CSM: to raise prices as raw material costs jump

Amsterdam / NL. (csm) Dutch food group CSM NV estimates the impact of increasing raw material costs for Bakery Supplies to be approximately 190 million Euro, but expects to offset these costs by product price increases in 2007 and 2008 while staying focused on achieving the 2008 targets for Bakery Supplies.

At an investors meeting in Amsterdam, Gerard Hoetmer, CEO of CSM said: «It is not our normal procedure to give market updates outside our normal reporting periods. However, given the unprecedented rise in the costs of many raw materials that we have seen over 2007, I want to take this opportunity to clarify the impact this has and will have on our business.

We are increasing our product prices by ten to 20 percent to offset the impact of higher input costs. These price increases are unprecedented but absolutely necessary. As we indicated during the presentation of our half year results, a lagging price increase effect cannot be avoided, impacting CSM adversely in 2007. We estimate that the 2007 results will be impacted by eight million Euro (first half year: three million Euro).

In 2006 CSM spent approximately one billion Euro on raw materials (excluding distribution and PURAC). Total cost increases compared to 2006 amount to approximately 190 million Euro. Centralized procurement has protected CSM so far from the full effect of the commodity price increases through hedging activities and savings of approximately ten million Euro. Consequently most of the impact of higher raw material costs will have effect in 2008. It is expected that further savings of around ten million Euro will be realized in 2008 to offset the impact on our results.
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