Income grows in second half of 2017, partially compensating for shortfall

Key account business slowed temporarily, growth in second half of year

The organic revenue growth during the course of 2017 was impacted to a material extent by temporary lower revenues with some key accounts for whom deliveries have increased again since the autumn of 2017. Revenues in local currency per quarter show the positive sales growth in fiscal year 2017, which was reinforced by the regained key account business: Q1: -3.7%, Q2: -3.2%, Q3: -1.3%, Q4: +1.6%. This resulted in an overall organic revenue downturn of -1.7% in 2017. Disclosed revenues amounted to CHF 384.0 million, also due to a positive currency translation effect of +1.4%, and were thus at practically the previous year's level (CHF 385.2 million). This means the revenue shortfall from the first half of the year was almost fully compensated for. At an EBITDA level, we again recorded growth of +5.7% in the second half of 2017, which was not able to totally compensate for the major shortfall in the first six months of -12.7%.

Germany depressed by one-off expenses, EAST segment enjoys upswing

Revenue growth in 2017 was weak on the whole in Germany, the largest country segment, where revenues in local currency fell by -3.0%. However, this is due to the lower first six months (-5.4%), while the regained key account business again led to very positive growth from the fourth quarter. Despite excellent cost management with lower operating cost it was not possible to maintain the former profitability due to the nonrecurring start-up costs for the new production lines. The EBITDA margin on total revenues fell from 8.6% in the previous year to 8.2% in 2017. A new production standard for the future was set when one of the most state-of-the-art production lines for dry blended products went live in Radolfzell in September 2017. This investment of CHF 35 million substantially increased capacity, cut unit costs and meets the very highest quality requirements.

Organic revenues in the country segment Switzerland/Rest of Western Europe were at the prior year's level on the whole. Holland, Spain and Austria made positive contributions, however Switzerland recorded lower sales due to the continued downturn in the gastronomy sector. The EBITDA margin on total revenues in this segment fell from 12.0% in the previous year to 10.8% in 2017.

The Eastern Europe segment continued to enjoy pleasing growth (EAST: Czech Republic, Slovakia, Poland, Hungary) with organic revenue growth of +1.8%. The better capacity uptake recorded as a result, together with the only slight increase in operating costs led to a substantial increase in EBITDA and an increase in the EBITDA margin on total revenues increased from 10.5% to 11.6%.

Gross margin stable, lower operating costs

The organic gross margin was at the previous year's level on the whole. The effect from the mix with a lower proportion of merchandise and individual price increases had a positive impact, however the slight increase in the price of raw materials had a negative impact. The Group succeeded in cutting its operating costs to below the previous year's level. Personnel expenses increased slightly by +0.5% after adjustment for currency translation. This was impacted by overtime in production due to the new production lines going live and salary increases under collective agreements in Germany. However, other operating expenses fell significantly after adjustment for currency translation, in particular with regard to marketing, IT and administration expenses. Extraordinary expenses were also incurred in 2017. This relates to project expenses, in particular for legal advice, for the public purchase offer by Bell Food Group. On the whole, consolidated profits fell by CHF -2.1 million to CHF 20.2 million. The profit margin is thus 5.3% of revenues.

Unchanged solid balance sheet, excellent equity ratio, higher free cash flow

The consolidated balance sheet does not show any material organic changes, however it does include a positive currency translation effect of +8% due to the substantial increase in exchange rates on the balance sheet date. The equity ratio recorded an excellent increase from 53.7% in the previous year to 57.8% at the end of 2017. The debt factor (net debt/EBITDA) remained constant at 1.8. The return on equity totaled 12.1% in 2017. Despite the lower cash flow from operating activities, the substantially lower level of capital expenditure meant that the free cash flow increased in fiscal year 2017 to CHF 13.4 million.

General meeting on 16 May 2018

The Ordinary General Meeting will be held on 16 May 2018. All holders of Hügli shares can participate at the general meeting and have voting rights, irrespective of whether they have already vested their shares to Bell Food Group.

The previous members of the Board of Directors are standing for re-election through to execution of the public purchase offer, which is expected to be on 25 May 2018. The former members, with the exception of the bearer shareholder representative, will resign when the public purchase offer is executed. The bearer shareholder representative will resign after execution of the court annulment (squeeze-out suit) or the deletion of the company as a result of the cash compensation merger (squeeze-out merger) or the absorption merger (Bell merger). Three representatives of the majority shareholder Bell Food Group have been proposed as new members of the Board of Directors: Hansueli Loosli, Lorenz Wyss and Marco Tschanz. Bell Food Group AG currently holds more than 67% of voting rights.

The purchase price of CHF 915 offered per bearer share already includes the dividend, and as a result no dividend payment will be applied for at the General Meeting. Bell Food Group intends to delist Hügli's shares from SIX Swiss Exchange if it controls more than 75% of voting rights in Hügli.

Successful start to 2018

Revenue growth of +9.5% was recorded in the first quarter of 2018 compared to the same period of the previous year (in local currencies: +1.6%). The high contributions made by the key account divisions Food Ingredients and Customer Solutions were particularly pleasing.

Financial calendar

For further information:

Andreas Seibold, CFO, Tel. +41 71 447 22 50, andreas.seibold@huegli.com

Hügli Holding AG, Bleichestrasse 31, CH-9323 Steinach

Hügli published its Annual Report 2017 today at 07.00 a.m. online at:

http://www.huegli.com/en/investor-relations/results-reports

Further financial information, information on corporate governance and on the Hügli share listed on the SIX Swiss Exchange (HUE / security no. 464795) can be retrieved from our Investor Relations website: http://www.huegli.com/en/investor-relations