Lower volumes and higher costs to weigh on Cloetta Q3
Nordic confectionery manufacturer Cloetta has warned its third-quarter EBIT will be negatively impacted by lower volumes, higher raw material costs and negative exchange rate differences.
The company says adjusted operating profit is expected to be SEK40-50 million ($5-6.2m) lower compared to last year.
In June, there was a fire in one of the production lines in the company’s factory in Turnhout, Belgium. The damages to the line, the company says, have proven to be bigger than initially expected, which has resulted in “production capacity constraints and significantly lower volumes being produced”.
The incident has also created ripple effects in the factory network when both new shifts have been installed in some factories and production has been outsourced to compensate for lost production. This has created higher complexity and additional cost, the company explains. The incident in the factory is in some cases also creating delivery problems resulting in lost sales.
“It is unfortunate that the incident in our factory in Turnhout has created ripple effects in our factory network,” says Henri de Sauvage-Nolting, president and CEO at Cloetta. “In combination with higher raw material cost and negative exchange rate differences this has created some short-term challenges. However, this is in our own control and we will be able to solve them. To increase our profitability, we are also working on a cost savings programme that we intend to launch later this year.”
The damaged line in the factory in Turnhout, Belgium, will be replaced with a new line that is expected to be fully operational in the second quarter of 2018. Most of the direct cost related to the damaged line is expected to be covered by insurances, the company says.
