Potato Woes, Exchange Rate
Impact Pinguin-Lutosa Sales

Sales for the Westrozebeke, Belgium-headquartered Pinguin-Lutosa Group slipped four percent during the first six months of 2009, from 224.1 million euros to 215.1 million, but this was reportedly due mainly to the loss of volume in the potato division and the weakening British pound.

Volumes for the frozen vegetable division remain at a high level. Had the exchange rate remained unchanged, that division would have achieved 6.4% more turnover for the six months ended June 30. As for the potato division, its sales had been exceptionally strong during the first half of 2008.

Operating result (EBIT) of the entire group was 2.3 million euros this year compared to 9.5 million euros in the first half of 2008. Recurring operating cash flow (REBITDA) followed the same pattern, coming in at 12 million euros compared to 17.2 million a year earlier. As of June 30, operating cash flow (EBITDA) for the potato division was 7.4 million euros compared to 13.6 million in 2008 – a drop of 6.2 million.

During the first half of 2008 the potato division had been able to benefit from very high margins as a consequence of favorable market conditions following the weak crops of 2006. In the last months of 2008, sales prices returned to a normal level, while costs increased. Due to this pressure on margins, a number of contracts were not continued, which in turn led to a decrease in sales. But the situation looks to stabilize for the second half of 2009.

On the brighter side, the recurring operating cash flow (REBITDA) of the frozen vegetable division increased by 28% and amounted to 4.6 million euros, a million euros higher than the previous year. Had the exchange rate for the British pound sterling remained unchanged, the REBITDA for frozen vegetables would have been 5.2 million euros, or 1.6 million higher than the previous year.

In the frozen vegetable segment the second half of the year is traditionally the one in which the greater part of the annual EBITDA and EBIT is realized, as most of the fresh vegetables are processed during this period.