Global meat industry giant Danish Crown has acknowledged it is in a ‘negative spiral’ with its supply of pigs and is in ‘crisis’ in terms of its financial performance.
In a brutally honest assessment of its annual report, Niels Duedahl, who assumed the role of Group CEO at Danish Crown on September 1, said:
“The quotation we pay to our owners has not matched our Danish competitors nor has it been close to the European benchmark in the past year.
“Although the key figures in our report show that we are financially robust, Danish Crown is in a crisis when you look at our relative performance.
“Right now, we are facing a further decrease in the supply of pigs of about 5% in this fiscal year. It is a negative spiral, so we are putting all our efforts into restoring our competitiveness.”
The report shows that the payments received for pig deliveries during the year by the cooperatives pig producing owners were up to DKK 3/kg (33p/kg) lower than the EU index against which Danish Crown measures itself.
The company’s latest financial year (October 23 to September 24) saw the closure of its large Ringsted abattoir, as part of a ‘massive’ savings and efficiency plan. Since the end of the fiscal year, Danish Crown has carried out a round of job cuts, reducing the number of salaried employees in the core business by 500. Together with other savings and efficiency measures, it said this should reduce total costs by at least DKK 500 (£55m).
Profit decline
In the 2023/24 fiscal year, Danish Crown’s operating profit (EBIT) increased by 1.2% to DKK 2,427m (£269m), but this included income from the sale of Agri-Norcold. Its net profit, declined by 29% to DKK 1,042m (£116m) in 2023/24.
“Viewed in isolation, the operating profit of Danish Crown are at an acceptable level, but we have not provided the returns that our owners rightly expect. Therefore, we are drawing a line and writing down the value of several assets which are not sufficiently contributing to the profitability of the company. It is a drastic but necessary step to restore our competitiveness,” Mr Duedahl added.
The board of directors has proposed a final payment for pig suppliers of DKK 0.70/kg (7p/kg) and a distribution from the undistributed equity of DKK 0.06/kg (0.67p/kg) for all kilos delivered over the past five years.
Unsatisfactory
Danish Crown chairman Asger Krogsgaard said: “The Board of Directors is very aware that it has been an unsatisfactory year for cooperative owners who supply slaughter pigs to Danish Crown.
“Our payments have not matched those of our Danish competitors, and at the same time, our company’s earnings have not been strong enough to pay the final payment that our cooperative owners expect. Therefore, we have chosen to supplement the final payment with an extraordinary payment from the undistributed equity, as we believe it will help secure future supplies of slaughter pigs.”
Mr Duedahl added: “In the coming year, we must improve our earnings performance, and the key focus for us is to re-establish our competitiveness in pig quotation.
“We have already implemented a comprehensive savings and efficiency plan to at least match the payments of our Danish competitors.
“At the same time, we need to narrow the gap to the German price, as it will make it more attractive to fatten pigs in Denmark and increase cooperative owners’ confidence in Danish Crown as a company.’