emmi group financial year 2016 results presentation · urs riedener, ceo annual results 2016 jörg...

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


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 %)


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


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


OneERP: project for the introduction of SAP

Successful start to roll-out phase, completion January 2017

2015 20162014 2017


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


– Growth of 6.5 % (organic: -0.2 %)

Global Trade


– Decline of 1.7 % (organic: -1.0 %)

Net sales Group 2016: CHF 3,259 million


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


Europe


Net sales Group 2016: CHF 3,259 million


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


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.


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 %


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 %


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 %


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


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 %


Net sales to gross profit

Improved gross profit and gross profit margin


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)


Overview of operating expenses

Year-on-year increase in operating expenses


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


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)


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


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)


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



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 %



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 %


International strategy proves successful

Emmi's strategic pillars

Strengthening of Swiss market

International growth

Cost management


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


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


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


Establishing leading positions in profitable niches: desserts

Increasing competition, negative currency effects due to weak GBP



Short-term measures

Focus on existing ranges

Growth with "smaller" innovations

Streamlining of range, merging of A-27 locations


Differentiation through new interpretation of

existing recipes

Utilising of individual strengths of A-27, Rachelli

and IFF


Establishing leading positions in profitable niches: organic

Consumption of organic products becoming more mainstream



Short-term measures

Securing of required volumes

Launch of Emmi Roth USA organic range


Securing of required volumes

Expansion of production capacities in the US

(Cowgirls)

Expansion of Gläserne Molkerei range

Source: ZMP


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


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


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


Innovation pipeline

In chiller cabinets now

Fresh yogurt flavour reinterpreted

Airy-light mousse

Available in mango, peach and strawberry

& rhubarb


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)


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


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


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


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)


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


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

emmi group financial year 2016 results presentation · urs riedener, ceo annual results 2016 jörg...

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