2014 Annual Report48

Current operating profit fell by 23.7% to 109.4 million. Current operating margin amounted to 2.4% of net sales, compared to 3.4% in 2013 (*), reflecting:

The solid volume resistance of our strategic brands; Improved volume and/or mix for certain activities; The pursuit of rationalization initiatives.

The above favorable impacts were however countered by: Unfavorable conditions for milk with a rising milk price during the first nine months of the year and constantly falling prices for industrial products, the latter movement exacerbated by the Russian embargo starting in August 2014; A difficult economic context affecting numerous markets; Continuous pressure on sales prices for consumer products in particular in France.

The evolution during 2014 of the Group s two business segments was thus contrasted with:

An increase of 3% in current operating profit (like-for-like) for cheese products, albeit current operating margin fell from 3.6% (*) to 3.4%; A decrease of 32.5% (like-for-like) in current operating profit for other dairy products, and a decrease of current operat- ing margin from 4% to 1.8%.

Cheese Products: Cheese product net sales rose +9% compared with 2013, to 2,722 million or 59.1% of Bongrain SA s total consolidated net sales. The proportion amounted to 59.4% (*) in 2013. The change mainly reflected favorable pricing in almost all coun- tries, and reasonably favorable volume and/or mix, subject however to strong contrasts depending on market and busi- ness. It breaks down as to:

Organic growth of +4.2%; A -1.5% unfavorable foreign exchange impact mainly reflect- ing the decrease against the euro of the Brazilian real and the currencies of Eastern Europe;

A +6.2% favorable scope of consolidation impact.

In France, net sales evolved favorably and displayed solid resis- tance on the part of our strategic brands.

In the other countries of Europe, net sales grew moderately but contrasts were perceptible inasmuch as certain coun- tries progressed because of favorable pricing but sometimes suffered falls in volume, whereas others bore the brunt of a difficult economic environment resulting in a slowdown of consumption. The zone was also penalized by foreign exchange impacts.

Beyond Europe, sales were also penalized by unfavorable currency impacts but increased in terms of organic growth with favorable price and volume impacts.

Current operating profit amounted to 91.8 million, 1.6 million more than in 2013 ( 90.2 million) (*), yet current oper- ating margin fell from 3.6% (*) to 3.4%, reflecting:

The increase in raw material costs, not fully reflected in our selling prices in all our markets;

Constant pressure on the selling prices for consumer products;

Growth in volumes for our strategic brands.

Other Dairy Products: Other Dairy Product net sales amounted to 1,996.8 million, +11.6% more than in 2013 with:

Growth of +6.4% reflecting strong volumes and favorable mix helping industrial product sales resist despite steeply falling world prices;

A positive impact of +9.9% from acquisitions;

An unfavorable foreign exchange impact of -4.5% mainly reflecting the depreciation against the euro of the Argentin- ian peso.

Current operating profit for Other Dairy Products fell to 36 million, compared with 71.8 million in 2013, given the particularly unfavorable conditions prevailing for milk.

Unallocated items Unallocated items depleted current operating profit by 18.4 million compared with 18.6 million 2013. They mainly comprised holding company costs.

Non-recurring items amounted to - 12.3 million compared with - 20.6 million in 2013 (*). They mainly comprised costs (including provisions) associated with performance improve- ment plan restructuring, and impairment of certain operating assets in Latin America reflecting economic difficulties, partial- ly offset by a net reduction in the amount of provisions for tax litigation and by capital gains on sale of investments.

Operating profit amounted to 97.1 million, down 20.9% over 2013.

Net financial expense amounted to 30.2 million compared with 24.6 million (*) in 2013.

The Group s share of results of associates amounted to 3.7 million compared with 8 million (*) in 2013.

Corporate income tax amounted to 25.8 million, down 25.2 million over 2013 and reflecting an effective tax rate of 36.5% compared with 48.1% in 2013 (*), in turn reflecting the impact of non-deductible expenses and the reduced impairment of deferred tax assets.

(*) Data is expressed on the basis of the previously reported figures for 2013 restated for the impact of IFRS 11.