Emmi’s Reports 3.4% Increase in Net Sales, Warns on Strong Swiss Franc

05 Feb 2015 --- In the 2014 financial year, Emmi generated net sales of CHF 3,404.0 million, which corresponds to an increase of 3.2%, thereby meeting the company’s targets. The positive result is attributable to the strengthening of the international business and the encouraging performance of the business division Switzerland, which confirmed the organic growth of the first half-year.

Success factors included Emmi Caffè Latte, Kaltbach and other cheese specialities in Switzerland and abroad, as well as various fresh product concepts.

In 2014, Emmi generated sales of CHF 3,404.0 million, an increase of 3.2% over the previous year (CHF 3,298.2 million). In organic terms, i.e. adjusted for acquisition and currency effects, sales at Group level rose by 3.0%. All product segments of Emmi’s core business made positive contributions. Exports of butter and milk powder in response to the need to reduce the pressure resulting from high milk volumes prompted considerable increases in the dairy products and powder/concentrates segments in the first half of the year. Adjusted for these non-strategic exports, organic growth at Group level was 2.5%, which is in the middle of Emmi’s medium-term forecast of 2% to 3%.

Emmi’s CEO Urs Riedener commented: “Group sales performed according to plan. In Switzerland, we even exceeded our expectations. The encouraging growth in our domestic market is a clear sign that we are steering our product portfolio in the right direction, and that we have set our priorities well. With the new organisation and creation of the business divisions Switzerland, Europe, Americas and Global Trade that came into being on 1 January 2014, we took another important step towards further strengthening our business in Switzerland and abroad.”

In terms of outlook, Emmi warned that like other exporting companies in Switzerland, it is negatively impacted by the strength of the Swiss franc. The weak Euro affects roughly CHF 400 million of export sales. Emmi has put together a package of measures to address this issue. This includes price increases for export products, additional efficiency programmes at facility level, price cuts for milk processed for export products and price negotiations with international suppliers. Emmi is doing everything in its power to ensure that Swiss dairy products continue to have sufficient sales potential in international markets. Nevertheless, currency effects will have a negative impact on Emmi’s sales performance. Given the various measures it has put in place, however, the company is highly confident that its 2015 net profit will still be within the margins of the medium-term guidance of 2.5% to 3.5%.

Sales in business division Switzerland rose from CHF 1,863.1 million to CHF 1,888.1 million, which corresponds to an increase of 1.3%. In organic terms, i.e. excluding acquisition effects, this amounts to a rise of 1.2%. A positive acquisition effect came from the acquisition of Käserei Studer with effect from 1 July 2013, while a negative effect resulted from the disposal of the Nutrifrais holding with effect from 1 April 2013.

Various successful brand concepts contributed to the good performance in Switzerland. Emmi Caffè Latte, for example, again performed outstandingly well, with growth also being achieved by cheese specialities such as Kaltbach and Der Scharfe Maxx, and the additive-free “Jogurtpur” (Pure Swiss Yogurt) also selling well. In fresh cheese, the new Mozzarella recipe had a beneficial effect on sales, while higher milk prices also had a slight positive effect.
 
However, milk drinks and AOP cheeses, Emmentaler AOP in particular, performed less well than expected.
 
The business division Switzerland accounted for 55% of Group sales (previous year: 56%).

Americas includes not only the US, Canada and Chile, but also Spain, France and Tunisia. Sales increased from CHF 817.6 million to CHF 840.0 million, corresponding to a rise of 2.7%, or 7.1% (organic). Negative currency effects are primarily attributable to developments in Chili, Canada and Tunisia.
 
Growth in sales is primarily due to the good performance in North America (US, Canada), Tunisia and Spain. Locally produced cow’s and goat’s milk cheeses sold very well in the US. Sales of AOP cheese fell, however, as price increases led to declining sales volumes. Emmi accepted this in order to support margins. In Tunisia, the Vitalait brand (yogurt, milk, desserts) performed extremely well. The recovery of the Spanish market, in which Kaiku’s lactose-free range and Emmi Caffè Latte achieved notable growth rates, was also pleasing.
 
The business division Americas accounted for 25% of Group sales (previous year: 25%).

In the business division Europe, sales rose by 8.3% from CHF 469.9 million to CHF 508.8 million. In organic terms, i.e. 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), from the increase in the stake in Gläserne Molkerei (with effect from 1 October 2014), resulting in the full consolidation of this group, and from the sale of Trentinalatte (with effect from 31 October 2014).
 
In fresh products, Italian A-27 (Bontà Divina brand) and Rachelli speciality desserts as well as Emmi Caffè Latte showed significant growth, while sales of yogurt in Italy declined. Emmi has recently sold the Italian yogurt manufacturer Trentinalatte to the German/Austrian Livia Group.
 
In the cheese business, sales of AOP cheeses declined, while those of specialties like Kaltbach and Der Scharfe Maxx increased in several markets.

Growth in dairy products is a result of the acquisition of the German Gläserne Molkerei.
 
The business division Europe accounted for 15% of Group sales (previous year: 14%).
 
Global Trade covers direct sales from Switzerland to customers in international markets in which Emmi has no companies or holdings. These include Asian, Eastern European and South American markets. Sales amounted to CHF 167.1 million, representing an increase of 13.2% (previous year: CHF 147.6 million).
 
This growth is largely attributable to an increase in powders and concentrates. Exports of milk powder and butter to decrease pressure resulting from higher milk volumes amounted to CHF 32.1 million in 2014. Excluding these, the business division would have achieved 1.3% growth, a figure reflecting, among other factors, the economic slowdown in Asia and a decline in contract manufacturing.
 
Global Trade accounted for 5% of Group sales (previous year: 5%).