Third quarter report 2018

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5 November 2018

  • Net sales increased by 24 percent to MSEK 2,263 (1,825). The increase refers mainly to the Irish company Manor Farm, which was acquired as of 28 August 2017. Net sales increased by 5 percent in Sweden, 12 percent in Denmark, 7 percent in Norway and 24 percent in Finland.
  • Adjusted operating income [1]rose by 19 percent to MSEK 100 (84), corresponding to a margin of 4.4 (4.6) percent. Ireland accounted for the major part of the increase, Norway and Finland also achieved improvements.
  • Income for the period amounted to MSEK 53 (47), corresponding to earnings per share of SEK 0.82 (0.75). The increase compared to previous year is, in addition to an improved operating income, referring to improved net finance cost.
  • Operating cash flow was MSEK 50 (114), impacted by higher capital expenditures primarily related to the finalization of the extention of the facility in Farre, Denmark and a small increase in working capital.
  • Net interest-bearing debt increased by MSEK 54 from 30 June 2018 to MSEK 2,093 as a result of the higher capital expenditure and the acquisition of a majority stake in Rokkedahl Food ApS in Denmark which was completed during the quarter. Rokkedahl produces and markets premium chicken and is a good complement to the Group’s growing premium offer in the Danish market.

Pro forma including the acquired Irish operation [2]

  • Including Manor Farm on a pro forma basis, net sales increased by 9 percent. 
  • Adjusted operating income [1] amounted to MSEK 100 (94), corresponding to a margin of 4.4 (4.5) percent.
MSEK Q3 2018 Q3 2017 Change 9M 2018 9M 2017 Change LTM 2017
Net sales 2,263 1,825 24% 6,631 5,040 32% 8,692 7,101
Adjusted EBITDA [1] 170 142 20% 477 379 26% 658 559
Adjusted operating income [1] (EBIT) 100 84 19% 270 214 26% 385 329
Non-comparable items -12 0 - -36 -10 - -60 -34
Operating income (EBIT) 87 84 4% 234 204 15% 325 295
Finance net -19 -26 25% -72 -54 -33% -89 -71
Income after finance net 68 58 18% 163 150 8% 236 224
Income tax expense -15 -11 -29% -33 -40 19% -48 -56
Income for the period 53 47 15% 130 110 19% 189 168
Adjusted EBITDA margin [1] 7.5% 7.8% - 7.2% 7.5% - 7.6% 7.9%
Adjusted operating margin [1] (EBIT) 4.4% 4.6% - 4.1% 4.2% - 4.4% 4.6%
Earnings per share, SEK 0.82 0.75 9% 2.00 1.82 10% 2.89 2.73
Adjusted return on capital employed [1] 10.5% 8.2% - 10.5% 8.2% - 10.5% 11.1%
Return on equity 12.8% 9.5% - 12.8% 9.5% - 12.8% 13.8%
Operating cash flow 50 114 -57% 146 114 28% 245 213
Net interest-bearing debt -2,093 -1,932 -8% -2,093 -1,932 -8% -2,093 -1,886

For the previous year, the Irish operation was consolidated during the period 28 August – 30 September 2017.                                                                                                  

Pro forma [2], including Ireland Q3 2018 Q3 2017 Change 9M 2018 9M 2017 Change LTM 2017
Net sales 2,263 2,082 9% 6,631 6,146 8% 8,692 8,207
Adjusted operating income [1] (EBIT) 100 94 5% 270 261 4% 385 376
Adjusted operating margin [1] (EBIT) 4.4% 4.5% - 4.1% 4.2% - 4.4% 4.6%

[1] Adjusted for non-comparable items, see page 12.
[2] The pro forma figures are presented for illustrative purpose in order to show how the segment would have contributed to the Group’s net sales and operating income if it had been part of the Group during the whole of 2017. The pro forma figures have not been audited. See page 3-4.

The CEO comments on the third quarter 

The Group’s net sales increased by 9 percent pro forma to MSEK 2,263 compared to MSEK 2,081 pro forma in the third quarter 2017, and by 3 percent adjusted for exchange rate effects. All countries contributed to the increase. Adjusted operating profit amounted to MSEK 100 compared to MSEK 94 pro forma in the third quarter 2017, corresponding to a margin of 4.4 (4.5 pro forma) percent.

Our segments in Norway, Ireland (pro forma) and Finland all contributed with improved margins in the quarter. The result in Sweden and Denmark remained weak in the quarter due to costs associated with frozen stock clearance and market investments respectively.

We continue to see a strong sales development in chilled and Ready-to-eat products, partly benefitting from positive currency effect. By customer channel the sales increase is highest in Retail, driven by a strong development in Denmark, but also in Ireland (pro forma) and Sweden. I am pleased to see a positive development in Food Service as well. Adjusted EBIT shows a positive development pro forma despite significant raw material price increases as we have been able to implement price increases combined with a positive sales mix effect

I am pleased to report full recovery of the fresh market in Sweden, which has impacted our margins negatively in the recent quarters. Although the result in Sweden will remain impacted throughout the remainder of the second half of 2018 due to stock clearance of frozen products, the underlying result is clearly improved. This bodes well for obtaining a more normalised margin level in Sweden from 2019.

During 2018 we have implemented robust initiatives in Denmark aimed at de-commoditising a larger part of the product portfolio. Our newly established brand Danske Familiegårde has been very well received thanks to successful product development, strong marketing support and a newly recruited sales team. I expect these front-loaded investments to be converted into a favourable price mix from 2019. Currently about 14% of our domestic retail sales is sold under the brand and we will be pushing to sequentially increase the share in the coming years.

The merger of our free range/organic chicken business in Denmark with Rokkedahl Food is another measure to strengthen the business in Denmark. High end birds, which have been a marginal segment for us in the past, are processed in small series and are well suited for a medium sized processing plant. The combination of the volumes of the businesses further allows economies of scale and I am hence convinced that the category can be successfully developed into a profitable market segment.

We continue to benefit from sharing best practice across markets. A good example is the development in Norway, where we through investments and other optimization initiatives have increased productivity significantly over the last couple of years, something that is also reflected in the increased margins.

Given the significant raw material price increases observed in the recent quarter, we have been working strenuously to obtain price increases towards our clients. I am pleased that our way of cooperating with our customers pays off in the current environment, as we already have agreed some price increases, while some are still being negotiated. We expect to recover the cost increases on our domestic markets. Within our commodity-based export business from Denmark, however, no short-term cost recovery is expected.

We have a clear target of increasing our exposure to the Ready-to-eat category as this segment is fast growing and generates stable strong margins. To facilitate further growth, we have carried out a major expansion of the Farre plant which is dedicated to such products. The MSEK 150 m investment is completed in accordance with budget and the new line has recently been started.

Net interest-bearing debt increased by MSEK 54 in the quarter to MSEK 2,093.The increase was driven by the higher capital exenditures and by the consolidation of the interest bearing liabilities of Rokkedahl Food amounting to MSEK 95. As previously communicated our overall investments in 2018 are estimated to MSEK 350, of which MSEK 337 were spent in the first three quarters. In light of limited investments and release of working capital, we expect a strong cash flow in the fourth quarter.

As previously communicated, we have identified a number of attractive capital project in Ireland post acquisition aimed at increased efficiency, animal welfare, food safety differentiation and debottlenecking. We have decided to phase in a number of these investment next year. For the group, we expect to invest around MSEK 380 in 2019.

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.

Leif Bergvall Hansen
Managing Director and CEO

Conference call
A conference call for investors, analysts and media will be held on 5 November 2018 at 8.30 AM CET.

Dial-in numbers:
UK: 020 3936 2999
Sweden: 010 884 80 16
US: 1 845 709 8568
Other countries: +44 20 3936 2999

Slides used in the conference call can be downloaded at 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, Chief Executive Officer  Tel: +45 22 10 05 44
Anders Hägg, Chief Financial Officer  Tel: +46 72 402 34 90
Henrik Heiberg, Head of M&A, Financing & IR Tel: +47 917 47 724

Financial calendar

  • Interim report for the fourth quarter and full year 2018:    
20 February 2019
  • Interim report for the first quarter 2019
9 May 2019

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 CET on 5 November 2018.