receive DKK 0.80 and DKK 1.30 per kg, respectively. At the same time, a total of DKK 102 million is being credited to the owners’ personal members’ accounts. Pig and sow members are being paid DKK 0.075 per kg, while cooperative members supplying cattle are being paid DKK 0.015 per kg.
This is down on last year, but Mr Bredholt says that it should be seen in the light of a year with special challenges: "The prices we are paying are still above those being paid in Germany and are also above the new European index which we introduced in connection with the new strategy plan."
Because of the challenges faced by the group in the UK market, the price difference between Denmark and Germany is slightly smaller than last year, said Mr Bredholt – with reference to the fact that UK subsidiary Tulip Ltd has experienced significant losses of competitiveness and earnings, resulting in a change of leadership and structure.
2015/16 is the first financial year with Group CEO Jais Valeur at the helm. He has just launched the company’s comprehensive five-year strategy plan under the title ‘4WD’. The plan includes a promise that, by the end of the strategy period, the settlement paid to owners will be DKK 0.60 higher than the EU pig price index.
"Both internally and externally, Danish Crown appears to be a well-managed company in which sound investments have been made, but FY 2016/2017 will still present challenges. As a supplier to the highly competitive retail business, raising prices to reflect rising raw materials prices is hard. At the same time, we are still facing challenges in our UK subsidiary," said Group CEO Jais Valeur.
ThePigSite News Desk