Income statement

Operating section

Emmi generated net sales of CHF 3,457.4 million in 2018, a rise of 2.8 % compared with the previous year (CHF 3,364.3 million). In organic terms, i.e. adjusted for currency and acquisition effects, Group sales grew by 2.3 %.

This figure is within the target range of 1.5 % to 3.0 % confirmed by Emmi in August 2018. Sales drivers included Emmi Caffè Latte (Switzerland and international markets), Italian desserts, goat’s milk products and dynamic development in the Tunisian and Chilean markets. 

Acquisition effects are accounted for by the following factors: 

Positive factors:

• Acquisition of Italian Fresh Foods (Italy, 1 March 2017)
• Increased stake in Mexideli (Mexico, 8 October 2017)

Negative factors:

• Sale of stake in Venchiaredo (Italy, 31 July 2017)
• Disposal of part of the trading goods business (Switzerland, 1 January 2018)

Sales development Switzerland

Sales by product group: Switzerland

Sales in the business division Switzerland were CHF 1,713.2 million, compared with CHF 1,730.7 million in the previous year. This corresponds to a decline of 1.0 %. Adjusted for divestment effects, sales grew by 0.6 %, slightly above the 0 % to 0.5 % forecasted by Emmi. In view of the continuing high price pressure on the customer side, this development is remarkable.

The divestment effect resulted from the sale of part of the trading goods business to Coop. Emmi took over the business in 1998 as part of its acquisition of the Coop cheese centre in Kirchberg in the canton of Berne. The part through which Coop maintains direct relationships with suppliers was sold back to Coop at the beginning of 2018. There were corresponding effects in the cheese, fresh products, fresh cheese and other products/services segments.

The good sales performance is due in part to the stronger Swiss retail business, which posted growth of around 2 % for the year as a whole (source: Nielsen). There was still considerable import and price pressure, however, impacting the cheese segment in particular. Around 2.9 % more cheese was imported from abroad in 2018 than in the previous year, with above-average rises in the fresh cheese and extra-hard cheese segments of 5.6 % and 8.7 % respectively (source: TSM Treuhand).

Dairy products (milk, cream, butter) posted significantly higher sales overall, primarily as a result of higher milk prices. In the cheese segment, Luzerner Rahmkäse and Le Petit Chevrier improved, while sales of fondue and AOP cheese fell. In fresh products, Emmi Caffè Latte and protein-enriched products saw sales increase, while Yoqua and private label products of retailers were down. Fresh cheese benefited from the warm summer, which boosted mozzarella sales.

The business division Switzerland accounted for 49.6 % of Group sales (previous year: 51.4 %).

Sales development Americas

Sales by product group: Americas

The business division Americas comprises the following markets: US, Canada, Mexico, Chile, Tunisia, Spain (excluding Lácteos Caprinos) and France.

It generated sales of CHF 1,044.3 million, breaking the billion barrier for the first time. Sales in the previous year were CHF 949.8 million, corresponding to an increase of 10.0 %. In organic terms, i.e. adjusted for currency and acquisition effects, they rose by 5.6 %. This figure is at the upper end of the forecasted range of 4 % to 6 %.

The positive acquisition effect is attributable to the increased stake in premium food importer Mexideli, which had an impact on the scope of consolidation.

The main reasons for the good organic growth were the pleasing sales performances in Tunisia, Chile and the US. In Tunisia, the products marketed under the Vitalait brand (yogurts, desserts, milk and cream) reported significantly higher sales, which had a positive effect on the dairy and fresh products segments. These were further strengthened by the good performance of US goat’s milk products (fresh products) and the Chilean market (dairy products). Last year’s upward trend in Chile was thus continued. In fresh products, Emmi Caffè Latte in Spain also made a positive contribution.

In the cheese segment, the pleasing performance of locally produced cow’s milk cheese in the US was a particular highlight. Cheese exports from Switzerland also recorded an increase. Sales of goat’s cheese remained stable despite Emmi deliberately withdrawing from one particular channel.

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

The business division Americas accounted for 30.2 % of Group sales (previous year: 28.2 %).

Sales development Europe

Sales by product group: Europe

In the business division Europe, sales rose by 5.2 % from CHF 564.1 million to CHF 593.3 million. In organic terms, i.e. adjusted for currency and acquisition effects, this resulted in growth of 4.4 %, exceeding Emmi’s expectations. The company had forecasted sales growth of 2 % to 4 %.

The positive acquisition effects are attributable to the acquisition of Italian Fresh Foods (fresh products), while the negative acquisition effects are due to the sale of the stake in Venchiaredo (fresh cheese).

Decisive growth factors included the higher sales of Emmi Caffè Latte and Italian speciality desserts, which had a positive impact on the fresh products segment. Emmi Caffè Latte grew in all European markets, most strongly in Germany and the UK. All three dessert companies reported rising sales of Italian speciality desserts, which is very pleasing. The cheese segment recorded a slightly negative organic performance overall, primarily due to lower sales of AOP cheese. By contrast, sales of speciality cheeses (Kaltbach, Der Scharfe Maxx) in Germany developed positively.

Sales of organic milk from Gläserne Molkerei were subdued, leading to an organic decline in the dairy products segment.

Dutch firm AVH dairy, a trading company that is strong in the field of goat’s milk specialities, also performed very well. The good development is reflected in the powder/concentrates segment.

The business division Europe accounted for 17.1 % of Group sales (previous year: 16.8 %).

Sales development Global Trade

Sales by product group: Global Trade

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.

Sales amounted to CHF 106.6 million, compared with CHF 119.7 million in the previous year, resulting in a decline of 10.9 % or 10.4 % in organic terms.

The negative performance is mainly attributable to declining exports of butter and milk powder. By contrast, various high-value exports, particularly cheese to Russia, increased, largely offsetting the declining sales in China (milk and fresh products).

Global Trade accounted for 3.1 % of Group sales (previous year: 3.6 %).

Gross profit

Gross profit increased by CHF 52.0 million to CHF 1,252.9 million in the year under review, compared with CHF 1,200.9 million in the previous year. This increase is primarily due to the good organic growth in the business divisions Americas and Europe as well as an overall favourable development of exchange rates and acquisition effects. The gross profit margin also rose from 35.7 % to 36.2 %. This is attributable to the increasing importance of branded products within the product portfolio. The successful implementation of further rationalisation and productivity measures also helped to offset the negative effects of the persistently high price pressure.

Non-recurring effects in the consolidated financial statements

The sale of the minority stake in The Icelandic Milk and Skyr Corporation “siggi’s” had a significant impact on the income statement for the period under review. The sale resulted in a pre-tax gain of CHF 79.4 million or CHF 57.8 million after taxes. The gain from this sale is included in the position “Income from associates and joint ventures”. Accordingly, earnings before taxes (EBT) rose by CHF 79.4 million and net profit by CHF 57.8 million. This special effect was already taken into account in spring 2018 with the distribution of a special dividend.

No significant non-recurring effects were recorded in the previous year.

Operating result

Operating expenses rose by CHF 39.5 million or 4.6 % in 2018 to CHF 905.4 million, compared with CHF 865.9 million in the previous year. As operating expenses grew more strongly than sales, they increased in comparison to sales from 25.8 % to 26.2 %, meaning that part of the margin gain at gross profit level was lost.

Personnel expenses were CHF 458.5 million in the period under review, compared with CHF 443.2 million in 2017. Since the increase of 3.4 % was slightly disproportionate to the development in sales, the ratio of personnel expenses to sales rose from 13.2 % to 13.3 % in the period under review.

Other operating expenses rose by CHF 24.3 million or 5.7 % in the period under review to CHF 446.9 million, compared with CHF 422.6 million in the previous year. In organic terms, i.e. adjusted for currency effects and acquisitions, expenses increased by CHF 16.5 million or 3.9 %. At CHF 12.0 million or 12.4 %, the most significant increase was in logistic expenses. The main reasons for this are higher volumes and the considerable rise in transport costs in individual countries (for example in the US). Accumulated marketing and sales-related expenses amounted to CHF 127.9 million, compared with CHF 126.0 million in the previous year, which corresponds to an increase of 1.5 %. While administrative expenses fell by a pleasing CHF 1.9 million or 4.7 %, expenses for occupancy, maintenance and repair rose by CHF 4.1 million or 6.3 %. Other operating expenses also increased substantially, due in part to a significantly reduced need for provisions for ongoing legal disputes in the previous year.

Other operating income fell by CHF 0.4 million year-on-year to CHF 5.3 million.

As a consequence of this development, earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by CHF 12.1 million to CHF 352.8 million, from CHF 340.7 million in the previous year. As a result, the EBITDA margin increased from 10.1 % in 2017 to 10.2 %.

Depreciation and amortisation rose by CHF 1.2 million in the period under review, from CHF 135.2 million to CHF 136.4 million. The marginal increase is due to slightly higher amortisation of goodwill. Unlike the majority of listed firms applying Swiss GAAP FER, Emmi continues to amortise goodwill via the income statement. Depreciation on property, plant and equipment and amortisation of other intangible assets were virtually unchanged compared with the previous year.

Earnings before interest and taxes (EBIT) were CHF 216.7 million in the period under review, CHF 10.9 million or 5.3 % higher than the previous year’s EBIT of CHF 205.8 million. The EBIT margin increased from 6.1 % in 2017 to 6.3 % in 2018.

Income from associates, financial result and income taxes

Income from associates and joint ventures totalling CHF 78.3 million includes the pre-tax gain made on the sale of the minority stake in The Icelandic Milk and Skyr Corporation “siggi’s” of CHF 79.4 million. Adjusted for this non-recurring effect, income from associates and joint ventures fell by CHF 4.7 million year-on-year. A major reason for this development is the loss of the profit share in “siggi’s” due to the sale of our minority stake.

The financial result (net financial expenses) was CHF 6.5 million and was thus significantly lower than in the previous year (CHF 10.4 million). This positive development is due to the significantly improved interest result, which in turn is mainly attributable to the successful refinancing of a bond in mid-2017.

Income taxes in the year under review amounted to CHF 50.2 million, of which CHF 21.6 million is attributable to the sale of the minority stake in The Icelandic Milk and Skyr Corporation “siggi’s”. Accordingly, income taxes adjusted for this non-recurring effect amounted to CHF 28.6 million, compared with CHF 30.3 million in the previous year. The adjusted tax rate was thus 13.7 % (previous year: 15.2 %), with the fall attributable to reductions in tax rates in a number of countries relevant to Emmi and a further increase in recognised deferred tax assets at companies with historical tax loss carryforwards.

Net profit

Profit including minority interests totalled CHF 238.3 million and was also affected significantly by the gain on the sale of the minority stake in The Icelandic Milk and Skyr Corporation “siggi’s”, which amounted to CHF 57.8 million after taxes. As a result, adjusted profit including minority interests amounted to CHF 180.5 million, up CHF 11.8 million from the previous year (CHF 168.7 million).

The reduction in minority interests from CHF 7.2 million in the previous year to CHF 5.0 million in the period under review is primarily attributable to the increased stakes in companies with minority interests in 2018.

Accordingly, net profit of CHF 233.3 million and adjusted net profit of CHF 175.5 million were reported for the period under review. This represents an increase of CHF 13.9 million or 8.6 % compared with the previous year’s net profit of CHF 161.6 million. The adjusted net profit margin rose from 4.8 % in 2017 to 5.1 %.