Emmi sales, profits rise

24 Aug 2016

Swiss milk processor and dairy products company Emmi generated sales of CHF1,594million in the first half of 2016 – an increase of 2.0 % compared to CHF1,563 million in the first six months of the previous year.

Emmi sales, profits rise

Swiss milk processor and dairy products company Emmi generated sales of CHF1,594million in the first half of 2016 – an increase of 2.0 % (in organic terms -0.7 %) compared to CHF1,563 million 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 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 %). The significant improvement in net profit includes, among others, the non-recurring negative effects of the erratic strengthening of the Swiss franc in 2015.

“The half-year sales reflect the challenging economic environment and the strong competition, with high milk volumes being one of the reasons,” said Urs Riedener, CEO of Emmi. “The profit development is the result of improved earnings abroad and the strong position in niches. “The international subsidiaries contributed again to the profit increase. A further earnings uplift resulted from the more recently acquired companies.”

In the business division Switzerland, sales were 2.4 % below the same period last year at CHF853.2 million (previous year CHF874.2 million). This was due to the declining retail business, low milk prices, high competitive and import pressure, and continued strong retail tourism.

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 %).

The business division Americas includes not only the US, Canada and Chile, but also Spain, France and Tunisia. Sales in this division amounted to CHF416.4 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 %).

The business division Europe includes the markets Benelux, Germany, the UK, Italy and Austria. Sales in this division amounted to CHF254.4 million (previous year CHF230.8 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 %).

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 CHF70.1 million, compared with CHF70.6 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 %).

Emmi said that it 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, Emmi said that it is confident that it 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 CHF180 million to CHF190 million, new EBIT CHF185 million to CHF195 million; previous net profit margin slightly above 3 %, new net profit margin slightly above 3.5 %).