Emmi Results Suffer Due to One-Off Charge

24 Mar 2015 --- Swiss dairy group Emmi has posted sales and profit falls for 2014, with declines due to a one-off impairment charge for its Italian subsidiary Trentinalatte, the company reported.

The company said that although sales and earnings were in line with expectations, EBIT declined by -19.2 % to CHF136.2 million (€128.7m) and net profit by -24.6 % to CHF 78.9 million (€74.5m).

Emmi generated net sales of CHF 3.4bn (€3.2bn) in 2014, which corresponds to an increase of +3.2 % (organic +3.0 %) and is in line with the target of +3 % to +4 %. Its sales forecast for 2015, however, is expected to be impacted by the strong Swiss Franc and organic sales, which the company expects to contract by -2% to -3%

The one-of charge notwithstanding, Emmi is confident that its value creation strategy is bearing fruit. The adjusted EBIT of CHF 170.7 million (€161.6m), the adjusted net profit of CHF 109.4 million (€103.4m) and the adjusted net profit margin of 3.2 % are all in excess of the original spring 2014 forecasts.

Urs Riedener, Emmi CEO: “One of our strategic priorities is to systematically improve our product portfolio and strengthen brand concepts with high potential. The 2014 results show that we are heading in the right direction.”

As communicated in February, sales increased by +1.3 % to CHF 1.8bn (€1.7bn) in Switzerland. In organic terms, i.e. excluding acquisition effects, this amounts to growth of +1.2 %. The acquisition of Käserei Studer AG with effect from 1 July 2013 gave rise to a positive acquisition effect, while a negative effect resulted from the disposal of the Nutrifrais holding with effect from 1 April 2013. The business division Switzerland accounted for 55 % of Group sales (2013: 56 %).

The business division Americas includes the US, Canada, Chile, Spain, France and Tunisia  and generated sales of CHF 840.0m (€794m) in 2014. This represents an increase of +2.7 %, or, adjusted for currency effects, +7.1 %. This growth is primarily attributable to the positive performance in North America, Tunisia and Spain. The negative currency effects primarily reflect the developments of the Canadian dollar, the Chilean peso and the Tunisian dinar against the Swiss franc. The business division Americas accounted for 25 % of Group sales (2013: 25 %).
 
Sales in the business division Europe rose by +8.3 % to CHF 508.8m (€480m). Adjusted for acquisition and currency effects, sales remained stable. The acquisition effect is attributable to the purchase of the dessert manufacturer Rachelli (with effect from 1 August 2013), the increase in the stake in Gläserne Molkerei (with effect from 1 October 2014), and the sale of Trentinalatte (with effect from 31 October 2014). The business division Europe accounted for 15 % of Group sales (2013: 14 %).
 
It is Emmi’s strategy to strengthen its position in Switzerland and grow further in the international business. In addition to its established markets in North America and Europe, Emmi is also focusing on viable markets outside Europe, in particular on Tunisia and Chile.

A spokesperson for Emmi told FoodIngredientsFirst: "Tunisia and Chile are expanding markets with considerable growth potential, whereas European markets are rather saturated. They offer us good opportunities to introduce new product lines like desserts (Tunisia) or lactose-free or kids-oriented products (Chile). We expect growth to continue, especially in Tunisia."
 

 
Like other exporting companies in Switzerland, Emmi is affected by the strength of the Swiss franc. To counter the negative effects, Emmi increased the prices of its export products abroad in the first quarter of 2015. The company also intensified its operational excellence and cost-cutting programmes in all the Swiss facilities and negotiated price cuts with international suppliers and milk producers.
 
Emmi expects slightly lower international raw material, energy and packaging prices in 2015. In Switzerland, retail tourism to neighbouring countries will increase. In addition, declining revenues in the domestic catering sector are to be expected due to tourists staying away. Outside the eurozone, consumer behaviour in the US is expected to remain stable, while significant growth is anticipated in Tunisia. The upward trend in Spain is likely to continue for locally produced products, although sales of products exported from Switzerland are expected to be lower, which is also the case for the other European markets.