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Emmi Group
Financial year 2016
Results presentation
Lucerne, 22 March 2017
WelcomeKonrad Graber, Chairman of the Board of Directors
Overview of the financial year 2016 Urs Riedener, CEO
Annual results 2016Jörg Riboni, CFO
Success factors Urs Riedener, CEO
OutlookUrs Riedener, CEO
Financial year 2016, Results presentation, 22 March 2017 3
Welcome Konrad Graber
Emmi had a good run despite icy slopes
Domestic market Switzerland: High pressure on sales and prices, as expected
Exports from Switzerland: Brands have potential
Business division Europe: Brexit dampens dessert business, lower AOP exports
Business division Americas: good growth in the US and in Tunisia
Foreign business contributes heavily to improvement in earnings
WelcomeKonrad Graber, Chairman of the Board of Directors
Overview of the financial year 2016 Urs Riedener, CEO
Annual results 2016Jörg Riboni, CFO
Success factors Urs Riedener, CEO
OutlookUrs Riedener, CEO
Financial year 2016, Results presentation, 22 March 2017 5
2016 at a glance
Sales under pressure, but significantly better earnings
Net sales CHF 3,259 millionGrowth of 1.4 % (organic: -1.0 %)
EBIT CHF 203 millionIncrease of 7.3 % EBIT margin 6.2 % (2015: 5.9 %)
Net profit CHF 140 millionIncrease of 16.7 % Net profit margin 4.3 % (2015: 3.7 %)
Financial year 2016, Results presentation, 22 March 2017 6
2016: Two interesting acquisitions in the first half of the year
Milestones January to June
January June
Caffè Latte in
Adelboden
Acquisition
Bettinehoeve
New campaign
LuzernerRahmkäse
New seasonal
Yoqua varieties
AcquisitionCowgirl Creamery
Young professionals
back in Switzerland
Financial year 2016, Results presentation, 22 March 2017 7
2016: Progress in SAP introduction in the second half of the year
Milestones July to December
July December
Caffè Latte
in cans
Facelift
Visitor Centre
Launch of
porridge
Strengthening of
goat's milk in CH
International
awards
Final straight for
SAP introduction
Financial year 2016, Results presentation, 22 March 2017 8
OneERP: project for the introduction of SAP
Successful start to roll-out phase, completion January 2017
2015 20162014 2017
Financial year 2016, Results presentation, 22 March 2017 9
Sales split by business division
CH and Americas in line with expectations, Europe falls short of forecast
Switzerland
Sales CHF 1,741 million
– Decline of 2.9 %
Americas
Sales CHF 866 million
– Growth of 8.5 % (organic: +2.8 %)
Europe
Sales CHF 519 million
– Growth of 6.5 % (organic: -0.2 %)
Global Trade
Sales CHF 133 million
– Decline of 1.7 % (organic: -1.0 %)
Net sales Group 2016: CHF 3,259 million
Financial year 2016, Results presentation, 22 March 2017 10
Sales by region
Business division Switzerland accounts for slightly more than half of sales
Top 5, sales:
Switzerland
USA
Spain
Germany
Tunisia
Switzerland
53 % (CHF 1,741 million)
Americas
27 % (CHF 866 million)
Global Trade
4 % (CHF 133 million)
Europe
16 % (CHF 519 million)
Net sales Group 2016: CHF 3,259 million
Financial year 2016, Results presentation, 22 March 2017 11
Sales by product group
Cheese and dairy products are the two largest segments
Fresh products
25 % CHF 800 million
Cheese
31 % CHF 1,015 million
Dairy products
31 % CHF 1,011 million
Powder/concentrates
3 % CHF 97 million Net sales Group 2016: CHF 3,259 million
Other products/services
5 % CHF 159 million
Fresh cheese
5 % CHF 177 million
Financial year 2016, Results presentation, 22 March 2017 12
Facts and figures 2012 to 2016
Record result thanks to increase in profits in international markets
in CHF million 2016 2015 2014* 2013 2012
Net sales 3,259 3,214 3,404 3,298 2,981
Earnings before interest, taxes, depreciation and
amortisation (EBITDA)
as % of net sales
328.2
10.1
314.9
9.8
293.1
8.6
280.1
8.5
271.4
9.1
Earnings before interest and taxes (EBIT)
as % of net sales
202.7
6.2
188.9
5.9
170.7
5.0
160.0
4.9
146.3
4.9
Net profit
as % of net sales
140.3
4.3
120.2
3.7
109.4
3.2
97.6
3.0
90.3
3.0
Full-time equivalents as at 31.12. 5,779 5,405 5,305 5,217 5,074
Volume of milk processed in million kg 1,688 1,613 1,667 1,430 1,181
*2014: EBIT and net profit adjusted for non-recurring effects of CHF -34.5 million and CHF -30.5 million respectively. These are attributable to the impairment charge in Italy (Trentinalatte) less the extraordinary gians and losses on the sale of companies, property, plant and equipment.
Financial year 2016, Results presentation, 22 March 2017 13
Sales performance: Group
Consolidated growth of 1.4 %, organic decline of 1.0 %
Group sales
in CHF million
Sales
2015
Acquisition
effect
Currency
effect
Organic
growth
Sales
2016
3,214 3,259
+2.3% +0.1% -1.0%
+1.4 %
Financial year 2016, Results presentation, 22 March 2017 14
Sales performance: Business division Switzerland
Swiss business under pressure
Sales Business division Switzerland
in CHF million
Cheese
Sales CHF 480.5 million, -4.6 % - Growing sales of Luzerner Rahmkäse and
Le Petit Chevrier
- Stable sales of Kaltbach
- Drop in sales of AOP cheeses
- Decline of trading business with Italian cheese
Fresh products
Sales CHF 346.2 million, -1.2 %- Growth for Caffè Latte and Yoqua
- Declining own brands
Dairy products
Sales CHF 663.4 million, -2.2 % - Smaller volumes
- Lower milk prices
Sales
2015
Acquisition
effect
Currency
effectOrganic
growthSales
2016
1,793 1,741
+0.0% +0.0% -2.9%
-2.9 %
Financial year 2016, Results presentation, 22 March 2017 15
Sales performance: Business division Americas
Tunisia and USA with good organic growth
Sales Business division Americas
in CHF million
CheeseSales CHF 361.9 million, +9.8 % (org. +3.6 %)- Growth in locally manufactured cheese- Growth for Kaltbach
- First US-exports of Scharfer Maxx via Emmi Roth USA- Drop in sales of AOP cheeses- Positive acquisition effect from Cowgirls & Canada
Fresh products Sales CHF 200.5 million, +14.2 % (org. +1.7 %)- Growth in Tunisia- Declines of Caffè Latte in Spain- Positive acquisition effect from Redwood Hill
Dairy products Sales CHF 237.1 million, -0.8 % (org. +0.3 %)- Growth in Tunisia- Declines in Spain and Chile
Sales
2015
Acquisition
effect
Currency
effect
Organic
growth
Sales
2016
798 866
+5.5% +0.2%+2.8%
+8.5 %
Financial year 2016, Results presentation, 22 March 2017 16
Sales performance: Business division Europe
Brexit weakens dessert exports from Italy
Sales Business division Europe
in CHF million
Sales
2015Acquisition
effect
Currency
effect
Organic
growth
Sales
2016
487 519
+6.4% +0.3% -0.2%
Cheese
Sales CHF 124.4 million, +1.5 % (org. +0.1 %)- Higher exports of Kaltbach and Der Scharfe Maxx
- Drop in sales of AOP cheeses
Fresh products
Sales CHF 206.9 million, -2.5 % (org. -0.6 %)- Growth for Caffè Latte in DE, AT and UK
- Growth of Onken in the UK
- Declines in the dessert business of A-27
Dairy products
Sales CHF 98.2 million, +7.7 % (org. +4.1 %)- Growth for Gläserne Molkerei
+6.5%
Other segments- Significant declines in sales of fresh cheese in Italy
WelcomeKonrad Graber, Chairman of the Board of Directors
Overview of the financial year 2016 Urs Riedener, CEO
Annual results 2016Jörg Riboni, CFO
Success factors Urs Riedener, CEO
OutlookUrs Riedener, CEO
Financial year 2016, Results presentation, 22 March 2017 18
Net sales to EBIT
Highest EBIT in Emmi's history
in CHF million 2016 2015 D in %
Net sales 3,258.8 3,213.9 1.4
Gross profit
as % of net sales
1,179.5
36.2
1,117.7
34.8
5.5
Other income 4.7 6.7 -28.9
Operating expenses -856.1 -809.4 5.8
EBITDAas % of net sales
328.210.1
314.99.8
4.2
Depreciation and
amortisation-125.8 -126.7 -0.7
Write-back of negative
goodwill
0.3 0.6 -50.8
EBIT
as % of net sales
202.76.2
188.95.9
7.3
Further strengthening of gross profit margin by 1.4 percentage points
Higher operating expensesprimarily due to acquisitions
EBIT exceeds CHF 200 million for the first time
EBIT margin 6.2 %
Financial year 2016, Results presentation, 22 March 2017 19
Net sales to gross profit
Improved gross profit and gross profit margin
in CHF million 2016 2015 D in %
Net sales 3,258.8 3,213.9 1.4
Gross profit
as % of net sales
1,179.5
36.2
1,117.7
34.8
5.5
Greater gross profit margin thanks to:
Increased productivity
Increasing importance of brandproducts (better mix)
Financial year 2016, Results presentation, 22 March 2017 20
Overview of operating expenses
Year-on-year increase in operating expenses
in CHF million 2016 2015 D in %
Personnel expenses
as % of net sales
424.5
13.0
402.3
12.5
5.5
Marketing and sales-related
expenses
as % of net sales
129.3
4.0
119.4
3.7
8.3
Occupancy expense,
maintanance & repair, leasing
67.5 64.4 4.7
Energy, operating materials
and supplies
62.8 61.3 2.3
Logistic expenses 92.7 91.6 1.2
Other operating expenses 79.3 70.4 11.3
Operating expenses
as % of net sales
856.1
26.2
809.4
25.2
Higher personnel expenses, caused
above all by acquisitions
Higher marketing investment for
branded products
Other operating expenses: Increase
primarily attributable to the introduction
of SAP
Financial year 2016, Results presentation, 22 March 2017 21
EBIT to net profit
Significant increase in earnings per share
in CHF million 2016 2015 D
EBIT 202.7 188.9 13.8
Income from associates and
joint ventures3.9 1.1 2.8
Financial result -14.6 -22.1 7.5
Earnings before taxes (EBT) 192.0 167.9 24.1
Income taxes
Average tax rate in %
-33.7
17.6
-31.8
19.0
-1.9
Minority interests -18.0 -15.8 -2.2
Net profitin % of net sales
Earnings per share (in CHF)
140.34.3 %
26.23
120.23.7 %
22.46
20.1
3.77
Normalized financial result
Net profit 2016:
CHF 140.3 million (NP margin 4.3 %)
Earnings per share
CHF 26.23 (2015: CHF 22.46)
Financial year 2016, Results presentation, 22 March 2017 22
Cash flow
Operating cash flow steady at high level
in CHF million 2016 2015 D
Cash flow from operating activities 271.9 272.8 -0.9
Investments in tangible assets -92.4 -66.2 -26.2
Investment in OneERP
and other intangible assets -12.1 -14.9 2.8
Other investment activities 7.3 6.9 0.4
Free cash flow 174.7 198.6 -23.9
Acquisition of holdings -93.2 -47.9 -45.3
Cash flow from financing activities and currency translation -63.4 -72.2 8.8
Net change in cash and cash equivalents 18.1 78.5 -60.4
Financial year 2016, Results presentation, 22 March 2017 23
23%
23%
54%
Investments
Investment activity 2016
Total investment 2016: CHF 104.4 million
Replacement investments
SAP enterprise software (Switzerland)
Replacement cooling technology (Emmen, CH)
Replacement spraying tower(Dagmersellen, CH)
New package-washing equipment (Ostermundigen, CH)
Expansion projects
New range of desserts (Emmen, CH)
Expansion of large-holed cheese production
(Landquart, CH)
Expansion of milk processing (Tunisia)
Bottle line further packaging (Emmen, CH)
Rationalisation investments
Automation of fondue packaging (Langnau, CH)
Connection of aseptic filling equipment to cooling tunnel (Emmen, CH)
Automation of packaging line (Rachelli, Italy)
New packaging machine (A-27, Italy)
Financial year 2016, Results presentation, 22 March 2017 24
Key figures for 2016 (1/3)
Net Debt / EBITDA
Solid Net Debt ratio
High financing potential for additional
investment exists
359
295
241
112
71
1.32
1.050.82
0.35 0.22 0
1
2
3
0
50
100
150
200
250
300
350
400
2012 2013 2014 2015 2016
Net Debt Net Debt-/EBITDA-Ratio
Financial year 2016, Results presentation, 22 March 2017 25
Key figures for 2016 (2/3)
Equity ratio
Equity ratio strengthened further
Average invested capital:
CHF 2,054 million
(2015: CHF 1,976 million)
Return on average invested capital
(ROIC): 8.2 % (2015: 7.5 %)
2323 2500 2532 2551 2603
50.2 50.3 51.954.6
57.9
0
10
20
30
40
50
60
70
0
400
800
1200
1600
2000
2400
2800
2012 2013 2014 2015 2016
Bilanzsumme CHF Mio. EK-Quote in %Total assets, CHF mio Equity ratio in %
Financial year 2016, Results presentation, 22 March 2017 26
Key figures for 2016 (3/3)
Dividend, dividend payment
The Board of Directors is proposing to the
General Meeting a 20 % dividend increase
to CHF 5.90
(2015: CHF 4.90)
Pay-out ratio within long-term target range
of 20 % to 25 %16.8818.24
20.4522.46
26.23
3.60 3.80 3.804.90
5.90
21.3 20.8
18.6
21.822.5
0
2
4
6
8
10
12
14
16
18
20
22
24
0
4
8
12
16
20
24
28
2012 2013 2014 2015 2016
EPS Dividende Ausschüttungsquote in %Dividend Pay-out ratio in %
WelcomeKonrad Graber, Chairman of the Board of Directors
Overview of the financial year 2016 Urs Riedener, CEO
Annual results 2016Jörg Riboni, CFO
Success factors Urs Riedener, CEO
OutlookUrs Riedener, CEO
Financial year 2016, Results presentation, 22 March 2017 28
International strategy proves successful
Emmi's strategic pillars
Strengthening of Swiss market
International growth
Cost management
Financial year 2016, Results presentation, 22 March 2017 29
Innovative spirit: part of the corporate history
Innovation supports sales and earnings
2006
2007
2008
Lassi
SwissAlp Cheese
Winzer
KALTBACH Raclette
SwissMüesli
LUZERNER Yogodu
Emminent
GALA Mousse
Financial year 2016, Results presentation, 22 March 2017 30
Establishing leading positions in profitable niches
Premium
Unique
CheeseEmmi Roth, PL
Yogurt PL
Processedcheese
Milk powder Milk,cream,
butter
Mozzarella
AOP
Raclette
Fondue
DessertsBasic
Lactose-free
Energy Milk Organic
yoghurt
DessertsPremium segment
ECLGoat's cheese
Griess-töpfli
SwissMüesli
Cheese spec.Emmi Roth
CheeseCowgirls
Jogurtpur
KaltbachYoQua
Large-hole cheese
Cheese
ChileEx-change-able
Basic
Stracchino Italy
Financial year 2016, Results presentation, 22 March 2017 31
Establishing leading positions in profitable niches: goat's milk
Goat's milk specialities
Short-term growth potential
Long-term growth potential
Short-term measures
Integration of newly acquired companies
Establishment of European network
Expansion of distribution in the US
Medium-term measures
Expansion of distribution in Europe
Innovation in Fresh Products
Expansion of brand business
Financial year 2016, Results presentation, 22 March 2017 32
Establishing leading positions in profitable niches: desserts
Increasing competition, negative currency effects due to weak GBP
Short-term growth potential
Long-term growth potential
Short-term measures
Focus on existing ranges
Growth with "smaller" innovations
Streamlining of range, merging of A-27 locations
Medium-term measures
Differentiation through new interpretation of
existing recipes
Utilising of individual strengths of A-27, Rachelli
and IFF
Financial year 2016, Results presentation, 22 March 2017 33
Establishing leading positions in profitable niches: organic
Consumption of organic products becoming more mainstream
Short-term growth potential
Long-term growth potential
Short-term measures
Securing of required volumes
Launch of Emmi Roth USA organic range
Medium-term measures
Securing of required volumes
Expansion of production capacities in the US
(Cowgirls)
Expansion of Gläserne Molkerei range
Source: ZMP
Financial year 2016, Results presentation, 22 March 2017 34
Higher earnings from international markets
Expansion of Emmi Operational Excellence
Subsidiaries and holdings of Emmi
2015:
Emmi Roth, USA
2014:
Surlat, Chile
2013:
Kaiku, Spain2015:
Vitalait, Tunisia
2017:
Rachelli, Italy
A-27, Italy
2017:
Gläserne Molkerei,
Germany
WelcomeKonrad Graber, Chairman of the Board of Directors
Overview of the financial year 2016 Urs Riedener, CEO
Annual results 2016Jörg Riboni, CFO
Success factors Urs Riedener, CEO
OutlookUrs Riedener, CEO
Financial year 2016, Results presentation, 22 March 2017 36
The market environment in 2017
Influential factors
Switzerland
Innovations
Brand development
Established product concepts
Operational Excellence
Finalisation SAP
Marked price pressure
High import pressure
Retail tourism steadily high
Declining retail business
Economic uncertainty
International
Org. growth (Roth, Kaltbach, lactose-free
products, Caffè Latte)
Markets: USA, Tunisia
Operational Excellence (Tunisia, Spain,
USA, Chile, Italy)
Goat's milk specialities (USA, Europe)
Loss in volume due to negative currency
effects for exchangeable products
Currency developments, e.g. Mexico
Brexit effects
Increasing milk price
Positive
Limiting
Financial year 2016, Results presentation, 22 March 2017 37
Sales growth 2007 to 2016
Growth stems from international markets
International Switzerland
in CHF million
0
500
1,000
1,500
2,000
2,500
2007 2008
3,000
587
2,501
1,914
2,671
625
2,046
2009
2,619
675
1,944
732
1,952
2,684
2010
1,909
2,721
811
1,910
2011 2012
1,842
2013
3,500
2,981
1,139
1,842
3,298
1,863
1,435
53 %
47 %
3,404
1,888
1,516
2014 20162015
3,214
1,421
1,793
1,518
1,741
3,259
Financial year 2016, Results presentation, 22 March 2017 38
Innovation pipeline
In chiller cabinets now
Fresh yogurt flavour reinterpreted
Airy-light mousse
Available in mango, peach and strawberry
& rhubarb
Financial year 2016, Results presentation, 22 March 2017 39
Outlook for 2017
Stabilised sales in Switzerland, slight growth in Europe, significant growth in the US
Organic growth, income targets
Sales Group 1 % to 2 %
Sales Business division Switzerland -2 % to 0 %
Sales Business division Americas 3 % to 5 %
Sales Business division Europe 0 % to 2 %
EBIT in CHF million 195 to 205
Net profit margin 4.0 % to 4.5 %
(Figures assume constant exchange rates and raw milk prices)
Financial year 2016, Results presentation, 22 March 2017 40
Medium-term objectives
Business divisions Switzerland and Europe: slight growth; Americas: significant growth
Organic growth, income targets
Sales Group 2 % to 3 %
Sales Business division Switzerland 0 % to 1 %
Sales Business division Americas 4 % to 6 %
Sales Business division Europe 1 % to 3 %
Net profit margin 4.3 % to 4.7 %
(Figures assume constant exchange rates and raw milk prices)
Questions & Answers
Appendix
Financial year 2016, Results presentation, 22 March 2017 43
Developments in milk prices
Difference between CH and DE milk price shrinking but still considerable
20
25
30
35
40
45
50
55
60
Jan Feb Mrz Apr Mai Jun Jul Aug Sep Okt Nov Dez
Milk price in Switzerland and Germany (conventional dairy milk, in CHF 0.01/kg)
CH 2015 CH 2016 DE 2015 DE 2016 Source: BLW, AMI
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Financial year 2016, Results presentation, 22 March 2017 44
Market price developments for skimmed milk powder and butter
1'500
2'000
2'500
3'000
3'500
4'000
4'500
5'000
5'500Global market prices Western Europe [USD/t]
Source: AMI
Skimmed milk powder
Butter
2009 2010 2011 2012 2013 2014 2015 2016 2017
Upward trend started in the 2nd half of 2016
Financial year 2016, Results presentation, 22 March 2017 45
Milk price development EU – Switzerland
Milk price difference EU – Switzerland in cents/kg milk
[including transport, excluding tax, 4 % fat, 3.3 % protein]
Milk price difference EU – Switzerland A-Milk
Milk price difference EU – Switzerland industrial milk (average)
Financial year 2016, Results presentation, 22 March 2017 46
Guideline price for
A-milk acc. to
system
CHF 60
million(CHF 4,500 per
company)
Agreed milk price system was breached five times in the past two years. This generated CHF 60 million for milk producers.
Milk price system breached several times
2011 2012 2013 2014 2015 2016 2017
BOM guideline price for A-milk and dairy milk price index BLW
(CHF 0.01/kg freight prepaid dairy excl. VAT)
Effective guideline price
for A-milk
Financial year 2016, Results presentation, 22 March 2017 47
Retail tourism remains steadily high
Increase in retail tourism between 2013 and 2015: 6 % (no major change in 2016)
Food supermarkets
Total CHF 2.4 billion
Estimated share of dairy products
approx. 15% = CHF 360 million
Purchases by
Swiss citizens
made abroadTotal CHF 10.7 billion