Fourth quarter and year-end report 2018
20 February 2019
- Net sales increased by 5 percent to MSEK 2,166 (2,061) in the fourth quarter 2018. Net sales increased by 6 percent in Sweden, 4 percent in Denmark, 3 percent in Norway, 5 percent in Ireland and 6 percent in Finland.
- Adjusted operating income[1] decreased by 12 percent to MSEK 102 (116), corresponding to a margin of 4.7 (5.6) percent. Adjusted operating income increased in all segments except for Denmark.
- Income for the period improved to MSEK 73 (58), corresponding to earnings per share of SEK 1.10 (0.89). The increase compared to previous year is referring to a lower tax expense.
- Operating cash flow was MSEK 212 (99), mainly thanks to an improved working capital.
- Net interest-bearing debt decreased by MSEK 180 from 30 September 2018 to MSEK 1,913 thanks to strong operating cash flow.
- The Board proposes a dividend for 2018 of SEK 2.00 (1.80) per share.
Pro forma including the acquired Irish operation[2]
- Including Manor Farm on a pro forma basis, net sales increased by 7 percent for the full year 2018.
- Adjusted operating income[1] for the full year 2018 amounted to MSEK 372 (376 pro forma), corresponding to a margin of 4.2 (4.6 pro forma) percent.
| MSEK | Q4 2018 | Q4 2017 | Change | 2018 | 2017 | Change |
| Net sales | 2,166 | 2,061 | 5% | 8,797 | 7,101 | 24% |
| Adjusted EBITDA[1] | 143 | 181 | -21% | 620 | 559 | 11% |
| Adjusted operating income (EBIT) [1] | 102 | 116 | -12% | 372 | 329 | 13% |
| Non-comparable items[1] | -13 | -25 | - | -49 | -34 | - |
| Operating income (EBIT) | 89 | 91 | -2% | 323 | 295 | 10% |
| Finance net | -15 | -17 | 15% | -86 | -71 | -21% |
| Income after finance net | 74 | 73 | 1% | 237 | 224 | 6% |
| Income tax expense | -1 | -15 | 94% | -33 | -56 | 40% |
| Income for the period | 73 | 58 | 26% | 204 | 168 | 21% |
| Adjusted EBITDA margin[1] | 6.6% | 8.8% | - | 7.1% | 7.9% | - |
| Adjusted operating margin (EBIT) [1] | 4.7% | 5.6% | - | 4.2% | 4.6% | - |
| Earnings per share, SEK | 1.10 | 0.89 | 24% | 3.10 | 2.73 | 14% |
| Adjusted return on operating capital employed[1] | 10.6% | 11.1% | - | 10.6% | 11.1% | - |
| Return on equity | 13.3% | 13.8% | - | 13.3% | 13.8% | - |
| Operating cash flow | 212 | 99 | 114% | 357 | 213 | 68% |
| Net interest-bearing debt | -1,913 | -1,886 | -1% | -1,913 | -1,886 | -1% |
For the previous year, the Irish operation was consolidated during the period 28 August – 30 December 2017.
| Pro forma[2], including Ireland | Q4 2018 | Q4 2017 | Change | 2018 | 2017 proforma | Change |
| Net sales | 2,166 | 2,061 | 5% | 8,797 | 8,207 | 7% |
| Adjusted operating income (EBIT)[1] | 102 | 116 | -12% | 372 | 376 | -1% |
| Adjusted operating margin (EBIT)[1] | 4.7% | 5.6% | - | 4.2% | 4.6% | - |
[1] Adjusted for non-comparable items, see page 12.
[2] The pro forma figures are presented for illustrative purpose in order to show how the segment would have contributed to the Group’s net sales and operating income if it had been part of the Group during the whole of 2017. The pro forma figures have not been audited. See page 3-4.
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, Naapurin Maalaiskana and Manor Farm. Eggs are also produced and sold in Norway. We are approximately 3,000 employees with annual sales of more than SEK 8 billion. For more information, please visit www.scandistandard.com.
CEO statement
The Group’s net sales increased by 7 percent pro forma to MSEK 8,797 compared to MSEK 8,207 pro forma in 2017. Growth in the fourth quarter was 5 percent and net sales amounted to MSEK 2,166. All segments contributed to the growth in the quarter and for the full year.
Adjusted operating income for 2018 amounted to MSEK 372 compared to MSEK 376 pro forma 2017, corresponding to a margin of 4.2 (4.6 pro forma) percent. Adjusted operating income for the fourth quarter amounted to MSEK 102 (116) corresponding to a margin of 4.7 (5.6) percent. Significant raw material cost increases impacted the result by MSEK 85 in the quarter. Price increases already carried out compensated by MSEK 79. During the fourth quarter we reviewed and aligned the practice for depreciation within the Group. The increased useful lifetime of our assets concluded by the analysis will have a positive effect on our operating margin going forward. The effect on adjusted operating income was around MSEK 28 in the fourth quarter 2018. The fourth quarter 2017 had a positive effect of MSEK 27 from third party compensation. In 2019, the quarterly depreciation expense is estimated to be around MSEK 45 (before effects of the implementation of IFRS 16).
Strong development in the chilled and Ready-to-eat categories had a positive contribution to the margin while stock clearance in the frozen category had a negative impact. Thanks to a strong operating cash flow, net interest-bearing debt decreased by MSEK 180 in the quarter to MSEK 1,913.
The Ready-to-eat category continued to grow at a higher rate than the rest of the business in the fourth quarter. With 18 percent of revenue it is about to become our second largest category, as the less profitable frozen category is continuing to decline. Following the recent investment to expand our largest Ready-to-eat plant, we are well positioned to meet a high order intake which bodes well for sales growth and fixed cost dilution within the Ready-to-eat category.
Our segments in Norway, Ireland and Finland all contributed with improved performance for the year and the quarter. Norway has strengthened its margins considerably in the recent years which is largely achieved by factory specialisation and implementing international best practice both within the production of the chilled and frozen categories as well as the Ready-to-eat category in combination with powerful category development initiatives. Although Q4 is seasonally the weakest quarter in Ireland, we managed to deliver a strong result. We also managed to reach the milestone of break-even in Finland. The management team is continuing to strengthen the position in the Finnish market, which is growing fast from a low per capita consumption.
Sweden remained negatively impacted by costs associated with frozen stock clearance. As we have communicated earlier, the remaining excess frozen inventory in Sweden was sold in the fourth quarter at a loss. We see continued strong performance in the fresh market in Sweden and we expect to regain a more normalised margin level in Sweden in 2019. Denmark remained negatively impacted by the measures linked to the establishment of the new brand De Danske Familiegårde and uncovered cost increases in the export portfolio. I expect positive contribution from the new brand and from the merger of our free range and organic chicken business with Rokkedahl Food ApS during 2019.
Given the significant raw material price increases observed in the recent quarter, we have been working strenuously to obtain price increases towards our customers. The way we cooperate with our customers pays off in the current environment, as we already have agreed a number of price increases, while some are still being negotiated. We expect to recover the cost increases on our domestic markets, however with a delay for Ireland.
As previously communicated, we have identified a number of capital projects in Ireland post acquisition aimed at increased efficiency, animal welfare and food safety. We have decided to phase in a number of these investment this year. For the Group, we expect to invest around MSEK 380 in 2019. During the first half of 2019 we will pay the first tranche of three of the earn-out linked to the Manor Farm acquisition.
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. The acquisition has contributed to further geographic diversification and we are positive about our cross-country teams’ ability to deliver benefits through exchanging best practice within the group.
Leif Bergvall Hansen
Managing Director and CEO
Conference call
A conference call for investors, analysts and media will be held on 20 February 2019 at 8.30 AM CET.
Dial-in numbers:
UK: 020 3936 2999
Sweden: 010 884 80 16
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.
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
- Interim report for the first quarter 2019 9 May 2019
- AGM 2019 9 May 2019
- Interim report for the second quarter 2019 21 August 2019
- Interim report for the third quarter 2019 6 November 2019
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 20 February 2019.
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