First quarter report 2020

Strong operating performance – resilience to Covid-19 pandemic

12 May 2020

• Net sales increased by 1 percent to MSEK 2,479 (2,458) in the first quarter 2020. Net sales increased in all segments except for Denmark.

• Adjusted operating income¹⁾ increased to MSEK 117 (110), corresponding to a margin of 4.7 (4.5) per­cent.
• Income for the period decreased to MSEK 35 (72). Earnings per share decreased to SEK 0.51 (1.11). The decrease compared to previous year is mainly referring to higher non-comparable items in the quarter, whereof MSEK 27 was related to Covid-19 pandemic but also to higher financial net mainly driven by currency effects.
• Operating cash flow was MSEK 95 (41). The increase was driven by improved working capital.
• Net interest-bearing debt decreased by MSEK 66 from 31 December 2019 to MSEK 2,134.

¹⁾ Adjusted for non-comparable items, see page 11.
 

CEO statement

Scandi Standard is reporting a strong adjusted result for the first quarter of 2020. Compared to the same quarter last year, net sales increased by 1 percent to MSEK 2,479 and adjusted EBIT increased by 6 percent to MSEK 117. Net sales were deflated by the price adjustments implemented in 2019 to pass through decreased raw material prices for feed. The improved adjusted EBIT was driven by increased volume reflecting strong demand for our products.

Towards the end of the quarter, effects of the Covid- 19 pandemic started to impact our business. During April we experienced an increase of about 7 percent in retail sales as consumers were spending more time at home. Correspondingly, Scandi Standard experienced a drop of about 30 percent in its Foodservice sales. Thanks to the resilience overall consumer demand for our products, I am pleased to report that these effects have broadly offset each other and that prices in our domestic markets generally remain unaffected.

Scandi Standard’s net sales is normally split 60 percent through domestic Retail channels and 20 percent through Foodservice channels. Scandi Standard has executed forceful measures to adjust throughput of products intended for these channels and made plans for alternative sales of specialised products already in stock. Certain plants and production lines focused on Retail sales has been operating during longer hours than normal and we have temporarily closed some production lines focused on Foodservice. Although we observe a partial reversal of these effects in line with lock downs being lifted, we expect the trend to remain for some time.

Scandi Standard is posting Covid-19 related non-comparable items in the first quarter accounts of MSEK 27. These items are primarily driven by cost related to Foodservice for inventory write-down, adjustments to production capacity and bad debt provision. 

Despite a robust balance sheet, a solid financing and significant current headroom to our financial covenants, we have found it prudent to implement precautionary cash preservation measures in case material negative change should incur. The MSEK 147 dividend proposal to the 2020 AGM as noted in the interim report for the fourth quarter 2019 has been withdrawn, the planned level of capital investments in 2020 have been reduced from MSEK 420 to MSEK 300. Further we renewed credit facilities of MSEK 200 and obtained additional facilities of MSEK 200 from our lenders.

I am proud of the way our organisation has rapidly been able to adapt to the current environment. I am confident that the combination of operational and financial measures implemented will allow us to optimise our performance and secure timely deliveries of high-quality products to the customers in the prevailing environment.

I wish to thank all our employees for their flexibility and hard work to secure high quality food supply to our customers in the Nordic region, Ireland and our export markets. In spite of the higher than normal sick leave and increased overtime throughout the group, Scandi Standard has so far continued to deliver a solid performance in manufacturing. I am pleased to report that we have received recognition from customers in all regions for this hard work. The safety and well-being of our employees will however always be our highest priority and several measures, including heightened hygiene measures, have been implemented to safeguard our staff.

During the first quarter we concluded a comprehensive strategic review aimed at identifying the best medium-and long-term path to extract our organic growth and earnings potential. Through the involvement of a broad part of our organisation I am confident that the process absorbed the best ideas and that these were refined through thorough discussions and analysis. Given the modest implications of Covid-19 so far, I expect that we can embark on specific projects and plans without much delay. We are posting MSEK 16 in non-recurring items relating to the strategic review in the first quarter.

As a direct consequence of the process, we have been convinced of the benefits of increased focus on the respective skill sets required within our Ready-to-cook (RTC) and Ready-to-eat (RTE) activities. Following this we have decided to adapt our reporting segments accordingly, to be implemented later this year.

In spite of the turbulence around us, we continue to carefully monitor the structural changes and opportunities within our sector. Following our recent strategic review, I am confident that we are even better suited as an acquisition vehicle in the poultry market. Acquisitions can generate significant benefits for the Group through sharing of best practice with improved efficiency and sustainable operations as well as contribute to increased stability in earnings.

I am pleased to report a good quarter with strong operating performance and the business’ resilience to the ongoing Covid-19 pandemic. Being a key producer of the most affordable main protein source with sales predominantly through the growing retail channel, Scandi Standard has had a good start to the second quarter of 2020. In the absence of material adverse change in the coming months, Scandi Standard will reconsider its current cash preservation measures.

 Leif Bergvall Hansen
Managing Director and CEO
  

Conference call
A conference call for investors, analysts and media will be held on 12 May 2020 at 8.30 AM CET.

Dial-in numbers:
UK: 020 3936 2999
Sweden: 010 884 80 16
US: +1 646 664 1960
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 www.scandistandard.com afterwards.

Further information

  
Financial calendar

     
This interim report comprises information which Scandi Standard is required to disclose pursuant to EU market abuse regulation and the Securities Markets Act. It was released for publication at 07:30 AM CET on 12 May 2020.

About Scandi Standard
Scandi Standard is the leading producer of chicken-based food products in the Nordic region and Ireland. The company produces, markets and sells ready to eat, chilled and frozen products under the well-known brands Kronfågel, Danpo, Den Stolte Hane, Manor Farm and Naapurin Maalaiskana. Eggs are also produced and sold in Norway. We are approximately 3,000 employees with annual sales over SEK 9 billion. For more information, please visit www.scandistandard.com.

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