DENMARK

Danish Crown: We're doing everything we can to restore our competitiveness

Provisions, write-downs and costs for a slaughterhouse closure drag down the result in a year when turnover and earnings - despite a four percent drop in the supply of slaughter pigs - were otherwise stable.

Posted on Nov 26 ,00:15

When a shareholder in Danish Crown reads the annual accounts and at the same time looks at the settlement that has been paid for deliveries of pigs during the year, there is a shortfall of up to three kroner for every kilo delivered. Therefore, the supply of fattening pigs to Danish Crown has decreased in the financial year 2023/24. The abattoir in Ringsted is closed, and a massive savings and efficiency plan has been launched.  

"Our settlement for pigs has neither matched the Danish competitors nor been close to the European benchmark in the past year. That is why Danish Crown is in crisis, even though the key figures in our accounts show that we are a financially robust company. Right now we are looking at a further decrease in pig supplies of around five per cent this financial year. It's a negative spiral, so we're doing everything we can to restore our competitiveness", says Niels Duedahl, who took over as Group CEO of Danish Crown on 1 September.

In the financial year 2023/24, Danish Crown's operating earnings (EBIT) have increased by 1.2 percent from DKK 2,398 million to DKK 2,427 million. The financial costs have increased by DKK 143 million to DKK 679 million, and despite the income from the sale of Agri-Norcold, the cost for special items - due to provisions, write-downs and costs for approx. 750 million DKK - increased from DKK 200 million in the financial year 2022/23 to DKK 466 million in the past year. The net result therefore goes back from DKK 1,469 million. DKK in 2022/23 to DKK 1,042 million DKK in 2023/24. A decline of 29 percent. 

"Viewed in isolation, the ordinary earnings at Danish Crown are at an acceptable level, but we have not at all delivered the settlement that our owners can rightly expect. Therefore, we draw a line in the sand and write down the value of a number of the assets that do not sufficiently contribute to earnings. It is violent, but necessary to restore our competitiveness", says Niels Duedahl.

Danish Crown Beef has done well and has slaughtered one and a half percent more cattle in Denmark than the previous year. Earnings in Scan-Hide, which sells cattle hides for leather production, have disappointed, however. Sales of luxury bags, furniture and large cars with leather upholstery have been hit by the economic downturn, forcing Scan-Hide to write down its inventory considerably. It has cost the settlement to the unit owners, and at the same time the two German cattle slaughterhouses have performed below expectations. 

Overall, the portfolio companies have also not contributed sufficiently to the group's earnings. Swedish KLS and the trading company ESS-FOOD deliver stable results that correspond to expectations. DAT-Schaub, on the other hand, has lost momentum due to sharply falling prices in sales to the pharma industry, so earnings have fallen from DKK 961 million to DKK 558 million. In Poland, Sokołów is challenged by fierce competition for orders from the Polish retail chains, and therefore earnings fall from DKK 194 million to DKK 132 million.

The board proposes a residual payment for suppliers of pigs of 70 øre/kg and a distribution from the undistributed equity of 6 øre for all kilos delivered in the past five years. For a cooperative owner who has delivered an average of 10,000 pigs per year for the past five years, this amounts to approximately DKK 900,000. For suppliers of sows, a residual payment of 80 øre/kg and a payment from the undistributed equity of 4 øre for all kilos delivered in the past five years is proposed. Unit owners who deliver cattle are intended for a residual payment of DKK 1.35/kg and a payment of 11 øre from the undistributed equity capital for all kilos delivered in the past five years. 

"On the board, we are very aware that it has been an unsatisfactory year for the unit owners who supply fattening pigs to Danish Crown. Our settlement has not matched our Danish competitors, and at the same time our earnings in the company have not been sufficient to pay out the residual payment that the unit owners expect as a minimum. That is why we have chosen to supplement the remaining payment with a completely extraordinary payment from the undistributed equity, as we believe it will contribute to securing the future supply of fattening pigs", says Asger Krogsgaard, chairman of Danish Crown.

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