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Ter Beke Profits Hit by Rising Costs

06 March 2013

BELGIUM - Belgian based meat and food procesor Ter Beke saw total group turnover increase by 4.3 per cent from €403.7 million to €421.1 million last year.

However, the increase in turnover did not result in an increase in profits, which were hit by rising input costs.

In the processed meats division, the turnover increased by €14.7 million.

The increase in turnover is partly due to an increase of the sales prices, which on a full year basis were still not enough to offset the rise in raw material prices.

The increase is also caused by growth in the slicing and packaging activities.

In the ready meals division, the turnover increased by €2.7 million, mainly due to a sales increase in lasagne and notwithstanding the termination of a number of contracts in France due to the termination of the industrial activities there.

In 2012, the group launched a new range of processed meats under the brand name Oligusto®, which are meat products enriched with olive oil and a lower total fat content.

The launch costs for this have been included in the result of the first semester, but the commercial start-up was somewhat delayed.

The new media campaign at the start of 2012 in the Come a casa® brand in Belgium has again resulted in an increasing market share. Come a casa® is increasingly fulfilling its leading position as engine of the fresh Mediterranean meals market, according to Ter Beke.

The increased volumes, the implemented price increases and a far-reaching cost control and reduction were not able to entirely offset increased production costs (chiefly raw materials, energy and wages) and the costs of market investments.

The changed product mix, with an increase in the sales of cheaper products at the expense of more expensive products caused by the general economic climate, curbed margin growth in the processed meats division.

Overall profit came to to €33.1 million compared to €33.2 million in 2011.

On 5 April 2012 the group announced the intention to end production at the site in Alby-sur-Chéran (France). Production was effectively terminated on 30 June 2012. The group does retain its commercial activities in France for products that are produced at the Belgian sites of the ready meals division at Marche-en-Famenne and Wanze.

The costs regarding this closure came to €1.1 million. These costs, along with a total of €0.9 million other dismissal costs, caused EBITDA to fall to €31.1 million in 2012.

In 2012, total non-cash costs decreased by €0.3 million to €17.5 million.

This results in an EBIT of €13.6 million in 2012 compared to €15.3 million in 2011 a fall of 11.5 per cent.

As the 2012 non-cash costs comprise a one-time reversal of impairments on the material fixed assets in Alby-sur-Chéran in the amount of €1.6 million, the non-recurring operational result amounts to minus €0.3 million. Hence, the 2012 REBIT amounts to €13.9 million compared to €15.3 million in 2011 - a fall of 9.0 per cent.

As previously announced, Ter Beke and the shareholders of France based Stefano Toselli incorporated, in 2011, a joint venture for the production and sale of lasagne and pasta meals in Central and Eastern Europe. The joint venture was incorporated under the name “The Pasta Food Company”.

The business plan of the joint venture provides for the construction in Poland of a production plant that will produce for the Central and Eastern European market.

Ter Beke’s share in the results of The Pasta Food Company in 2012 amounts to €183,000. This result of the joint venture is accounted for using the equity method.

Since January 2013, the frozen ready meals sector has been confronted with a scandal originating from the presence of horse meat or horse DNA in frozen ready meals, which, according to the label, should not contain such meat or DNA.

"Ter Beke only produces chilled ready meals. We deplore that these events also negatively impact our sector, even though Ter Beke’s products are not at all concerned," said a company spokesman.

"The reduced demand implies that Ter Beke adjusts its production planning on a daily basis and is currently applying temporarily unemployment in its lasagna production facilities in Wanze and Marche-en-Famenne.

"This is necessary because we use fresh products and operate with limited inventory levels.

"We concentrate fully on an open and transparent communication with our customers and our consumers and are doing our utmost to reconfirm our customers’ confidence in our chilled products.

"Meanwhile, it is almost impossible to assess the impact on the 2013 results.

"As far as possible, we will communicate further on this matter when we report on the first quarter results."

TheMeatSite News Desk

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