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Konrad Graber Chairman BoD (right), Urs Riedener CEO (left)

Dear Shareholders

Economic and geopolitical upheaval and the suffering of the Ukrainian people have shaped the half-year. In addition, there are concerns about energy supply and the climate as well as a pandemic that refuses to subside. As people, society and companies, we have to adapt more and more quickly to a permanently changing ­environment.

“The needs of our stake­holders are at the centre of our strategy.”

Konrad Graber

Emmi is also constantly adapting in order to remain agile, efficient and relevant, and to continue to act innovatively and responsibly. By steadfastly pursuing and regularly validating our strategic direction and fostering a corporate culture that combines appreciation with a sense of purpose in individual activities, we are creating the best possible conditions for mutual long-term success.

Ambitiously developing strengths

In the spring, we honed our proven strategy, building on our strengths. Key future issues and the needs of our stakeholders are now anchored even more firmly at the centre of our activities. The same applies to our ambition to continue to operate our business in a resource-efficient, environmentally friendly and socially responsible manner on the basis of the Emmi sustainability model.

With the Emmi Purpose, we have also formalised why Emmi exists and what inspires us day after day: “Together, we create the best dairy moments – today and for generations to come.”

On this basis, our teams have largely confirmed the resilience of our business model in an extremely challenging environment. With our locally based organisation, differentiated brand concepts and wide-ranging innovations, we have got people excited about our unique products and responded quickly to changing needs. At the same time, we have been able to counter spiralling purchasing, energy and logistics costs with targeted measures, some of which have taken effect with a time lag.

Half-year sales exceed CHF 2 billion for the first time

At CHF 2,016.5 million and organic growth of 5.4%, sales exceeded the two billion threshold for the first time. The main drivers were our international business, the continued recovery in the food service sector, and the sustained momentum of our innovative speciality desserts and brand concepts such as Emmi Caffè Latte.

This confirms our resolve to continue to drive forward our strategic alignment with a diversified product and country portfolio and its transformation, and to further strengthen our business in key markets and profitable niches. This also includes investments in the specialty cheese segment, where we successfully integrated the Athenos business in the USA, the leading US feta specialist acquired at the end of 2021. In addition, our resource-efficient new cheese plant in Emmen will start operations in autumn, positively impacting long-term value creation in central Switzerland.

“Emmi is also constantly adapting to remain agile, efficient and relevant.”

Urs Riedener

Broad-based dynamic

In our home market of Switzerland, we were able to slightly increase our sales. We achieved this despite the pandemic-related high volumes in the comparative period as well as the additional high import and price pressure exacerbated by the weakness of the euro. Differentiated brand concepts such as Emmi Caffè Latte and Emmi Energy Milk as well as the recovery of the food service and industrial customer business had a positive impact.

With impressive double-digit organic, price-driven growth, the dynamic continued in the division Americas. In Brazil, we were able to further expand our presence, and our companies in Mexico, Spain, Tunisia and the USA likewise recorded a good development.

The division Europe also contributed to the strong organic growth. Once again, our Italian speciality desserts and the continued momentum of Emmi Caffè Latte were the main contributors here. Adverse factors, on the other hand, included the normalisation of cheese sales compared with the high comparative figures influenced by the pandemic, particularly in the counter segment, and signs of a slowdown in demand fuelled by prices and exchange rates.

Input cost development dampens results

Overall, sales grew more strongly than operating ­results due to the delayed effect of cost-related sales price increases. This happened despite extensive measures to contain the continuing massive increase in raw material, other material, energy and logistics costs and persistent bottlenecks in the supply chain and in the labour market. Added to this, the war in Ukraine has fuelled cost increases and triggered uncertainty on the markets.

At CHF 108.6 million, EBIT decreased by 20.8 million compared with the prior-year period, corresponding to an EBIT margin of 5.4% (previous year: 6.9%). Net income amounted to CHF 78.1 million, a decrease of CHF 20.6 million compared with the first half of 2021. The net profit margin was 3.9% (previous year: 5.2%).

Uncertainty to continue into the second half of the year

There is no sign of brightening in the gloomy macroeconomic and geopolitical situation, with a feedback effect on consumer demand and rising interest rate and currency risks. The strongly fluctuating infection figures are also a reminder that the coronavirus has not disappeared.

Accordingly, we will need to remain highly disciplined and cost-conscious also in the second half of the year and to pass on increases in purchasing prices in a responsible manner. The effect of the sales price increases is expected to contribute to an improvement in the margin situation over the course of the second half of the year. But in view of the challenging conditions and continuing historically high input costs, this will not fully offset the shortfall in the first half of the year.

While we are sticking to our medium-term forecast, we are slightly adjusting our outlook for the full year at EBIT level – from previously CHF 290 million to CHF 305 million to now CHF 265 million to CHF 280 million – as well as for the net profit margin at 4.5% to 5.0% (previously 5.0% to 5.5%). For sales development, we expect higher organic growth of 5% to 6% (previously 2.5% to 3.5%) due to input costs and inflation, with ranges for the division Americas of 10% to 12% (previously 6% to 8%), for the division Europe of 6% to 8% (previously 3% to 5%), and for the division Switzerland of 0.5% to 1.5% (previously -1% to 0%).

Focus on profitability

While the focus in the second half of 2022 will be on improving operational profitability, it remains important to continue to successfully shape Emmi’s long-term development. Accordingly, we will continue to invest systematically in our employees, in successful products and in our brands, as well as in value-creating projects.

The sustainable design of our products and processes will also remain an integral part of our strategy. This will additionally strengthen our ability to create long-term value and remain attractive – especially for young people. Those who wait risk losing them as consumers.

We would like to thank you for the trust you have placed in Emmi and our brands and for your support along the way.

Konrad Graber

Chairman of the Board of Directors

Urs Riedener