Fourth quarter and year-end report 2019
A year with strong growth and improved results
7 February 2020
- Net sales increased by 12 percent to MSEK 2,420 (2,166) in the fourth quarter 2019. Net sales increased in all segments.
- Adjusted operating income2) was stable at MSEK 104 (104), corresponding to a margin of 4.3 (4.8) percent.
- Income for the period decreased to MSEK 42 (74). Earnings per share decreased to SEK 0.60 (1.11). The decrease compared to previous year is mainly referring to a higher tax expense but also to higher financial net and higher non-comparable items in the quarter.
- Operating cash flow was MSEK 321 (230). The improvement is referring to an improvement in working capital.
- Net interest-bearing debt decreased by MSEK 335 from 30 September 2019 to MSEK 2,200.
- The Board of Directors proposes a dividend of SEK 2.25 (2.00) per share corresponding to MSEK 147 (131).
- 2019 is the first accounting year for which IFRS 16 Leases is applied. The change is treated as a change in accounting principles and the comparison numbers have been adjusted. For further information, see Note 1 and the Scandi Standard AB (publ) Annual Report 2018, Note 31.
| MSEK | Q4 2019 | Q4 2018 1) | Change | 2019 | 2018 1) | Change |
| Net sales | 2,420 | 2,166 | 12% | 9,891 | 8,797 | 12% |
| Adjusted EBITDA2) | 185 | 168 | 10% | 776 | 714 | 9% |
| Adjusted operating income (EBIT)2) | 104 | 104 | -1% | 454 | 381 | 19% |
| Non-comparable items2) | -16 | -13 | -26% | -30 | -49 | 39% |
| Operating income (EBIT) | 87 | 91 | -4% | 424 | 333 | 28% |
| Finance net | -20 | -17 | -19% | -113 | -99 | -13% |
| Income after finance net | 67 | 74 | -10% | 312 | 233 | 34% |
| Income tax expense | -25 | -1 | - | -75 | -33 | - |
| Income for the period | 42 | 74 | -43% | 237 | 200 | 18% |
| Adjusted EBITDA margin2) | 7.6% | 7.7% | - | 7.8% | 8.1% | - |
| Adjusted operating margin (EBIT)2) | 4.3% | 4.8% | - | 4.6% | 4.3% | - |
| Earnings per share, SEK | 0.60 | 1.11 | -46% | 3.60 | 3.05 | 18% |
| Adjusted return on capital employed2) | 11.0% | 9.7% | - | 11.0% | 9.7% | - |
| Return on equity | 14.2% | 13.2% | - | 14.2% | 13.2% | - |
| Operating cash flow | 321 | 230 | 39% | 590 | 354 | 67% |
| Net interest-bearing debt | -2,200 | -2,370 | 7% | -2,200 | -2,370 | 7% |
1) When applicable, adjusted for changed accounting principles according to IFRS 16 Leases, see Note 1 Accounting policies and the Annual Report 2018, Note 31.
2) Adjusted for non-comparable items, see page 14.
CEO statement
In 2019 we experienced strong growth and improved results with net sales growing by 12 percent to MSEK 9,891 and adjusted EBIT growing by 19 percent to MSEK 454. In the fourth quarter our top line increased by 12 percent, to MSEK 2,420, compared to last year, and we report an adjusted EBIT at the same level as previous year of MSEK 104.
We continue to see a strong demand for our products in all our markets. During 2019 our top line growth has been inflated due to the successful implementation of price increases to mitigate corresponding increases in raw material costs, but our underlying growth still remains strong and higher than the average organic growth of approximately 6-7 percent annually demonstrated in recent years. This is driven by a good mix between market growth, increased market share and a more favourable product portfolio driving price realization. I am particularly pleased to report a strong volume growth for the year of 6 percent.
We continue to see a very strong growth in the Ready-to-eat product category, which generated a 34 percent growth for Q4 2019 and a 31 percent growth for 2019. Our marketing efforts combined with significant capacity investments in this area has allowed us to tap into the strong demand in the Ready-to-eat category. This has led to an increase in turnover from less than MSEK 500 in 2015 to MSEK 2,011 in 2019. The Ready-to-cook Chilled product category also contributed with a strong growth of 9 percent for the quarter and of 12 percent for the full year. As for previous quarters, the less profitable Ready-to-cook Frozen and Ready-to-cook Export product categories continued to decrease as proportion of net sales compared to the same quarter the year before, despite some stock clearance in the quarter.
In terms of sustainability and food safety, we strive to be leading in the poultry space. To secure further advances in these areas, we have set ambitious long-term targets and intermediate milestones. I am looking forward to reporting our progress from an already good level in the coming periods. As an example, feed conversion ratios have been improved compared to 2018 corresponding to a reduced feed consumption of 7,200 tons. This means we have saved approximately 250 truckloads of feed. This also corresponds to a reduction in the required farming area by about 1,100 ha making it available for other uses.
During recent years we have gained market shares in our home markets through the introduction of new innovative and healthy products and our focus on improved sustainability work. I am convinced that these drivers will continue to work in our favour and enable us to sustain significant long-term growth. Scandi Standard is uniquely positioned among our competitors in our home markets. We are geographically well diversified, have a skilled organization and a solid structural setup.
As we have previously communicated, we carried out significant investments in our business in Ireland during 2019. These investments are part of the overall investment program identified in connection with the acquisition in 2017 aimed at increasing efficiency, improving animal welfare, food safety differentiation and debottlenecking. For the group, capital expenditure amounted to MSEK 419 in 2019, which is higher than previously communicated mainly due to that some investments have been brought forward. For 2020 we expect investments to remain stable for the Group aimed at facilitating further growth and margin improvements.
During the fourth quarter our net interest-bearing debt decreased by MSEK 335 to MSEK 2,200 compared to the end of the third quarter 2019. The decrease was driven by a seasonal working capital release and increased use of vendor financing, as well as by some temporary effects. Operating cash flow for 2019 was MSEK 590 compared to MSEK 354 last year. We remain committed to finding a good balance between returning capital to our shareholders and reinvesting into profitable growth. For the 2020 Annual General Meeting, the Board has resolved to propose a dividend of MSEK 147 equivalent to SEK 2.25 per share.
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. 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 with the way Scandi Standard is currently positioned with a solid business model of sustainably produced and healthy products. Following the exceptional growth in 2019 we expect a moderate development in the coming quarter. This will allow us to increase the focus on measures aimed at improving margins.
Leif Bergvall Hansen
Managing Director and CEO
Conference call
A conference call for investors, analysts and media will be held on 7 February 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
| For further information, please contact: | |
| Leif Bergvall Hansen, Managing Director and CEO | Tel: +45 22 10 05 44 |
| Julia Lagerqvist, CFO | Tel: +46 72 402 84 02 |
| Henrik Heiberg, Head of M&A, Financing & IR | Tel: +47 917 47 724 |
Financial calendar
|
May 12, 2020 May 12, 2020 August 26, 2020 November 4, 2020 |
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 7 February 2020.
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