Emmi Posts 7% Sales Growth 

04/02/08 Emmi has posted net sales of CHF 2,501 million in 2007, which corresponds to 7.1% growth. The main factors contributing to this growth were integration of the Mittelland Molkerei and the northern Italian dairy Trentinalatte, as well as the Emmi brand concepts and specialities.

As already communicated on 10 December 2007, earnings from abroad were clearly below expectations in the second half of 2007, and Emmi anticipates a net profit margin of between 1.5% and 1.7% in 2007. To ensure long-term profitability, two packages of measures have been defined for 2008 and 2009 to lower costs amounting in total to CHF 20 million. Emmi projects that the net profit margin will return to over 2.0% in 2008.

In 2007, Emmi reported net sales of CHF 2,501 million, amounting to growth of 7.1%. In Switzerland, net sales rose by 4.8%, while in international markets sales grew by 15.3%. The growth in Switzerland is predominantly due to integration of the Mittelland Molkerei. In international markets, the contributors to growth came from the positive development of the brand concepts for fresh products and cheese and the integration of the yoghurt producer Trentinalatte. Excluding acquisition and consolidation effects, Emmi posted organic growth of 3.4% in 2007, 1.8% of which was in Switzerland and 9.3% abroad.

Sales of dairy products rose by 8.0% to CHF 754 million (prior year: CHF 698 million) in 2007. This growth is largely attributable to integration of the Mittelland Molkerei on 1 April 2006. Despite pressure on prices, sales of conventional dairy products grew organically by 1.6%.

The 13.5% increase in sales of fresh products to CHF 537 million (prior year: CHF 473 million) is attributable in particular to sustained growth of Emmi Caffè Latte and the integration of the northern Italian dairy Trentinalatte on 1 July 2006. Adjusted for acquisition effects, growth in fresh products amounted to 6.5%. Promising sales growth was seen with Swiss Müesli, which was launched in the summer.

Emmi posted net cheese sales of CHF 820 million (prior year: CHF 791 million), representing growth of 3.7%. While Emmi performed well with natural cheese in Switzerland, despite full liberalisation of the cheese market with the European Union, the decline in sales of processed cheese could not be offset by the mild winter. On international markets, Emmi enjoyed very good growth, achieving double-digit growth with its Kaltbach line and its specialities.

Full liberalisation of the cheese market with the European Union put prices for fresh cheese under immense pressure. Thanks to measures drawn up with the milk producers and less pressure from imports in the second half of 2007 as a result of sharply increased prices in Europe, Emmi held its own in the market and was only 2.8% down on the previous year at CHF 125 million (prior year: CHF 129 million).

The 3.5% growth in sales of powder/concentrates to CHF 88 million (prior year: CHF 85 million) is attributable exclusively to the Swiss market. There was a slight downturn in exports. With other products/services, sales rose by 11.0% to CHF 177 million (prior year: CHF 160 million), due largely to the integration and growth of the fresh service offered by the Mittelland Molkerei and a positive performance in the retail business.

Despite lower-than-expected growth in international earnings during the second half of 2007, the Board of Directors and Group Management firmly believe that Emmi is on the right path with its defined international strategy and they intend to keep to this path.

Prices for Emmentaler in Italy settled back at their higher level again in the fourth quarter of 2007. After the overheating of the European milk market, things have cooled off and international milk prices are falling. Price increases scheduled for 1 January 2008 were also largely implemented in international markets.

To ensure profitability over the long term, the Group Management of Emmi has also approved a short-term package of measures to lower costs for 2008 amounting to around CHF 10 million and initiated a second package of the same order of magnitude, which will impact on costs in the second half of 2008 and 2009.

The most important levers of the cost-saving measures are projects aimed at reducing product range complexity, optimising advertising and marketing activities and lowering operating and logistics costs. The planned measures will lead to around 20 job cuts in Switzerland. Emmi assumes that these job cuts can be achieved largely through natural fluctuation. In our international business, greater priority will be attached to strategic products and markets to ensure that measures are implemented in conformity with the strategy.

Emmi anticipates the net profit margin to return to over 2.0% in 2008.

In January 2008 Emmi exercised its option to acquire 100% of Ostrimo AG. Ostrimo AG owns the property associated with the Emmi production facility in Ostermundigen. Both parties have agreed not to disclose the purchase price.