Danish Crown reports increase in net profit
The first six-months period of the fiscal year 2019/2020 was the strongest reported in Danish Crown's history, said the company in a press release. However, soon after that, the COVID-19 crisis has started to erode the company's financial reserves, stated Jais Valeur, Group CEO, Danish Crown.
More or less simultaneously with the end of the first half of our 2019/20 financial year, the corona crisis began to impact settlement prices for the company’s owners.
“We’ve had a very strong first half with broadly based progress, building on a combination of continuing strong sales of pork to China, the divestment of Tulip Ltd. in the UK and, not least, overall strong Group performance. No one can take that away from us, but right now we’re dedicating all our resources to steering Danish Crown safely through the coronavirus crisis,” said Jais Valeur, Group CEO of Danish Crown.
Revenue was up 18% from DKK 26,987 million (€3.6 billion) in 2018/19 to DKK 31,834 million (€4.2 billion) driven especially by an increase in the pork price. Operating profit increased by 43% from DKK 1,220 million (€163 million) to DKK 1,750 million (€234 million), while the net profit rose 46% from DKK 960 million (€128 million) to DKK 1,391 million (€186 million). Strong prices for pork in the Asian market have supported the company's financial performance.
“Obviously, our improvement is driven by our exports to China, but the platform we’ve built over the course of the years is starting to prove its worth. The breadth of our business and product portfolio is historically strong, and we are more diversified geographically as well as in terms of product categories than previously. This is important as it will ensure attractive settlement prices for our owners going forward,” said Jais Valeur.
In broad terms, Danish Crown Foods has succeeded in passing on the rising prices of pork to its selling prices. On the respective domestic markets in Sweden and Poland, KLS Ugglarps and Sokolow have witnessed strong demand for local products, consolidating their market positions. Improving its sales to the pharmaceuticals industry, DAT-Schaub contributed to continued revenue and earnings growth.
Unfortunately, the market for beef and veal remains challenged with prices remaining stable, but at a low level. While Danish Crown Beef generally experienced operational improvements, the outbreak of COVID-19 has caused greater uncertainty.
The public lockdowns in most parts of the world in response to COVID-19 will impact on Danish Crown’s earnings in the second half of the year – not least the loss of sales to restaurants and other foodservice market players, which affects large parts of the food sector and causes market volatility.
Toward the end of the first half, beef prices were the first to be hit, and prices of pork were quick to follow. The pace of markets re-opening, especially in Europe, will determine when the markets will start to recover.
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