Aug 13 Russia's drought and temporary ban on
grain exports is set to hit Europe's smaller food and drink
groups more severely than larger groups which are either not so
dependent on grain or have bought forward at fixed prices.
Following is a compilation of company reaction, analyst
comments and share details from European companies which might
be affected by the resultant rise in grain prices.
* WESTERN EUROPEAN BEER GROUPS:
European brewing shares recovered this week after the
world's biggest brewer, Anheuser-Busch InBev (ABI.BR), said
current rising grain prices would not hit the group until 2012
at the earliest due to forward buying or hedging of key
ingredients such as malting barley and other grains.
"Though coverage may differ by zone, overall we have
sufficient protection. We are covered not only for the remainder
of 2010, but also throughout 2011," AB InBev Chief Financial
Officer Felipe Dutra said on Thursday after reporting higher
than expected second-quarter profits. [ID:nLDE67BO4P]
Analyst Andrew Holland at brokers Evolution Securities added
there were "no worries on input costs. InBev said that it does
not expect to see any impact from the recent barley price
increase, believing it to be a short-lived spike."
This helped shares in most of the world's four biggest
brewers, all of which are headquartered in Europe. Belgium's AB
InBev was up 1.1 percent, London-based SABMiller SAB.L rose
0.3 percent, Heineken (HEIN.AS) was 0.5 percent ahead while
Carlsberg (CARLb.CO) was off 0.3 percent.
Copenhagen-based Carlsberg reports half-year profits on Aug.
17 followed by Dutch firm Heineken on Aug. 25, while SABMiller
next reports on its second-quarter (July-Sept) in October.
* WESTERN EUROPEAN FOOD GROUPS:
Europe's three biggest food groups, Nestle NESN.VX,
Unilever (ULVR.L)(UNc.AS) and Danone (DANO.PA), are relatively
cushioned from the rise in grain price as all use little grain,
and what they do use has largely been hedged forward.
Smaller and private-label food groups which are big wheat
users, however, are likely to suffer, and much depends on how
much of the grain price rises they can pass through to retailers
and than on to consumers.
Swiss-based Nestle, the world's biggest food group and
regarded as solid performer in tough conditions, was calm in the
face of a spike in commodity price inflation, and increased its
growth forecast for 2010. [ID:nLDE67811N].
"Nestle seemed somewhat less concerned than its peers,
promising second-half growth broadly in line with the first half
and saying it was prepared for the more challenging environment
of the second half," said Andrew Wood at Sanford Bernstein.
"If price tensions were to continue, we think that this
should have a limited impact on European majors' results
(Nestle, Unilever and Danone) in the short term," said analyst
Orianne Segaud at brokers Natixis.
Dutch bakery group CSM CSMNc.AS, which supplies muffins
and pastries to European and U.S. retailers, said it would raise
prices to offset higher wheat prices, but analysts warned there
is a limit to this process for non-branded goods in times of
slow economic recovery [ID:nLDE67913Q].
In Britain, the worst-affected listed company is likely to
be bread and cake maker Premier Foods (PFD.L), which is heavily
exposed to wheat prices. Its shares have seen little impact
after falling dramatically to around 18 pence from 288p in early
2007 at the time of its disastrous RHM takeover.
* EUROPEAN RETAILERS:
West European food retailers have seen little impact as food
manufacturers have yet to try and pass on grain price rises, but
those retailers in the drought-affected areas have been under
pressure to push up prices.
Russian supermarket chain Seventh Continent SCOH.MM said
it had stopped buying milk and dairy products from Danone and
Unimilk after they raised prices sharply citing the severe
drought in the nation [ID:nLDE67B10T].
Paris-based Danone, which announced plans to merge its
Russian dairy business with Unimilk in June, said deliveries to
Seventh Continent were suspended starting in August after the
retailer rejected a 4 percent price increase.
* WORLD WHEAT REPORT:
The U.S. government slashed its estimate for world wheat
output as Russia faced drought losses on a quarter of its grain
area, and Russian Agriculture Ministry data show grain exports
would be down sharply. [ID:nLDE67b1CG] [ID:nN129838]
Concern is now focused on possible delays in the planting of
winter wheat in Russia and Ukraine, which traditionally starts
in August, amid fears there have been insufficient rains to
allow planting of the new crop. [ID:nLDE67COAZ].
Ukraine, the world's sixth-largest exporter of wheat, said
it was considering cutting grain exports after a scorching
summer heatwave, as it feared a possible food grain shortage at
(Reporting by David Jones; Edited by Simon Jessop)