Emmi inches up sales after strong recovery in second half of 2017

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07 Feb 2018 --- Swiss milk processor and dairy products company Emmi improved group sales by 3.2 percent to CHF 3.36 billion (US$3.5 billion) in 2017, which is a slight rise in annual sales on an organic basis following a recovery in the second half of 2017.

In organic terms, i.e. excluding currency and acquisition effects, this resulted in a growth of 0.5 percent and the performance reflects higher sales in the business divisions Americas (4.1 percent) and Europe (0.8 percent) as well as a decline of 0.6 percent in the business division Switzerland.

According to the company, the strong second half of the year compensated for the weak first six months of 2017, with good cheese sales and the strong US and Tunisian markets making positive contributions.

The forecasted range published in August of -1 percent to 0 percent was therefore exceeded. The same was true for the business division Europe, while the business divisions Switzerland and Americas were in line with expectations.

Success factors included the cheese business in the US (cow’s milk and goat’s milk), Emmi Caffè Latte (particularly in Switzerland, the UK and Spain), Rachelli desserts, organic milk from Gläserne Molkerei and the Tunisian market.

“Emmi recorded an impressive performance in the second half of 2017. The sales growth in the cheese business of the business division Americas and the progress made in the dessert business helped to counteract the import and price pressure in Switzerland,” says Emmi’s CEO Urs Riedener.

“The investments in niche markets such as organic and goat’s milk products as well as the reinforcement of key brands are bearing fruit. The recent acquisitions will provide a further boost to sales.”

Sales in the business division Switzerland fell by 0.6 percent from CHF 1,741.3 million to CHF 1,730.7 million. The price effect was -0.7 percent and the volume effect was +0.1 percent. Emmi had forecasted a sales decline of -2 percent to 0 percent, so sales in the domestic Swiss market were in line with expectations despite price pressure remaining at a high level.

The good second half of the year largely offset the declines in the first six months of 2017. This was due in part to the stronger Swiss retail trade, which posted stable sales for the year as a whole after being at around -1 percent in the middle of the year.

Import and price pressure remained high, impacting, in particular, the cheese and fresh cheese segments, with 4.2 percent more cheese imported from abroad in 2017 than in the previous year.

Sales of dairy products (milk, cream, butter) remained relatively stable overall. In the cheese segment, Luzerner Rahmkäse made gains while AOP cheese posted a decline, reflecting the higher volume of cheese imports mentioned above.

In fresh products, Emmi Caffè Latte, Jogurtpur and Energy Milk saw sales increase, while Yoqua and private labels were down.

The business division Switzerland accounted for 51 percent of group sales (previous year 53 percent).

Meanwhile, there were good sales in Tunisia and the US and progress in Chile.

The business division Americas includes the US, Canada, Chile, Tunisia, Spain (excluding Lácteos Caprinos), France and now also Mexico.

Sales rose by 9.7 percent from CHF 865.6 million to CHF 949.8 million. In organic terms, i.e. adjusted for currency and acquisition effects, this resulted in an increase of 4.1 percent, which is line with the forecasted range of 3 percent to 5 percent.

The positive acquisition effect is attributable to the increased stakes in SDA Chile and Mexideli as well as the acquisitions of Cowgirl Creamery and Jackson Mitchell.

The main reasons for the positive organic growth are the pleasing sales performances in Tunisia and the US, according to the financial statement.

In Tunisia, the yogurts, desserts and milk marketed under the Vitalait brand reported significantly higher sales, which had a positive effect on the dairy and fresh products segments.

The good development in Chile provided a further boost. Emmi is satisfied that the core business in Chile has stabilized, while in the US, locally produced cow’s and goat’s milk cheeses performed well, and Spain saw an increase in sales of Emmi Caffè Latte.

The price war on private label yogurts in Spain and in the cheese segment in France had an inhibiting effect on sales.

In the business division Europe, sales rose by 8.7 percent from CHF 519.0 million to CHF 564.1 million. In organic terms, i.e. adjusted for currency and acquisition effects, this resulted in a growth of 0.8 percent, thereby exceeding Emmi’s expectations.

Based on the modest first half of the year, the company had anticipated a decline of -3 percent to -1 percent. The key drivers behind the positive trend reversal were the sales growth at Gläserne Molkerei and AVH dairy (mainly goat’s milk powder) and the stabilization in the dessert business.

The acquisition effect, which was significantly positive overall, was attributable to the purchase of the stakes in Bettinehoeve and Lácteos Caprinos, the acquisition of Italian Fresh Foods and the sale of the stake in Venchiaredo.

In fresh products, Emmi Caffè Latte in the UK and the Italian specialty desserts from Rachelli performed very well, while in the cheese segment the Kaltbach specialties made gains in Germany, Austria and the UK. By contrast, AOP cheese and Onken yogurts remained under heavy pressure.

Dairy products reflect the sales growth of organic milk specialist Gläserne Molkerei.

The fresh cheese segment was impacted positively by the acquisition-based growth through Bettinehoeve and negatively by falling volumes and prices in Italy. The good performance in the powder/concentrates segment is attributable to higher sales of goat’s milk powder (AVH dairy).

The business division Europe accounted for 17 percent of Group sales (previous year 16 percent).
Business division Global Trade: Economic slowdown in emerging markets
The business division Global Trade primarily comprises direct sales from Switzerland to customers in countries where Emmi has no subsidiaries. These include the Asian and eastern European markets, most South American countries and the Arabian Peninsula.

Emmi will issue its forecast for sales and net profit in 2018 when the figures for the financial year 2017 are published.

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