Plumrose USA achieves impressive organicgrowth in a year where RESULTS are negatively impacted by a lost court case.
With organic growth of a staggering 6.9pc, Plumrose has yet
again demonstrated
that the company's products enjoy very strong demand from American
retailers.
Moreover, the high growth is especially impressive in light of
the fact that the total
market for bacon and cold cuts has been shrinking afterbig price
increases have
forced many consumers to buy less.
CEO Dave Schanzer is satisfied with the results and the way they
have been achieved.
- Our substantial organic growth is based on several orders from
both existing and new customers. It shows that Plumrose commands a
strong position in the market, says Dave Schanzer.
Earnings under pressure
Despite the increased volume and revenue, Plumrose's results are
basically the same as last year.
- We have seen record-high commodity price increasesand even
though we have passed many of these increases on to our customers,
we have not been able to follow suit completely, says Dave
Schanzer.
In addition, the results have been negativelyimpacted by a court
case heard by the Danish Supreme Court. The case involved a
productrecall in 2005 which, according to the Supreme Court,
was not justifiable on health grounds and was therefore not covered
by the group's recall insurance policy despite the fact that the
products were contaminated with gear oil. The lost court case
results in a loss of DKK 50 million, a non-recurring item which
markedly weakens the overall results for the year.
Finally, Plumrose has had high overtime costs because the
company has worked hard to meet the increased demand.
New factory in the USA
- Capacity at two of our factories has been more than fully
utilised for a long time. Therefore I am very happy that Danish
Crown has decided to build a new cold cuts factory in Iowa. When it
is finished in 2013, it won't just solve our capacity problems. It
will also ensure more high-quality products, a more environmentally
friendly production and lower costs, says Dave Schanzer.
The first sod was cut at the beginning of October, and the
factory will improve both Plumrose's competitiveness and the
company's reputation.
It will thus be LEED-certified by the American authorities,
which means that the most modern technology available will be used
to ensure the least possible pollution and the lowest possible
energy consumption.
- For many of our biggest customers, the environmental impact of
their suppliers is very important, so the new plant will also make
Plumrose a more attractive business partner. Today, Plumrose
produces both private-label and branded Plumrose products while the
collaboration with the American Heart Association on producing
low-salt products is increasing the value of the Plumrose brand,
says Dave Schanzer.
On the right track
There is every reason to feel optimistic about Plumrose's
development.
- The general trend is that fewer consumers are eating out at
restaurants, but buying their foods in shops, which is obviously
unfortunate for the food-service industry, but good for us. At the
same time, many consumers have switched from brand products to
privatelabel, which represents a very big chunk of our business,
says Dave Schanzer.
And even though he thinks the US economy is finding its feet
again, he sees no reasonto change Plumrose's strategy.
- We continue to see very strong demand. The new financial year
is primarily about completing the new factory on time and
within budget. At the same time, we must work with sales to ensure
that both the new and existing factories are working to capacity as
soon as the new factory is finished. This is a key focus area, and
I expect to achieve both goals, says Dave Schanzer.
Why not sel?
He also takes the opportunity to address the question of
whether, in fact, Danish Crown's owners ought not to sell
Plumrose.
This has been discussed on several occasions by the Board of
Representatives, and Dave Schanzer acknowledges that it is a
relevant issue.
- There is no doubt that, being located in the USA, Plumrose is
of far less strategic importance than many of the other companies
in the group. However, we have become more strategically important
inrecent years because today we only buy spare-ribs
from Danish Crown and canned products from Tulip Food Company,
yet our situation is nevertheless special, says Dave
Schanzer.
However, Dave Schanzer has his own answer to the question.
Is the juice worth the squeeze? I believe it is. Plumrose is
good business for the company's owners, and will be for many years
to come, he says with a smile