Fourth quarter and year-end report 2020

Resilient in a challenging environment

• Net sales decreased by 1 percent to MSEK 2,393 (2,420) in the fourth quarter 2020. At constant exchange rates net sales increased by 3 percent.
• Adjusted operating income¹⁾ increased by 10 percent to MSEK 115 (104), corresponding to a margin of 4.8 (4.3) percent.
• Income for the period decreased to MSEK 21 (42). Earnings per share decreased to SEK 0.32 (0.60). The decrease is mainly driven by higher non-comparable items in the quarter.
• Operating cash flow was MSEK -23 (304). The decrease is mainly due to higher working capital. The operating cashflow amounted to MSEK 476 (536) for the full year.
• Net interest-bearing debt of MSEK 1,933 was at the same level compared to 30 September 2020 and decreased by MSEK 267 compared with the end of the same quarter last year.
• The Board anticipates to propose a total dividend for the financial year 2020 of SEK 2,50 per share, corresponding to MSEK 164 (0). The Board proposes a dividend of SEK 1,25 (0,00) per share, corresponding to MSEK 82 (0) to the Annual General Meeting 2021. The Board intends to summon an Extraordinary General Meeting during the second half of 2021 to propose a second dividend of 1.25 SEK per share.

¹⁾ Adjusted for non-comparable items. see page 15 and page 26.
²⁾ Reclassification of cash flow effect for leasing assets has been made for the year and for comparative figures.

CEO statement

Scandi Standard reports another quarter of underlying growth and a strong operating result. Compared to the fourth quarter last year, our top line increased by 3 percent in local currency. When including currency movement net sales declined by 1 percent, to MSEK 2,393 (2,420), and our adjusted EBIT increased by 10 percent to MSEK 115 (104), implying a margin of 4.8 (4.3) percent.

The strong operating result has been made possible thanks to 2/3 of our revenues arising from Retail chains in our five markets, which has proven resilient to negative Covid-19 effects. Retail demand has remained strong both for our Ready-to-cook and Ready-to-eat products.

Consumers in our five domestic markets are more focused than ever on locally produced products adhering to the strictest animal welfare, food safety and ESG ((Environmental Social and Governance), standards. We are spending considerable resources on continual improvements within a broad range of ESG KPI’s. Based on a platform of good experiences within these areas in the Nordic countries we have made substantial progress also in Ireland, which operated at a European average prior to the 2017 acquisitions. For example, we have reduced the average use of antibiotics from 70 to 25 percent and the lead indicator for animal welfare (foot pad lesions) by 14 percent.

The second wave of Covid-19 pandemic has led to another sudden dive in Foodservice demand and in turn significant oversupply in global export markets. Our export business has been further challenged by prevalence of bird flu in Denmark, Sweden and Ireland causing temporary import bans in some of our most profitable export markets in Asia. Consequently, we experienced a low-price realisation in the export markets and an increase of our inventory. In turn this has led to non-comparable cost of MSEK 16, related to the Covid-19 pandemic with temporarily closing of production lines, and inventory write-downs, and MSEK 15 was related to bird flu with an inventory write-down to current market prices. Following the sudden change in demand, production adjustments have been implemented to adapt to reduced demand in Foodservice and the export market.

I am pleased to report the effects of bird flu are expected to be more than halved compared to what we experienced in 2016/2017. The exposure is reduced significantly as our export share has dropped from 15 percent in 2016 to 8 percent in 2020 of the total net sales. Further, forceful mitigating actions have been implemented such as diversifying the export client network, close cooperation with authorities to secure more targeted import restrictions, and increased capacity to ready-to-cook products. All in all, bird flu is no longer regarded as the challenge it used to be to Scandi Standard.

I remain proud of the way our organisation has rapidly been able to adapt to the sudden and significant changes caused by Covid-19 pandemic in the last year. As the Covid-19 pandemic has recently taken a turn to the worse, taking care of our employees remains top priority. Further, we are focused on mitigating actions to avoid production stops due to quarantined staff and also to adapt production to prevailing demand within different segments. The latter is being managed through tight biosecurity measures, cohorts, comprehensive testing schemes, and contingency plans for maintaining production volume with reduced product spectre. We hope the sum of these efforts will allow us to maintain a high operating performance and secure timely deliveries of high-quality products to the customers in the prevailing environment.

Scandi Standard has decided to embark on a strategy to include plant-based products as a profitable growth avenue for the future. The combination of strong internal skills in areas such as product development, processing and food safety combined with existing infrastructure and a unique customer network in five domestic markets and export markets in Europe provide a great platform to execute such strategy. Plant-based and poultry products are both subject to very strong secular growth trends. Early in Q2 2021 we are launching a small scale of product lines produced in existing plants. Simultaneously we are investing in proprietary IP and considering alternative processing models for the future.

ESG is at the core of what we are doing in Scandi Standard. There is full alignment between success in meeting the strictest ESG targets and our operational and financial success for the group. Poultry stand out in the protein industry and Scandi Standard stand out in the poultry industry. We in the process of enhancing our ESG approach and look forward to hosting an ESG day later this year.                            

Scandi Standard has a strong balance sheet, a solid financing, and a significant available liquidity. Compared to the end of the fourth quarter last year, net interest-bearing debt has been reduced by about MSEK 267 to MSEK 1,933 (2,200). Our capital investment amounted to MSEK 355 for 2020, of which MSEK 94 was spent in the fourth quarter. We expect to spend approximately MSEK 400 during 2021, with flexibility to adjust if required. The 2021 investments are a combination of efficiency, capacity and ESG investments.

To this end the Board anticipates to propose a total dividend for the financial year 2020 of SEK 2,50 per share. The Board proposes a dividend of SEK 1,25 (0,00) per share to the Annual General Meeting 2021. The Board intends to summon an Extraordinary General Meeting during the second half of 2021 to propose a second dividend of 1.25 SEK per share.

Despite the turbulence around us, we continue to carefully monitor the structural changes and opportunities within our sector. We have a proven track record of adding significant value through acquisitions, most notably in product development, processing efficiency, live animal production and improved animal welfare/ESG performance.

Scandi Standard’s business model has proven resilient during 2020. The long-term pattern of strong growth and solid margins in the Retail channel has not been impaired by Covid-19 pandemic and we expect this trend to continue. The high share of retail sales has to a large extent absorbed the sudden and dramatic changes in Foodservice and Export. Due to Covid-19 pandemic we expect poor demand and high volatility to sustain in the Foodservice and export channels for some time. However, we are confident in observing a boost in sales and better profitability from these segments once consumers are more free to move around.

Leif Bergvall Hansen
Managing Director and CEO

Conference call

A conference call for investors, analysts and media will be held on 11 February 2021 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

• Annual general meeting                                                          May 7, 2021

• Interim report for the first quarter 2021                                 May 7, 2021
• Interim report for the second quarter 2021                          August 26, 2021
• Interim report for the third quarter 2021                                November 12, 2021

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 11 February 2021.

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 of more than SEK 9 billion. For more information, please visit www.scandistandard.com.

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