Niels Ulrich Duedahl, Danish Crown Group CEO: We are in a much better place than we were a year ago
Danish Crown implemented a comprehensive savings plan in the 2024/25 financial year to adjust costs to the future business volume. 500 white-collar workers were laid off, the loss-making factory in China was sold, a factory in Germany that packed fresh meat for the German retail trade was closed, and a turnaround of key German and English activities was initiated.
At the same time, targeted efforts have succeeded in reversing the trend in the supply of pigs to the group's Danish slaughterhouses, so overall Danish Crown is coming out of the year stronger.
“We are in a much better place than we were a year ago, but we still have a lot of work ahead of us before we have finally put the crisis behind us”, says Group CEO Niels Ulrich Duedahl and elaborates:
"We have succeeded in creating a better balance between payments to our unit owners, operating costs and capacity utilization at the slaughterhouses, but it is important that we strengthen our earnings further so that we can both pay a competitive price for the unit owners' raw materials and develop Danish Crown".
Larger ongoing payout
A combination of increased competitiveness and a change in the approach to the relationship between the unitholders' ongoing payment for their deliveries of slaughter animals (the quotation) and the distribution of the year's profit - the so-called residual payment - meant that Danish Crown increased its quotation significantly in the spring. Over a few weeks, it was raised by DKK 2.80, of which DKK 1.60 came from the change in the approach to the relationship between quotation and residual payment, while DKK 1.20 was increased competitiveness. At the same time, the target for the residual payment was lowered to 0.70 øre. This maneuver has reduced operating earnings (EBIT) and thus the year's net profit.
Revenue in the financial year 2024/25 came to DKK 65.4 billion, compared to DKK 67.8 billion the year before. When adjusted for an overall decrease in the unit owners' supplies of slaughter animals of 10 percent, this is actually an increase in revenue per kilo delivered by the unit owners.
Operating earnings (EBIT) were DKK 1.63 billion compared to DKK 2.4 billion in 2023/24. The decline of approximately DKK 800 million is primarily due to the changed approach to the balance payment, which has continuously sent a total of DKK 589 million extra to unit owners since May.
The net result ends at 788 million DKK, but adjusted for the increased price, the result would be 1,247 million DKK. This corresponds to an increase of 19.7 percent compared to last year, which is reflected in a stronger competitiveness. Measured against the German price, the gap over the entire year has been reduced from 2.52 DKK to 1.32 DKK per kilo.
"The increased competitiveness that was created through the many initiatives, as well as the decision to change our approach to the balance payment and raise the listing further, gave us momentum. We must always at least match the settlement of our Danish competitors, and we must succeed in further reducing the gap to the German listing. The latter is central to maintaining the raw material base and thus the opportunity to create value for our unitholders", says Niels Ulrich Duedahl.
Strong year for beef
There has been a strong demand for beef in Europe throughout the year. As a result, the Danish settlement for cattle has increased by an average of 48 percent during the year. However, the German cattle slaughterhouses and Scan-Hide, which processes cattle hides into raw leather, have not delivered satisfactory earnings, so a number of initiatives have been launched to reverse the trend.
The group's subsidiaries are delivering overall as expected. There is progress in the Polish company SokoĊów, Swedish KLS and ESS-FOOD are delivering stable results, while DAT-Schaub's earnings are not satisfactory. This is due to a weak global market for heparin, due to large stocks both in the healthcare sector and among buyers of crude heparin.
The continuous focus on creating more value in the products from raw material to finished product has resulted in a contract with McDonald's. From the summer of 2026, Danish Crown will supply the burger patties to all McDonald's restaurants in Denmark, Sweden and Finland.
"The agreement with McDonald's proves that we at Danish Crown, with our integrated value chain and focus on sustainability, can create value for large international players and retail chains. In the coming years, we will both develop the partnerships we already have, and then we will work purposefully to create new ones. We know the opportunities are there, because the QSR segment (Quick Service Restaurants) continues to experience growth", says Niels Ulrich Duedahl.
Business growth
The changed approach to the level of the residual payment from 110 øre to 70 øre per kilo naturally also affects Danish Crown's balance sheet and financial ratios. Net interest-bearing debt has increased by 390 million DKK measured on the last day of the year. At the same time, the average net interest-bearing debt over the entire year has been 800 million DKK lower than the year before. Equity has been reduced because, according to last year's accounts, unit owners were paid out 330 million DKK of the free funds because the expected residual payment in 2023/24 could not be covered by the net result. In addition, 180 million DKK was paid out from the so-called unit owner and owner accounts.
"The change in solvency and financial leverage is largely driven by our changed approach to the level of the remaining payment. In the coming year, it is a clear goal for us to create growth in the business, and although this requires increased working capital, we expect to be able to reduce our net interest-bearing debt further through lower working capital and better earnings. In this way, we will strengthen both solvency and liquidity, thereby reducing our interest costs", says Anders Aakær Jensen, Group CFO at Danish Crown.
New leadership for transformation
During the year, the Group Management Group has undergone changes and expanded with new members. In the spring, it was decided to divide the core business into three new business areas, Danish Crown Industry, Danish Crown Foods and Danish Crown UK. Together with the Executive Board, the CEO of Danish Crown Beef and the CEOs of the four subsidiaries, the heads of the three business areas now form the Group Management Group.
This is the group that will drive the transformation of Danish Crown, and there are clear objectives for the new financial year:
"We have taken the necessary steps to improve our competitiveness and have a stronger raw material base. Now the transformation must be implemented. We expect this to take two years, and persistence will be the key word. This will require continued strong efforts from our employees, who have already put in solid work to turn the tide. Based on stable supplies of raw materials from our shareholders, we must now create renewed growth in revenue and increase productivity across the group, so that we can increase our competitiveness by another DKK 1 billion", says Niels Ulrich Duedahl.
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