This first half of the financial year 2004/2005 was hampered by a triply difficult economic context:

Consumer activity throughout Western Europe is experiencing a real slump. In many countries, the world of “mass consumption” has even deflated for the first time in its history.
In an economic climate marked by uncertainty and unemployment, consumers are looking for lower prices and flocking to discount retail outlets which are winning market share once dominated by traditional channels. This slowdown can doubtlessly be explained by the time-delayed impact of the switch to the eur which, objectively speaking, caused sharp inflation in a number of products and services, as well as by the increase in oil prices and “digital” purchases…
While the group’s presence on all retail circuits and in all brands (national brands, store brands, and discount brands) protects it somewhat from this dip in consumer activity, it has still felt the effects in Western Europe. Luckily, Eastern Europe, where Bonduelle has a strong presence, is still experiencing solid growth.
Its price and product initiatives have resulted in a return to market stability in early 2005.

In France-which still represents nearly 50% of group sales-public authorities have taken up the horrendous effects of the “Galland” law which brought on a significant and regular increase in consumer retail prices of brand-name products but without any proportional increase in producers’ net sale prices.
As such, an agreement signed in late June overseen by the French Ministry of Finance, forced industry players as of September to reduce prices by 2% without signs of a subsequent pick-up in consumer activity. This meant a drop in sales and above all profits for producers.
Even though this effect on the group was softened by its strong presence abroad and on non-impacted markets (retailers’ brands, bargain brands, professional food service), it still felt the effects on its related turnover (20%). The Galland legal reform, planned for summer 2005, will give brands back their competitive edge in terms of consumer sale price and therefore growth.

The dollar continued to crumble throughout the half-year, having a direct effect on consolidated turnover and an indirect effect on market price levels for products with competitors producing in dollars (United States, as well as Thailand, Israel, and others).
Moreover, Central European currencies continued their appreciation in comparison with the euro, especially in Poland and in Hungary, countries in which the group is a major producer of canned and frozen exports. This was felt two-fold by the group; sales and profitability temporarily suffered without calling into question the validity of its Eastern plants which remain an obvious strategic advantage in the short and medium term.
Despite this climate and due to the successful launch of major innovations (Tetra Recart pack in Germany, France and the Netherlands, fresh soups, new fresh-seal packaging for prepared salads in France, etc.) and its continued industrial rationalisation (closing the Peschiera, Italy plant), the group was able to keep its sales at comparable structure, amounting to €661m (i.e., -1.8%). The operating margin, at comparable structure and exchange rate, was up, both in terms of value and in terms of turnover ratio (5.3%).
The total turnover is up slightly (€688m, i.e. +2%) thanks to the prorata temporis effect of the strategic acquisition of VITA, the German ready-to-eat salad leader, in January 2004. However, the company incurred greater losses than expected, as the monetary outlook and low consumer activity weighed down the operating margin which amounted to €27m. The second half-year should see a considerable increase in the company’s profitability.

The group will continue on its medium-term path, and the Bonduelle brand which received a major boost from its exposure during the Vendée Globe, is stronger than ever before.

Christophe Bonduelle,
Manager