Fourth quarter and year-end report 2017
- Net sales in the fourth quarter 2017 rose to MSEK 2,060.6 (1,507.6), of which newly acquired Manor Farm accounted for MSEK 430.5. Excluding Manor Farm, the increase was 8 percent. Net sales increased in Sweden, Denmark and Finland but declined in Norway.
- Adjusted operating income* in the quarter increased to MSEK 115.5 (32.9), corresponding to a margin of 5.6 (2.2) percent. Manor Farm is included with MSEK 24.2.
- Apart from Manor Farm, the improvement in adjusted operating income* refers to compensation from third party in a total amount of MSEK 26.7 for part of the campylobacter effects, lower impact from the bird flu, and improved adjusted operating income* in Denmark and Finland.
- Income for the period increased to MSEK 58.3 (0.7) and earnings per share were SEK 0.89 (0.01).
- Operating cash flow was MSEK 99.1 (29.0), positively impacted by higher income and lower capital expenditure. Net interest-bearing debt increased to MSEK 1,885.6 (1,515.4) due to the acquisition of Manor Farm.
- The Board proposes a dividend for 2017 of SEK 1.80 (1.35) per share, corresponding to an increase of 33 percent.
| MSEK | Q4 2017 | Q4 2016 | Change | 2017 | 2016 | Change |
| Net sales | 2,060.6 | 1,507.6 | 37% | 7,100.9 | 5,967.4 | 19% |
| Adjusted EBITDA* | 180.6 | 88.4 | 104% | 559.0 | 451.6 | 24% |
| Depreciation and amortization | -67.6 | -55.2 | 22% | -232.4 | -201.3 | 15% |
| Adjusted operating income* | 115.5 | 32.9 | 251% | 329.1 | 251.6 | 31% |
| Non comparable items | -25.0 | -11.6 | - | -34.4 | -13.4 | 157% |
| Operating income | 90.5 | 21.3 | 325% | 294.7 | 238.2 | 24% |
| Finance net | -17.0 | -21.6 | -21% | -71.1 | -71.3 | 0% |
| Income after finance net | 73.5 | -0.3 | 24590% | 223.6 | 166.9 | 34% |
| Income tax expense | -15.2 | 1.0 | -1620% | -55.7 | -35.5 | 57% |
| Income for the period | 58.3 | 0.7 | 8224% | 167.9 | 131.4 | 28% |
| Adjusted EBITDA margin* | 8.8% | 5.9% | - | 7.9% | 7.6% | - |
| Adjusted operating margin* | 5.6% | 2.2% | - | 4.6% | 4.2% | - |
| Earnings per share, SEK | 0.89 | 0.01 | 8818% | 2.73 | 2.21 | 24% |
| Adjusted return on operating capital employed* |
11.1% | 10.3% | - | 11.1% | 10.32% | - |
| Return on equity | 13.8% | 13.9% | - | 13.8% | 13.9% | - |
| Operating cash flow | 99.1 | 29.0 | - | 213.1 | 112.7 | - |
| Net interest-bearing debt | 1,885.6 | 1,515.4 | 24% | 1,885.6 | 1,515.4 | 24% |
* Adjusted for non-comparable items, see page 5.
CEO statement
The Group achieved strong organic growth and improved margins overall in 2017. Excluding newly acquired Manor Farm, net sales for the full year increased by 9 percent, and by 9 percent pro forma compared to the full year 2016. Operations in Sweden and Denmark showed an increase in net sales of 7 and 8 percent respectively, while net sales in Norway rose by 3 percent and in Finland by 90 percent. Manor Farm achieved growth of 8 percent pro forma. Adjusted operating income for the Group for the full year 2017 improved by 20 percent excluding Manor Farm and by 18 percent pro forma.
The Group’s net sales in the fourth quarter amounted to MSEK 2,060.6, an increase of 8 percent excluding Manor Farm and by 7 percent pro forma compared to the corresponding quarter last year. Sweden and Denmark achieved growth of 5 and 22 percent respectively, while net sales in Norway declined by 7 percent. Net sales in Finland increased by 29 percent and was in line with the average for the first three quarters 2017.
Adjusted operating income for the Group in the fourth quarter amounted to MSEK 115.5 compared to MSEK 32.9 in the fourth quarter 2016. The weak result last year was negatively impacted by approximately MSEK 29 related to the bird flu. After a challenging 2017, it is satisfying to report that the impact of the bird flu is no longer significant and that the level of campylobacter in our supply chain in Sweden is record low. Our risk management process has been effective resulting in compensation from third party in a total amount of MSEK 26,7 in the quarter for part of the campylobacter effects on adjusted operating income.
The Swedish operation reported adjusted operating income of MSEK 40.8 in the fourth quarter compared to MSEK 27.5 in the fourth quarter last year. The bird flu had a negative impact of approximately MSEK 6 compared to approximately MSEK 14 last year. We expect a negative impact of the bird flu in the first quarter 2018 of approximately MSEK 1-3 per month.
In addition to the effects of the bird flu, adjusted operating income for the Swedish operation was also impacted by weaker than normal demand for chilled products in the retail channel. The decline in demand is mainly caused by the attention paid to the unusually high levels of campylobacter recorded in the first half of 2017. At the same time, the producers have not yet fully adjusted their volumes which has led to oversupply and pressure on prices. Of the above mentioned third party compensation, MSEK 11.7 is included in adjusted operating income for Sweden. We do not anticipate to receive any further compensation during the year. We also expect continued soft demand for chilled products in Sweden.
The Danish operation showed a continued positive trend in income in the fourth quarter. Adjusted operating income amounted to MSEK 34.6 compared to MSEK 13.6 in the fourth quarter last year. The strong result was mainly achieved through extra deliveries of ready to eat products to one of our large European customers. Income was also favourably impacted by unusually high export prices.
Based on the positive reception of the new premium products under De Danske Familiegårde brand, we have decided to recruit additional sales persons to drive the concept and to significantly increase our efforts in marketing during 2018. 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. We also expect a decline in export prices from the current unusually high level.
The operation in Norway achieved a continued strong result in the quarter. Adjusted operating income amounted to MSEK 30.1 compared to MSEK 27.8 in the fourth quarter last year, corresponding to a margin of 8.3 percent compared to 7.2 percent last year. The positive trend during the last quarters has been driven by a strong and innovative product offering in combination with increased plant efficiency. Given the current contract dynamics in the Norwegian market, we expect stable market shares during 2018.
I am pleased to report a strong fourth quarter for Manor Farm with adjusted operating income of MSEK 24.2 (15.6 proforma). The positive trend in income was driven by unusually strong Christmas sales, a favourable product and channel mix as well as higher yield in production. The integration process is proceeding according to plan. I appreciate the commitment and positive contributions from the management team for Ireland. There is potential for efficiency improvements in a number of areas. We expect to decide on a capital expenditure program during the first half of 2018 aimed at increasing efficiency in the production plant.
Adjusted operating income for the Finnish operation was negative and amounted to MSEK -8.1 in the fourth quarter compared to MSEK -20.4 in the fourth quarter last year. Although the result in Finland has been disappointing, it was satisfying to see an improvement of MSEK 4.6 from the third quarter 2017. As capacity utilization is still low, the depreciation-to-sales ratio is almost twice as high as for our other operations. However, the plant is very modern and the requirements regarding capital expenditure and working capital going forward will be limited. We continue to implement the measures necessary to reach break-even as soon as possible.
Through investments in Sweden and Norway in the past years, we have achieved substantial growth in net sales of ready to eat products. In order to meet a further increase in demand for these products from our large customers, such as McDonalds, we have decided to expand capacity at our plant in Farre, Denmark.
The Group’s net interest-bearing debt declined from the third quarter and amounted to MSEK 1,885.6 at year-end. We continue our efforts to reduce working capital from the high level in 2017 and to further strengthen the cash flow. We expect capital expenditure to amount to approximately MSEK 350 in 2018, of which MSEK 150 refers to the above mentioned capacity expansion in Farre. The total amount for capital expenditure may be revised later in the year after the decision on the investment program for Ireland.
Although the Group’s income and margin short term will be affected by a number of factors mentioned above, I am convinced that we will see a more positive trend in the second half of the year. We are also well positioned to achieve organic as well as structural growth in the coming years.
The Board has decided to propose a dividend for 2017 of SEK 1.80 per share, which corresponds to an increase of 33 percent from SEK 1.35 last year.
Leif Bergvall Hansen
Managing Director and CEO
Conference call
A conference call for investors, analysts and media will be held on 20 February 2018 at 10.00 AM CET.
The dial-in numbers are:
UK: 020 3059 8125
Sweden: +46 8 50 510 036
Other countries: +44 20 3059 8125
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.
Further information
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 |
Financial calendar
- First quarter report 2018 3 May 2018
- 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 20 February 2017.
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