Earnings Dampened by Tough Market Conditions

The first half of the 2021/22 fiscal year for Danish Crown was characterized by a significant shift. After 2½ years of strong demand from China, the company has reoriented its sales and production capabilities to cater to demand in Europe and countries like the USA, Australia, and Japan. The shift was challenging, especially with the increasing supply of pigs from cooperative owners. However, the company's employees have worked hard to overcome these challenges, resulting in satisfactory financial results, according to Jais Valeur, Group CEO of Danish Crown. Danish Crown reported a revenue increase of 3.6% in the first half of the fiscal year, from DKK 28.9 billion to DKK 29.9 billion. However, due to a 4.8% increase in production and distribution costs to DKK 27.7 billion, the after-tax profit decreased from DKK 1.3 billion to DKK 1.1 billion. The company has also been affected by the global economic inflationary pressure, which was higher than anticipated during the half-year period. Costs related to transport, packaging, and energy have risen by nearly half a billion Danish kroner. The company faced rising costs and slow markets in the initial months of the fiscal year, making it challenging to implement necessary price increases. Although the situation has improved with the easing of COVID-19 pressures across Europe, costs have increased further due to Russia's invasion of Ukraine, says Valeur. Despite rising costs of raw materials, packaging, transport, and energy affecting Danish Crown’s processing companies, DAT-Schaub, which processes pig parts for food ingredients and pharmaceutical industry raw materials, continues to make progress. The company reported record-high earnings and a 17% improvement. The price of beef increased significantly during the half-year period, with positive operational developments and a low supply of beef in Europe driving prices up. This, along with positive developments for the company's two cattle abattoirs in Germany and Scan-Hide, which processes cattle hides for the leather industry, contributed to a strong overall performance for Danish Crown Beef. In January, Danish Crown launched its first major series of plant-based products under the brand Den Grønne Slagter. Sokolõw in Poland and KLS in Sweden have also established a strong presence in their domestic markets for plant-based food and plan to expand their product ranges in the coming autumn. Despite the positive outlook, Valeur acknowledges that there are still challenges ahead. For the first time in two years, the company has not been able to deliver a payment for pigs that is DKK 0.60 higher than the EU index. With farm finances currently under pressure due to rising feed and energy prices, the main task is to restore the company's competitive strength. In the first half of the fiscal year, Danish Crown was DKK 0.20 ahead of the EU index, assuming a supplementary payment on par with last year.