Interim report, third quarter 2014
Underlying sales growth, but lower margins
Third quarter compared to the same period 2013 pro forma
- Net sales increased by 3 percent to 1,358.9 (1,313.7) MSEK, with strong growth in Sweden offsetting lower sales in Norway. Net sales were flat in constant FX.
- Adjusted* operating income decreased to 66.5 (75.5) MSEK and adjusted operating margin decreased to 4.9 (5.7) percent, mainly due to the termination of a major contract in Norway as of 1 April 2014.
- Significantly lower finance costs following the refinancing of the bank loans in July 2014.
- Adjusted* income for the period increased to 39.1 (21.7) MSEK, and adjusted* earnings per share were 0.65 (0.43) SEK.
- Adjusted* operating cash flow improved to 65.9 (35.9) MSEK, including a further reduction of inventories.
- Acquisition of Bosarpskyckling AB, the leading producer of organic chicken in Sweden, was completed during the quarter.
- Outlook for the full year 2014 has been raised for net sales and lowered for adjusted operating income. See page 3.
Overall, the Group’s performance in the quarter was encouraging in terms of sales. Strong growth in sales in Sweden offset the reduction in sales in Norway from the termination of the ICA Norway contract as of 1 April 2014. Excluding that contract, net sales increased by 12 percent.
Operating income and margin declined because of the termination of the ICA Norway contract. The growth in sales in Sweden has been at lower margins than the lost sales in Norway. We also had some non-recurring costs related to the IPO (Initial Public Offering), although much smaller than in the previous quarter, and have now taken almost all transition costs for the formation of the new Group.
Income for the period and earnings per share grew year on year, benefitting from lower finance costs after the refinancing of the loans in early July. Cash flow showed a strong improvement including the benefit of a further reduction in inventories.
The Swedish operation showed strong growth in net sales and adjusted operating income in comparison to a weak third quarter last year. Margins were, however, affected by higher production costs caused by uneven bird-weight due to slower broiler growth in the unseasonably hot summer weather. The acquisition of Bosarpskyckling AB was finalised during the quarter, and integration has proceeded according to plan. The acquisition complements Kronfågel’s product offering and will further strengthen our position in the premium segment.
Trends in Denmark showed some signs of improvement compared to previous quarters. Net sales showed a good increase within chilled products. Adjusted operating income and margin remained below last year, partly impacted by the Russian import ban which has caused lower prices on some products in export markets in Europe.
The decline in net sales and adjusted operating income in Norway was due to the termination of the ICA contract. This has been offset to some extent by new product listings and sales, although at a slower pace than anticipated. As recently announced, Fredrik Strømmen will be joining as new country manager in Norway from March next year. He has 20 years of experience from several senior positions within branded foods sales and joins us from Orkla. I am delighted to welcome Fredrik to Scandi and I am sure he will contribute to driving further sales growth.
We continue to focus on improving product innovation by capitalising on our strengths in brand and product development. The successful launch of Minutfilé in Sweden earlier in the year was followed by launches of this product in both Denmark and Norway in the quarter. The collaboration with the MAX restaurant chain, which has only just started, has been very successful so far and our co-branded nuggets have become the best-selling product in this category in the Swedish retail market.
On the basis of sales growth year to date, we have raised the outlook for net sales for the full year to be in line with 2013 pro forma. The impact of the termination of the ICA Norway contract and the slower than anticipated replacement of these sales will continue to affect us in the fourth quarter. We have therefore lowered the outlook for adjusted operating income for the full year to be in line with or lower 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 07:30 CET on 28 November 2014.