Third quarter report 2019
Another quarter with strong growth and improved results
6 November 2019
- Net sales increased by 12 percent to MSEK 2,541 (2,263) in the third quarter 2019. Net sales increased in all segments.
- Adjusted operating income2) increased by 23 percent to MSEK 125 (102), corresponding to a margin of 4.9 (4.5) percent.
- Income for the period improved to MSEK 72 (52). Earnings per share rose to SEK 1.12 (0.80). The increase compared to previous year is mainly referring to the improvement in operating income. There were no Non-comparable items in the quarter.
- Operating cash flow was MSEK 90 (18). The improvement is referring to the increased operating income and lower capital expenditure.
- Net interest-bearing debt increased by MSEK 84 from 30 June 2019 to MSEK 2,535.
- 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 | Q3 2019 | Q3 20181) | Change | 9M 2019 | 9M 20181) | Change | LTM | 20181) |
| Net sales | 2,541 | 2,263 | 12% | 7,471 | 6,631 | 13% | 9,637 | 8,797 |
| Adjusted EBITDA2) | 207 | 195 | 6% | 591 | 546 | 8% | 759 | 714 |
| Adjusted operating income (EBIT) 2) | 125 | 102 | 23% | 350 | 277 | 27% | 455 | 381 |
| Non-comparable items2) | - | -12 | - | -13 | -36 | - | -26 | -49 |
| Operating income (EBIT) | 125 | 89 | 40% | 337 | 241 | 40% | 428 | 333 |
| Finance net | -33 | -22 | -49% | -92 | -82 | -12% | -109 | -99 |
| Income after finance net | 92 | 67 | 37% | 244 | 159 | 54% | 319 | 233 |
| Income tax expense | -20 | -14 | -36% | -50 | -32 | -56% | -51 | -33 |
| Income for the period | 72 | 52 | 38% | 194 | 127 | 53% | 268 | 200 |
| Adjusted EBITDA margin2) | 8.2% | 8.6% | - | 7.9% | 8.2% | - | 7.9% | 8.1% |
| Adjusted operating margin (EBIT) 2) | 4.9% | 4.5% | - | 4.7% | 4.2% | - | 4.7% | 4.3% |
| Earnings per share, SEK | 1.12 | 0.80 | 40% | 3.00 | 1.94 | 55% | 4.11 | 3.05 |
| Adjusted return on operating capital employed2) | 10.5% | 9.7% | - | 10.5% | 9.7% | - | 10.5% | 9.7% |
| Return on equity | 16.1% | 12.7% | - | 16.1% | 12.7% | - | 16.1% | 13.2% |
| Operating cash flow | 90 | 18 | 398% | 270 | 124 | 117% | 500 | 354 |
| Net interest-bearing debt | -2,535 | -2,577 | 2% | -2,535 | -2,577 | 2% | -2,535 | -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 13.
CEO statement
I am proud to present another quarter of strong growth and improved results. Compared to the third quarter last year, our top line increased by 12 percent, to MSEK 2,541, and our adjusted EBIT increased by 23 percent to MSEK 125, implying a margin of 4.9 percent.
We continue to see a strong demand for our products in all our markets. Although our top line growth is somewhat inflated due to the successful implementation of price increases to mitigate corresponding increases in raw material costs, our underlying growth is very strong and remains higher than the average organic growth of approximately 6-7 percent annually demonstrated in recent years. This is driven by a good mix between market growth, increased market share and a more favorable product portfolio driving price realization. Given the increased product prices to consumers, I am particularly pleased to report a quarterly volume growth of 4 percent.
The strongest growth was generated in the Ready-to-eat product category (31 percent) and in the Ready-to-cook Chilled product category (13 percent). We continue to observe a decline in the less profitable Ready-to-Cook Frozen product category (-9 percent) and the export category grows at a slower pace than the categories with better profitability.
In term of sustainability and food safety metrics, we strive to be a leader in the European poultry space. In order to secure further advances in these areas, we have set ambitious long-term targets and intermediate milestones. I am looking forward to reporting our progress in the coming periods. We are also putting increased emphasis on communicating our work in these areas and the attractive features of poultry products in general. Several recent consumer campaigns to this end have been very well received, and we see the increasing consumer awareness of our sustainability metrics with poultry as a positive key driver for our sales.
During the last years we have gained market share in our home markets through the introduction of new innovative, healthy 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 long-term growth. 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. Based on the improvements made in the third quarter I am pleased to report another step towards the earnings potential inherent in our business model.
As we have previously communicated, we are carrying out significant investments in our business in Ireland this year. These investments are part of the overall investment program identified in connection with the acquisition in 2017 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 third quarter our net interest-bearing debt increased by MSEK 84 to MSEK 2,535 compared to the end of the second quarter 2019. The increase was driven by the earn out payment of MSEK 133 paid to the former owners of Manor Farm. When adjusting for this, our net debt decreased by MSEK 49. Operating cash flow amounted to MSEK 90 compared to MSEK 18 for the same quarter last year. 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 example 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 6 November 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 www.scandistandard.com 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 fourth quarter 2019 February 7, 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 6 November 2019.