Third quarter report 2016
3 November 2016
- Net sales increased by 12 percent to MSEK 1,569.9 (1,396.1) and by 13 percent at constant exchange rates. All countries contributed to the growth in net sales.
- Adjusted operating income* declined by 3 percent to MSEK 76.1 (78.7), corresponding to a margin of 4.8 (5.6) percent. Adjusted operating income increased in Sweden and Norway, but declined in Denmark and Finland. Additional costs in Sweden and Norway to meet the strong increase in net sales had a negative impact on the margin.
- Income for the period amounted to MSEK 49.6 (48.5) and earnings per share were SEK 0.83 (0.81).
- Adjusted operating cash flow* declined to MSEK 15.8 (48.4) due to higher capital expenditure to increase production capacity in Sweden and Finland as well as an increase in working capital. Trade receivables increased compared to last year, mainly as an effect of the growth in net sales.
| MSEK | Q3 2016 | Q3 2015 | Change | 9m 2016 | 9m 2015 | Change |
| Net sales | 1,569.9 | 1,396.1 | 12% | 4,459.8 | 4,047.0 | 10% |
| Operating income | 75.4 | 71.4 | 6% | 216.9 | 211.8 | 2% |
| Income for the period | 49.6 | 48.5 | 2% | 130.7 | 135.5 | -4% |
| EPS, SEK | 0.83 | 0.81 | 2% | 2.19 | 2.26 | -3% |
| Adjusted EBITDA* | 124.8 | 126.7 | -2% | 363.2 | 364.5 | 0% |
| Adjusted operating income* | 76.1 | 78.7 | -3% | 218.7 | 223.3 | -2% |
| Adjusted operating margin* | 4.8% | 5.6% | - | 4.9% | 5.5% | - |
| Adjusted income for the period* | 50.3 | 54.1 | -7% | 132.3 | 144.4 | -8% |
| Adjusted EPS, SEK* | 0.84 | 0.90 | -7% | 2.22 | 2.41 | -8% |
| Adjusted operating cash flow* | 15.8 | 48.4 | -67% | 85.5 | 284.7 | -70% |
*) Adjusted for non-comparable items in Q3 2016 of MSEK -0.7 (-7.3) in EBITDA and operating income and MSEK -0.7 (-5.6) in income for the period, and in 9m 2016 of MSEK -1.8 (-11.5) in EBITDA and operating income and MSEK –1.6 (-8.9) in income for the period. Non-comparable items in Q3 2015 and 9m 2015 have been adjusted with MSEK -7.0 in EBITDA and operating income and MSEK -5.4 in income for the period that were previously reported in Q4 2015. See page 3.
CEO Statement
I am pleased to report continued strong growth in net sales in the quarter with an increase of 13 percent at constant exchange rates year over year. Net sales in chilled products grew by 17 percent at constant exchange rates. As in the second quarter, the growth referred mainly to additional distribution in Norway, strong growth in chilled products in Sweden and new or extended listings in Finland.
We continued our efforts in product development and brand building and launched a number of new products that were well received by the consumers. The Group's market share in chilled products was significantly strengthened in Sweden and Norway.
The adjusted operating margin for the Group was lower than last year. The decline was caused by a downturn in adjusted operating income for the Danish operation following continued price pressure in both the local market and on exports, as well as additional costs related to bottlenecks and inefficiencies in the production facility in Finland. The extra efforts made in production in Sweden and Norway to meet the strong increase in net sales also restrained the full impact on margins from the growth in the quarter.
Adjusted operating cash flow was significantly lower than last year as a result of an increase in both capital expenditure and working capital. The increase in capital expenditure refers mainly to an extension of production capacity in Sweden and Finland to secure possibilities for continued strong growth. Trade receivables increased compared to last year, mainly driven by the growth in net sales. Inventory reductions in Denmark and Norway were offset by an increase in inventories in Sweden from a low level at the start of the year.
Net sales for the Swedish operation showed strong growth, mainly within chilled products. Sales were record high in several categories, such as the ready-to-eat Minut products and Minutfilé. We also saw strong growth in sales of our organic chicken under the Bosarpkyckling brand. The adjusted operating margin for the Swedish operation rose from last year as a result of higher volumes and an improved product mix with a higher proportion of chilled products. The rebuilding of the Valla facility to increase capacity was finalized during the quarter, but it will take some time before the targeted productivity levels can be reached.
We also achieved continued strong growth in net sales for the Norwegian operation, mainly referring to the agreement with Coop Norway, under which deliveries started in August 2015, and the new agreement with NorgesGruppen signed earlier this year. The adjusted operating margin in the quarter was negatively impacted by additional costs to meet the strong increase in customer demand and maintain service levels. It is satisfying that we have been able to significantly grow our market share in Norway during the year. Efforts in product development and brand building are also gradually being stepped up. A good example of this is the launch of a premium range of free-range chicken products in the quarter.
Net sales for the Danish operation showed an increase from last year. The adjusted operating margin declined due to continued price pressure in both the local market and on exports. The margin improved from the second quarter of this year as export prices were somewhat more stable in the third quarter. In line with our strategy for the Danish operation, the new management team is focusing less on growing volumes and more on creating value. Our newly signed supply agreement with one of Europe’s leading foodservice providers regarding further processed products is a good example of these efforts.
Net sales for the Finnish operation more than doubled in the quarter as a result of new and extended customer contracts. Adjusted operating income remained negative, however, due to costs for handling bottlenecks and inefficiencies in production. We are continuing our work to increase productivity in the facility and expect to see a gradual improvement over the coming quarters.
It was encouraging to see another quarter with a growth in net sales that was twice as high as the growth in the market. This clearly shows the benefit of our work in product innovation and that our efforts in category management and in building strong customer relations are paying off. We are working on taking the full advantage of this growth and also improve the Group's margin and financial position.
Leif Bergvall Hansen
Managing Director and CEO
Further information
For further information, please contact:
| Leif Bergvall Hansen, Chief Executive Officer |
Tel: +45 22 10 05 44 |
| Tobias Wastensson, Head of Group Finance | Tel: +46 10 456 14 86 |
Financial calendar
- Report for the fourth quarter and full year 2016: 28 February 2017
- Report for the first quarter 2017: 11 May 2017
This interim report comprises information which Scandi Standard is required to disclose under the Securities Markets Act and/or the Financial Instruments Trading Act. It was released for publication at 07:30 CET on 3 November 2016.
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