Emmi: Sales targets exceeded in a challenging international environment
02.02.12 07:40

Lucerne, 2 February 2012 - Emmi generated net sales of CHF 2,721.3 million in 2011. This corresponds to an increase of 1.4%. The positive result is thanks to the encouraging performance of its latest acquisitions, to significant growth outside Switzerland, to the strong performance of Emmi Caffè Latte and to the products newly launched in Switzerland. The net profit margin for 2011 will be around 3%.


Emmi generated net sales of CHF 2,721.3 million in 2011. Compared to the prior year (CHF 2,683.7 million), this corresponds to an increase of 1.4%. In organic terms - 'organic' meaning adjusted for the effects of acquisitions and currencies - net sales at Group level fell by -1.9%. This figure is just short of our expectations and is attributable to the adverse economic environment. However, we had decided to stabilize earnings by not aiming for short-term growth.

Net sales in Switzerland fell by -2.1% to CHF 1,909.9 million (prior year: CHF 1,951.9 million). The fall is primarily attributable to activities outside the company's core business, specifically the abandonment of unprofitable logistics services for third parties and lower volumes in trading business. These losses have a positive impact on the financial result. Brand concepts such as Emmi Caffè Latte, Luzerner and Energy Milk posted an excellent performance. Innovations such as Milk Shake, Yogurt Milk and Mozzarella Mini Marinati contributed to this result, as did recent acquisitions Fromalp (2010) and Rutz Käse (2011). Adjusted for acquisitions, sales fell by -3.6%.

In international markets, Emmi achieved a 10.9% increase in sales to CHF 811.4 million (prior year: CHF 731.7 million). This increase is at the upper end of our expectations and can be attributed to the outstanding performance of our latest acquisitions (Onken, Cypress Grove Chèvre and A-27), growth at Emmi Roth USA and improved sales of Emmi Caffè Latte. Growth was restrained by losses resulting from the strength of the Swiss franc, especially in exports of Swiss cheese. In local currencies and adjusted for acquisitions, growth of 3.2% was achieved.

Emmi's CEO Urs Riedener commented: "Given the extremely challenging environment, the result is an impressive one. I am particularly pleased by the outstanding performance of our most recent acquisitions. Our carefully considered acquisition strategy is paying dividends."


Performance differed from one product group to another. Fresh products achieved a slight increase, notably through the continued growth of Emmi Caffè Latte and the launch of two new products. Fresh cheese remained stable, while the cheese segment suffered from increasing import pressure.  

In the cheese segment, Emmi achieved net sales of CHF 534.8 million in 2011 compared with CHF 546.0 million in the prior year, a decline of -2.0%. This was positively influenced by factors such as the strong performance of Luzerner Rahmkäse, raclette marketed under the Emmi umbrella brand and the acquisition of Fromalp. The fall in demand for Emmentaler AOC, losses sustained from selling cheeses not manufactured or matured by Emmi and price pressure on own-brand products in the lower price segments, which is attributable to increasing import volumes, had a negative impact. Organic growth (adjusted for acquisitions) amounted to -7.1%.

Net sales of fresh cheese remained stable at CHF 131.8 million (prior year: CHF 131.9 million). The warm weather in the early part of the year had a beneficial impact, although there was evidence here, too, of import pressure on own-brand products. Lower prices were compensated for by volume growth.

Sales of Emmi's fresh products grew by 0.3% last year to CHF 370.5 million (prior year: CHF 369.6 million). Emmi Caffè Latte made a positive contribution with double-digit growth, as did the newly-launched products Milk Shake and Yogurt Milk. These new launches did not draw any sales away from existing Emmi products, and Emmi Energy Milk remained virtually stable.

Sales of dairy products (milk, cream and butter) fell by -1.2% in 2011 to CHF 708.4 million from CHF 717.2 million in the prior year. Price increases brought about by rising milk prices had a positive impact in the first half of the year, while there were some losses in generic products and volumes were lower. Organic growth amounted to -1.5%.

Sales of powder/concentrates in 2011 fell by -6.2% to CHF 62.4 million from the prior year's CHF 66.5 million. This was a result of falling sales in various food industry segments, tough price competition and the shutdown of production for maintenance.

Sales of other products and services fell, as expected, by -15.4% to CHF 102.0 million (prior year: CHF 120.7 million). This resulted from the decision to stop providing unprofitable logistics services to third parties at Suhr, which will have a positive impact on earnings. Organic growth amounted to -15.6%.



With the exception of the cheese and other services product groups, sales rose in all segments in international markets. Sales of Emmi Caffè Latte increased slightly despite the strength of the Swiss franc, although this had a negative impact on other exports from Switzerland. The encouraging performances of the most recent acquisitions cushioned the adverse effects of the currency situation considerably.

Net sales of cheese in 2011 amounted to CHF 389.8 million compared with CHF 411.6 million in the prior year, corresponding to a -5.3% decline. In the US, sales of locally produced cheese both from Emmi Roth USA and Cypress Grove Chèvre saw double-digit increases. However, exports from Switzerland suffered in all key foreign markets due to the strength of the Swiss franc, particularly Emmentaler exported to Italy, in contrast to fondue. Organic growth, i.e. adjusted for currency effects and acquisitions, declined by -0.6%.

Net sales of fresh cheese rose 31.6% to CHF 43.6 million from the prior year's figure of CHF 33.2 million. This is attributable to the good collaboration with Venchiaredo and the expansion of the Trentina brand (formerly Trentinalatte) in Italy.

Net sales of fresh products rose by 41.3% to CHF 270.5 million (prior year: CHF 191.5 million). The acquisition of the Onken yoghurt brand, which achieved double-digit growth in the UK, had a positive impact in this respect. No less encouraging was the double-digit growth achieved by Emmi Caffè Latte in all key foreign markets except Germany - particularly in Spain, the UK and Belgium. Emmi's losses in Germany were a consequence of two retail chains electing to stop stocking its products due to price increases. The decision to forgo sales was taken deliberately in other not to jeopardize earnings. The strength of the Swiss franc meant that losses were also sustained in the export of yoghurt and Swiss Müesli. In organic terms, net sales fell by -3.8%.

Net sales of CHF 24.6 million (prior year: CHF 16.5 million, +48.8%) were achieved in dairy products. The increase is attributable to CASP's local business in the US.

Net sales of powder/concentrates increased by 27.7% in 2011 to CHF 26.3 million from the prior year's CHF 20.6 million. This growth resulted from additional exports made in order to take pressure off the Swiss milk market.

Net sales of other products and services fell by -3.5% to CHF 56.5 million (prior year: CHF 58.4 million) due to the exchange rate situation. Organic growth amounted to 5.8%.


- Success in activities increases margin
- Emmi expects earnings before interest and taxes (EBIT) of around CHF 130 million and a net profit margin of around 3% in the financial year 2011. This encouraging performance is primarily attributable to the following:
- The very positive performance of more recent acquisitions: Emmi Roth USA, Onken, Cypress Grove Chèvre and, in Italy, A-27 (since July 2011) have strengthened the international business to a marked extent and are attenuating the negative currency impact.
- The increase in prices abroad in the second half of 2011 was realized successfully.
- Successful brand concepts such as Emmi Caffè Latte and Energy Milk were further strengthened both in Switzerland and abroad.
- Innovations (Milk Shake, Yogurt Milk, Mozzarella Mini Marinati) were successfully rolled out.
- Unprofitable lines, e.g. in the low-priced generics segment and in logistics services, were eliminated.
- Rigorous cost management resulted in further significant savings.


Outlook

Raw milk prices are expected to remain at their present level in the first half of 2012, while prices for other raw materials (coffee, fruit and cereals) and packaging costs are likely to remain stable or increase only slightly. Import pressure will persist in Switzerland. Demand in the retail trade is expected to be volatile. Emmi expects consumer sentiment in the US and Germany - our most important markets outside Switzerland - to remain stable and to be subdued in Italy. In view of the economic situation and the value of the Swiss franc standing at 1.20 against the euro, Emmi's success in 2012 will largely be driven by strong brand concepts and by products produced locally abroad, as well as by further cost savings.

For further information, please refer to the analysts' and media conference on Thursday, 29 March 2012, where detailed figures on the Emmi Group's performance in financial year 2011 and the outlook for 2012 will be published.
 
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