Scandi Standards AB (publ) interim report January - June 2023
Continued earnings improvement
April – June 2023
- Net sales amounted to MSEK 3,411 (3,056) in the second quarter of 2023. At constant exchange rates net sales increased by 7 per cent.
- Operating income (EBIT) increased to MSEK 121 (42), corresponding to a margin of 3.5 (1.4) per cent.
- Income for the period amounted to MSEK 74 (7). Earnings per share amounted to SEK 1.11 (0.07).
- Operating cash flow was MSEK 272 (135).
January – June 2023
- Net sales amounted to MSEK 6,695 (5,848) in the first half of 2023. At constant exchange rates net sales increased by 10 per cent.
- Operating income (EBIT) increased to MSEK 213 (79), corresponding to a margin of 3.2 (1.3) per cent.
- Income for the period amounted to MSEK 117 (17). Earnings per share amounted to SEK 1.95 (0.18)
- Operating cash flow was MSEK 330 (141).
Significant events after the close of the quarter
- As part of its turnaround process for Denmark, Scandi Standard AB (publ) has on the 18 July 2023 entered into an agreement to divest its majority stake in Rokkedahl Food ApS. The divestment will reduce complexity in production and free up resources to focus on the ongoing turnaround process of our Ready-to-cook business in Denmark.
- In August 2023 Morningstar Sustainalytics published an updated ESG Risk Rating and ranked Scandi Standard 10th out of 360 companies in packaged food.
Key metrics2)
|
|
Q2 2023 |
Q2 2022 |
Δ |
H1 2023 |
H1 2022 |
Δ |
R12M |
2022 |
|
Net sales |
3,411 |
3,056 |
12% |
6,695 |
5,848 |
14% |
12,966 |
12,119 |
|
EBITDA |
230 |
172 |
34% |
426 |
308 |
38% |
839 |
722 |
|
Operating income (EBIT) |
121 |
42 |
189% |
213 |
79 |
170% |
425 |
290 |
|
EBITDA margin % |
6.7% |
5.6% |
1.1ppt |
6.4% |
5.3% |
1.1ppt |
6.5% |
6.0% |
|
EBIT margin % |
3.5% |
1.4% |
2.2ppt |
3.2% |
1.3% |
1.8ppt |
3.3% |
2.4% |
|
Non-comparable items1) |
- |
- |
- |
- |
- |
- |
- |
- |
|
Adjusted EBITDA1) |
230 |
172 |
34% |
426 |
308 |
38% |
839 |
722 |
|
Adjusted operating income (Adj. EBIT)1) |
121 |
42 |
189% |
213 |
79 |
170% |
425 |
290 |
|
Adjusted EBITDA margin1) % |
6.7% |
5.6% |
1.1ppt |
6.4% |
5.3% |
1.1ppt |
6.5% |
6.0% |
|
Adjusted EBIT margin1) % |
3.5% |
1.4% |
2.2ppt |
3.2% |
1.3% |
1.8ppt |
3.3% |
2.4% |
|
Income after finance net |
88 |
18 |
- |
149 |
34 |
- |
300 |
186 |
|
Income for the period |
74 |
7 |
- |
117 |
17 |
- |
239 |
138 |
|
Earnings per share, SEK |
1.11 |
0.07 |
- |
1.95 |
0.18 |
- |
3.79 |
2.02 |
|
Return on capital employed % |
9.3% |
3.2% |
6.1ppt |
9.3% |
3.2% |
3.2% |
9.3% |
6.7% |
|
Return on equity % |
11.0% |
1.1% |
9.9ppt |
11.0% |
1.1% |
11% |
11.0% |
6.2% |
|
Operating cash flow |
272 |
135 |
101% |
330 |
141 |
134% |
385 |
197 |
|
Net interest-bearing debt |
1,976 |
1,949 |
1% |
1,976 |
1,949 |
1% |
1,976 |
1,983 |
|
NIBD/Adj. EBITDA |
2.4 |
3.6 |
-34% |
2.4 |
3.6 |
-34% |
2,4 |
2.7 |
|
Lost time injuries (LTI) per million hours worked |
26.7 |
28.4 |
-6% |
23.3 |
28.2 |
-17% |
24.3 |
27.4 |
|
Feed efficiency (kg feed/live weight) |
1.50 |
1.50 |
0% |
1.50 |
1.50 |
0% |
1.50 |
1.50 |
1) Restated non-comparable items. see note 5.
2) For definition of alternative KPIs. see page 22.
CEO Comments
Once again, Scandi Standard delivered a significant improvement in earnings for the second quarter, with an operating income of MSEK 121 (42). This shows that our continual improvement efforts, aimed at establishing a stable base for profitable and sustainable growth, work even under market conditions that have remained challenging. Scandi Standard’s net sales rose 7 per cent at constant exchange rates to MSEK 3,411 (3,056).
Operating income improved in all segments
Ready-to-cook (RTC) reported sales growth of 13 per cent to MSEK 2,495 (2,199) in the second quarter. The operating income improved to MSEK 48 (-16) despite lower export prices. After a period with reductions in slaughter volumes, it is gratifying to see that we, during the second quarter has been able to increase the slaughter volumes with 5 per cent in a profitable way. While some work remains to return to profitability, I’m proud of the continued improvements in earnings. The increased demand for our products in several of our markets makes me still optimistic about the development of the segment.
During the quarter, we continued to pursue comprehensive change initiatives in our Danish operation, thus reducing the loss in Ready-to-cook in Denmark to MSEK -27, compared with MSEK -46 for the first quarter. Among other things we reduced the proportion of slow-growing birds in our product range in order to satisfy changes in consumer demand. This process will continue in the coming quarters, and we expect to regain balance at the end of the year. As a further step in improving the Danish operation, we divested our majority ownership share in Rokkedahl Food in July 2023, which reduces complexity in production and tied-up capital while we can maintain deliveries of organic products in Denmark.
In 2022 and early 2023, we faced increased costs for feed and gas. While in the second quarter, feed prices stabilised, and a downward trend was noted for a number of other input goods.
Ready-to-eat (RTE) continued to demonstrate robust sales during the quarter, with net sales that increased 3 per cent to MSEK 774 (748) although with lower sales volumes. The operating income improved to MSEK 59 (51). Earnings were positively impacted by MSEK 11 in insurance indemnity related to the fire that damaged our production facility in Farre in April 2022.
An agreement with a large customer outside of our domestic markets ended during the quarter, which will sequentially impact the sales volumes during the coming quarters. We expect a gradual replacement with new, more profitable business. During the period with temporary lower levels of activities in our production facility in Farre, we take advantage of the opportunity for upgrades and prepare for expansion and future growth. The expansion of capacity in Norway has begun, and we expect to start production medio 2024. This is part of our long-term structural work to develop our RTE segment.
Other/Ingredients, our business and product development area aimed at utilising the whole bird and adding value to our products, contributed an operating income of MSEK 24 (18). We continued to develop our business in the segment through increased utilization, and we made use of more products from each bird. The international market prices fell towards the end of the second quarter, and our expectation is that we will see a return to the levels that prevailed prior to the fourth quarter of 2021.
Climate targets validated by the Science Based Targets initiative
We continued to improve our sustainability efforts, and the fact that Scandi Standard’s climate targets have been validated by the Science Based Targets initiative (SBTi) is gratifying. This means that Scandi Standard is one of only a few Swedish food producers who have had their climate targets approved by Science Based Targes initiatives and thus has science-based climate goals that are aligned with the Paris Agreement for promoting reduced climate change. Scandi Standard has two ambitious goals: cutting our emissions in own operations (Scope 1 and 2) in half, and in our value chain (Scope 3) as well, by 2030 with 2021 as a base year. It is also gratifying to see that our sustainability efforts have been recognised by the business community. In August 2023 Morningstar Sustainalytics published an updated ESG Risk Rating and ranked Scandi Standard 10th out of 360 companies in packaged food.
Stable financial position
Operating cash flow improved drastically during the quarter, primarily due to stronger earnings and decreased working capital. The change in working capital was mainly driven of lower inventory levels, partly due to seasonal effect but also a result of our continuous work to ensure a proper balance between production and demand. Investment levels remained low. Net interest-bearing debt totalled, after disbursement of MSEK 75 in dividends to MSEK 1,976, which was somewhat better than at the end of the first quarter. Our previous announcement about investments of approximately MSEK 400 in 2023 still applies, with a priority on increased refinement capacity in RTE and RTC as well as the roll-out of our new business system for the purpose of becoming a more robust and efficient Group.
Positioned for growth
Looking forward, I believe that chicken holds a strong position, in part at the continued expense of other proteins such as pork and beef. I also believe that chicken, with its resource efficiency and low carbon footprint, is part of the solution to the climate crisis and we will continue to push this agenda.
It is gratifying to see that we have taken additional significant steps in the right direction toward restoring historical profitability after a previous tough period for the Group. I expect our continued progress will compensate for somewhat tougher market conditions in RTE and Ingredients.
Although some turnaround measures remain during this autumn, I will now shift focus towards implementing strategies and processes aimed at increasing the long-term value creation in the Group. With increased control over the operation, robust financing and strong market positions, we are well positioned to succeed with this.
Stockholm, 23 August 2023
Jonas Tunestål, Managing Director and CEO, Scandi Standard
Conference Call
A conference call for investors, analysts and media will be held on 23 August 2023 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 recording of the conference call will be available on www.scandistandard.com afterwards.
Further information
For further information, please contact:
Jonas Tunestål, Managing director and CEO and Julia Lagerqvist, CFO
Tel: +46 10 456 13 00
Henrik Heiberg, Head of M&A, Financing & IR
Tel: +47 917 47 724
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 23 August 2023.
Financial calendar
| Interim report for Q3 2023 Interim report for Q4 2023 Interim report for Q1 2024 |
October 26, 2023 February 9, 2024 May 3, 2024 |
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 3,200 employees with annual sales of more than SEK 12 billion.
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