scandi standard (scst ss)€¦ · up scandi standard (scst ss) q4 2019 presentation –7 february...

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Scandi Standard (SCST SS)Q4 2019 Presentation – 7 February 2019 Revenue by category

Revenues per country

Revenue by channel

Sweden 29%

Denmark 32%

Norway 15%

Ireland 19%

Finland 5%

Chilled 50%

Frozen 12%

Ready to eat 21%

Other 17%

Retail 61%

Food service 21%

Export 10%

Industry 5%

Other 3%

Note: Figures for 2017, 2018 and 2019 are compiled in accordance with changed accounting principles for IFRS 16 Leases, note 21 in the 2018 Annual Report 2018

7.7% 7.6%

2

Forward looking statements and accounting issues

This presentation contains various forward-looking statements that reflect management’s current views with respect tofuture events and financial and operational performance. The words “believe,” “expect,” “anticipate,” “intend,” “may,” “plan,”“estimate,” “should,” “could,” “aim,” “target,” “might,” or, in each case, their negative, or similar expressions identify certain ofthese forward-looking statements. Others can be identified from the context in which the statements are made. Theseforward-looking statements involve known and unknown risks, uncertainties and other factors, which are in some casesbeyond the Company’s control and may cause actual results or performance to differ materially from those expressed orimplied from such forward-looking statements. These risks include but are not limited to the Company’s ability to operateprofitably, maintain its competitive position, to promote and improve its reputation and the awareness of the brands in itsportfolio, to successfully operate its growth strategy and the impact of changes in pricing policies, political and regulatorydevelopments in the markets in which the Company operates, and other risks.

The information and opinions contained in this document are provided as at the date of this presentation and are subject tochange without notice.

No representation or warranty (expressed or implied) is made as to, and no reliance should be placed on, the fairness,accuracy or completeness of the information contained herein. Accordingly, none of the Company, or any of its principalshareholders or subsidiary undertakings or any of such person’s officers or employees accepts any liability whatsoeverarising directly or indirectly from the use of this document.

2019 is the first accounting year for which IFRS 16 Leases is applied. Scandi Standard has elected to use the fullretrospective method where the accumulated effect of the transition is reported in the opening balance for 1 January 2018.The change is treated as a change in accounting principles and the comparison numbers have been adjusted. For furtherinformation, see Note 1 in the Q3 2019 report and note 31 in Scandi Standard AB (publ) Annual Report 2018.

3

2019 – Strong growth in sales and improved results

1)Net cash flow excluding dividend and acquisitions

Financial highlights

MSEK Q4 2019 Q4 2018 2019 2018

Net sales 2,420 2,166 9,891 8,797

Adj. EBITDA 185 168 776 714

Adj. EBITA 117 118 505 430

Adj. EBIT 104 104 454 381

Adj. EBITDA margin 7.6% 7.7% 7.8% 8.1%

Adj. EBIT margin 4.3% 4.8% 4.6% 4.3%

Op. cash flow* 321 230 590 354

NIBD -2,200 -2,370 -2,200 -2,370

EPS (reported) 0.60 1.11 3.60 3.05

EPS adj. 0.85 1.31 4.06 3.79

Net cash flow per share1)

5.12 3.18 6.62 1.14

Adj. ROCE 11.0% 9.7% 11.0% 9.7%

Return on Equity 14.2% 13.2% 14.2% 13.2%

• Strong 2019

- 12% growth

- 19% growth in adj. EBIT

• Strong growth and good results in the quarter

- 12% growth in net sales

- Adj. EBIT MSEK 104

- Strong operational cash flow

- 14% Return on equity

• Dividend proposal of SEK 2.25 (2.00)per share

4

Q4 – Exceptional top line growth

Underlying growth

2%

10%

Currency

12%• 10% underlying growth

- Ready-to-eat products representing approx. 2/3

- Strong performance for Read-to-cook products

• Currency effect of 2%

• 2020 growth expected to be modest

- Lower growth rate in Ready-to-eat after strong 2019

- Impact from movement in raw material prices

6

Part of our sustainability agenda - Improving feed conversion ratio

Figures based on mean of FCR values from several published sources

• Chicken 4,5 times more feed effecient than

beef

201920172016 2018

1.59

1.56

1.54

1.52

Feed efficiency, kg feed/kg live weight

2.7

Beef SalmonPork Chicken

7.5

1.21.6

Feed efficiency, kg feed/kg live weight

• We have improved feed conversion rate over the

last 4 years

• This equals a reduction of 25,000 tons of

feed (2019 volumes)

• Frees up 4000 ha of farming area

7

• Strong volume growth

- Driven by Ready-to-cook and Ready-to-eat

• Strong contribution from improved mix

- Increased proportion of branded sales

• Price increases have matched raw material inflation

- Relationship based pricing model with retail customers and contracted farmers

• Some OPEX increases

• Very low depreciation in Q4 2018

Strong earnings development in 2019

8

Solid development in most profitable product categories

Note: (1) Share of group sales, category/channel q/q growth in parenthesis (2) RTC=Ready-to-cook, RTE=Ready-to-eat

• 9% quarterly growth in Chilled Ready-to-cook

- Increased volume

- Improved product mix

- Price impact from compensation of raw material inflation

• 34% quarterly growth in Ready-to-eat

- New capacity rapidly absorbed

- Volume increase both in breaded and un-breaded categories

- Benefits from product development initiatives

• Inventory clearance of frozen products in the quarter

9

4 x organic growth in Ready-to-eat in 5 years

• Rapidly growing market for convenience products

• Developing platforms for the future

Ready-to-eat products, Total sales (MSEK) and share of Group sales

10

Strong growth in retail and food service

Note: (1) Share of group sales, category/channel q/q growth in parenthesis

• Retail revenue growth of 9%

- Solid mix between high end and discount retailers

• Foodservice revenue growth of 33%

- Strong contribution from quick service restaurants

- Product innovation and strengthened sales organisation

11

• 19% improvement in EBIT in 2019

• All countries contributed

• Stable development in Q4

- Strong growth if adjusting for changes in deprecation (MSEK 22)

Earnings improvement in all countries in 2019

12

• 6% increase in net sales

- Solid retail demand

• Improved adj. EBIT margin

- Improved cost efficiency and yields

• Positive market outlook

Sweden –Solid growth and improved margins

MSEK Q4 2019 Q4 2018 2019 2018

Net Sales 692 654 2,864 2,656

Adj. EBITDA 68 60 257 238

Depreciation -18 -28 -74 -99

Adj. EBITA 49 36 183 139

Amortisation 0 0 -1 -1

Adj. EBIT 49 43 182 138

Non-recurrings items - -8 - -42

EBIT 49 35 182 96


Adj. EBITA margin 7.1% 5.5% 6.4% 5.3%

Adj. EBIT margin 7.1% 6.5% 6.3% 5.2%

13

Denmark – Exceptional growth, low margins

MSEK Q4 2019 Q4 2018 2019 2018

Net Sales 868 698 3,426 2,750

Adj. EBITDA 37 33 186 163


Adj. EBITA 16 19 103 94

Amortisation -1 -1 -4 -4

Adj. EBIT 16 19 101 92

Non-recurrings items -14 -2 -20 -2

EBIT 2 18 80 90


Adj. EBITA margin 1.9% 2.8% 3.0% 3.4%

Adj. EBIT margin 1.8% 2.8% 2.9% 3.3%

• 24% revenue growth

- New Ready-to-eat capacity rapidly absorbed

- Continued positive development for new brand

• Quarterly result impacted by special items

- Frozen inventory clearance

- Restructuring initiatives in the quarter

• Strong focus on margin improvement

- Situation expected to gradually normalise in 2020

14

Norway – Continued very strong performance

MSEK Q4 2019 Q4 2018 2019 2018

Net Sales 385 373 1,619 1,512

Adj. EBITDA 50 53 223 208


Adj. EBITA 36 42 166 148


Adj. EBIT 32 38 150 131

Non-recurrings items - - - -

EBIT 32 38 150 131


Adj. EBITA margin 9.3% 11.3% 10.3% 9.8%

Adj. EBIT margin 8.2% 10.1% 9.2% 8.7%

• 3% revenue increase

- 5% in local currency

- Strong growth in Ready-to-eat segment

• Continued best in class margins

• Strong product portfolio and operational performance

15

Ireland – Good quarter

MSEK Q4 2019 Q4 2018 2019 2018

Net Sales 479 451 1,972 1,894

Adj. EBITDA 44 40 169 157


Adj. EBITA 36 34 137 125


Adj. EBIT 28 26 107 96

Non-recurrings items - -2 - -2

EBIT 28 24 107 94


Adj. EBITA margin 7.5% 7.5% 6.9% 6.6%

Adj. EBIT margin 5.9% 5.9% 5.4% 5.1%

• 6% revenue growth (3% in local currency)

• Good operational performance

• Successful investments in 2019

- Cost efficiency

- Animal welfare and food safety

- Debottlenecking

16

Finland – Strong growth, soft quarterly results

MSEK Q4 2019 Q4 2018 2019 2018

Net Sales 118 97 491 416

Adj. EBITDA 1 2 20 9


Adj. EBITA -4 0 -2 -13

Amortisation - 0 - 0

Adj. EBIT -4 0 -2 -13

Non-recurrings items -2 - -9 -

EBIT -6 0 -10 -13


Adj. EBITA margin -3.7% 0.0% -0.3% -3.1%

Adj. EBIT margin -3.7% 0.0% -0.3% -3.1%

• 22% revenue growth

• Weak margins in the quarter

- Seasonally higher costs and inventory clearance

• Focus on further improvement from 2019 performance

- Debottlenecking

- Improved product mix and innovations

- Manufacturing costs / yields

17

Income statement Restated for IFRS 16

MSEK Q4 2019 Q4 2018 2019 2018

Net sales 2,420 2,166 9,891 8,797

Adj. EBITDA 185 168 776 714


Adj. EBITA 117 118 505 430


Adj. EBIT 104 104 454 381

Non-recurring items -16 -13 -30 -49

EBIT 87 91 424 333

Net financial items -20 -17 -113 -99

Earnings before tax 67 74 312 233

Taxes -25 -1 -75 -33

Net income 42 74 237 200

Average number of shares, 65.4 65.3 65.4 65.3

EPS 0.60 1.11 3.60 3.05

Adj. EPS 0.85 1.31 4.06 3.79


Adj. EBITA margin 4.8% 5.4% 5.1% 4.9%

Adj. EBIT margin 4.3% 4.8% 4.6% 4.3%

• 12% revenue growth in the quarter

• 10% adj. EBITDA growth (7.6% margin)

• Increased depreciation

- Alignment across segments ultimo 2018

• Stable adjusted EBIT

• Non recurring items mainly related to restructuring in Denmark

• Tax rate 37% (1%)

- Revaluation of losses carried forward 16 MSEK

18

Statement of financial position

• Improved returns

- Adj. ROCE 11.0%

- ROE 14.2%

• Equity ratio 28% (27%)

• IFRS 16 effect on NIBD MSEK 445 in 2019

9.7

11.0

0

2

4

6

8

10

12

4

0

5

1

2

3

Average Capital Employed, BSEKAdj. ROCE %

3,9

2018

4,1

2019

2019

4,1

13.214.2

0

5

10

15

0,0

0,5

1,0

1,5

2,0

Adj. ROE% Average Equity, BSEK

1,6

2018

1,7

2019

19

Working capital Working capital

617710

632 654

509563

498 543

211

0

1

2

3

4

5

6

7

8

0

100

200

300

400

500

600

700

800

Q4 2018Q3 2018

7.5%7.8% 7.7%

7.5%

5.8%

6.2%

2.1%

5.3%5.6%

Q4 2017 Q1 2018 Q2 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019

• Reduction in working capital

- Seasonal and temporary items

- Increased vendor financing

• Working capital / Sales 2.1%

• Normal level expected to be 4-6%

MSEK 31-Dec-19 30-sep-19 31-Dec-18

Inventory 826 859 749

Trade and other receivables 901 984 850

Trade and other payables -1,117 -998 -901

Other working capital, net -400 -313 -190

Working capital 211 532 509

Net working capital/Sales 2.1% 5.6% 5.8%

20

Strong cash flow

1)Net cash flow excluding dividend and acquisitions

• EBITDA improvement

• Significant working capital release

• High quarterly capital expenditure

• Net cash flow per share SEK 5.12

MSEK Q4 2019 Q4 2018 2019 2018

Opening balance NIBD -2,535 -2,577 -2,370 -2,323

EBITDA 169 146 748 662

Adjustments for non-cash items 21 -7 29 3

Change in working capital 305 133 264 157

Capital expenditure -171 -34 -419 -371

Net increase in leasing assets -4 -7 -33 -98

Operating cashflow 321 230 590 354

Paid finance items net -24 -19 -72 -78

Paid tax 8 -23 -49 -83

Paid dividend - - -131 -118

Acquisitions 0 0 -133 -4

Other items 31 20 -36 -119

Net cash flow 335 207 170 -47

Closing balance NIBD -2,200 -2,370 -2,200 -2,370

Capex/Depreciation 258% 96% 166% 165%

Paid financial expenses/NIBD 1% 0.8% 3.3% 3.3%

Net cash flow per share1) 5.12 3.18 6.62 1.14

Dividend per share - - 2.00 1.80

21

Cash flow guidance

Notes: (1) Subject to changes – estimates updated on a quarterly basis (2) Yield based on YTD share price (3) Capex/Depreciation for 2018 and 2019E based on changed IFRS standard

• Dividend policy

- 60% of net income over time

- Dividend proposal SEK 2.25 (2.00) per share to be paid in Q2 2020

• Paid interest estimate to 3 - 3.5% of average NIBD

• Blended effective tax rate of about 20-21%

• 2020 capital expenditures estimated to MSEK 420 (419)

- Spread within the group

- Focus on facilitating growth and margin improvements

• Contingent liabilities - Manor Farm acquisition

- Three earn out tranches payable in 2019, 2020 and 2021

- 2019 tranche of MSEK 133 paid in Q3 2019

- See appendix for details

1.0

2.5

0.5

0.0

1.5

2.5

0.0

3.0

3.5

4.0

2.0

20192015

1.80

Dividend yield

2.00

2016 2017 2018 2020

1.30

1.80

1.35

2.25

Paid dividend Dividend yield

Dividend

0

50

100

150

200

250

300

350

400

450

1.0

0.0

1.2

0.2

0.4

0.6

0.8

1.4

2016 2019

Capex/Depreciation

2015 2017 2018 2020E

Capex / depreciationCapital expenditure

Capital expenditure

22

Summary and Outlook

• Strong growth and good results

- Solid demand for our products in all markets

- 2019 growth well above 5 year average of 6-7%

• Solid innovations

• Further strengthening of our brands

• Lower top line growth expected for 2020 following exceptional 2019

- Focus on margin improvement from Q4 2019

• Following structural opportunities closely

• Dividend proposal of SEK 2.25 (2.00) per share

Segments, pro-forma figures and non-comparable items

Appendix I

24

Segment information by quarter 125

Group (MSEK) Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019

Sales 1,303 1,359 1,252 1,310 1,341 1,396 1,376 1,386 1,504 1,570 1,508 1,594 1,622 1,825 2,061 2,116 2,252 2,263 2,166 2,458 2,472 2,541 2,420

Sales growth 1% 3% -4% -3% 3% 3% 10% 6% 12% 12% 10% 15% 8% 16% 37% 33% 39% 24% 5% 16% 10% 12% 12%

EBIT (Adj) 76 67 80 68 77 72 68 68 74 76 33 59 70 84 116 82 92 102 104 110 115 125 104

EBIT margin 5.9% 4.9% 6.4% 5.2% 5.7% 5.1% 4.9% 4.9% 4.9% 4.8% 2.2% 3.7% 4.3% 4.6% 5.6% 3.9% 4.1% 4.5% 4.8% 4.5% 4.6% 4.9% 4.3%

Sweden (MSEK)

Sales 525 544 488 531 564 573 572 564 619 625 584 648 636 658 615 649 661 692 654 695 711 765 692

Sales growth 17% 15% 3% 6% 8% 5% 17% 6% 11% 9% 2% 5% 3% 5% 5% 0% 4% 5% 6% 7% 8% 11% 6%

EBITA (Adj) 31 30 34 33 43 39 38 44 52 51 28 35 34 41 41 32 29 36 43 42 44 48 50

EBIT (Adj) 30 29 33 33 43 39 37 43 51 51 27 35 34 41 40 31 29 35 43 42 43 48 49

EBIT margin 5.8% 5.4% 6.8% 6.2% 7.7% 6.9% 6.6% 7.7% 8.4% 8.2% 4.7% 5.4% 5.4% 6.2% 6.6% 4.8% 4.3% 5.1% 6.5% 6.0% 6.1% 6.2% 7.1%

Denmark (MSEK)

Sales 523 585 554 585 571 589 539 549 596 637 550 580 625 654 671 635 688 729 698 860 826 873 868

Sales growth 1% 9% 8% 7% 9% 1% -3% -6% 5% 8% 2% 6% 5% 3% 22% 9% 10% 12% 4% 35% 20% 20% 24%

EBITA (Adj) 24 24 32 33 35 38 34 29 22 30 14 22 29 35 35 23 23 28 20 33 25 29 17

EBIT (Adj) 23 24 32 33 35 38 34 28 22 30 12 21 28 34 34 22 22 28 19 32 25 28 16

EBIT margin 4.5% 4.1% 5.8% 5.6% 6.1% 6.4% 6.3% 5.2% 3.6% 4.7% 2.1% 3.7% 4.6% 5.2% 5.0% 3.5% 3.2% 3.9% 2.8% 3.7% 3.0% 3.2% 1.8%

Norway (MSEK)

Sales 307 309 279 276 280 201 322 332 353 361 388 388 374 360 361 362 393 384 373 400 419 415 385

Sales growth -22% -18% -28% -26% -9% -3% 15% 20% 26% 20% 21% 17% 6% 0% -7% -7% 5% 7% 3% 11% 7% 8% 3%

EBITA (Adj) 28 24 25 13 10 16 22 20 26 - 28 31 32 28 30 32 38 35 42 41 45 44 36

EBIT (Adj) 24 20 21 9 6 12 18 16 22 -4 24 27 28 24 26 28 34 31 38 37 41 40 32

EBIT margin 7.8% 6.5% 7.5% 3.3% 2.0% 6.0% 5.5% 4.9% 6.3% -1.0% 6.1% 7.0% 7.5% 6.7% 7.3% 7.8% 8.7% 8.2% 10.1% 9.2% 9.8% 9.7% 8.2%

Ireland (MSEK)

Sales - - - - - - - - - - - - - 166 431 464 499 479 451 496 501 496 479

Sales growth - - - - - - - - - - - - - - - - - - 5% 7% 0% 3% 6%

EBITA (Adj) - - - - - - - - - - - - - 12 24 27 34 30 34 25 39 38 36

EBIT (Adj) - - - - - - - - - - - - - 10 17 20 27 23 26 17 32 30 28

EBIT margin - - - - - - - - - - - - - 5.9% 4.0% 4.3% 5.4% 4.8% 5.9% 3.5% 6.3% 6.1% 5.9%

Finland (MSEK)

Sales - - - - - 20 16 21 34 47 71 70 87 80 91 106 114 99 97 112 129 132 118

Sales growth - - - - - - - - - 141% 345% 237% 157% 70% 29% 51% 30% 24% 6% 6% 13% 33% 22%

EBITA (Adj) - - - - - -9 -12 -9 -12 -11 -20 -13 -10 -13 -8 -5 -4 -3 0 1 1 2 - 4

EBIT (Adj) - - - - - -9 -12 -9 -12 -11 -20 -13 -10 -13 -8 -5 -4 -3 0 1 1 2 - 4

EBIT margin - - - - - -46.4% -74.6% -43.4% -35.4% -23.5% -27.8% -18.9% -11.2% -15.8% -8.8% -5.0% -3.7% -3.2% 0.0% 0.5% 0.4% 1.3% -3.7%

25

Non-recurring items

MSEK Q4 2019 Q4 2018 2019 2018

Restructuring costs1)

-5 -1 -12 -1

Restructuring of production2)

- -8 -7 -42

Transaction costs3)

-1 -9 -1 -11

Effect of changes in est. life expectancy of fixed assets4)

- 8 - 8

Costs for faulty raw materials5)

-6 - -6 -

Other -4 -3 -4 -3

Total adjustments to operating income -16 -13 -30 -49

1) Restructuring costs in Denmark in the second quarter 2019 and in Sweden in the second quarter 2018

2) Closing of hatchery in Finland in the second quarter 2019 and restructuring of and changes in production in Sweden during 2018.

3) Deal fees related to the acquisitions of Rokkedahl Food ApS in Denmark in 2018 and the Irish company Carton Bros ULC.

4) The share of the effect of the analysis of applied depreciation rates in relation to estimated actual useful life that refers to previous periods.

5) Costs for quality issues caused by a supplier not covered by insurance

Manor Farm earn-out mechanism

Other

Appendix II

27

• The first earn-out tranche of EUR 0.4 million will be paid if 2017 EBITDA exceeds EUR 13 million

• The three later earn-out tranches

- Nominal aggregate base amount of EUR 25 million

- Subject to adjustment based on the actual EBITDA performance in each of the earn-out years 2018, 2019 and 2020 as compared to the 2016 EBITDA

- For the calculation of each earn-out payment, a sliding EV/EBITDA multiple scale is applied, ranging from a minimum multiple of zero to a maximum multiple of 9

- The earn-out tranches will be paid upon availability of audited accounts for the relevant year, verifying EBITDA

• The agreement includes a provision whereby the vendors would be eligible for a minimum of the base earn-out amount at maturity of each of the remaining earn-out tranches if there is a change of control in Scandi Standard.

Earn-out mechanism

EUR million EBITDA Earn out payment

1 0.1

3 0.6

5 1.5

7 2.7

9 4.2

11 6.1

13 8.3

15 10.9

17 13.1

19 14.6

21 16.2

28

Product category split

Wide product range, including whole chicken, cuts, marinated,

steaks, skewers, organic, free-range, etc.

Cooked chicken

sold both

chilled and

frozen, e.g.

nuggets, sallad

chicken etc.

Wide product range, including whole chicken, cuts, marinated,

steaks, skewers, organic, free-range, etc.

Mainly

eggs and

ingredie

nts

Chilled

Frozen

Ready-to-Cook Ready-to-Eat Other

• Retail: Retail customers in our domestic markets: SE, DK, NO, IE & FI

• Food Service: Home market FS customers and international key accounts

• Export: Customers outside our home markets, regardless of channels, except international key accounts

• Ingredients: Industry and Pet food customers

• Other: Sales of Eggs, day-old chicks and hatching eggs

Sales Channel split

Wide product range, including whole chicken, cuts, marinated, steaks, skewers, organic, free-range, etc.Export

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