First quarter report 2018
- Net sales increased by 33 percent to MSEK 2,116 (1,594) and adjusted operating income* by 36 percent to MSEK 80 (59). The increase in both net sales and adjusted operating income* refers mainly to the newly acquired Irish operation. At constant exchange rates, net sales increased by 30 percent and adjusted operating income* by 35 percent.
- Excluding the Irish operation, net sales increased by 4 percent to MSEK 1,652 (1,594) and by 3 percent at constant exchange rates. Net sales rose in Denmark and Finland, were unchanged in Sweden and declined in Norway.
- Adjusted operating income*, excluding the Irish operation, rose by 2 percent to MSEK 60 (59), corresponding to a margin of 3.6 (3.7) percent. Adjusted operating income* improved in Finland, was unchanged in Denmark and Norway and declined in Sweden.
- The Irish operation, which was consolidated as of 28 August 2017 performed well and contributed with MSEK 464 (-) in net sales and MSEK 20 (-) MSEK in adjusted operating income.*
- Income for the period rose by 47 percent to MSEK 44 (30), and earnings per share were SEK 0.67 (0.50).
- Operating cash flow was MSEK 27 (5), positively impacted mainly by the higher income. Net interest-bearing debt increased by MSEK 53 from 31 December 2017 and amounted to MSEK 1,939 (1,521). The increase from the previous year refers mainly to the acquisition of the Irish operation.
|MSEK||Q1 2018||Q1 2017||Change||LTM||2017|
|Adjusted operating income* (EBIT)||80||59||36%||350||329|
|Non comparable items||-||-1||-||-33||-34|
|Operating income (EBIT)||80||58||38%||317||295|
|Income after finance net||55||39||41%||240||224|
|Income tax expense||-11||-9||22%||-58||-56|
|Income for the period||44||30||47%||182||168|
|Adjusted EBITDA margin*||7.0%||7.1%||-||7.8%||7.9%|
|Adjusted operating margin* (EBIT)||3.8%||3.7%||-||4.6%||4.6%|
|Earnings per share, SEK||0.67||0.50||36%||2.92||2.73|
|Adjusted return on operating capital
|Return on equity||13.0%||12.1%||-||14.1%||13.8%|
|Operating cash flow||27||5||-||235||213|
|Net interest-bearing debt||1,939||1,521||27%||1,939||1,886|
|Proforma, including Ireland||Q1 2018||Q1 2017
|Adjusted operating income* (EBIT)||80||75||7%||381||376|
|Adjusted operating margin* (EBIT)||3.8%||3.7%||-||4.6%||4.6%|
*Adjusted for non-comparable items, see page 12.
The Group’s net sales increased strongly in the quarter driven by the acquisition of Manor Farm, the leading chicken producer in the Republic of Ireland, and good organic growth. Investments in product development continued and we launched a number of new, innovative products. The Group strengthened its position in all our home markets.
The operations in Denmark and Finland both generated strong growth, while net sales were unchanged in Sweden and declined in Norway. Net sales for Manor Farm increased by 10 percent pro forma. Including Manor Farm, the Group's net sales for the quarter increased by 5 percent pro forma to MSEK 2,116.
The adjusted operating margin was largely unchanged in Denmark and Norway, but declined in Sweden. The margin in Finland improved and we took another step towards reaching break even. Manor Farm achieved an increase in adjusted operating income of 25 percent pro forma, corresponding to a margin of 4.3 percent. Including Manor Farm, the adjusted operating income for the Group increased by 7 percent pro forma to MSEK 80.
The share of value-added products of total net sales increased significantly compared to the first quarter 2017 pro forma. Chilled products grew by 9 percent pro forma and ready-to-eat products by 21 percent pro forma. The growth in retail sales was somewhat lower than the overall growth in the Group’s net sales, while net sales in the food-service channel rose by 20 percent.
Net sales in Sweden were flat and the adjusted operating margin was 4.8 percent compared to 5.4 percent in the previous year. The weak performance was mainly due to continued oversupply of chicken in the market, a high inventory level and a less favourable product mix with a higher share of frozen products that are less profitable. I do not expect any improvement in the market situation in Sweden in the second quarter. However, we are seeing some signs of an increase in demand for chilled products and expect the market to gradually normalise in the second half of the year. The trade restrictions due to the bird flu had a negative impact on adjusted operating income of approximately 6 MSEK in the quarter. As previously communicated, we expect a continued negative impact on operating income of approximately MSEK 1-3 per month in 2018 until the remaining trade restrictions have been lifted.
Net sales in Denmark increased by 9 percent to MSEK 635 compared to the first quarter in the previous year. The growth was mainly driven by higher sales in the retail channel and of ready-to-eat products. The adjusted operating margin was 3.5 percent, which was slightly lower than in the previous year. Based on the positive reception of the new premium products under De Danske Familiegårde brand, we have recruited additional sales persons and are making significant investments in marketing to drive the concept. Although I am confident that these investments in the medium to long term will add value to both the category and the Group, they will have a negative impact on income short term.
Net sales in Norway amounted to MSEK 362 and the adjusted operating margin was 7.2 percent compared to 7.0 in the previous year. The Norwegian operation again reported the highest margin in the Group. Efficiency in production has increased significantly and the product range has been strengthened. Net sales declined by 7 percent as a result of a planned rationalization of the product range for the food service channel in order to increase efficiency in production. Net sales in the retail channel showed a continued positive trend. Apart from the effects from the rationalization of the product range, we expect net sales in Norway to increase in line with the growth in the market in the coming quarters.
I am very satisfied with the performance of Manor Farm in the quarter, delivering a growth in net sales of 10 percent pro forma to MSEK 464. The adjusted operating margin was 4.3 percent compared to 3.7 percent pro forma in the previous year (corresponding to an adjusted operating margin before amortization of 5.8 percent compared to 5.5 percent in the previous year pro forma). The ongoing performance of the operation and the prospects for improvements that have been confirmed during the integration process are encouraging. I am pleased to welcome Vincent Carton from now on as a member of Group Management.
The business is Finland showed a continued strong growth in net sales of 51 percent compared to the first quarter in 2017 and by 17 percent compared to the fourth quarter in 2017. The growth was driven by an improved yield in production and an improved product mix. We have seen a sequential improvement in earnings in the last quarters and can now for the first time report a positive adjusted EBITDA. The adjusted operating income was still negative, however, and amounted to MSEK -5. We continue to implement the measures necessary to reach our first goal of break-even as soon as possible and expect to see continued improvements in the coming quarters.
We are carefully following the structural changes in our sector and believe that we are ideally positioned to take part of the consolidation of the European poultry market. We believe the acquisition of Manor Farm is a good illustration of how we can create value and stability for our shareholders.
Net interest-bearing debt increased marginally in the quarter due to higher net capital expenditure of MSEK 90, which was 32 percent above depreciation. Capital expenditure related to the capacity expansion within ready-to-eat products in our plant in Farre in Denmark amounted to approximately MSEK 40 in the quarter and is estimated to amount to approximately MSEK 150 in total. The expansion of Farre is expected to be completed in the beginning of the third quarter 2018. We expect capital expenditure in 2018 to amount to approximately MSEK 350. We are currently finalising the investment plan for Ireland will communicate the total estimated amount for capital expenditure in 2018 when this plan is completed. We also expect to see a gradual release of working capital in 2018, particularly in the second half of the year.
I am pleased that we, in line with our strategy, continued to strengthen our leading position in the premium segment in all our home markets. As mentioned above, value-added products increased significantly as a proportion of net sales compared to the first quarter 2017, particularly the ready-to-eat products. It was also satisfying to see the positive development for Manor Farm despite the work on integration, and to be able to report a continued improvement in earnings in Finland.
Leif Bergvall Hansen
Managing Director and CEO
A conference call for investors, analysts and media will be held on 3 May 2018 at 8.30 AM CET.
UK: 020 3936 2999
Sweden: 010 884 8016
US: 1 845 709 8568
Other countries: +44 20 3936 2999
Slides used in the conference call can be downloaded at www.scandistandard.com under Investor Relations. A replay of the conference call will be available on the web site afterwards.
For further information, please contact:
Leif Bergvall Hansen, Chief Executive Officer Tel: +45 22 10 05 44
Anders Hägg, Chief Financial Officer Tel: +46 72 402 34 90
Henrik Heiberg, Head of M&A, Financing & IR Tel: +47 917 47 724
- Annual General Meeting 22 May 2018
- Second quarter report 2018 22 August 2018
- Third quarter report 2018 31 October 2018
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 3 May 2018.