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Structural initiatives in Sweeteners
- Alignment of xylitol production capacity to demand by mothballing the xylose plant and reducing xylitol production at our facilities in Anyang, China
- Non-cash writedown of xylitol fixed assets by DKK 100 million and by DKK 460 million relating to goodwill
- Change of divisional management
Our sales in Sweeteners for the financial year 2008/09 are expected to be around DKK 1.5 billion corresponding to negative organic growth of almost 10%. Profitability has slipped to an EBIT margin of slightly over 5% against historical levels of over 15%. The decline is primarily related to a xylitol price decrease and some volume losses, caused by new entrants and fierce price competition.
Sweeteners, including xylitol, are a strategic part of Danisco's product offering. We are confident that we can restore profitability to over 10% medium term, in a market estimated to grow 3-5% p.a. This expectation is based on:
- Best-in-class xylitol production platform and process technology
- Capacity reduction by mothballing the xylose plant in Anyang, China, and reducing the production of xylitol at the same site
- Increased success for new xylitol applications using our global sales and marketing organisation
- Capitalising on the synergy potentials of our Bio Actives cluster and general cost savings
Writedown of assets and impairment test of goodwill
The reduced production capacity at the Anyang plant means a writedown of DKK 100 million on the facility. The new long-term outlook for the profitability of the product area xylitol in Sweeteners will require a writedown of goodwill of DKK 460 million. Non-cash writedowns in Q3 will thus total DKK 560 million. With the inclusion of expected cash costs of DKK 15 million needed for the restructuring of the business, special costs booked in Q3 will be DKK 575 million from the Sweeteners area. Please see our stock exchange notice no. 04/2009 of today for more information about management's group outlook for 2008/09.
Change of divisional management
It has been agreed that Nicholas Dunning, Executive Vice President, Sweeteners will resign. His replacement will be announced shortly.
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