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  • Assets, financing and cash flow
Financial Commentary

Assets, financing and cash flow

Total assets as at 31 December 2020 were down 1.9 % or CHF 45.2 million compared with 31 December 2019 to CHF 2,337.1 million (previous year: CHF 2,382.3 million). This decrease is mainly attributable to a reduction in cash and cash equivalents as a result of acquisition activity and the associated offsetting of goodwill against shareholders’ equity. In addition, the negative development of currencies that are relevant for Emmi versus the Swiss franc resulted in a markedly negative currency effect. While free cash flow generation and acquisition effects had a positive effect on total assets, they were unable to offset the above-mentioned negative effects.

Operating net working capital (consisting of inventories as well as trade receivables and payables) was CHF 542.0 million, up 4.6 % or CHF 23.6 million on the previous year (CHF 518.4 million), despite negative currency effects. Overall, the increase was slightly slower than the growth in sales and is partly due to acquisition activity.

Non-current assets remained practically unchanged versus the previous year at CHF 1,088.3 million (2019: CHF 1,089.1 million). Property, plant and equipment, which account for the major part of non-current assets, rose year-on-year from CHF 976.5 million to CHF 985.7 million. This is due in equal parts to acquisition effects and higher investment activity both versus depreciation and in comparison to the previous year. Currency effects continued to be significantly negative, particularly due to the devaluation of the Brazilian real, which curbed this increase.

With regard to financing, most positions are stable as well. This mainly applies to long-term financial liabilities, which recorded only minor movements versus the previous year. With regard to short-term financial liabilities, the acquisition-related increase and repayments of existing financial liabilities roughly balanced each other out, meaning that negative currency effects were ultimately responsible for the reported decrease. The equity ratio fell in particular as a result of acquisition activities and the associated offsetting of goodwill against shareholders’ equity from 54.6 % as at 31 December 2019 to 52.8 %. Due primarily again to the acquisition activity and the associated drop in cash and cash equivalents, net debt rose from a historical low of CHF 89.0 million in the previous year to CHF 163.1 million as at 31 December 2020. Net debt as a ratio of EBITDA remains low at 0.43 (previous year: 0.25).

Cash inflow from operating activities amounted to CHF 342.6 million in the period under review, a significant increase of CHF 39.3 million on the previous year figure of CHF 303.3 million. While profit including minority interests was slightly lower year-on-year, cash flow before changes in net working capital, interest and taxes amounted to CHF 403.6 million, up CHF 53.2 million versus the previous year (CHF 350.4 million). After taking into account losses from the sale of investments/businesses on top of the substantial deviation in the other non-cash items due to currency losses, this increase reflects the operational improvement. The change in net working capital had an overall negative impact of CHF 15.7 million on cash flow from operating activities in the period under review. In the previous year, this change had a slightly positive effect of CHF 1.8 million on the corresponding cash flow. The impact of interest and taxes on cash flow from operating activities was CHF 3.6 million less than in the previous year.

Cash outflow from investing activities amounted to CHF 326.8 million in the period under review, compared with CHF 226.3 million in the previous year. This corresponds to an additional cash outflow of CHF 100.5 million. Investments in acquisition activity of CHF 198.8 million were the main reason for this, amounting to an additional cash outflow of CHF 66.0 million compared with the previous year (CHF 132.8 million). Net investments in property, plant and equipment were CHF 121.3 million, up significantly from CHF 93.6 million (net) in 2019.

Not including cash flow from acquisition activities, the level of free cash flow generated in financial year 2020 thus amounted to CHF 214.6 million. Compared to the previous year (CHF 209.8 million), this corresponds to an increase of CHF 4.8 million, with higher investments offset by growth in cash flow from operating activities.

Cash outflow from financing activities amounted to CHF 91.9 million in the period under review, versus CHF 148.6 million in the previous year. In the previous year, the repayment of a CHF 100 million bond had a corresponding impact on cash outflow. In the year under review, the repayment of financial liabilities in addition to higher dividend payments to the shareholders of Emmi AG led to additional cash outflows compared with the previous year.

As a consequence of these cash flows, cash and cash equivalents fell from CHF 378.1 million to CHF 294.7 million in financial year 2020, down CHF 83.4 million.

Outlook 2021

The uncertainties triggered by the coronavirus coupled with fears about economic development in the key markets where Emmi operates shape the outlook for the current year. Our sales and profit forecasts are based on the assumption that the situation will calm down in those markets that are important for Emmi from the second quarter of 2021. However, it is likely to be 2022 before we see a return to normality. From a financial perspective, Emmi therefore largely expects stability again in 2021, albeit with the likelihood of continued adverse effects on growth. Conversely, nobody yet knows exactly what everyday private and working life – and by extension consumer behaviour – will look like going forward.

National and international economic forecasts predict strong growth this year following the major disruption to the economy in 2020. But the timing and extent of this recovery is still unknown. Broad predictions of this nature, however, are not very reliable when it comes to the food industry, as performance within this sector varied greatly in 2020 from one distribution channel to another. While food retail in many countries experienced solid growth due to the coronavirus in 2020, many specialists within the sector expect retail sales to be down in 2021 – sometimes significantly so. At the same time, sales in the food service sector – which has been hit the hardest by the effects of the pandemic – are likely to start improving in 2021, although Emmi is not expecting a return to pre-pandemic levels until 2022 at the earliest. Rising unemployment in most countries as a result of the pandemic is a cause for concern. It is conceivable that lower household incomes will lead to increased demand for cheaper basic-range products. While Emmi is confident that its strong brand concepts will yield long-term success, it is not completely immune to the short-term economic reality.


In the business division Switzerland, conditions remain challenging for Emmi. The environment in which it operates is as competitive as ever: price pressure will persist, and a growing portion of retail sales will be attributable to imports. High Swiss milk prices and the limited supply of milk will give imports a further competitive edge in the coming years. In addition, the continual expansion of new production capacities in Switzerland that want to be used to capacity will put further pressure on prices. In 2021, Emmi expects high volatility in demand and a renewed surge in consumer tourism. Emmi will counter these negative developments with its strong brand concepts, trend-led innovations, a strong focus on customers and consumers, as well as robust production output.

Established brands such as Emmi Caffè Latte and Kaltbach as well as trending concepts – for example, vegan food – are major success factors for the business division Europe that should yield organic growth in the current year. However, Emmi also predicts a falling trend for retail sales growth in many European countries. The extent to which the food service business will recover in 2021 remains to be seen. This makes it all the more important for Emmi to further reinforce its strong position in interesting niches such as speciality desserts in addition to brand and trend concepts. With rising milk prices and a strengthening Swiss franc, significant price increases for Swiss export products are a risk worth noting for sales in the business division Europe.

In the business division Americas, which was hit the hardest by the pandemic in 2020, Emmi predicts a gradual recovery in the food service business and an associated strengthening of the business in the US. Emmi continues to expect a substantial uptick in the growth markets of Brazil, Chile, Mexico and Tunisia, although the expiration of state programmes to encourage consumption poses a risk. Investments in niche areas and trending concepts will likely help the business division Americas return to its medium-term growth path in the current year. While Emmi is optimistic in this regard, at the same time it is aware that demand and prices are highly volatile, the trend is still towards basic-range products, and macro-economic turmoil could return at any time.

Sales and profit growth 

Emmi is robust and well diversified. The defined strategy will continue to be pursued with intent and purpose in the new financial year. Under these circumstances, organic sales development at Group level is likely to continue at a similar rate to 2020 (1 % to 2 %). However, Emmi expects a decline in the Swiss domestic market. With the gradual return to previous consumption patterns, a decline in sales of between 1 % and 2 % in organic terms must be expected. In the business division Europe, similar reasons are likely to result in a slowdown in organic sales growth (1 % to 3 %). By contrast, there is reason to expect that the business division Americas, which has been hit hard by the coronavirus crisis, will again become a growth driver (organic growth of 4 % to 6 %).

To support earnings, Emmi remains committed to its efficiency programme and will continue to step this up in certain areas. The companies Emmi has recently acquired have opened up additional sources of earnings, although in the short term they will also generate integration costs. Emmi expects earnings before interest and taxes (EBIT) to rise overall in 2021 (CHF 275 million to CHF 290 million), with a largely stable net profit margin (5.2 % to 5.7 %). Emmi also confirms the medium-term goals for organic growth and net profit margin.