Income statement

Operating section

Despite the global turmoil and negative foreign exchange trends, Emmi generated net sales of CHF 3,706.1 million in 2020 (previous year: CHF 3,494.0 million) and growth of 6.1 %. This is comprised of organic growth of 1.9 %, a positive acquisition effect of 8.7 % and a negative foreign currency effect of 4.5 %. The positive organic growth confirms the robustness of Emmi’s business model, the well-balanced nature of the product and country portfolio, and the organisation’s adaptability. The Swiss business was the main contributor to growth in the first half of 2020. Emmi’s home market then saw old consumer behaviour – including consumer tourism – return to a certain extent in the second half of the year. The rise in imported dairy products – particularly cheese – also had a negative impact for Emmi. By contrast, the foreign markets performed well in the second half of the year, while the Emmi Caffè Latte and Kaltbach brand concepts also fared well amid the crisis.

The trends that emerged in the first half of the year as the coronavirus tightened its grip around the world continued in the second half. Globally, retail sales increased, whereas the food service business, convenience products and some branches of the food industry that are relevant for Emmi took a major hit.

Overall, organic sales growth rates were very similar in the first and second halves of the year. However, a detailed examination shows considerable geographical differences. In the first six months of the year, Emmi’s Swiss business enjoyed the sales-boosting effects of the coronavirus crisis; in the second half, however, the factors inhibiting sales dominated, and the consistent trend seen in recent years towards imported dairy products intensified disproportionately. Conversely, important growth markets such as Chile and Tunisia rallied and growth in Europe was strong, providing major contributions to the Group’s sales growth.

The balancing effect of geographical diversification was not the only testament to the resilience of Emmi’s strategy in 2020, however. The years of work on selected brand concepts also bore fruit. Emmi Caffè Latte, for instance, enjoyed continued growth despite the tough conditions, while business with Swiss speciality cheeses – particularly Kaltbach – also supported growth in all business divisions. Last year was also characterised by intensive work on the investment portfolio as part of the implementation of the long-term corporate strategy. The recent acquisitions and divestments will enable us to reap even greater benefits from the dynamics in developing markets, raise the profile of brand products and further consolidate our strong position in the dessert business.

Acquisition effects are accounted for by the following factors:

Positive factors:

• Acquisition of a blue cheese production site (US, 28 February 2019)
• Acquisition of Leeb Biomilch GmbH and Hale GmbH (Austria, 8 October 2019)
• Acquisition of Laticínios Porto Alegre Indústria e Comércio S.A. (Brazil, 24 October 2019)
• Acquisition of Pasticceria Quadrifoglio S.r.l. (Italy, 31 October 2019)
• Merger with Quillayes (Chile, 15 January 2020)
• Acquisition of Chäs Hütte Zollikon GmbH (Switzerland, 29 July 2020)
• Acquisition of Indulge Desserts Group (US, 6 October 2020)

Negative factors:

• Sale of Emmi Frisch-Service AG (Switzerland, 3 April 2019)
• Sale of Lácteos Caprinos S.A. (Spain, 18 December 2020)

The internal shifting of distribution channels for individual customers additionally led to acquisition or divestment effects in the business divisions Americas, Europe and Global Trade. However, these shifts between individual business divisions did not have any impact on sales at Group level.

Sales development Switzerland

Net sales by product group: Switzerland

Sales in the business division Switzerland were CHF 1,686.2 million in 2020 (previous year: CHF 1,675.0 million). This corresponds to growth of 0.7 %. Adjusted for divestment effects (primarily the sale of Emmi Frisch-Service AG), the organic sales growth of 1.4 % was in line with Emmi’s expectations. The only cautiously optimistic guidance issued despite the good results for the first half of 2020 proved realistic in light of the in some cases hugely negative impact of measures to tackle the coronavirus. After a solid summer, sales in the food service and out-of-home consumption businesses, along with sales to certain industrial customers, came under pressure – massively so in some cases. Foreign competition was also clearly perceptible, and Swiss dairy products lost market share in 2020. The additional dairy product consumption in the retail business was largely met through imports, with consumers increasingly turning to imported products due to the temporary suspension of cross-border shopping.

The largest segment, dairy products (milk, cream, butter), recorded a small organic fall of 0.1 %. This came despite the segment being well into positive territory in the first half of the year thanks to COVID-related record sales in the retail business and a positive milk price effect. During the second half of the year, not only did retail demand normalise, but the impact of the coronavirus measures also fed through into the food service and industrial customers businesses.

In the cheese segment, the pleasing organic growth of 2.4 % was driven by additional sales of Le Gruyère AOP and strong brand concepts such as Kaltbach, Luzerner Rahmkäse, Scharfer Maxx and Le Petit Chevrier. A sizeable increase in cheese imports during the reporting period acted as a drag.

In the fresh products segment (organic growth: 2.0 %), Emmi Caffè Latte and Emmi Energy Milk performed particularly well. However, both convenience concepts were held back slightly in the second half of the year by the COVID-related reduction in mobility (e.g. remote teaching). Yogurt and ice cream sales also contributed to the growth.

The encouraging trend in fresh cheese (organic growth: 5.6 %) was primarily attributable to the tremendous popularity of mozzarella in home cooking.

The business division Switzerland accounted for 45.5 % of Group sales (previous year: 47.9 %).

Sales development Americas

Net sales by product group: Americas

The business division Americas includes the Emmi Group companies in the US, Spain (excl. Lácteos Caprinos S.A.), Chile, Brazil, Tunisia, France, Mexico and Canada.

The business division Americas generated sales of CHF 1,281.8 million in 2020 (previous year: CHF 1,114.7 million). This 15.0 % increase was chiefly attributable to acquisition effects. The strongly negative currency effects related mainly to Central and South American currencies, and to a lesser extent to the US dollar and euro. Adjusted for these effects, organic growth was 1.6 %. This meant that sales in the second half recovered strongly in the business division that suffered most at the hands of the coronavirus crisis due to its large share of the food service business.

The acquisition effects primarily relate to the purchase of a blue cheese production site in the US, the increased stake in Brazil, which had an impact on the scope of consolidation, the merger of Surlat with Quillayes in Chile and the acquisition of the Indulge Desserts Group in the US.

In the cheese segment, restrictions such as closures of sales outlets, cheese counters and restaurants imposed in response to the pandemic resulted in a fall in sales of 0.9 % in organic terms. Under these circumstances, the increase in cheese exports from Switzerland to the US – including, for example, Kaltbach – was extremely welcome.

As a consequence of the coronavirus, Chile and Tunisia were largely responsible for both a major jump in demand for basic products, with a positive effect on the dairy products segment (organic growth: 12.3 %), and for falls in the fresh products segment (organic decline: -2.7 %). Positive contributions there, e.g. from Brazil (entry into the yogurt business), could not fully make up for the lower sales in California and Spain. However, Emmi Caffè Latte posted pleasing growth in Spain despite the country being hit hard by the coronavirus.

In the fresh cheese segment (organic growth: 2.7 %), the uptick in Brazil and at Redwood Hill in California balanced out the downturn – again linked to the coronavirus pandemic – in Mexideli’s wholesale business.

The organic growth in the powder/concentrates segment resulted from the stronger sales of goat’s milk powder and concentrates in California due to the coronavirus crisis. In the other products/services segment, the organic decline is attributable to a decline in the food service business in Spain, Mexico, Chile and California.

The business division Americas accounted for 34.6 % of Group sales (previous year: 31.9 %).

Sales development Europe

Net sales by product group: Europe

The business division Europe includes the Emmi Group companies in Germany, Italy, the Netherlands, the UK, Austria, Belgium and Lácteos Caprinos in Spain (sold on 18 December 2020).

The business division Europe generated sales of CHF 630.7 million, up 6.4 % on the previous year’s figure of CHF 592.8 million. Adjusted for currency and acquisition effects, this resulted in strong organic growth of 4.4 %. Organic growth increased significantly again in the second half of the year.

The overall positive acquisition effects are chiefly attributable to the takeover of Leeb Biomilch GmbH and Hale GmbH in Austria as well as the Pasticceria Quadrifoglio Group in Italy. The sale of Lácteos Caprinos S.A. has been included as a divestment effect in the fresh cheese and dairy products segments.

The decisive growth drivers in the fresh products segment – the largest segment in terms of sales – were Emmi Caffè Latte in the UK, Austria and Germany, Italian speciality desserts and Onken yogurts (organic growth: 3.5 %).

Significantly higher sales of Kaltbach, fondue and Swiss cheese varieties in the Netherlands, Germany and the UK produced strong organic growth in the cheese segment (organic growth: 9.0 %).

The gains in the dairy products segment (organic growth: 8.0 %) were primarily the result of the coronavirus driving up demand for high-quality organic dairy products from Gläserne Molkerei in Germany.

The growth driver in the powder/concentrates segment is the trading company AVH dairy in the Netherlands, which was able to achieve high growth with the sale of goat’s milk powder, especially in the Asian market. The fresh cheese segment suffered declines at Lácteos Caprinos in Spain and Bettinehoeve in the Netherlands due to disruptions in the food service business as a result of the coronavirus. Growth in the other products/services segment mainly relates to the vegan products business in Austria.

The business division Europe accounted for 17.0 % of Group sales (previous year: 17.0 %).

Sales development Global Trade

Net sales by product group: Global Trade

The business division Global Trade primarily comprises direct sales from Switzerland to customers in countries in which Emmi has no subsidiaries. These include the Asian and eastern European markets, most South American countries and the Arabian Peninsula.

Sales in the business division Global Trade were CHF 107.4 million, compared with CHF 111.5 million in 2019. In organic terms, sales were down by 1.9 %. This was principally due to lower hotel and flight capacity utilisation as a consequence of the coronavirus. The restrictions in Asia had a particularly strong impact on fresh products (yogurts and yogurt drinks). The cheese segment trod water, as growth for Kaltbach almost entirely made up for lower fondue sales. The growth in the powder/concentrates segment reflects the rise in exports of surpluses of skimmed-milk powder.

Global Trade accounted for 2.9 % of Group sales (previous year: 3.2 %).

Gross profit

Gross profit increased by CHF 83.1 million to CHF 1,349.7 million in the year under review, compared with CHF 1,266.6 million in the previous year. This increase is chiefly attributable to the acquisition effects, which more than made up for the strongly negative currency effects. In addition, however, organic sales growth and the slight rise from 36.3 % to 36.4 % in the gross profit margin contributed to the higher gross profit. We welcome the increase in the gross profit margin despite the trend towards basic products during the coronavirus crisis. The successful implementation of measures to increase rationalisation and productivity are not the only reason for this; the further strengthening and enhanced focus of the product and company portfolio on high-margin businesses also played a role. As a result it was possible to compensate for the sustained high price pressure.

Non-recurring effects in the consolidated financial statements

As part of its realigned focus on an international business with strong growth and margins, Emmi sold its majority stake in Lácteos Caprinos S.A. during the year under review, which had a significant effect on the income statement. The sale resulted in a pre-tax loss of CHF 14.6 million or CHF 14.2 million after taxes. The loss from this sale is included under “Other operating expenses”. Adjusted for this non-recurring effect, EBITDA, EBIT and EBT increase by CHF 14.6 million, while profit incl. minority interests and net profit increase by CHF 14.2 million. This transaction had no significant impact on liquid funds or the consolidated cash flow statement.

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

Operating result

Operating expenses rose by CHF 57.3 million or 6.2 % in 2020 to CHF 977.9 million, compared with CHF 920.6 million in the previous year. While the absolute increase is once again attributable to large contributions from acquisitions, the ratio of operating expenses to sales declined slightly from 26.4 % to 26.3 % thanks to rigorous cost management.

Personnel expenses were CHF 493.8 million in the period under review, compared with CHF 462.4 million in 2019. This 6.8 % increase was largely in line with sales development. As a proportion of sales, personnel expenses therefore remained constant at 13.3 %. This shows that salary increases were offset by measures to cut costs and improve efficiency.

Other operating expenses were up CHF 25.7 million or 5.6 % in the period under review to CHF 484.0 million, compared with CHF 458.3 million in the previous year. This means that other operating expenses grew at a slightly slower pace than sales in the period under review. The absolute increase is again attributable to acquisitions. This effect more than offsets the reduction in expenses due to negative currency effects. In organic terms – that is, excluding the loss from the sale of Lácteos Caprinos S.A. (CHF 14.6 million) – other operating expenses fell significantly. Accumulated marketing and sales-related expenses amounted to CHF 127.0 million, compared with CHF 129.9 million in the previous year. This moderate decline is due not only to a more focused approach, but also a shift in the timing of marketing activities. At CHF 8.6 million or 12.6 %, the most significant increase in Other operating expenses was recorded by occupancy, maintenance and repair. In addition to acquisition effects, major maintenance projects in Switzerland that had been planned for a long time contributed to this disproportionate increase. An encouraging development is that all other items under Other operating expenses decreased as a ratio of sales – sometimes significantly. Part of the success of the many projects aimed at optimising the Group-wide supply chain can be seen in the logistic expenses, which recorded a well-below average increase of 2.4 %.

Other operating income was down CHF 2.4 on the previous year to CHF 4.5 million due to higher gains from the sale of fixed assets in 2019.

As a consequence of this development, earnings before interest, taxes, depreciation and amortisation (EBITDA) rose year-on-year from CHF 352.9 million to CHF 376.3 million. Adjusted for the above-mentioned non-recurring effect, EBITDA amounted to CHF 390.9 million for the year under review. The adjusted EBITDA margin therefore increased from 10.1 % in 2019 to 10.5 %.

Depreciation and amortisation rose by CHF 9.7 million in the period under review, from CHF 110.0 million to CHF 119.7 million. This increase is attributable to higher impairment charges in addition to acquisition effects. The previous year values for amortisation of intangible assets have been restated due to a change in the consolidation and accounting principles for goodwill.

Earnings before interest and taxes (EBIT) were CHF 256.6 million in the period under review. Adjusted for the above-mentioned non-recurring effect, this amounted to CHF 271.2 million, exceeding previous year EBIT by CHF 28.0 million or 11.5 % (2019: CHF 243.2 million). Consequently, the adjusted EBIT margin increased from 7.0 % in 2019 to 7.3 % in 2020.

Income from associates, financial result and income taxes

Income from associates and joint ventures recorded a loss CHF 1.0 million in the period under review, compared with a gain of CHF 2.3 million the previous year. The main reason for this was that our operating business in Brazil was considered as an associate for nearly ten months in 2019 before becoming a fully consolidated Group company.

The financial result (net financial expenses) was CHF 13.4 million, compared with CHF 6.8 million in the previous year. A worse currency result due to higher hedging costs, lower interest and other financial income, as well as higher bank charges and borrowing costs arising from local financing for recently acquired companies were the main reasons for this expected development.

Income taxes amounted to CHF 40.6 million, versus CHF 34.8 million in the previous year. Adjusted for the sale of Lácteos Caprinos S.A., the tax rate of 16.8 % fell to 16.0 %. The higher adjusted tax rate compared to the previous year (14.6 %) is mainly due to non-recurring effects in 2019.

Net profit

Profit including minority interests was CHF 201.6 million. Adjusted for the above-mentioned non-recurring effect, this amounts to CHF 215.8 million, an increase of CHF 11.8 million on the previous year figure of CHF 204.0 million.

The marked increase in minority interests in profit from CHF 9.0 million in the previous year to CHF 13.2 million in the period under review is a positive sign, even if it dented net profit. It shows that companies with minority interests increased their profitability overall in the period under review. The contributions from recently acquired companies with minority interests played a major role here.

Accordingly, net profit in the period under review was CHF 188.4 million, with adjusted net profit amounting to CHF 202.6 million versus CHF 195.0 million in 2019. The adjusted net profit margin therefore fell slightly from 5.6 % in 2019 to 5.5 % in the reporting period. As expected, the margin gain at EBIT level turned in to a margin erosion at net profit level versus the previous year and is attributable to higher financing expenses, income taxes, minority interests and the proportional loss from associates.