Second quarter report 2019

Continued strong growth and improved results

21 August 2019

  • Net sales increased by 10 percent to MSEK 2,472 (2,252) in the second quarter 2019. Net sales increased by 8 percent in Sweden, 20 percent in Denmark, 7 percent in Norway, 13 percent in Finland and remained unchanged in Ireland.
  • Adjusted operating income[2] increased by 24 percent to MSEK 115 (92), corresponding to a margin of 4.6 (4.1) percent. Adjusted operating income increased in all segments.
  • Income for the period improved to MSEK 50 (32). Earnings per share rose to SEK 0.78 (0.49). The increase compared to previous year is mainly referring to the improvement in operating income.
  • Operating cash flow was MSEK 138 (74). The improvement is referring to the increased operating income and lower capital expenditure.
  • Net interest-bearing debt increased by MSEK 40 from 31 March 2019 to MSEK 2,451.
  • 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 Q2 2019 Q2 2018 [1] Change H1 2019 H1 2018 [1] Change LTM 2018 [1]
Net sales 2,472 2,252 10% 4,930 4,368 13% 9,359 8,797
Adjusted EBITDA[2] 194 181 7% 384 351 9% 751 719
Adjusted operating income (EBIT) [2] 115 92 24% 225 175 29% 431 381
Non-comparable items[2] -13  -23 - -13  -23 - -39  -49
Operating income (EBIT) 101 69 46% 212 152 39% 392 333
Finance net -38 -31 -23% -59 -60 1% -99 -99
Income after finance net 64 39 63% 153 92 66% 294 233
Income tax expense -14 -7 -106% -31 -18 -72% -46 -33
Income for the period 50 32 54% 122 74 64% 248 200
Adjusted EBITDA margin[2] 7.8% 8.1% - 7.8% 8.0% - 8.0% 8.2%
Adjusted operating margin (EBIT) [2] 4.6% 4.1% - 4.6% 4.0% - 4.6% 4.3%
Earnings per share, SEK 0.78  0.49 57% 1.88  1.14 66% 3.79  3.05
Adjusted return on operating capital
employed[2]
10.4%  10.0% - 10.4%  10.0% - 10.4%  9.7%
Return on equity 15.6%  14.6% - 15.6%  14.6% - 15.6%  13.2%
Operating cash flow 138  74 87% 179  106 69% 428  354
Net interest-bearing debt -2,451  -2,497 2% -2,451  -2,497 2% -2,451  -2,370

[1] When applicable, adjusted for changed accounting principles according to IFRS 16 Leases, see Note 1 and the Annual Report 2018, Note 31. 
[2] Adjusted for non-comparable items, see page 12. 

CEO statement

The Group reported a continued strong growth and an improved result for the second quarter of 2019. We generated a top line growth of 10 percent to MSEK 2,472 and our adjusted EBIT increased by 24 percent to MSEK 115 compared to the same quarter last year.

The demand for our products continued to flourish in the second quarter and we continued to gain market share and improve our sales mix. Our top line growth was consequently well above the 7 percent average organic growth we have demonstrated over the last five years. The strongest growth was generated in the Ready-to-eat product category (26 percent) and in the Ready-to-cook Chilled product category (10 percent). We continue to observe a decline in the less profitable Ready-to-cook Frozen product category (-10 percent) and the export share continued to decrease in the second quarter.

Poultry products are becoming increasingly attractive to consumers due to taste, environmental profile, favorable pricing and not least a very healthy product compared to most substitutes. During the last years we have gained market share in our home markets through the introduction of new innovative products and our focus on improved sustainability work. I am convinced that these drivers will continue to work in our favor and enable us to sustain significant growth over the longer term.

Scandi Standard is uniquely positioned among our competitors in our home markets. We are geographically well diversified, have a skilled organization and a robust structural setup. During last year we have proven our ability to pass through raw material price changes and I am looking forward to gradually demonstrate the earnings power inherent in our business model.

The majority of our capital investments this year will be directed towards our business in Ireland. The investments are aimed at increasing efficiency, improving animal welfare, food safety differentiation and debottlenecking. For the group, we expect to invest around MSEK 380 in 2019. During the beginning of the third quarter of 2019, we have paid the first tranche for the earn out linked to the Manor Farm acquisition in the amount of MSEK 133.

By the end of the second quarter 2019, our net interest-bearing debt was MSEK 2,451, compared with MSEK 2,497 by the end of the same quarter last year. Operating cash flow was MSEK 138 compared to MSEK 74 in the same quarter last year, mainly driven by higher EBITDA and lower capital expenditure. During the quarter, we returned MSEK 131 (SEK 2.00 per share) to our shareholders and reinvested MSEK 102 in our business. We remain committed to finding a good balance between returning capital to our shareholders and reinvesting into profitable growth.

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 happy with our cross-country teams’ ability to deliver benefits through exchanging best practice within the group.

I am pleased with the way Scandi Standard is currently positioned with a robust business model of sustainably produced, healthy products. Based on the current market outlook, I see good opportunities for incrementally improving returns to the shareholders in the coming periods.

Leif Bergvall Hansen
Managing Director and CEO

Conference call

A conference call for investors, analysts and media will be held on 21 August 2019 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 the web site 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

  • Interim report for the third quarter 2019        November 6, 2019
  • Interim report for the fourth quarter 2019      February 6, 2020
  • Interim report for the first quarter 2020         May 12, 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 21 August 2019.

Tags:

About Us

Scandi Standard is the leading producer of chicken-based food products in the Nordic region and in the Republic of Ireland. We produce, market and sell ready to eat, chilled and frozen products under the well-known brands Kronfågel, Danpo, Den Stolte Hane, Naapurin Maalaiskana and Manor Farm. In Norway eggs are also produced and sold. Since 2013 our family has grown dramatically with a revenue of 7,101 (2017) with approximately 3 000 employees. Vision: Better Chicken for a Better LifeMission: The Scandi Way – The way we work every day to become better and make a difference, promoting health and wellbeing for people, the chickens and our planet.