Balchem slows production to match demand
retaining reduced inventory levels this year in an effort to
improve operating efficiency and reduce exposure to the uncertain
economic environment.
The company, whose encapsulated products segment supplies the food, human and animal health markets, has also seen the departure of two senior members earlier this year, including Winston Samuels, vice-president and general manager of the encapsulated products segment, in a personnel reorganisation designed to cut costs.
Also in reaction to falling sales volumes, Balchem reduced production in the second half of last year and inventory levels have now dropped to $5.96 million compared to $7.2 million the previous year.
"I would expect our production to come lose to sales volume over the next months," Frank Fitzpatrick, the recently appointed chief financial officer told NutraIngredientsUSA.com.
Over the past year the company has been hit by a slowdown in new product launches in the food industry, which generates about half the sales of its encapsulated segment.
In addition, increased competition in both the domestic and international markets have put pressure on prices and eroded margins, said the company, which saw losses at the encapsulated segment of almost $1 million after a $5.1 million profit in 2002.
Fitzpatrick noted that there are some new competitors on the European market, an area that Balchem is trying to expand in, but facing bigger challenges than its home market, where it claims to hold the dominant position.
"We have created the marketplace as we go but many companies have the ability to do what we do themselves," he added.
The encapsulation business is however looking for new applications as it seeks to increase its sales to the nutritional products sector.
The other units, packaged chemicals maker ARC Specialty Products and BCP Ingredients, which markets unencapsulated choline supplements to the feed industry, fared better over 2003, increasing sales and profits.
