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  • Assets, financing and cash flow
Financial Commentary

Assets, financing and cash flow

Total assets as at 31 December 2019 were up by 1.6 % or CHF 44.8 million compared with 31 December 2018 to CHF 2,865.3 million (previous year: CHF 2,820.5 million). This increase is primarily attributable to the free cash flow generated from operating activities, which in the period under review did not, however, manifest itself in higher cash and cash equivalents, but rather was used for acquisitions and definancing (paying back bonds and dividend payments). In addition, total assets were negatively impacted by forex trends of currencies that are relevant for Emmi versus the Swiss franc.

Operating net working capital (inventories as well as trade receivables and payables) was CHF 518.4 million, up 6.4 % or CHF 31.3 million on the previous year (CHF 487.1 million), chiefly as a result of acquisition activities. This rise, which was significantly higher than the 1.1 % growth in sales, is due to the fact that the acquisitions made were in large part not completed until the fourth quarter of 2019.

Non-current assets increased by CHF 50.4 million. The main reason for this was the high investments in acquisition activity. The full consolidation of new Group companies caused a marked increase in property, plant and equipment, as well as in intangible assets (goodwill). This was driven primarily by the increased stake in Brazil and the impact this had on the scope of consolidation; the reduction in the book value of investments in associates and joint ventures can likewise be explained by this development. The amount of loans and other receivables also recorded a significant decline, attributable to the winding-up of a financing arrangement in the US, which also led to a reduction of the loans on the liabilities side. Investments in property, plant and equipment were slightly higher than depreciation in the period under review. Non-current assets were adversely impacted by forex trends of currencies that are relevant for Emmi versus the Swiss franc.

With regard to financing, acquisition activities led to an increase in liabilities on the consolidated balance sheet. The fact that liabilities were nevertheless still reduced by a considerable CHF 82.3 million overall can be explained by the repayment in June 2019 of a bond in the amount of CHF 100 million and by the winding-up of a financing arrangement in the US, as referred to above. The equity ratio rose to 62.3 %, up from 58.7 % as at 31 December 2018. The main reason for this substantial increase alongside the decrease in liabilities mentioned earlier is profit including minority interests, which at CHF 175.2 million more than compensated for dividend payments and negative currency effects. Net debt was further reduced in the period under review, specifically from CHF 101.8 million at the end of 2018 to CHF 89.0 million as at 31 December 2019. The ratio of net debt to EBITDA therefore remained low at 0.25 (previous year: 0.29).

Cash inflow from operating activities amounted to CHF 303.3 million in the period under review, a significant increase of CHF 11.4 million compared with the previous year (CHF 291.9 million). Cash flow before changes in net working capital, interest and taxes remained stable versus the previous year, at CHF 350.4 million in 2019 versus CHF 351.9 million in 2018, reflecting the stable operating performance at EBITDA level. The increased cash flow from operating activities is mainly due to the considerable reduction in income taxes paid, which were down CHF 8.8 million year on year to CHF 39.7 million. This can be explained above all by the sale of the minority stake in “siggi’s” in 2018. The change in operating net working capital had a slightly positive impact on cash flow from operating activities overall in the period under review, amounting to CHF 1.8 million. This is compared to the prior year, when the change in operating net working capital dented the corresponding cash flow by CHF 3.5 million.

Cash outflow from investing activities amounted to CHF 226.3 million in the period under review, compared with just CHF 5.7 million in the previous year. This corresponds to a sharp increase in cash outflow of CHF 220.6 million, due mainly to acquisition activities. Whereas in the period under review the combined effect of acquisitions and divestments resulted a net investment of CHF 132.8 million, the previous year saw a net cash inflow of CHF 62.6 million, primarily owing to the sale of the minority stake in “siggi’s”. As already announced last year, investments in property, plant and equipment were also significantly higher, up from CHF 73.7 million net in 2018 to CHF 93.6 million net in 2019.

Not including cash flow from acquisition activities, the level of free cash flow generated in the reporting period thus amounted to CHF 209.8 million, compared with CHF 223.6 million the year before. This decrease is chiefly attributable to higher investments in property, plant and equipment, which rose by CHF 19.9 million, more than offsetting the increased cash flow from operating activities.

Cash outflow from financing activities amounted to CHF 148.6 million in the period under review, compared with CHF 50.2 million in the previous year. The main reason for this marked rise in cash outflow is the repayment of a CHF 100 million bond in June 2019. A total of CHF 50.0 million was allocated to dividend payments (previous year: 56.4 million), of which CHF 48.1 million (previous year: CHF 53.5 million) went to the shareholders of Emmi AG.

As a consequence of these cash flows, cash and cash equivalents fell from CHF 451.4 million to CHF 378.1 million in financial year 2019, down CHF 73.3 million.

Outlook 2020

Global indicators tell a tale of two economies. While international trade remains soft, with corresponding consequences for the industrial sector, the employment markets are reporting strong numbers and domestic economic forces are helping to stabilise business activity in many countries. The US continues to post solid growth; in Europe, however, the pace of growth has started to slow. If the eagerly awaited economic recovery in Germany and Europe takes a while to materialise or is weaker than expected, this will of course have adverse repercussions for the Swiss economy, which is inextricably linked to the financial health of its neighbours. We also see various global economic risks on the horizon, posed in particular by trade disputes such as the one between the US and China. The International Monetary Fund forecasts that economic output in Latin America will make only modest gains in the year ahead, and political risks – including in Chile – have the potential to deal a decisive blow to growth.

In spite of the economic risks outlined above, the prevailing mood of optimism among consumers due to low levels of unemployment in many countries makes Emmi cautiously optimistic about future macroeconomic developments as they pertain to the company. In Switzerland, the State Secretariat for Economic Affairs (SECO) does not anticipate any significant change in underlying economic momentum for 2020. Conditions in Switzerland remain challenging for Emmi, however. The environment in which it operates is as competitive as ever: price pressure will persist, and some of the predicted increase in retail sales will be attributable to further growth in imports.

With regard to raw material prices, Emmi expects the milk price to remain largely stable or to trend upwards slightly. The price level for the most important non-dairy raw materials (e.g. coffee and fruit) and for packaging materials should remain mostly stable. Conversely, costs for energy and transport will likely rise.


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. As a result, sales in the Switzerland business division will remain under pressure. The increase in the milk price effective 1 October 2019 in connection with the new sustainability standard should prop up sales to a limited extent. Emmi’s goal is unchanged: to achieve stable to slightly higher organic sales in Switzerland through strong brand concepts.

Strong brands are also important success factors in the Europe business division. While it is currently very difficult to assess the impact of Brexit on Europe as a whole and even though economic momentum in Europe remains weak, Emmi expects organic growth in the Europe business division. The Italian dessert companies and goat’s milk products from the Netherlands are likely to play a key role here in 2020 as well. Emmi is also hoping for a positive impact from exports of speciality cheeses and Emmi Caffè Latte from Switzerland.

The Americas business division should continue to see ongoing rising demand in the US and Mexico. Provided milk collection in Tunisia normalises and the social unrest in Chile abates, these markets can also be expected to provide a decisive boost to growth going forward. Brazil will significantly increase sales of the Americas business division in 2020 but will only be able to make a minor contribution to organic growth. The two European markets falling under the Americas business division – Spain and France – will also impede sales growth.

Sales and profit growth 

Emmi is robust and well diversified. The defined strategy will be continue to be pursued with intent and purpose. Organic sales growth in line with medium-term forecasts should therefore be realistic for 2020.

To support earnings, Emmi remains committed to its efficiency programme and will step this up in certain areas. The companies Emmi has recently acquired have opened up additional sources of revenue, although in the short term they will also generate integration costs. Emmi expects earnings before interest and taxes (EBIT) to rise slightly overall at Group level in 2020.

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 %