August 29, 2013
 

Emmi reports 17.0% net sales increase in H1 2013 

 

 

 

In the first half of 2013, Emmi posted net sales of CHF1,566.6 million (US$1.7 billion) - an increase of 17.0 % on-year.

 

Adjusted earnings before interest and taxes (EBIT) increased by 5.3% to CHF65.0 million (US$71 million), while adjusted net profits declined by 0.8% to CHF39.0 million (US$42 million), resulting in an adjusted EBIT margin of 4.2% (prior year: 4.6%) and an adjusted net profit margin of 2.5% (prior year: 2.9%). This result is a reflection of the strong pressure on prices in Switzerland and various European markets. Emmi confirms its forecast for 2013 as a whole of Group-wide sales growth of 8-10%, EBIT of CHF140 million-155 million (US$152 million-168 million) and a net profit margin of around 3%.

 

The company's forecasts with regard to the economic environment proved correct: pressure on prices remained high - not only in Switzerland - in spite of generally increasing milk prices. These current trends impacted on the income situation, as price increases in various markets could only be passed on with a slight delay. The markets in which Emmi is active performed very differently: while consumer sentiment was subdued in southern Europe, sales in the US, Tunisia, Chile and the Far East developed well.

 

Urs Riedener, CEO of Emmi, commented, "The sales trend in our core business is on track. Income has been affected, not entirely unexpectedly, by strong competition, particularly in the Swiss market. Nonetheless, we will achieve our sales and earnings targets for 2013."

 

In Switzerland, net sales fell by 1.6% to CHF890.5 million (US$967 million) against prior year's CHF905.3 million (US$983 million). This decline takes into account the sale of the stake in Nutrifrais SA. Declines in Switzerland were therefore lower than expected and Emmi was able to slightly expand its market share in the core retail trade business. This is an impressive development, particularly given the falling retail sales of dairy products in Switzerland, which declined 2.7% on a value basis in the first half of 2013. Adjusted for divestment effects, sales in dairy products (+0.4%), fresh products (+2.1%) and powder/concentrates (+13.8%) all increased, while those in cheese (-1.0%), fresh cheese (-3.1%) and other products and services (-27.8%) declined.

 

Factors driving growth in the Swiss business were Emmi Caffè Latte, Mix-it Müesli, Jogurtpur and good day in fresh products, as well as the Kaltbach cheeses, raclette cheese and Le Gruyère AOC. Falling sales were attributable in particular to the trading business, the disposal of the stake in Nutrifrais SA and the termination of the frozen goods logistics business.

 

In the international business, Emmi achieved sales growth of 55.8% to CHF676.1 million (US$735 million) versus prior year's CHF433.9 million (US$471.5 million). Emmi's core business performed well and according to the planning in key markets and product groups, while the sharp decline in butter and milk exports led to a drop in sales of CHF32 million (US$35 million). Excluding these export effects, international organic growth was 6.5%. Adjusted for acquisition and currency effects, sales in Emmi's international business increased in the areas of cheese (+4.4%), fresh cheese (+3.4%), fresh products (+2.7%) and other products and services (+13.3%). Sales declined in dairy products (-35.0%) and powders/concentrates (-77.6%), which is unsurprising given the sharp fall in exports of butter and milk powder.

 

The growth in sales in the international business is mainly attributable to the increase in the stake in Spanish company Kaiku with effect from July 1, 2012. Emmi was also able to grow thanks to higher cheese exports, sales growth in locally produced cheeses in the US and the good performance of desserts from A-27 and of Emmi Caffè Latte. The company increased exports of cheeses, including specialities such as Le Gruyère AOC, Appenzeller^® and Kaltbach. Germany, the UK and the US were growth markets in terms of cheese.

 

Emmi's international business accounted for some 43% of total sales, of which 30% was accounted for by products exported from Switzerland and 70% by products made locally by Emmi subsidiaries.

 

The company expects the market situation to change little in financial year 2013. In Switzerland, high import pressure, retail tourism, declines in the food service sector and competitive prices will continue to shape the business. The average milk price will be higher in the second half of 2013 compared to the previous year period, while other raw material prices are likely to remain close to their current level.

 

In the international business, Emmi continues to expect positive consumer sentiment in the US and other markets outside of Europe. In Europe, the southern European markets will continue to contract, while consumption in the other European markets relevant to Emmi is likely to remain stable. Emmi believes that the targets published in March can still be achieved.