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Operating Margins Under Pressure at Bel Group

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Operating Margins Under Pressure at Bel Group

Operating Margins Under Pressure at Bel Group
August 07
09:49 2017

Bel Group, the French cheese producer, has reported a 14.9% rise in sales to €1.67 billion for the first half of 2017, spurred by the consolidation of the Mont-Blanc Materne (MOM) group acquisition, which accounted for 14.1 percentage points of the increase. Foreign exchange fluctuations had a slightly negative 0.4% impact on sales. Accordingly, organic sales growth came to 1.2% in the first half of the year.

Consolidated operating income fell by 19.7% versus the first half of 2016 to Eur133 million. The group’s operating margin was mainly negatively impacted by the sharp downturn in volumes in the Middle East and Greater Africa.

Volume growth in European markets slowed in the first half as a result of fierce competition among food retailers, particularly against a backdrop of a sharp increase in milk and dairy raw material prices. The region’s sales growth stemmed mainly from higher prices for industrial products, which follow quoted raw material prices. Excluding the impact from changes in the scope of consolidation and the foreign exchange impact, sales in Europe grew 4.4% over the first six months of 2017.

Sales in the Middle East and Greater Africa region declined a sharp 8.0% versus the first half of 2016 on a comparable exchange rate basis. Apart from the markets long suffering from wars and unrest, resulting in supply difficulties, purchasing power fell for people living in the main African and Middle Eastern countries that depend on raw materials exports, particularly oil. The region’s dairy product markets contracted significantly in the past year, while competitive pressures swelled. In this environment, selling prices could only be raised moderately to offset higher dairy raw material prices.

Volumes sold in the Americas, Asia-Pacific region were buoyant in most markets. Excluding the impact of the MOM acquisition and a favourable forex impact, the region’s sales grew a healthy 7.2% in the first half of 2017.

Looking ahead, Bel Group expects raw material prices, particularly butter fat raw material prices, will rise and that it will continue to confront a tough economic environment. Against this backdrop, Bel Group expects operating margin to be lower in the second half of the year versus the prior year period. The group will continue its efforts to improve industrial productivity and to tightly manage resources, while following its strategy to develop in the healthy snack space by building on the vitality of its brands and the talent of its teams.

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