EMMI AG Media release
Half-year results 2017
Emmi posts virtually stable earnings, but sales disappoint
Lucerne, 23 August 2017 - Emmi generated sales of CHF 1,600 million in the first half of 2017 - an increase of 0.4 % (in organic terms -1.3 %) compared to CHF 1,594 million in the first six months of the previous year. It also achieved a net profit of CHF 66 million (previous year: CHF 61 million) and a net profit margin of 4.1 % (previous year: 3.8 %). Emmi believes that it is on target for earnings for full-year 2017. However, growth forecasts for Group sales and the business division Europe are to be revised downward.
Emmi Group key figures
Amounts in CHF million | First half of 2017 | First half of 2016 |
Net sales | 1,600 | 1,594 |
of which Switzerland | 838 | 853 |
of which Americas | 442 | 416 |
of which Europe | 259 | 255 |
of which Global Trade | 61 | 70 |
Change in sales in % | 0.4 | 2.0 |
Acquisition effect in % | 2.6 | 2.0 |
Currency effect in % | -0.9 | 0.7 |
Organic sales growth in % | -1.3 | -0.7 |
EBITDA | 156.6 | 153.3 |
as % of net sales | 9.8 | 9.6 |
EBIT | 90.4 | 92.5 |
as % of net sales | 5.7 | 5.8 |
Net profit | 66.0 | 60.8 |
as % of net sales | 4.1 | 3.8 |
No significant non-recurring effects were recorded in the reporting period or in the previous year's period. For this reason, Emmi does not to disclose adjusted earnings.
Acquisition effects are accounted for by the following factors:
- Stake in Bettinehoeve (Netherlands, 2 February 2016)
- Increased stake in SDA Chile (Chile, 19 May 2016)
- Acquisition of Cowgirl Creamery (USA, 31 May 2016)
- Acquisition of Jackson Mitchell (USA, 4 January 2017)
- Stake in Lácteos Caprinos (Spain, 12 January 2017)
- Acquisition of Italian Fresh Foods (Italy, 1 March 2017)
In the first six months of 2017, Emmi achieved sales of CHF 1,600.2 million, which was 0.4 % higher than the previous year's figure of CHF 1,594.1 million. In organic terms, i.e. adjusted for acquisition and currency effects, sales fell by 1.3 %. This was mainly due to declining retail sales in Switzerland, lower cheese exports and losses in the dessert business of A-27. The latter is, among other things, a result of the weak pound sterling, related to Brexit.
Urs Riedener, CEO of Emmi, commented: "The half-year sales reflect the challenging economic environment, including a contracting retail business and increasing cheese imports in the business division Switzerland, while Brexit and modest cheese exports impacted on the business division Europe. However, many markets outside Europe performed reasonably well."
In March of this year, organic growth of 1 % to 2 % was forecasted for full-year 2017. The decline in sales in the first six months is therefore not satisfactory. Nevertheless, profitability was kept nearly stable and in line with forecasts. While EBIT fell by 2.2 % (from CHF 92.5 million to CHF 90.4 million), net profit rose by 8.6 % to CHF 66.0 million (previous year: CHF 60.8 million). This improvement is primarily attributable to the full takeover of Mittelland Molkerei.
Business division Switzerland: decline in retail, and competitive pressure
In the business division Switzerland, sales were 1.8 % below the same period last year at CHF 838.2 million (previous year: CHF 853.2 million). This was due, among other factors, to the contracting retail business which fell by some 1 % in dairy products (source: Nielsen), as well as 4.4 % higher cheese imports (source: TSM Treuhand).
Almost all segments posted declines. It is pleasing that fresh products were able to withstand the strong competition. This is primarily due to Emmi Caffè Latte, which has long been a guarantee for success, and Emmi Jogurtpur, which is popular among almost all consumer groups. Luzerner Rahmkäse and mozzarella also showed a pleasing development. By contrast, private-label products came under pressure across the board. AOP cheese also suffered decreases.
The business division Switzerland accounted for 52 % of Group sales (previous year: 54 %).
Net sales by product group: business division Switzerland | |||
Amounts in CHF million | Sales | Sales | Organic |
Dairy products | 312.8 | 329.0 | -4.9 % |
Cheese | 219.2 | 223.5 | -1.9 % |
Fresh products | 175.3 | 174.4 | 0.5 % |
Fresh cheese | 56.7 | 57.1 | -0.6 % |
Powder/concentrates | 33.5 | 29.0 | 15.3 % |
Other products/services | 40.7 | 40.2 | 0.9 % |
Total division Switzerland | 838.2 | 853.2 | -1.8 % |
Business division Americas: Tunisia and the US continue to guarantee success
The business division Americas includes not only the US, Canada and Chile, but also France, Tunisia and parts of Spain (Kaiku).
Sales in this business division improved by 6.2 % over the first six months to CHF 442.3 million (previous year: CHF 416.4 million). Organic growth was 2.4 %, which is below Emmi's expectations of 3 % to 5 %. This was due to the ongoing challenging environment in France and Spain. Chile also has yet to reach the desired level, although sales have stabilised. Tunisia and the US again posted a positive performance.
The cheese business in the business division Americas saw pleasing organic growth of 5.6 %. Cow's and goat's milk speciality cheeses manufactured in the US performed particularly well, while cheese sales in France fell. Results in fresh products were mixed. Vitalait yogurts and desserts (Tunisia) continue to do well, and Emmi Caffè Latte was able to offset the loss of the largest customer in Spain. The yogurt and dessert business declined in many places, however, including France (A-27) and Spain (with the exception of the lactose-free range).
The business division Americas accounted for 28 % of sales (previous year: 26 %).
Net sales by product group: business division Americas | |||||||
Amounts in CHF million | Sales | Sales | Difference | Acquisition | Currency | Organic | |
Cheese | 180.4 | 163.9 | 10.0 % | 3.4 % | 1.0 % | 5.6 % | |
Dairy products | 130.2 | 122.4 | 6.4 % | 9.5 % | -4.3 % | 1.2 % | |
Fresh products | 97.2 | 100.7 | -3.5 % | 0.5 % | -3.3 % | -0.7 % | |
Powder/concentrates | 2.5 | 0.1 | 2,147.5 % | 2,093.0 % | 23.5 % | 31.0 % | |
Fresh cheese | 0.2 | 0.4 | -43.0 % | 71.7 % | 0.7 % | -115.4 % | |
Other products/services | 31.8 | 28.9 | 10.2 % | 8.0 % | 0.5 % | 1.7 % | |
Total division Americas | 442.3 | 416.4 | 6.2 % | 5.4 % | -1.6 % | 2.4 % | |
Business division Europe: strain due to lower dessert sales of A-27 and currency situation
The business division Europe includes the markets Benelux, Germany, the UK, Italy, Austria, and Lácteos Caprinos in Spain.
Sales in the business division Europe rose by 1.9 % to CHF 259.3 million (previous year: CHF 254.4 million) in the first half of 2017. Excluding currency and acquisition effects, however, this corresponds to a decline of 2.1 %. The performance in this business division is therefore clearly below expectations (growth of 0 % to 2 %). Major factors included the negative performance of A-27's desserts and the unfavourable currency situation. The weaker pound sterling against the Swiss franc and the euro negatively impacted Onken yogurts, which are manufactured in Germany, and the Italian desserts of A-27 in the UK. Cheese exports also declined.
Dairy products were the only major segment to post a positive performance. This is due to organic milk processor Gläserne Molkerei.
The business division Europe accounted for 16 % of Group sales (previous year: 16 %).
Net sales by product group: business division Europe | |||||||
Amounts in CHF million | Sales | Sales | Difference | Acquisition | Currency | Organic | |
Fresh products | 105.7 | 106.7 | -0.9 % | 8.5 % | -4.9 % | -4.5 % | |
Cheese | 53.4 | 56.1 | -4.8 % | 3.2 % | -2.4 % | -5.6 % | |
Dairy products | 49.6 | 49.2 | 0.7 % | 0.1 % | -1.8 % | 2.4 % | |
Fresh cheese | 37.4 | 32.5 | 15.0 % | 23.4 % | -2.1 % | -6.3 % | |
Powder/concentrates | 9.6 | 7.2 | 32.9 % | - | -2.4 % | 35.3 % | |
Other products/services | 3.6 | 2.7 | 34.7 % | - | -2.3 % | 37.0 % | |
Total division Europe | 259.3 | 254.4 | 1.9 % | 7.3 % | -3.3 % | -2.1 % | |
Business division Global Trade: key export countries fail to take off
The business division Global Trade comprises exports from Switzerland to customers in countries in which Emmi has no subsidiaries or holdings. These include the Asian and Eastern European markets, as well as certain South American countries (such as Brazil, Mexico) and the Arabian Peninsula.
The business division generated sales of CHF 60.4 million, a fall of 13.8 % year-on-year (previous year: CHF 70.1 million). The declines in the two larger product segments cheese and fresh products can be explained in large part by lower sales in Russia (cheese) as well as in Asia and the Middle East (fresh products). Falling milk volumes in Switzerland also led to considerably lower regulatory exports.
Global Trade accounted for 4 % of Group sales (previous year: 4 %).
Net sales by product group: business division Global Trade | |||
Amounts in CHF million | Sales | Sales | Organic |
Fresh products | 21.9 | 23.1 | -5.1 % |
Cheese | 21.0 | 21.9 | -4.0 % |
Dairy products | 8.0 | 9.6 | -16.2 % |
Powder/concentrates | 7.1 | 10.3 | -31.3 % |
Fresh cheese | 0.4 | 0.1 | 533.2 % |
Other products/services | 2.0 | 5.1 | -62.5 % |
Total division Global Trade | 60.4 | 70.1 | -13.8 % |
Stable earnings
Gross profit changed only slightly year-on-year in the first half of 2017, coming in at CHF 577.1 million (previous year: CHF 577.2 million). The same is true for the gross profit margin (36.1 % compared with 36.2 % in the first half of 2016). This is attributable to rationalisation and productivity-raising measures, which were largely able to offset price pressure.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by 2.2 % to CHF 156.6 million (previous year: CHF 153.3 million) due to lower operating expenses. By contrast, earnings before interest and taxes (EBIT) fell by 2.2 %, mainly due to additional goodwill amortisation as a result of acquisitions made, coming in at CHF 90.4 million (previous year: CHF 92.5 million). Net profit was 8.6 % higher at CHF 66.0 million and the net profit margin was 4.1 % (previous year: CHF 60.8 million). This is attributable to significantly lower minority interests as a result of the acquisition of the minority interests in Mittelland Molkerei AG.
Outlook for full-year 2017
Emmi continues to face challenging conditions in the second half of 2017. The markets remain competitive and the economic situation in countries such as the UK, Spain, Italy and France difficult. Added to this are increasing imports in the Swiss market and generally restrained consumption of dairy products.
Based on the current situation, Emmi is partially revising its sales targets announced in March 2017. In Switzerland (forecast: -2 % to 0 %) and in the business division Americas (forecast: 3 % to 5 %), the targets continue to be achievable, although towards the lower end of the advised ranges. The sales forecast for the business division Europe needs to be revised and is now -3 % to -1 % (instead of 0 % to 2 % growth). As a consequence, the 2017 organic sales growth target at Group level is now -1 % to 0 % (instead of 1 % to 2 % growth).
Earnings expectations remain the same as announced in March 2017 (EBIT: CHF 195 million to CHF 205 million, net profit margin: 4.0 % to 4.5 %).
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