Half-year results 2016
Emmi holding its own in a challenging environment
Media release
Half-year results 2016
Emmi holding its own in a challenging environment
Lucerne, 23 August 2016 – Emmi generated sales of CHF 1,594million in the first half of 2016 – an increase of 2.0 % (in organic terms -0.7 %) compared to CHF1,563million in the first six months of the previous year. It also achieved a net profit of CHF 61 million (previous year CHF46 million) and a net profit margin of 3.8 % (previous year 3.0 %). For full-year 2016, Emmi believes that it is on target for both sales and earnings.
Emmi Group key figures
amounts in CHF million | first half of 2016 | first half of 2015 |
Net sales | 1,594.1 | 1,563.0 |
of which Switzerland | 853.2 | 874.2 |
of which Americas | 416.4 | 387.3 |
of which Europe | 254.4 | 230.8 |
of which Global Trade | 70.1 | 70.6 |
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Change in sales in % | 2.0 | -3.8 |
acquisition effect in % | 2.0 | 1.4 |
currency effect in % | 0.7 | -3.5 |
organic sales growth in % | -0.7 | -1.7 |
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EBITDA | 153.3 | 142.0 |
as % of net sales | 9.6 | 9.1 |
EBIT | 92.5 | 84.4 |
as % of net sales | 5.8 | 5.4 |
Net profit | 60.8 | 46.2 |
as % of net sales | 3.8 | 3.0 |
No significant non-recurring effects were recorded during the current and the previous reporting period. For this reason, Emmi has opted not to disclose adjusted earnings.
Acquisition effects are accounted for by the following factors:
- Acquisition of cheese business of J.L. Freeman (Canada, 15 April 2015)
- Acquisition of Redwood Hill (USA, 31 December 2015)
- Stake in Bettinehoeve (Netherlands, 2 February 2016)
- Increased stake in SDA Chile (Chile, 19. May 2016)
- Acquisition of Cowgirl Creamery (USA, 31. May 2016)
In the first six months of 2016, Emmi achieved sales of CHF 1,594.1 million, which was 2.0 % higher than the previous year’s figure of CHF 1,563.0 million. In organic terms, i.e. adjusted for acquisition and currency effects, sales fell by 0.7 %. This was mainly due to low international milk prices.
Emmi exceeded its earnings forecasts. The company generated an EBIT of CHF 92.5 million compared to CHF 84.4 million in the previous year (+9.5 %) and an EBIT margin of 5.8 % (previous year 5.4 %). Net profit was CHF 60.8 million, compared with CHF 46.2 million in the previous year (+31.6 %), with a net profit margin of 3.8 % (previous year 3.0 %). The significant improvement in net profit includes, among others, the non-recurring negative effects of the erratic strengthening of the Swiss franc in 2015.
Urs Riedener, CEO of Emmi, commented: “The half-year sales reflect the challenging economic environment and the strong competition, with high milk volumes being one of the reasons. The profit development is the result of improved earnings abroad and the strong position in niches.”
Urs Riedener added: “The international subsidiaries contributed again to the profit increase. A further earnings uplift resulted from the more recently acquired companies.”
Business division Switzerland: decline in retail and competitive pressure
In the business division Switzerland, sales were 2.4 % below the same period last year at CHF 853.2 million (previous year CHF 874.2 million). This was due to the declining retail business, low milk prices, high competitive and import pressure, and continued strong retail tourism.
Notably, sales of fresh products grew in spite of this. Caffè Latte, YoQua and Energy Milk all made positive contributions. By contrast, cheese and fresh cheese recorded considerable falls in sales, suffering under the difficult economic conditions in the Swiss market. This was particularly pronounced for AOP cheese, while the Kaltbach specialities and the Luzerner Rahmkäse (Lucerne cream cheese) achieved growth. The decline in dairy products (milk, cream, butter) was caused by a drop in volumes and lower milk prices. Sales in the powder/concentrates segment were unchanged, while those of other products/services were down slightly.
The business division Switzerland accounted for 54 % of Group sales (previous year: 56 %).
Net sales by product group: business division Switzerland
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amounts in CHF million | sales 1HY 2016 | sales 1HY 2015 | organic growth |
Dairy products | 329.0 | 333.8 | -1.4 % |
Cheese | 223.5 | 237.4 | -5.8 % |
Fresh products | 174.4 | 172.8 | 0.9 % |
Fresh cheese | 57.1 | 60.2 | -5.1 % |
Powder/concentrates | 29.0 | 29.0 | 0.0 % |
Other products/services | 40.2 | 41.0 | -1.9 % |
Total division Switzerland | 853.2 | 874.2 | -2.4 % |
Business division Americas: growth below expectations, good performance in niches
The business division Americas includes not only the US, Canada and Chile, but also Spain, France and Tunisia.
Sales in this division amounted to CHF 416.4 million (previous year CHF 387.3 million), an increase of 7.5 %. In organic terms, i.e. excluding currency and acquisition effects, this resulted in growth of 1.8 %. The positive acquisition effect is accounted for by the purchase of the cheese business of J.L. Freeman, the acquisitions of Redwood Hill and Cowgirl Creamery, and the increased stake in the trading entity SDA Chile.
Growth was below expectations, primarily due to low milk prices in the US and the challenging economic situation in Chile and Spain.
In the cheese business, locally produced goat’s cheese in the US and exported cheese specialities from Switzerland recorded pleasing growth rates. Fresh products and dairy products benefited from the excellent development in Tunisia (yogurts, desserts and milk). By contrast, sales growth in cow’s milk cheese produced in the US remained modest due to the low milk prices, whereas the volumes showed a pleasing development. Sales in Chile were stable, while those in Spain declined slightly, with the exception of the lactose-free range.
The business division Americas accounted for 26 % of sales (previous year: 25 %).
Net sales by product group: business division Americas
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amounts in CHF million | sales 1HY 2016 | sales 1HY 2015 | difference 2016/2015 |
| acquisition effect | currency effect | organic growth |
Cheese | 163.9 | 151.9 | 7.9 % |
| 3.3 % | 2.7 % | 1.9 % |
Dairy products | 122.4 | 117.7 | 4.0 % |
| 0.3 % | -0.8 % | 4.5 % |
Fresh products | 100.7 | 86.1 | 17.0 % |
| 13.4 % | 0.8 % | 2.8 % |
Fresh cheese | 0.4 | 0.0 | n.a. |
| n.a. | n.a. | n.a. |
Powder/concentrates | 0.1 | 0.6 | -82.2 % |
| 0.3 % | 0.4 % | -82.9 % |
Other products/services | 28.9 | 31.0 | -6.9 % |
| 1.2 % | 2.4 % | -10.5 % |
Total division Americas | 416.4 | 387.3 | 7.5 % |
| 4.5 % | 1.2 % | 1.8 % |
Business division Europe: growth despite tough environment
The business division Europe includes the markets Benelux, Germany, the UK, Italy and Austria.
Sales in this division amounted to CHF 254.4 million (previous year CHF 230.8 million), a rise of 10.2 % (in organic terms 1.2 %). This enabled the business division to hold its own, despite the ongoing strength of the Swiss franc. The positive acquisition effect is the result of the stake in Bettinehoeve.
The fresh products (primarily Caffè Latte and Italian desserts), cheese (exports of speciality cheeses such as Kaltbach and Der scharfe Maxx) and dairy products (Gläserne Molkerei, Germany) segments had positive impacts. By contrast, sales of AOP cheeses (generally) and fresh cheese in Italy and the Netherlands (AVH dairy) declined.
The business division Europe accounted for 16 % of Group sales (previous year: 15 %).
Net sales by product group: business division Europe
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amounts in CHF million | sales 1HY 2016 | sales 1HY 2015 | difference 2016/2015 |
| acquisition effect | currency effect | organic growth |
Fresh products | 106.7 | 102.1 | 4.4 % |
| - | 1.4 % | 3.0 % |
Cheese | 56.1 | 52.7 | 6.4 % |
| - | 3.3 % | 3.1 % |
Dairy products | 49.2 | 46.7 | 5.4 % |
| 1.3 % | 3.6 % | 0.5 % |
Fresh cheese | 32.5 | 21.3 | 52.7 % |
| 64.5 % | 5.2 % | -17.0 % |
Powder/concentrates | 7.2 | 5.4 | 32.6 % |
| - | 4.5 % | 28.1 % |
Other products/services | 2.7 | 2.6 | 4.9 % |
| 0.3 % | 3.6 % | 1.0 % |
Total division Europe | 254.4 | 230.8 | 10.2 % |
| 6.2 % | 2.8 % | 1.2 % |
Business division Global Trade: economic driver in the BRICS countries falters
The business division Global Trade covers direct sales from Switzerland to customers in international markets, mainly in countries where Emmi has no subsidiaries or investments. These include the Asian and Eastern European markets, as well as certain South American countries (e.g. Brazil) and the Arabian Peninsula.
The division generated sales of CHF 70.1 million, compared with CHF 70.6 million in the previous year, which corresponds to a slight decline of 0.7 % (in organic terms: growth of 0.7 %). The development primarily reflects the lower sales in cheese. The increase in the powder/concentrates and dairy products segments can be attributed to higher milk volumes and the related exports of milk powder and butter.
Global Trade accounted for 4 % of Group sales (previous year: 4 %).
Net sales by product group: business division Global Trade
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amounts in CHF million | sales 1HY 2016 | sales 1HY 2015 | difference 2016/2015 |
| acquisition effect | currency effect | organic growth |
Fresh products | 23.1 | 23.3 | -1.0 % |
| - | - | -1.0 % |
Cheese | 21.9 | 24.3 | -9.7 % |
| -4.1 % | - | -5.6 % |
Powder/concentrates | 10.3 | 9.9 | 4.1 % |
| - | - | 4.1 % |
Dairy products | 9.6 | 6.0 | 61.3 % |
| - | - | 61.3 % |
Fresh cheese | 0.1 | 0.3 | -79.7 % |
| - | - | -79.7 % |
Other products/services | 5.1 | 6.8 | -24.8 % |
| - | - | -24.8 % |
Total division Global Trade | 70.1 | 70.6 | -0.7 % |
| -1.4 % | - | 0.7 % |
Increased earnings in the international business divisions boost operating result
Earnings before interest and taxes (EBIT) increased from CHF 84.4 million to CHF 92.5 million in the first half of 2016, which corresponds to an EBIT margin of 5.8 % (previous year 5.4 %).
Net profit rose to CHF 60.8 million compared with CHF 46.2 million in the previous year’s period, representing an increase of 31.6 %. The net profit margin amounted to 3.8 % (previous year 3.0 %). An important reason for this improvement are the non-recurring negative currency effects in the previous year, which were due to the high Swiss franc.
Subsidiaries abroad made a considerable contribution to this positive earnings development. Efficiency measures in the business divisions Americas and Europe under the Operational Excellence programme again had a positive impact. In addition, the companies acquired in recent years performed well.
Outlook for full-year 2016
Emmi does not expect the economic conditions to change significantly in the second half of the year, with the highly competitive and volatile environment and the low milk prices likely to remain determining factors in the second half of the year. In addition, significant macroeconomic uncertainties recently appeared. For example, it is not yet possible to fully assess the consequences of the Brexit vote in the UK.
Sales development in 2016 continues to be strongly affected by the challenging situation in the Swiss market, where import pressure and retail tourism persist. Nonetheless, we are confident that we will be able to achieve the targets communicated in Switzerland and Europe. In the business division Americas, however, it is becoming clear that the targeted organic growth of 5 % to 7 % is too ambitious for this year, due to the low milk prices in the US as well as the difficult economic conditions in Chile and Spain.
At Group level, Emmi therefore anticipates a sales growth of -1 % to 1 % (previously 0 % to 1 %) and slightly increases its earnings outlook (previous EBIT CHF 180 million to CHF 190 million, new EBIT CHF 185 million to CHF 195 million; previous net profit margin slightly above 3 %, new net profit margin slightly above 3.5 %).