Annual results 2012

Broad-based success for Emmi

---

Lucerne, 27 March 2013 - Net sales at Emmi were up 9.6 % to CHF 2,981.2 million in 2012. Adjusted for extraordinary income, earnings before interest and taxes (EBIT) rose by 12.2 % to CHF 146.3 million, while net profit increased by 8.8 % to CHF 90.3 million, resulting in an adjusted EBIT margin of 4.9 % (prior year 4.8 %) and an adjusted net profit margin of 3.0 % (prior year 3.0 %). The solid annual results are primarily based on the strong performance of recent acquisitions and rigorous cost management. Emmi expects Group sales to grow and the net profit margin to remain unchanged in 2013. A proposal will be made to the Annual General Meeting on 25 April 2013 for a gross dividend of CHF 3.60 (prior year: CHF 3.40) per registered share from the capital reserves.

Emmi posted net sales of CHF 2,981.2 million in 2012, up 9.6 % from the prior year (CHF 2,721.3 million). Earnings before interest and taxes (EBIT) at CHF 165.7 million and net profit at CHF 106.2 million were positively affected by the disposal of fixed assets, in particular the site of the former Butterzentrale in Lucerne, which contributed CHF°19.4 million to EBIT and CHF 15.9 million to net profit (after taxes). Adjusted for this effect, EBIT grew by 12.2 % to CHF 146.3 million and net profit rose by 8.8 % to CHF 90.3 million. This result is at the upper end of the target range and, considering the continued challenging economic climate, is very positive. It can be attributed to our strategy, which focuses on high-quality Swiss products, products manufactured locally abroad and rigorous cost management.

Urs Riedener, CEO of Emmi: "Emmi is still on track with its strategy. I am delighted that we achieved sustainable growth in 2012 and that our international sales were significantly above the CHF 1 billion mark for the first time. Together with the Swiss business, which continues to be the company's mainstay, and the solid earnings, we will be able to continue investing in Emmi's healthy growth in the future."

Fierce competition on the domestic market

As announced back in February, net sales in Switzerland fell by 3.6 % to CHF 1,842.1 million (2011: CHF 1,909.9 million). Adjusted for acquisitions, sales fell by 3.9 %. This was chiefly due to the elimination of unprofitable activities outside of retail. Other influential factors included price pressure in the trade and industrial business and import pressure on products such as mozzarella and cheese spreads. Emmi successfully held on to market share in its core business, the retail trade, despite a general decline in retail sales of dairy products (-1.8 %¹). Besides Emmi Caffè Latte, new products such as "Chäs Schiibe" (cheese slices), Kaltbach Creamy & Tasty and Mix-it Müesli contributed to this result in 2012.

The Swiss business accounted for 61.8 % of total Group sales in the 2012 financial year (2011: 70.2 %).

International sales surpassed CHF 1 billion for the first time

Emmi achieved a 40.4°% increase in sales in international markets to CHF 1,139.1 million (2011: CHF 811.4 million). In local currency and adjusted for acquisitions, growth amounted to 4.7 %.

Growth was therefore at the upper end of expectations and is primarily due to the acquisition of Kaiku and Diprola. Recent acquisitions such as Onken, Cypress Grove Chèvre and A-27 performed well, as did the cheeses produced locally by Emmi Roth USA and Emmi Caffè Latte. The fact that export sales picked up again following the dip in 2011 was particularly pleasing, with sales growth for Le Gruyère AOC, Kaltbach and Emmi Caffè Latte.

Emmi's international business (export and production abroad) accounted for 38.2 % of total Group sales (25.0 % Europe, 10.5 % North and South America, 2.0 % Africa and 0.7 % Asia/Pacific).

Broad-based improvement in earnings

Gross profit grew by 13.4 % to CHF 1,028.2 million (2011: CHF 907.1 million). The main contributors to this result were price increases abroad and cheaper procurement of packaging and non-dairy raw materials. Considering the currency situation, which continues to be difficult, this growth is extremely positive, but also necessary to allow Emmi to continue investing in its competitiveness. The gross profit margin improved from 33.3 % to 34.5 %.

Operating expenses increased in the 2012 financial year by 13.5 %, to CHF 776.9 million (2011: CHF 684.5 million). Personnel expenses rose by 8.7 % to CHF 374.9 million on account of acquisitions. The additional employees primarily joined Emmi from Kaiku and Diprola. The 18.3 % increase in other operating expenses to CHF 402.0 million is mainly due to an increase in marketing investment and rising sales expenditure (+18.9 %).

Earnings before interest, taxes, depreciation and amortisation (EBITDA)increased by 13.4 % to CHF 271.4 million (2011: CHF 239.3 million) thanks to an exceptional income from the disposal of fixed assets. This caused the EBITDA margin to increase from 8.8 % to 9.1 %.

Depreciation was up 7.4 % due to acquisitions, climbing to CHF 85.9 million, while amortisation fell by 30.4 %. The main reason for the latter was the comparably high figure in 2011 owing to the impairment on the goodwill from the purchase of Trentinalatte. Investment in fixed assets was up to 34.0 %. In Switzerland this was mainly linked to efficiency enhancements and innovations. Outside Switzerland, however, this was used to expand capacity and to ensure the production infrastructure needed for growth.

The income from the disposal of fixed assets caused earnings before interest and taxes (EBIT) to increase by 27.1 % to CHF 165.7 million (2011: CHF 130.3 million). This in turn caused the EBIT margin to increase from 4.8 % to 5.6 %. Adjusted for the one-time effect related to the income from the disposal of fixed assets, EBIT totalled CHF 146.3 million, and was therefore up 12.2 % year-on-year. The adjusted EBIT margin also increased to 4.9 % from 4.8 % in 2011.

Increase in net profit, stable net profit margin

The financial result deteriorated from CHF -7.0 million to CHF -16.4 million. The main reason for this was the increased financing requirement due to acquisitions. The improvement in earnings caused tax expense to rise to CHF 28.2 million (2011: CHF 23.6 million). At 18.5 %, the average tax rate on pre-tax profit was maintained at the prior-year level.

This results in a net profit of CHF 106.2 million for the 2012 financial year (2011: CHF 83.0 million) and a net profit margin of 3.6 %. Adjusted for the income from the disposal of fixed assets, net profit amounted to CHF 90.3 million (+8.8 %) and the corresponding net profit margin totalled 3.0 % (unchanged).

CEO Urs Riedener, commented: "Considering the challenging environment, we are very pleased that we were able to maintain our profitability level."

Outlook for 2013

Emmi will continue to pursue its proven strategy, grow its international business and defend its position in Switzerland. The focus will remain on our existing key markets in Europe and the USA. In addition, Emmi will strengthen its position in Chile and Tunisia and maintain a presence in the emerging regions of the world, such as Asia, Russia and Latin America through exports from Switzerland.

In the first half of 2013, prices of raw materials are set to remain more or less stable. Emmi does not see any significant changes in packaging either. The price of milk is set to rise by 3 centimes per kilo on 1 June 2013. Import pressure will persist in Switzerland, and retail tourism will remain at a high level, but is not likely to see further significant growth. In the key markets of the USA, Germany and the UK, we can assume that consumer spending will remain stable. The emerging markets, such as Chile, Tunisia and the Asian countries are set to see further growth. In southern Europe, on the other hand, consumer sentiment is likely to remain muted. Emmi also expects the Swiss franc to remain overvalued against the euro. In light of the above-mentioned circumstances, Emmi's continued success in 2013 relies on strong brand concepts in Switzerland and in the international business, branded products produced locally abroad, the strong performance of its acquisitions and ongoing rigorous cost management.

Emmi expects Group-wide sales growth of 6 % to 8 % in 2013. On the Swiss market, we expect a decline of between 2 % and 3 %, while in international markets we anticipate growth of 20 % to 25 %. These figures include the influence of acquisitions completed in 2012. Emmi is expecting profitability to remain at a similar level to that in 2012, i.e. with earnings before interest and taxes (EBIT) of between CHF 140 million and CHF 155 million and a net profit margin of 3 %.

In the medium to long term, Emmi aims to continue to achieve organic growth of 6 % to 8 % per year outside Switzerland. Sales are expected to stabilise in the medium term in Switzerland. The company anticipates organic growth of 2 % to 3 % at Group level. Through organic growth and acquisitions, Emmi's goal is to increase the share of international sales to around 50 % in three years' time.

Emmi key figures 2012

Amounts in CHF million	2012	2012 adjusted*	2011	Change
Net sales	2,981		2,721	9.6 %
Earnings before interest, taxes, depreciation and amortization (EBITDA)	271.4		239.3	13.4 %
as % of net sales	9.1		8.8	-
Earnings before interest and taxes (EBIT)	165.7	146.3	130.3	12.2 %
as % of net sales	5.6	4.9	4.8	-
Net profit	106.2	90.3	83.0	8.8 %
as % of net sales	3.6	3.0	3.0	-
Investment in fixed assets (excl. acquisitions)	131.3		98.0	34.0 %
as % of net sales	4.4		3.6	-
Headcount (full-time equivalents) as at 31.12.	5,074		3,890	30.4 %
Net sales per employee CHF 000s (mean value)	665		717	-7.3 %
Volume of milk and cream processed in million of kg	1,220		1,017	20.0 %
	31.12.12		31.12.11
Total assets	2,323		1,949	19.2 %
of which shareholders' equity incl. minority interests	1,165		1,023	13.9 %
as % of total assets	50.2		52.4	-

 

* Adjusted for extraordinary income made up of gains from the disposal of fixed assets, in particular the site of the former Butterzentrale in Lucerne, which contributed CHF 19.4 million to EBIT and CHF 15.9 million to net profit (after taxes). The adjusted values will be relevant for future comparisons.

¹ Source: Nielsen

Contacts

Esther Gerster, Head of Corporate Communications & Investor Relations T +41 41 227 27 86 ir@emmi.ch

Sibylle Umiker, Head of Media Relations T +41 41 227 28 40 media@emmi.ch

---