Emmi Reports Excellent Performance for International Business
Emmi generated net sales of CHF 2,981.2 million in 2012, an increase of 9.6%. This positive result is attributable to the encouraging expansion of business outside Switzerland, which exceeded expectations.
7 Feb 2013 --- Important factors behind the successful results were recent acquisitions, the performance of Emmi Caffè Latte in Switzerland and abroad (+11%), and newly launched products in Switzerland such as cheese slices "Chässchiibe" and "Mix-it Müesli".
Emmi generated net sales of CHF 2,981.2 million in 2012, an increase of 9.6% on the previous year (2011: CHF 2,721.3 million). In organic terms, i.e. adjusted for acquisition and currency effects, net sales at Group level fell slightly by 1.3%. In a continued challenging environment, this figure is in line with our forecasts.
Net sales in Switzerland declined from CHF 1,909.9 million to CHF 1,842.1 million. Emmi was pleased that the market share in core business held steady, despite a general downtrend in retail sales for milk products (-1.8%).
The 3.6% drop in net sales is attributable in part to the decision to forego sales from activities outside the core business, primarily unprofitable logistics services for third parties. Other factors were lower volumes in trading and food service business and substantial pressure from imports in certain segments, such as mozzarella. Emmi Caffè Latte again performed very well, with growth of 8% in Switzerland. This excellent performance was one of the factors that allowed the production level of 100 million cups to be exceeded in 2012 for the first time ever. Emmi was also pleased with its new products "Mix-it Müesli" and "Chässchiibe" cheese slices, and with the performance of the Kaltbach products and raclette cheese. Adjusted for acquisitions, sales in the domestic market fell by 3.9%.
In international markets, Emmi achieved a 40.4% increase in sales, to CHF 1,139.1 million (2011: CHF 811.4 million). This figure exceeded expectations and performance was underpinned by several factors. Emmi Caffè Latte increased significantly in its four biggest markets in terms of sales, rising by 12% overall and witnessing the highest level of growth in Spain (approximately 50%). Among the other products to post sales growth were Le Gruyère AOC and the Kaltbach cheeses. Businesses acquired over recent years also performed very well. The cheeses produced locally in the United States by Cypress Grove Chèvre and Emmi Roth USA, and Bontà Divina desserts generated double-digit growth. In local currency terms and adjusted for acquisitions, growth amounted to 4,7 %. This is a promising result in view of the fact that, unlike in the prior-year period, there were no butter exports in the second half of 2012 to help ease the situation on the milk market and given that organic growth came primarily from cheese, fresh products and dairy products.
Emmi's CEO Urs Riedener commented: "2012 marked an important and encouraging step in the implementation of our strategy. I am very pleased with how our business outside Switzerland has performed. This business has become an important pillar for Emmi. Another positive element is that in Switzerland we held our market position well in our core business, retail. Going forward, we are well equipped to continue performing successfully in our key markets."
In the cheese segment, Emmi achieved net sales of CHF 529.5 million in 2012 compared with CHF 534.8 million in the prior year, a decline of 1.0%. Positive factors were the new cheese slices "Chässchiibe" as well as higher sales in raclette cheese and Kaltbach cheese. In contrast, declines were recorded in Emmentaler AOC and in trading with cheeses not manufactured or matured by Emmi. The acquisition effect stems from the takeover of Rutz Käse AG. In organic terms (adjusted for acquisitions), there was a decrease of 2.2%.
In fresh cheese net sales contracted by 7.7% to CHF 121.6 million (2011: CHF 131.8 million). This contraction was the result of strong pressure from mozzarella and cheese spread imported from the EU, private labels in particular.
Net sales of Emmi's fresh products fell by 7.6% in the 2012 financial year, to CHF 342.6 million (2011: CHF 370.5 million). Emmi Caffè Latte made a positive contribution, with solid single-digit growth, as did the newly introduced Mix-it Müesli, while sales of milk drinks and yoghurt declined. In addition, some fresh products (accounting for around CHF 18 million) were reclassified to the dairy products segment.
Net sales of dairy products (milk, cream and butter) contracted by 2.7% in 2012 to CHF 688.9 million from CHF 708.4 million in the prior year. This drop is attributable to the lower level of milk prices compared with 2011, which in turn resulted in lower sales prices. Volumes contracted slightly as well.
In powder/concentrates net sales fell by 3.2% in 2012 to CHF 60.4 million from the prior year's CHF 62.4 million. This was the result of contracted sales in various segments of the food industry, fierce competition on prices and the absence of surplus milk in the second half of 2012.
Net sales of other products and services declined, as expected, by 2.9% to CHF 99.1 million (prior year: CHF 102.0 million). This was the result of the decision to stop providing unprofitable logistics services to third parties, which will impact earnings favourably. Trading business likewise declined.
Net sales of cheese amounted to CHF 466.8 million in 2012, compared with CHF 389.8 million in the prior year, corresponding to growth of 19.8%. Exports of Le Gruyère AOC and Kaltbach cheese performed well. In the US, Emmi's biggest foreign market for cheese, sales of locally produced cheese from Emmi Roth USA and Cypress Grove Chèvre saw double-digit increases. Exports from Switzerland posted single-digit growth. Organic growth, i.e. adjusted for currency effects and acquisitions, amounted to 3.6%.
In fresh cheese net sales rose to CHF 46.4 million from the prior year's figure of CHF 43.6 million, an increase of 6.2%. This is attributable to the collaboration with Venchiaredo and the expansion of the Trentina brand in Italy. In organic terms, the increase amounted to 8.7%.
Fresh products posted net sales growth of 43.7 % to CHF 388.9 million from CHF 270.6 million in 2011. The double-digit increase in Italian desserts and Emmi Caffè Latte was extremely positive, with the latter recording the strongest growth in Spain. Onken yoghurts in the UK and Spain's Kaiku also made positive contributions. Net sales increased 4.6% in organic terms.
Dairy products achieved net sales of CHF 154.0 million compared with CHF 24.6 million in the prior year. This corresponds to a year-on-year increase of 526% and is attributable primarily to from the good performance of Kaiku's lactose-free and regional milk and growth at CASP in the US. Organic growth amounted to 57.5%, although there were hardly any butter exports to regulate the milk volume in the second half of the year.
Net sales of powder/concentrates contracted by 4.7% year-on-year to CHF 25.1 million (2011: CHF 26.3 million). This contraction was due to a lower level of exports aimed at regulating the Swiss milk volume. The organic decline amounted to 12.7%.
In other products and services net sales increased by 2.6% to CHF 57.9 million (2011: CHF 56.5 million). Kaiku made a positive contribution, contrasting with a decline in Austria attributable to the decision to forego unprofitable logistics business of EUR 9 million. The decrease in organic terms therefore amounted to 4,9%.
Stable margin thanks to successful brand concepts and targeted acquisitions
Emmi expects earnings within the published outlook, i.e. earnings before interest and taxes (EBIT) of between CHF 130 million and CHF 145 million for the 2012 financial year, as well as a net profit margin of around 3%. The performance is mainly attributable to the following:
• The more recent acquisitions are performing well: Onken, Cypress Grove Chèvre, Italy's A-27 and Kaiku (since July 2012) strengthened international business significantly. This allowed the competitive disadvantages brought by the strong Swiss franc to be attenuated somewhat.
• Emmi Caffè Latte continued to develop well.
• Innovations were launched successfully: cheese slices (Chässchiibe), Kaltbach Creamy & Tasty, Mix-it Müesli.
• A conscious decision was taken withdraw from unprofitable business in logistics services for third parties or in trading.
• Careful cost management generated further savings.
Raw materials prices should hold steady in the first half of 2013 overall, at most rising slightly in a few individual categories. Emmi is not anticipating any significant changes in packaging either. In Switzerland, although the pressure on prices from imports will continue, the already high level of "retail tourism" will not intensify to any substantial degree. In the key foreign markets of the US, Germany and the UK, consumer spending is likely to remain stable, and the emerging markets such as Chile, Tunisia and the Asian countries will see further growth. In contrast, consumer sentiment in Italy will remain muted. Emmi also expects the Swiss franc to remain overvalued against the euro. In light of these factors, strong brand concepts in Switzerland and abroad, brand products manufactured locally outside Switzerland, strong performance of acquisitions and ongoing rigorous cost management will be key to Emmi's continued success in 2013.