Grupo SOS: doubles net profit in 2007

Madrid / ES. (sos) Grupo SOS S.A., brand leader in the segments of vegetable oil, rice and biscuits, doubled net profit in 2007 to 26,1 million EUR, an increase of 236 percent versus 2006. Group turnover last year was 1,40 billion EUR, down 4,5 percent on the 2006 figure, mainly as a result of the fall in the mill-gate price of olive oil. However, profits rose by 24,4 percent, with an EBITDA of over 100,5 million EUR.

The highlight last year was the recovery by the vegetable-oil division, where EBITDA moved up by 68,03 percent to 59,5 million EUR. These good results were due to the stability of mill-gate olive-oil prices thanks to high available supplies in the 2006/2007 crop year. Prices fell by 26 percent compared with the previous crop year, when price volatility had been the order of the day.

Lower and more stable input prices meant that a significant proportion of the reduction could be passed on to consumers, encouraging stronger sales and better returns. This was particularly true in export markets, where volume sales rose by 10,7 percent. The markets showing most growth were those where Grupo SOS is well positioned (United States, Australia, Canada, France and Brazil), together with emerging markets (Mexico and India).

In Italy the SOS Italian brands, led by Carapelli and Sasso, consolidated their market leadership, obtaining a combined volume increase of 22,1 percent versus the 2006 figures and maintaining an upward trend. Overall, more than 50 percent of the vegetable-oil division´s EBITDA came from exports, which thus compensated for the slowdown in domestic consumption while at the same time laying the foundations for international development of the olive-oil business.

Vegetable-oil division

In seed oils the rise in world demand, combined with the surge in biofuels and the fall in the supply of oil-bearing seeds due to adverse weather conditions, led to a significant increase in mill-gate prices throughout the world. Although this affected the results obtained in this segment, particularly in the second half of 2007, Grupo SOS succeeded in consolidating the leadership position of its brands in both Spain and Italy. The acquisition in Italy of the Friol brand was particularly helpful in this sense.

In all, the vegetable-oil division accounted for 63,1 percent of Group sales and 59,3 percent of consolidated EBITDA. With regard to the rice division, the rundown of world stocks was the main cause of major increases in the price of milled rice. In Spain alone input costs rose by 27,4 percent in 2007.

Rice activities

Notwithstanding, Grupo SOS achieved notable growth in its rice activity in Portugal and consolidated its leadership position in Spain and the Netherlands, with only small adjustments in profitability as a result of the higher input costs. On the other side of the Atlantic the brands of American Rice saw significant growth in the domestic market. The good performance of the rice business in America contributed significantly to the overall increase in the performance of the rice division, with EBITDA moving up by 51,6 percent. The rice division represents 19,9 percent of total Group turnover and 18,1 percent of consolidated EBITDA.

Biscuit division

The biscuit division was also affected by the increase in the cost of raw materials, forcing the company to adjust its downstream prices in the second half of the year. However, the impact on the profitability of the biscuit making division was less severe than first feared, thanks to the growing preponderance of added-value biscuits in the division´s product range. These biscuits are less sensitive than standard biscuit formats to increases in the cost of basic inputs.

The biscuit division accounted for 9,8 percent of turnover and 21,7 percent of Group EBITDA. Lastly the diversification division was also hit by rising costs, which influenced the result at EBITDA level. In table olives, although sales were up, the company was unable to claw back the advertising outlay needed to familiarise customers with the new packaging format, Tetra Recart.

Diversification represents 7,2 percent of Group turnover and 1,0 percent of EBITDA. In short, 2007 was a difficult year due to the continuing rising trend in the cost of inputs, especially in the rice, biscuit and seed-oil businesses. However, stable olive oil prices permitted a strong recovery in the vegetable-oil division overall, with a particularly good showing in exports. In fact, export sales by Grupo SOS in 2007 accounted for 58 percent of the Group´s global turnover.