Danish Crown Results Weakened by Problems in the UK
Much of Danish Crown’s business is performing well but, as a result of continued losses in the UK company Tulip, the group has decided to postpone its strategic target by two years. The ongoing problems in the UK business are impacting Danish Crown’s earnings to such an extent that it will now take an extra two years to realise its strategic target of raising the settlement price paid to co-operative members by DKr0.60 per kg.
“We’re definitely not happy with the financial statements. 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, says Jais Valeur, group chief executive of Danish Crown.
Jais Valeur.
Due to declining pork and beef prices, Danish Crown’s revenue in the 2017/18 financial year has, in spite of acquisitions in the period, declined from DKr62.024 billion to DKr60.892 billion (€8.16 billion). On the other hand, the gross profit is up DKr146 million to DKr8 billion following the acquisition of DK-Foods in Denmark, Gzella in Poland and the Dutch company Baconspecialist Zandbergen. The new activities have also led to increased distribution and administration costs. The profit from primary operations has fallen by DKr181 million to DKr1.742 billion.
It is primarily Tulip Ltd that is dragging down the results. Despite the fact that the company actually returned a profit on ordinary operations for the first quarter of the fiscal year. A net operating loss of DKr260 million has been posted for the year against a loss of DKr231 million last year.
“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 DKr200 million from the 2018/19 financial year,” says Jais Valeur.
“The other processing companies have posted better results than last year. Our Polish company Sokołów’s earnings are up 26 per cent and Tulip Food Company in Denmark posted growth of 29 per cent following a year of improved sales of bacon in Europe and growth in exports of canned meat. During the year, both companies have implemented significant acquisitions, which will contribute to boosting earnings in the two businesses in the future.”
