Tough economic conditions have taken their toll on Scandinavian confectionery group Cloetta Fazer. A contraction in the Swedish market has resulted in a drop in profit for the third quarter of 2003, which the company has attributed to poor performance during the hot summer months.
"The drop in profit during the third quarter is attributable to the summer months of July and August, while September has shown positive development," said the company's chief executive Karsten Slotte.
The company's operations in Poland were also slow, characterised by lower sales volumes, rising raw material costs and a weaker currency. This has resulted in a deficit in Poland compared with the preceding year. The company claims to be taking measures to reverse this negative trend. "Poland's upcoming accession to the EU will change conditions on the Polish market and provide scope for better coordination in production, sales and marketing<" said Slotte. "We are now gearing up our efforts to adapt Cloetta Fazer's structure and organisation to these new conditions."
Nonetheless, the company can claim some satisfaction in increasing its market share in Finland by 6 per cent. In addition, Cloetta Fazer insists that overall operating profit in its two main markets, Sweden and Finland, remains on a par with the previous year. "Sales of our key brands continued to rise, while sales of pick- and-mix declined," said Slotte.
In addition, the company remains upbeat that the Christmas period will restore fortunes. "We have now entered our most significant sales period, the fourth quarter, when the Christmas sales take place," said Slotte. "The fourth quarter traditionally accounts for around 40 per cent of annual profit. Falling cocoa prices will have only a partial impact on fourth quarter earnings due to forward contracts currently in force."
The group reported sales of SK2.08 billion (€229.5m) for the first nine months of the year. Operating profit dropped to SK214 million while third quarter sales reached SK695 million, down by SK26 million.
Operating profit for the third quarter was SK71 million and profit after financial items for the first nine months was SK228 million.
The Cloetta Fazer Group is the Nordic region's largest confectionery company, with a market share of 22 per cent. The company has production facilities in Sweden, Finland and Poland. The group manufactures and markets many popular brands including Kexchoklad, Dumle, Geisha, Polly and Center. Annual sales in 2002 amounted to SK3 billion.