Swiss Dairy Emmi Posts Near 17% Profit Boost

22 Mar 2017 --- Sales at Swiss milk processor Emmi increased 1.4% to CHF 3,259 million (US$3,282 million) in 2016, mostly down to a series of acquisitions, according to the company’s annual results.

Meanwhile earnings before interest and taxes (EBIT) rose by 7.3% to CHF 202.7 million (US$204.1 million), while net profit amounted to CHF 140.3 million (US$141.3 million), 16.7% higher than in the previous year.

According to Emmi this positive result exceeded company expectations and will be proposing a distribution of a dividend from capital contribution reserves of CHF 5.90 gross (2016: CHF 4.90) per registered share to the General Meeting in April. 

Emmi’s acquisitions included the purchase of the cheese business of J.L. Freeman (Canada, 15 April 2015), Redwood Hill (USA, 31 December 2015), a 60% stake in Bettinehoeve (Netherlands, 2 February 2016), and increased stake in SDA Chile (Chile, 19 May 2016) and the acquisition of Cowgirl Creamery (USA, 31 May 2016).

Emmi expects conditions to remain challenging in 2017, but nonetheless wants to achieve slightly higher sales and to stabilize its improved earning power.

“Given the pressure on the Swiss business, this is a pleasing result. This success has been driven by further progress abroad, the geographical expansion of the Operational Excellence program and the good performance of higher-margin brands. Switzerland remains at the heart of our strategy, says Urs Riedener, CEO Emmi Group.

Breaking down sales trends by business division, Emmi says Switzerland fell by 2.9% to CHF 1,741.3 million (US$1,754 million), compared to  CHF 1,793.3 million in 2015.
This was the result of a price effect of -1.3% and a volume effect of -1.6%. The business division Switzerland accounted for 53% of Group sales, compared to 56% in 2015.

There was also solid growth in the US and Tunisia with sales in the business division Americas rising from CHF 798.1 million (US$804.1 million) to CHF 865.6 million (US$871.9 million). This corresponds to growth of 8.5%, or 2.8% in organic terms (adjusted for currency and acquisition effects). The business division Americas accounted for 27% of Group sales (2015: 25%).

Meanwhile in Europe Brexit “hampers sales of desserts from Italy,” according to Emmi. 

Sales increased by 6.5% to CHF 519.0 million (US$522.5 million). In organic terms, however, the result was a decline of 0.2%. This was primarily a consequence of the weaker pound sterling, which, in particular, made it more difficult to export A-27 desserts from Italy to the UK. The business division Europe accounted for 16% of Group sales, compared with 15% in 2015. 

Sales in the business division Global Trade fell by 1.7% (a decline in organic terms of 1.0%) to CHF 132.9 million (US$133.8 million). This is largely attributable to the economic slowdown and weak currencies in various emerging markets. Global Trade accounted for 4% of Group sales (2015: 4%).

In terms of outlook, the company expects that “conditions in the dairy industry will continue to be challenging and that competition will remain intense”.
 
“The massive pressure exerted by imports and retail tourism are likely to persist in Switzerland in 2017. Emmi intends, however, to stabilize sales in its home market with strong brands and innovations. It expects that the business division Americas will continue to perform well in the US and Tunisia, while the markets in Spain and France are likely to remain challenging,” according to the company.

“In the business division Europe, the weak pound sterling is making imports from Italy (desserts), Germany (Onken yogurt), and Switzerland (Caffè Latte and cheese) more expensive. This is going to hamper sales in 2017. It can be assumed that those exports from Switzerland with strong and well differentiated brand concepts, such as Caffè Latte, speciality cheese from Kaltbach and Der Scharfe Maxx, will hold their ground, while easier substitutable products will continue to find it difficult.”

“Overall, the international business will have a beneficial effect on sales development, mainly because of the acquisitions already made and the good momentum built up in the business division Americas,” it concludes.