Tough times for Raisio Nutrition

- Last updated on GMT

Related tags: Health food, Nutrition, Omega-3 fatty acid

Raisio Nutrition, the health food division of Finland's Raisio
Group, ended the first quarter with a drop in sales compared to the
previous year. But the company remained confident that its decision
to focus on its nutrition and food ingredients businesses, and to
sell Raisio Chemicals, its most profitable operation, would pay
dividends in the long term.

Raisio announced earlier this year that it planned to sell Raisio Chemicals in order to focus to on its nutrition and life sciences units, using the proceeds of the sale to build its presence in the growing health food and ingredients sector.

But results for the first three months of the year might suggest that this strategy could do with a rethink, at least at first glance. The nutrition arm saw its sales drop by 3.7 per cent to €91.1 million compared to the previous year, while the chemicals business saw a 3.3 per cent improvement to €106.5 million.

However, the company stressed that the drop in sales from the nutrition arm was due mainly to the disposal of two non-core businesses (the Carlshamn ice cream unit and an almond paste manufacturer) and to the decision to stop industrial margarine production in Sweden - and that the underlying performance of the nutrition business continued to improve.

Nonetheless, the nutrition unit remained in the red, with operating losses of €1.5 million (compared to losses of €1.4 million a year before). The closure of the Swedish margarine business could also lead to a further write-down of assets in the coming year, the company warned.

If the margarine business in Sweden continued to struggle, there were solid performances in the same sector in both Finland and Poland, while the company's first margarine production unit in Russia opened its doors in January. Russia and Poland are both seen as major growth markets by the company.

Despite the poor overall performance from the nutrition business, the company remains confident that it can return the unit to the black. It highlighted a number of innovative products, such as a multigrain cereal and bran mixture with linseed and Beneviva Omega3 light margarine (high in essential fatty acids), which it said reflected its expertise in the grain and vegetable oil segments and gave it an excellent base on which to rebuild its health food business.

The performance of the Raisio Life Sciences division in the first quarter was altogether more encouraging, however, with sales up by 88.7 per cent to €11.8 million. The figures were partly boosted by the acquisition in April 2003 of the food diagnostics company Diffchamb, but also by an excellent performance from the ingredients business, where sales rose from €6.3 million to €9.8 million.

"The determined inputs made in the European ingredients market last year are beginning to bear fruit,"​ the company said in a statement. "One particularly successful product application is the yoghurt drink sold in small bottles. This product is currently sold in nine European countries. Furthermore, the first quarter saw the launch of milk containing the Benecol ingredient in Spain, a Benecol light spread in Greece and a Benecol yoghurt drink in Finland."

Benecol is the company's cholesterol-lowering ingredient made from stanol esters.

Ironically given the decision to sell the unit, the chemicals business was the star performer for Raisio, with turnover up by 3.3 per cent to €106.5 million and a return to the black at the operating level with profits of €1.9 million, compared to losses of €3.2 million a year earlier.

This in turn helped lift the group as a whole out of the red in the first quarter with operating profits improving considerably from losses of €6.7 million to €0.7 million. Total group turnover was up 2.3 per cent to €205.6 million.

The chemicals division is to be sold to Swiss group Ciba Specialty Chemicals for €475 million, which will be used to settle Raisio's debts and allow it to focus more sharply on the core wellness sector. The sale should be completed by the end of the third quarter at the latest.

The €200 million in exceptional profits the company expects to book from the sale of the division will give some much needed support to the company's balance sheet, but Raisio will have to move quickly to strengthen its operations in the health and nutrition sector if it is to pull itself out of the red for the year as a whole.

The group said it planned to focus in particular on accelerating organic growth, including a stronger focus on research and development in order to speed up the rate of new product launches. "By expediting research and development, Raisio can expand the range of plant-based products and launch new, tasty and healthy foods and animal feeds, as well as functional food ingredients. For the fast growing food diagnostics markets, rapid testing methods will be developed."

Related topics: Omega-3s & Nutritional oils

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