Interim report, second quarter 2014
Sales and income for the quarter in line with outlook
Second quarter compared to pro forma 2013
- Net sales increased by 1 percent to 1,302.9 (1,290.2) MSEK, but decreased by 2 percent at constant FX, impacted by the previously communicated termination of a major contract in Norway.
- Adjusted* operating income decreased to 76.3 (90.3) MSEK, mainly due to the termination of the contract in Norway.
- Adjusted* income for the period amounted to 22.2 (40.7) MSEK, and adjusted* earnings per share were 0.44 (0.81) SEK.
- Adjusted* operating cash flow increased to 186.6 (79.8) MSEK, mainly driven by a reduction of inventories.
- Scandi Standard’s shares were listed on NASDAQ OMX Stockholm on 27 June.
- A new credit facility has been established, which will substantially reduce annual interest costs.
- Acquisition of Bosarpskyckling AB, the leading producer of organic chicken in Sweden, was announced on August 20. See page 8.
- Outlook for the full year 2014 remains unchanged. See page 4.
I am pleased to present our first quarterly report following the successful completion of the Initial Public Offering (IPO) and listing of the Company on NASDAQ OMX Stockholm on 27 June.
Trends in net sales and operating income during the quarter were generally in line with our expectations. Demand for our products continued with solid growth. Adjusted for the terminated contract in Norway, Group net sales increased by 11 percent over the same period last year.
The Swedish operation reported strong growth in net sales and operating income in the quarter. The margin in Sweden was also positively affected by improved productivity following the investments in new production equipment made during 2013. We are also pleased to announce that we have signed a new contract in Sweden with the hamburger chain MAX. Trends in Denmark were less favourable due to continued price pressure, particularly on exports which account for the majority of sales for the Danish company. In Norway, following the termination of the ICA contract, we have added a number of new product listings with major customers. Excluding ICA, net sales in Norway increased by 12 percent in the quarter.
In terms of sales by product category, frozen products outgrew chilled in the quarter. This was mainly due to the high proportion of chilled products sold to ICA Norway last year as well as our focus this year on reducing inventories of frozen products through marketing campaigns in both Sweden and Denmark. Excluding ICA Norway, Group sales of chilled products increased by 9 percent. Longer term we still expect to achieve a higher proportion of sales in chilled products where margins are higher than in frozen, as we continue to capitalize on our strengths in product and brand development. A good example of this is the recent successful launch of Minutfilé in Sweden. We will also start to sell this product in both Denmark and Norway in the third quarter.
Income in the quarter was negatively affected by non-comparable items, including costs for the IPO and for the write-off of arrangement fees for the old credit facility. Adjusted for these costs, operating income and margin declined as compared to an unusually strong second quarter in 2013. For the first half, adjusted operating income decreased by 6 percent but equalled 49 percent of operating income for the full year 2013 pro forma.
Cash flow was strong both for the quarter and the first half, mainly driven by a reduction in working capital. Since year-end 2013 working capital has been reduced from 9.4 percent to 6.3 percent of net sales.
Yesterday we announced the acquisition of Bosarpskyckling AB, the leading Swedish producer of organic chicken, a segment that is growing rapidly. The acquisition complements Kronfågel´s existing product range and will further strengthen our position in the premium segment. Bosarp had sales of 25 MSEK in 2013 and will be accretive to income from the outset.
Our outlook for the full year is unchanged and we still expect adjusted operating income to be in line with or higher than 2013 pro forma.
Leif Bergvall Hansen
Managing Director and CEO
For further information, please contact:
Leif Bergvall Hansen, Chief Executive Officer, Tel: +45 22 10 05 44
Jonathan Mason, Chief Financial Officer, Tel: +45 22 77 86 18
Patrik Linzenbold, Head of Investor Relations, Tel: +46 708 25 26 30
This interim report comprises information which Scandi Standard is required to disclose under the Securities Markets Act and/or the Financial Instruments Trading Act. It was released for publication at 08:00 CEST on 21 August 2014.