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  • Assets, financing and cash flow
Financial Commentary

Assets, financing and cash flow

Total assets as at 31 December 2018 were up by 4.6 % or CHF 123.4 million compared with 31 December 2017 to CHF 2,820.5 million (previous year: CHF 2,697.1 million). This change is mainly due to the significant increase in cash and cash equivalents of CHF 238.8 million, which also benefited from the sale of the minority stake in The Icelandic Milk and Skyr Corporation “siggi’s”.

Operating net working capital (inventories as well as trade receivables and payables) was CHF 487.1 million, down slightly on the previous year (CHF 506.2 million) despite overall sales growth of 2.8 %. The instructed reduction in trade payables in 2017 to avoid negative interest rates also contributed to this.

By contrast, non-current assets declined substantially by CHF 105.2 million. The main reason for this was the low investments in the period under review. Both investments in intangible assets and investments in property, plant and equipment were significantly lower than amortisation and depreciation. With regard to intangible assets, it should be noted that no acquisitions were made in 2018 apart from a few purchases of minority interests, and that Emmi amortises goodwill in the income statement. We expect investing activities in property, plant and equipment to increase again in the coming year. Currency translation differences due to the strengthening of the Swiss franc against many of the currencies relevant to Emmi also made a significant contribution to the reduction in non-current assets.

With regard to financing, the reclassifications between short and long-term liabilities were primarily due to a bond issued in the amount of CHF 100 million, which will mature in June 2019. The equity ratio rose to 58.7 %, up from 56.4 % as at 31 December 2017. The main reason for this substantial increase is profit including minority interests, which at CHF 238.3 million more than compensated for dividend payments and negative currency effects. This development is also a consequence of the gain from the sale of the minority stake in Icelandic Milk and Skyr Corporation “siggi’s”. Net debt was significantly reduced in the period under review, from CHF 338.4 million at the end of 2017 to CHF 101.8 million as at 31 December 2018. The ratio of net debt to EBITDA was therefore low at 0.29 (previous year: 0.99).

Cash inflow from operating activities amounted to CHF 291.9 million in the period under review, a significant increase of CHF 40.2 million compared with the previous year (CHF 251.7 million). Cash flow before changes in net working capital, interest and taxes increased by CHF 16.4 million versus the previous year, essentially reflecting the operational improvement achieved at EBITDA level. The change in operating net working capital had a slightly positive impact on cash flow from operating activities overall in the period under review. This represents a significant improvement of CHF 49.5 million compared with the previous year. The instructed reduction in trade payables in 2017 to avoid negative interest rates was a major contributing factor. This effect will no longer occur in 2019. A further positive effect was visible in the change in trade receivables, which were neutral in 2018 following a significant increase in the previous year. Conversely, the change in other payables, accrued liabilities and deferred income had a negative impact. In addition, there was a significant increase in taxes paid, also as a result of the sale of the minority stake in The Icelandic Milk and Skyr Corporation “siggi’s”.

Cash outflow from investing activities amounted to CHF 5.7 million in the period under review, a significant reduction of CHF 468.6 million year-on-year (2017: CHF 474.3 million). The main reason for this was acquisition activities. Whereas the sale of the minority stake in The Icelandic Milk and Skyr Corporation “siggi’s” resulted in a net cash inflow from acquisition activities of CHF 62.6 million in the period under review, the previous year saw a cash outflow of CHF 398.1 million. Investments in property, plant and equipment were also lower in 2018. The cash outflow of CHF 80.3 million in the period under review corresponds to a reduction of CHF 16.0 million compared with the previous year.

Not including the cash flows resulting from acquisition activities, the level of free cash flow generated in 2018 thus amounted to CHF 223.6 million, compared with CHF 175.5 million in 2017.

Cash outflow from financing activities amounted to CHF 50.2 million in the period under review, compared with an inflow of CHF 26.6 million in the previous year. The cash outflow in the period under review resulted mainly from dividend payments of CHF 56.4 million (previous year: CHF 33.6 million), whereas in 2017 there was an overall positive cash flow from financing activities due to the refinancing in the middle of the year.

As a consequence of these cash flows, cash and cash equivalents rose from CHF 212.6 million to CHF 451.4 million in financial year 2018, a marked improvement of CHF 238.8 million.

Outlook 2019

The global economy lost considerable momentum in the second half of 2018. While the US economy continued to expand, the slowdown in growth in the EU was already clearly noticeable. Political issues such as the trade dispute between the US and China or Brexit are perceived as particular risks and could lead to greater uncertainty in the future. At the end of 2018 the European Central Bank forecasted weaker gross domestic product (GDP) growth of 1.7 % for the EU in 2019, down from 1.9 % in 2018.

In Switzerland, the State Secretariat for Economic Affairs (SECO) also revised its forecasts downwards at the end of 2018, but still anticipates moderate growth of 1.5 % for 2019. This is also expected to be achieved through rising consumption, especially in the food sector. Conditions in Switzerland remain challenging for Emmi, however. The competitive environment will continue to be tough, and some of the predicted increase in retail sales will be attributable to further growth in imports.

With regard to raw material prices, we expect milk to remain largely stable. The price level for the most important non-dairy raw materials (e.g. coffee and fruit) should be stable to slightly higher. We expect to see higher prices primarily for energy and transport and for packaging.


The considerable pressure exerted by imports and the price war in the retail trade will persist in Switzerland, and consumer tourism will remain a constant theme. Sales in the business division Switzerland will therefore remain under pressure, especially as the positive effect of a higher milk price will likely be eliminated in 2019. Emmi’s goal is to achieve stable to slightly higher organic sales in Switzerland through strong brand concepts.

Strong brands are also important success factors in the business division Europe. While it is currently very difficult to assess the impact of Brexit on Europe as a whole, we expect organic growth in the business division. The Italian dessert companies and goat’s milk products from the Netherlands are likely to play a key role here. Emmi is also hoping for a positive impact from exports of speciality cheeses and Emmi Caffè Latte from Switzerland.

In the business division Americas, we expect further significant growth in demand in Tunisia (milk, fresh products), the US (cheese, goat’s milk specialities) and Chile (milk, fresh products) in 2019. Foreign currency effects in countries such as Chile, Mexico and Tunisia will remain an issue, however, as will the pressure in the business division’s European markets Spain and France. The latter will again inhibit the business division’s organic growth.

Sales and profit development

Emmi is robust and well diversified. Organic sales growth in line with medium-term forecasts should therefore be realistic for 2019.

To support earnings, Emmi will continue to pursue its efficiency programme and step this up in certain areas. The company therefore expects slightly higher profitability at Group level in 2019.

Emmi also confirms the medium-term sales growth forecast for the Group and the individual business divisions:

  • Group 2 % to 3 %
  • Switzerland 0 % to 1 %
  • Americas 4 % to 6 %
  • Europe 1 % to 3 %