Food firms given warning about jump in input costs
Published 06/07/2011 | 05:00
FOOD companies were given another warning about higher input costs after CSM gave a profit warning yesterday.
The Dutch bakery supplies giant said raw material costs had increased even more than expected in the second quarter and that, as a result, earnings would be lower year on year. Costs had increased to €240m from €200m only three months earlier.
CSM's woes matched those of the UK's Premier Foods, which last week issued a profit warning and saw its share price fall by a quarter amid difficulties with the major retailers and higher input prices.
When food prices started to increase rapidly last summer following a Russian export ban on grain, most major food companies had hedged supply for the coming year. With many of those hedges now beginning to expire, companies are perceived to be more exposed than ever to shifts in input costs.
NCB's analyst Darren Greenfield said CSM's profit warning was likely to be particularly relevant to Irish-led bakery specialists Aryzta, the owner of Cuisine de France, among other brands.
"CSM's statement highlights the continued cost pressure present in the industry," he said.
"Aryzta highlighted at their third-quarter results in June that they have an ongoing programme of dynamic pricing and are working closely with customers to mitigate the impact of pricing on consumers through product innovation -- which should make it easier for Aryzta to push through the double-digit price increases required to recover costs," he added.
Bloxham Stockbrokers noted that while there had been no indication so far that Irish companies had been hit, "the number of food companies struggling with commodity costs are growing."