Emmi (SWX:EMMN): 2013 financial year results

[Jerome]

 

Growth on all fronts, stable returns

Lucerne, March 26, 2014 - In 2013, Emmi posted net sales of CHF 3298 million, up 10.6%. Adjusted for extraordinary effects, earnings before interest and taxes (EBIT) rose by 9.4% to CHF 160 million, and net income by 8.1% to CHF 98 million. As a result, margins remained stable year-on-year, at 4.9% for EBIT and 3.0% for net profit. For the current year, Emmi expects Group sales growth of between 3 and 4%, and a net profit margin on a par with last year. The payment of a dividend of CHF 3.80 gross (previous year CHF 3.60) per registered share from capital contribution reserves will be proposed at the Annual General Meeting on April 24, 2014.

Emmi's net sales for the 2013 financial year amounted to CHF 3298 million, compared with CHF 2981 million in the previous year, an increase of 10.6%. Earnings before interest and taxes (EBIT) of CHF 168 million and net profit of CHF 105 million were positively influenced by the extraordinary effect of the sale of fixed assets, as in 2012. These amounted to CHF 8.5 million for EBIT (2012: CHF 19.4 million) and CHF 7.0 million for net income, after tax (2012: CHF 15.9 million). Adjusted for this effect, EBIT rose by 9.4% to CHF 160 million, and net income by 8.1% to CHF 98 million. Stable margins were therefore recorded for both EBIT and net profit, at 4.9% and 3.0% respectively.   Sales and EBIT were therefore slightly above the forecast range, which called for an increase in sales from 8% to 10% and EBIT between CHF 140 million and 155 million.   CEO Urs Riedener explains: "After a cautious start in the first half of the year, Emmi has embarked on a real final sprint. Thanks to the pleasing performance of proven products, the support of innovations and the contribution of recently acquired companies, sales and earnings targets have been comfortably met. Thanks to its strategy, Emmi is moving in the right direction.     Growth returns to the Swiss market   As already announced in February, sales in Swiss increased by 1.1% to CHF 1863 million (2012: CHF 1842 million). Excluding acquisitions, growth was even 1.4%. The negative effect of acquisitions of -0.3% is attributable to the sale of shares in Nutrifrais. This effect could not be fully offset by the acquisition of Studer cheese dairy. Further sales losses were caused by the transfer of frozen food logistics to third parties.   Growth was recorded in many sectors, most strongly in Cheese (2.3%, or CHF 12 million) and Powders/concentrates (19.9%, or CHF 12 million). The Swiss market accounted for 56% of Group sales in fiscal 2013 (2012: 62%).     International activities: on course   On the international marketsEmmi increased its sales by 26.0% to CHF 1435 million (CHF 1139 million in 2012). Adjusted for currency effects (1.0%) and acquisitions (23.0%), growth amounted to 2.0%. The effect of acquisitions is due to the increased stake in Kaiku and Diprola, the acquisition of a majority stake in AVH dairy trade, and the takeover of Rachelli and Studer cheese dairy.   Internationally, all core business segments reported growth. The biggest increases were in Dairy Products (84.3%, or CHF 130 million) and Fresh Products (22.1%, or CHF 86 million).   International activities (exports from Switzerland and production abroad) accounted for 44% of total Group sales (27% for Europe, 12% for North and South America, 4% for Africa, 1% for Asia/Pacific).     Stable yields   THE gross profit increased by CHF 61 million, or 5.9%, to CHF 1089 million in the year under review (CHF 1028 million in 2012). The gross profit margin of 33.0% was lower than in the previous year (34.5%). This decline is due in particular to the higher proportion of international activities, whose margin is currently still lower than that of the Group, but the trend is crescendoing. In Switzerland, the previous year's margin could not quite be maintained. This was due to price pressure in the retail trade, pressure from imports, and ongoing delays in passing on milk price increases, particularly in the B segment.   THE operating expenses increased by 5.4% to CHF 819 million (2012: CHF 777 million), a proportionally smaller increase than sales, which had a positive impact on the EBIT margin and offset the fall in the gross profit margin. personnel expenses also increased less rapidly than sales, but still by 6.2% to CHF 398 million (2012: CHF 375 million) due to acquisitions. Other operating expenses were clearly reduced in proportion to sales. In 2013, they amounted to 12.7% versus 13.5% the previous year. In absolute terms, they rose by only 4.6% to CHF 420 million (2012: CHF 402 million). Due to the decline in profit from the sale of fixed assets compared with the previous year, other operating income fell by around half compared with 2012, from CHF 20 million to almost CHF 10 million.   Following these developments, the earnings before interest, tax, depreciation and amortization (EBITDA) increased by 3.2% to CHF 280 million (2012: CHF 271 million). EBITDA margin, on the other hand, fell from 9.1% to 8.5%.   THE amortization increased by 5.5% to a total of CHF 112 million during the period under review (2012: CHF 107 million). This increase was mainly due to higher depreciation on property, plant and equipment as a result of acquisitions.   THE earnings before interest and tax (EBIT) reached CHF 168 million, exceeding the 2012 figure by 1.7% (CHF 166 million). Exceptional factors included the sale of fixed assets, such as a commercial building in Langenthal and frozen food logistics in Kriens. Adjusted for these effects, EBIT was CHF 160 million, 9.4% higher than in 2012 (CHF 146 million). The adjusted EBIT margin remained unchanged at 4.9%.     Increase in net income with stable net profit margin   THE financial result improved from CHF -16.4 million to CHF -15.7 million. The increase in interest expenses due to acquisitions was offset by a neutral foreign exchange result in the period under review (2012: foreign exchange loss of CHF 3.6 million). The INCOME TAXES amounted to CHF 30 million (2012: CHF 28 million). The tax rate rose from 18.5% to 19.7%, due partly to tax increases in Switzerland and partly to the growing proportion of international business.   All in all, after deducting minority interests of CHF 19 million, net income of CHF 105 million (2012: CHF 106 million) was achieved for the 2013 financial year. Net profit adjusted for the effect of the sale of fixed assets amounted to CHF 98 million, up 8.1% on the previous year (CHF 90 million). The corresponding net profit margin remained unchanged at 3.0%.   Urs Riedener, CEO: "Emmi has succeeded in maintaining profit margins despite high price pressure, and we are delighted with this. This is the result of focusing on core competencies, the success of our brands, clearly set priorities and strict cost management."     Outlook   For the first half of 2014, Emmi expects raw material prices to remain stable or to rise slightly from time to time. In Switzerland, for example, target prices for milk were raised at the beginning of the year. They will probably remain at this level until at least mid-2014.   In Switzerland, purchasing tourism will stagnate at a high level, and pressure from imports will persist. In the USA, it is realistic to expect more positive consumer behavior. The developing markets of Chile and Tunisia are expected to grow strongly again, albeit taking into account the volatility of local currencies. In Southern Europe, consumer sentiment will remain sluggish, although Spain is showing signs of recovery. Emmi does not expect any major changes in the Central European markets, and anticipates a stable situation overall on the foreign exchange markets.   In line with its strategy, Emmi intends to strengthen its position in Switzerland and continue to grow internationally. Emmi expects Group-wide sales growth of between 3 and 4% for 2014. Growth is expected to be low in Switzerland, at a maximum of 1%, and in the range of 6% to 8% in international markets. These figures take into account the effect of the 2013 acquisitions, which is relatively modest. EBIT is forecast at between CHF 155 million and CHF 170 million, with a net profit margin of around 3%.   In the medium to long term, the objective is organic growth, i.e. without acquisitions, of 6 to 8% per annum abroad and a maximum of 1% in Switzerland. At Group level, the company expects organic growth of 2 to 3%. Thanks to this growth and to acquisitions, Emmi is aiming for international business to account for around 50% of sales in around two years' time. For the net profit margin, a target range of 2.5 to 3.5% has been set.     Emmi Group key figures   Amounts in millions of CHF (unless otherwise stated) 2013 2013 corrected* 2012 2012 adjusted* Net sales 3298   2981   Earnings before interest, taxes, depreciation and amortization depreciation and amortization (EBITDA) 280,1   271,4      in % of net sales 8,5   9,1   Earnings before interest and taxes (EBIT) 168,5 160,0 165,7 146,3    in % of net sales 5,1 4,9 5,6 4,9 Net income 104,6 97,6 106,2 90,3    in % of net sales 3,2 3,0 3,6 3,0 Fixed assets (excluding acquisitions) 126,2   131,3      in % of net sales 3,8   4,4   Employees (full-time) at 31.12 5 217   5074   Net sales per employee in thousands of CHF (average value) 632   665   Volume of milk / cream processed in millions of kg 1465   1220     31.12.2013   31.12.2012   Balance sheet total 2500   2323      of which shareholders' equity incl. minority interests 1258   1165      in % of total assets 50,3   50,2   *Adjusted for extraordinary income from the sale of fixed assets. These amounted to CHF 8.5 million for EBIT (2012: CHF 19.4 million) and CHF 7.0 million for EBIT. (2012: CHF 15.9 million) for net income (after tax). For future comparisons, corrected values will be used.     Note: figures over CHF 10 million are rounded (exception: table above).

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