Despite strong sales in confectionery speciality fats, Danish firm Aarhus Oliefabrik on Wednesday reported a drop in post-tax profits to DKK 19.4 million (€2.61m) for the first quarter of 2003, compared with DKK 21.8 million for the same period in 2002. Results were knocked by intense price competition and a global recession in bulk oil markets.
While sales to the speciality fats segment - the strategic focus area for the company - improved by more than 20 per cent, bulk oil sales declined by more than 7 per cent for the first quarter in 2003. Aarhus Olie in Denmark and Aarhus in the USA accounted for the improvement in speciality fats sales.
Although Aarhus Olie, Denmark did actually increase its sales volume to the bulk oil segment during the period, all of its subsidiaries suffered a general decline within the segment. A market that suffered from intense price competition and global recession pushing net margins below expectations for the period to DKK 228.9 million and below the level attained for the same period in 2002 that stood at DKK 241.0 million.
Looking ahead to the rest of 2003, Kjeld Ranum, chairman of Aarhus, said in a statement on Wednesday that the company has made an adjustment of DKK -10 million on previous expectations, anticipating this week that consolidated profits for 2003 will reach DKK 190-210 million, before tax, and DKK 120-140 million, after tax. According to Aarhus, the adjustment is primarily due to the decline in exchange rates applied in translating the results of foreign subsidiaries.
While difficult market conditions are expected to continue for the bulk oil segment, on a positive note, continued improvements are anticipated in earnings from the strategic focus area, chocolate and other confectionery speciality fats.