EMMI AG Media release
Annual results 2017
Sales and profit performance slightly above expectations
Lucerne, 5 March 2018 - Emmi increased its sales by 3.2 % (0.5 % in organic terms) to CHF 3,364 million in 2017. Earnings before interest and taxes (EBIT) rose by 1.6 % to CHF 206 million. Net profit amounted to CHF 162 million, 15.1 % higher than in the previous year. This significant increase in net profit is primarily attributable to the reduction in minority interests. Distribution of a gross dividend of CHF 10.00 per registered share (2016: CHF 5.90) will be proposed to the General Meeting. This distribution will include a special dividend of CHF 3.00, enabling shareholders to participate in the non-recurring gain from the sale of the stake in siggi's (February 2018). Despite the competitive environment, growth of 1.5 % to 3 % is realistic for 2018, and Emmi has slightly raised its medium-term forecast for the net profit margin.
Emmi generated net sales of CHF 3,364.3 million in 2017 (2016: CHF 3,258.8 million), which corresponds to an increase of 3.2 % on the previous year. In organic terms (adjusted for acquisition and currency effects), Group sales grew by 0.5 %.
Sales and earnings slightly exceeded Emmi's expectations. EBIT increased by 1.6 % from CHF 202.7 million to CHF 205.8 million, resulting in an EBIT margin of 6.1 % (2016: 6.2 %). Net profit was CHF 161.6 million, compared with CHF 140.3 million in the previous year, resulting in a net profit margin of 4.8 % (2016: 4.3 %).
Amounts in CHF million | 2017 | 2016 |
Net sales | 3,364 | 3,259 |
Change versus previous year | 3.2 % | 1.4 % |
of which acquisition effect | 2.8 % | 2.3 % |
of which currency effect | -0.1 % | 0.1 % |
of which organic sales growth in local currency | 0.5 % | -1.0 % |
Earnings before interest, taxes, depreciation and amortisation (EBITDA) | 340.7 | 328.2 |
as % of net sales | 10.1 | 10.1 |
Earnings before interest and taxes (EBIT) | 205.8 | 202.7 |
as % of net sales | 6.1 | 6.2 |
Net profit | 161.6 | 140.3 |
as % of net sales | 4.8 | 4.3 |
Investment in fixed assets (excl. acquisitions) | 99.1 | 104.4 |
as % of net sales | 2.9 | 3.2 |
Acquisition effects relating to sales are accounted for by the following factors:
- 60 % stake in Bettinehoeve (Netherlands, 2 February 2016)
- Increased stake in SDA Chile (Chile, 19 May 2016)
- Acquisition of Cowgirl Creamery (US, 31 May 2016)
- Acquisition of Jackson Mitchell (US, 4 January 2017)
- 80 % stake in Lácteos Caprinos (Spain, 12 January 2017)
- Acquisition of Italian Fresh Foods (Italy, 1 March 2017)
- Sale of stake in Venchiaredo (Italy, 31 July 2017)
- Increased stake in Mexideli (Mexico, 8 October 2017)
Urs Riedener, CEO Emmi Group, comments: "Emmi made up a good deal of ground in the second half of the year, boosted by the good sales performance in the US and Tunisia, a well-functioning cheese business and more favourable economic conditions. Our earnings were also supported by the efficiency programme currently running in Switzerland and several international subsidiaries."
Sales performance
The following table provides an overview of sales performance by business division. Please find more detailed information on Emmi's sales performance in 2017 in the media release dated 8 February 2018.
in CHF million | Business division Switzerland | Business division Americas | Business division Europe | Business division Global Trade | Group |
Sales 2017 | 1,730.7 | 949.8 | 564.1 | 119.7 | 3,364.3 |
Sales 2016 | 1,741.3 | 865.6 | 519.0 | 132.9 | 3,258.8 |
Change | -0.6 % | 9.7 % | 8.7 % | -10.0 % | 3.2 % |
of which acquisition effect | - | 6.4 % | 6.8 % | -0.3 % | 2.8 % |
of which currency effect | - | -0.8 % | 1.1 % | - | -0.1 % |
Organic sales growth | -0.6 % | 4.1 % | 0.8 % | -9.7 % | 0.5 % |
Profit performance
Gross profit increased by CHF 21.4 million or 1.8 % to CHF 1,200.9 million in the year under review (2016: CHF 1,179.5 million) as a result of acquisitions. The gross profit margin fell from 36.2 % in the previous year to 35.7 %, mainly due to price pressure in Switzerland. By contrast, the business divisions Americas and Europe improved their gross margins slightly despite the significant margin losses suffered in the UK market due to Brexit-related factors.
These losses were offset by a disproportionately small increase of just 1.1 % in operating expenses, which rose from CHF 856.1 million to CHF 865.9 million. This was achieved thanks to Emmi's cost-saving and efficiency improvement programme, Emmi Operational Excellence (EOE), which has also been implemented successfully at various international production sites. Significant cost savings were also achieved through reduced IT expenses following completion of the SAP rollout in Switzerland. Overall, this was enough to offset the 4.4 % increase in personnel expenses, which rose from CHF 424.5 million to CHF 443.2 million. As a consequence of the developments outlined above, earnings before interest, taxes, depreciation and amortisation (EBITDA) improved by CHF 12.5 million to CHF 340.7 million (2016: CHF 328.2 million). The EBITDA margin was exactly the same as in 2016 at 10.1 %.
The EBIT margin was also practically unchanged at 6.1 % (2016: 6.2 %). This is attributable to an increase of CHF 3.1 million or 1.6 % in earnings before interest and taxes (EBIT) to CHF 205.8 million (2016: CHF 202.7 million). EBIT was negatively impacted by significantly higher amortisation on intangible assets, primarily as a consequence of the increased goodwill amortisation resulting from the acquisitions. Unlike most listed firms using Swiss GAAP FER, Emmi continues to amortise goodwill via the income statement.
Net financial expenses fell significantly by 28.9 % to CHF 10.4 million in the year under review due to lower interest expense and a slightly better currency result. Income taxes decreased by CHF 3.4 million to CHF 30.3 million (2016: CHF 33.7 million).
Minority interests were significantly down on the previous year, falling by CHF 10.8 million. This was mainly due to the acquisition of the minority interests in Mittelland Molkerei AG. Overall, Emmi increased its net profit by 15.1 % in financial year 2017 to CHF 161.6 million (2016: CHF 140.3 million), with a net profit margin of 4.8 % (2016: 4.3 %).
Appropriation of profits
The Board of Directors of Emmi AG wants Emmi's shareholders to participate in the good result and in the non-recurring gain from the sale of the stake in US yogurt manufacturer siggi's (see media release dated 5 January 2018). It also wants to mark the 25-year anniversary of Emmi AG. The Board of Directors therefore proposes that the General Meeting approve the distribution of a dividend of CHF 10.00 (2016: CHF 5.90) gross per registered share for financial year 2017 on 5,349,810 shares entitled to dividends. The Board of Directors proposes to distribute CHF 7.00 per share from the capital contribution reserves (exempt from withholding tax) and CHF 3.00 per share from retained earnings (subject to withholding tax).
The General Meeting of Emmi AG will take place in Lucerne on Thursday, 12 April 2018.
Outlook
The global economy has accelerated, which will benefit the growth markets of Emmi's business division Americas in particular. We expect a continued increase in demand in Tunisia and the US, while the Chilean market should also confirm signs of a recovery. Foreign currency effects in countries such as Chile, Mexico and Tunisia will continue to be an issue, however. In addition, the European markets in this division (Spain and France) will once again inhibit growth this year.
Although the economy in the eurozone is expected to grow in 2018, our forecast for the business division Europe takes account of several inhibiting factors such as continued strong competition, the consequences of Brexit and the performance of the British pound. This will affect the performance of Emmi's UK business (Onken yogurts, exports from Switzerland and dessert exports from Italy). Combined with the recent appreciation of the euro, this business division should make a positive contribution to sales performance overall, taking into account all markets.
Given favourable conditions, sales growth may also be possible in our home market of Switzerland in 2018. This is supported by the outlook for Swiss retailers, which ranges from stable to at best slightly increasing sales in the food sector, as well as by the higher milk price (price increase on 1 October 2017) and strong brand concepts. There is still massive import pressure, however, and retail tourism remains at a stable, high level. There are therefore considerable challenges to be overcome if we are to achieve sales growth.
Overall, Emmi expects organic sales growth almost in line with the medium-term forecast in 2018.
To support earnings, Emmi will also continue its efficiency and cost-saving programme and step this up above all at its international production sites. We therefore expect operating profit to be higher year-on-year in 2018.
2018 forecasts
- Sales Group | 1.5 % to 3 % |
- Sales Switzerland | 0 % to 0.5 % |
- Sales business division Americas | 4 % to 6 % |
- Sales business division Europe | 1 % to 3 % |
- EBIT | CHF 205 million to CHF 215 million |
- Net profit margin | 4.5 % to 5.0 % (excluding gain from "siggi's") |
Medium-term forecasts
- Sales Group | 2 % to 3 % |
- Sales Switzerland | 0 % to 1 % |
- Sales business division Americas | 4 % to 6 % |
- Sales business division Europe | 1 % to 3 % |
- Net profit margin | 4.5 % to 5.0 % |
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