Positive Trends Support Danish Crown's Satisfactory Financial Outlook

Despite a challenging global pork market and declining prices in the first half of FY 2017/18, Danish Crown has seen a growth in earnings before special items, from 1,026 million DKK to 1,041 million DKK, a 1.5% year-on-year increase. The company's processing companies have all reported growth, with Sokołów performing well in Poland, Tulip Food Company seeing increased export earnings, and Tulip Ltd moving in a positive direction. The group's aggregate results for the half-year are up 171 million DKK from the same period last year, according to Jais Valeur, Group CEO of Danish Crown. In Denmark, the group's pig slaughter numbers increased by 1.5% for the half-year, a smaller increase than expected but still a positive trend given the pressure on pork prices. The average price per kg paid to farmers was 0.76 DKK lower than last year. Valeur expressed regret over the decrease in price paid to the company's owners, attributing it primarily to the low USD exchange rate, which has affected the prices received for exports to Asia and strengthened the competitive power of US abattoirs in China, Japan and Southeast Asia. The company's revenue decreased from 30.7 billion DKK to 30.1 billion DKK for the reporting period, largely due to the divestment of Plumrose in the US, which accounted for revenue of 1.7 billion DKK during the same period last year. This effect was partly offset by the acquisition of Overberg in South Africa, Agrimares with activities in Spain and South America, and DK-Foods in Denmark. DAT-Schaub, Danish Crown's sales and processing company for natural casings for sausage production, had a successful half-year, posting significant growth in both revenue and earnings. In the UK, Tulip Ltd has not seen the expected growth in demand from the UK retail market, resulting in a setback for the turnaround process that Danish Crown has been working on since autumn 2016. A number of initiatives have been launched to strengthen sales in Tulip Ltd. Prices for Danish beef have been rising, with the average price per kg paid to farmers approximately 10% higher than last year. However, earnings in Danish Crown Beef have been negatively impacted by a general decrease in the number of slaughter animals in Denmark and a sluggish beef market in Germany. Danish Crown launched its strategy for the period up until 2021 eighteen months ago, with the goal of improving the price per kg of pork paid to farmers by approximately 0.60 DKK compared to an EU index. The company is focusing on developing its business in its four domestic markets in northern Europe and in Asia, as well as globally in the categories of natural casings, bacon, canned products and pizza toppings. Valeur stated that the company has made progress towards its ambitious goals, improving earnings across the group by 0.27 DKK per kilo compared to the EU index and making a number of strategically important acquisitions. However, he acknowledged that there is still much work to be done to achieve the company's strategic goal.