Strong organic growth in a focused Chr. Hansen A/S

In the financial year 2006-07, Chr. Hansen surpassed, in every way, the positive result from last year. All business areas and regions contribute to strong growth in both sales and profitability. At the same time, DKK 450 million are invested in the company’s future. In spite of a weakened US dollar the company expects a continued positive development for 2007-08.

• Sales amounted to DKK 3,709 million, an increase of 4 percent from last year. Measured in local currencies, the sales growth amounts to 10 percent.
• EBITDA was DKK 906 million corresponding to growth of 24 percent.
• The working capital was reduced to DKK 593 million corresponding to 16 percent of sales.
• Massive investments totaling DKK 450 million, primarily for a new plant for lactic acid bacteria at Avedoere, Copenhagen, Denmark

“Since the change in our ownership two years ago we have been working determinedly to focus the business and create growth, and I am very proud of what we have achieved. For the second year in a row we have demonstrated that our strategy has revitalized Chr. Hansen so that we not only deliver better results; we are also producing growth way above industry standard,” says Lars Frederiksen, CEO.


Focused strategy creates results

DKKm	2005/06	2006/07
Income statement
Net revenue	3,556	3,709
Gross profit	1.403	1.608
EBITDA	733	906
Operating profit - EBIT	352	560
Net result before tax	-193	-53
Net result	-183	-95
Cash flow from operating activities	555	497
Balance sheet
Balance sheet total	9,416	9,214
Net interest-bearing external debt	4.725	6.590
Equity	754	609
Key ratios
EBITDA margin %	20.6	24.4
EBIT margin %	9.9	15.1
ROAIC %	4.2	6.9
Average number of employees	2,495	2,507

Sales increased by 10 percent in local currencies but due to the weakening of the US dollar in particular, the sales increase measured in DKK amounted to 4 percent. Solid growth in all regions and product groups was recorded, but sales of cultures and enzymes developed particularly strong, generating 18 percent organic growth.

In spite of increasing prices of raw materials, a better sales mix, increased efficiency in production and a more centralized sourcing strategy resulted in an improvement of the profit margin (EBITDA) from 20.6 to 24.4 percent.

In December 2006 part of the shareholder debt was restructured into bank debt with lower interest. This increased the interest-bearing debt, but on the other hand reduced the interest expense.
During the financial year Chr. Hansen has divested, as planned, its activities within paprika and auxiliaries for the pharmaceutical industry. This contributed to focusing on the continued development and investment within the key areas: Cultures, enzymes, colors and certain flavor solutions.


Investment in a new culture factory in Avedoere, Copenhagen, Denmark

According to the plan, Chr. Hansen’s new culture plant at Avedoere will be ready for production in spring 2008. The plant will sustain a globally increasing demand for lactic acid bacteria. Priced at DKK 300 million, this is the single largest individual investment ever in Chr. Hansen’s history of more than 130 years.
“I am very pleased to be heading up this substantial investment, which clearly indicates that we not only prioritize growth here and now, but also very much look to the future,” says Lars Frederiksen.

New Health & Nutrition division

In September, Chr. Hansen established a new business division primarily targeted at the global market for dietary supplements and other applications for probiotic bacterial cultures outside the food area.
“The global health trend is becoming more and more prevailing. Over the years we have been the global market leader in the probiotic culture area, among other things owing to our strong clinical documentation. With the establishment of the new division we wish to accelerate the development of probiotic products that sustain and promote our general health and wellbeing in a natural way. In addition we have created a new development organization for cultures and enzymes for foods, as a way to boost customer-driven innovation,” says Lars Frederiksen.


Positive expectations for 2007-08

As a consequence of the very strong development in EBITDA, the net result for the year is better than expected, albeit negative.
“This is fully in line with our expectations and has to do with the way in which companies that are owned by equity funds are financed. We now have a stronger platform and a more focused company than ever before. At the same time the results of our employee satisfaction survey are very positive, so I believe we are in the best position to ensure continued growth and good results for 2008,” concludes Lars Frederiksen.