Emmi Reports Net Sales Decrease of 1.9%

In the financial year 2009, Emmi achieved net sales of CHF 2,619 million. This is a 1.9% drop in sales compared to the prior year (CHF 2,670 million). Sales were thus better than expected.

5 Feb 2010 --- Emmi posted net sales of CHF 2,619 million for the last financial year, which corresponds to a slight decrease of 1.9%. Sales were thus better than expected. In local currency terms, the fall in sales was 1.0%; this corresponds to an organic decline of 4.4%. The main reason for this result is the significantly lower milk price in 2009 compared with 2008. The expected net profit margin for 2009 is between 2.7% and 2.9%.

Emmi Group net sales in 2009

Almost all product groups posted a fall in sales last year due to the price of raw materials. The price for raw milk in 2009 was around 18% lower than that in the prior year. The milk price was cut twice within a year (by 9.2 centimes on 1 January and 6 centimes on 1 July). Price reductions were passed on in full to customers.

Payments from private and governmental organisations for exported goods are now shown in full as a reduction in the cost of goods sold. Figures from 2008 are adjusted accordingly in line with the Swiss GAAP ARR concept. Contributions from exports and processing were CHF 31.5 million in 2009 (prior year: CHF 22.8 million).

In the financial year 2009, Emmi achieved net sales of CHF 2,619 million. This is a 1.9% drop in sales compared to the prior year (CHF 2,670 million). Sales were thus better than expected. In organic and local currency terms, sales fell 4.4% due to the lower raw milk price and the difficult economic environment: -5.4% in the home market of Switzerland and -1.5% abroad.

Net sales in Switzerland fell by 4.9% to CHF 1,945 million (prior year: CHF 2,045 million). Adjusted for the acquisition of Nutrifrais SA, this corresponds to a decline of 5.4%. Of this, 2.5% is attributable to the fall in volumes supplied, which is largely due to the loss of generic volumes for a large Swiss customer.

Emmi saw sales increase by 7.9% to CHF 674 million in international markets (prior year: CHF 625 million); in local currency terms, the increase was 12.3%. This is largely attributable to the acquisition of Roth Käse Ltd. in the US.

Adjusted for acquisitions, Emmi posted a slight fall in sales in international markets (-1.5% in local currency terms) due to low consumer confidence and falling raw material prices. However, high milk powder exports led to volume growth in foreign sales of 2.1%. By contrast, the large difference in milk prices between Switzerland and Europe - particularly during the first half of the year - was not beneficial to export sales.

Performance in product groups

With the exception of the cheese segment, the individual product groups all posted negative sales performance. Falling raw milk prices, wary consumers and foreign currency effects were jointly responsible for this. By contrast, the increases in sales volumes of fresh cheese (+3.5%) and powder/concentrates (+18.7%) were pleasing.

Emmi posted net cheese sales (natural and processed cheese) of CHF 919 million in 2009 (prior year: CHF 873 million), representing 5.3% growth. Emmi was narrowly able to maintain its performance in Switzerland with natural cheese. Internationally, Emmi strengthened its position (+17.4%), particularly in the US. This was possible thanks to the acquisition of Roth Käse Ltd.

Sales of Emmi's fresh products fell by 3.0% last year to CHF 564 million (prior year: CHF 581 million). The growth driver here was again the successful product Emmi Caffè Latte, along with the new product Caffè Latte Zero. Emmi Caffè Latte enjoyed increasing popularity both in Switzerland and abroad. Sales fell overall in fresh products due to lower raw material prices which were passed on to customers in full. The loss of generic volumes for one large Swiss customer also underlined this trend.

Emmi posted sales of CHF 135 million (prior year: CHF 140 million) in fresh cheese, corresponding to a decline of 3.2%. It was able to successfully maintain its market position.

Sales in powder/concentrates fell by 5.0% in 2009 to CHF 85 million (prior year: CHF 89 million). However, Emmi took significantly higher volumes (18.7%) on lower prices (-23.7%), primarily from increased exports in response to pressure in the Swiss milk market.

In 2009, classic dairy products (milk, cream and butter) fell by 6.3% to CHF 746 million (prior year: CHF 796 million). This effect was due to lower raw material prices and the loss of the large customer mentioned above.

Sales in other products/services fell by 11.4% to CHF 169 million (prior year: CHF 190 million), due to difficult developments in trading as a result of lower sales in the catering segment. Emmi also focused on more profitable services in this area.

Higher margins due to successful activities

Emmi expects to achieve an EBIT of between CHF 105 and CHF 110 million and a net profit margin of between 2.7% and 2.9% in financial year 2009. The reasons behind this pleasing result are as follows:

* In the international business, the acquisition of US company Roth Käse Ltd. in January 2009 in particular played a key role in this pleasing result. Roth Käse Ltd. was able to meet and even exceed its sales, turnover and earnings targets in a difficult economic environment.
* Further cost savings programmes of the order of CHF 5.0 million were also successfully implemented, and certain unprofitable businesses were given up.
* The strategic success factor of Emmi Caffè Latte was also very high last year, with further sales growth recorded (including double-digit growth in Switzerland).
* As part of its focus, Emmi ceased operations at its subsidiary Emmi Nordic AB in Gävle (Sweden) last year and reorganised the business, thus making considerable savings.

Outlook
Raw milk prices are likely to remain significantly lower than the prior year in the first half of 2010. Emmi anticipates stable consumer confidence in Switzerland. By contrast, Emmi expects a slight recovery abroad due to recovering consumer confidence and in spite of potential currency effects.