CEO Leif Bergvall Hansen comments on the first quarter

The demand for our products continued to flourish in the first quarter. The exceptionally strong top line growth was partly due to a large contingency order within Ready-to-eat and the consolidation of Rokkedahl Food ApS which was acquired in the third quarter last year. The underlying growth was, however, well above the 7 percent average we have demonstrated over the last five years.

Poultry products are becoming increasingly attractive to consumers due to taste, health attributes, environmental profile and not least a very favourable pricing compared to the alternatives. During the last years we have gained market share in our home markets through the introduction of new innovative products, improved communication of our sustainability work and a strengthened position of our main brands. I am convinced that these drivers will continue to work in our favour and enable us to sustain significant growth over the longer term.

The strongest growth was generated in the Ready-to-cook Chilled category (15 percent) and, as mentioned, in the Ready-to-eat category (36 percent). We continue to observe a decline in the less profitable Ready-to-cook Frozen category (‑1 percent) and export decreased to below 8 percent of net sales in the first quarter.

As previously known, our margins have been under pressure during the last couple of years due to several of our most significant risk factors providing headwind simultaneously. Coming out of this challenging period, I am proud to report that the overall margin impact was limited to about 1.5 percentage points. This demonstrates our ability to generate stable results through application of a skilled organisation, a robust structural setup, ability to pass through raw material price changes and geographic diversification. Now that we have entered a more favourable environment, I am looking forward to demonstrating the earnings power inherent in our business model.

Scandi Standard is uniquely positioned among our competitors in our home markets. We are geographically well diversified and increasingly reaping the benefits of best practice across the individual markets.

As previously communicated, we have identified several capital projects in Ireland post acquisition aimed at increased efficiency, animal welfare, food safety differentiation and debottlenecking. We have decided to phase in a number of these investments this year. For the group, we expect to invest around MSEK 380 in 2019. During the first half of 2019 we will pay the first tranche for the earn out linked to the Manor Farm acquisition in the amount of MSEK 125.

By the end of the first quarter 2019, our net interest-bearing debt was MSEK 2,411 compared to MSEK 2,391 at the end of the first quarter 2018, an increase with MSEK 20. We remain committed to reinvest a large proportion of our cashflow in the business to fuel profitable growth. Over time, increased earnings will enable us to maintain a competitive direct yield to our shareholders whilst allocating sufficient funds to take advantage of our strong growth opportunities. The Board has proposed a dividend of SEK 2.00 per share for 2019 corresponding to MSEK 131.

We are carefully following the structural changes in our sector and believe that we are ideally positioned to take part of the consolidation of the European market. We believe the acquisition of Manor Farm is a good illustration of how we can create value and stability for our shareholders. The acquisition has contributed to further geographic diversification and we are happy with our cross-country teams’ ability to deliver benefits through exchanging best practice within the group.

I am pleased with the way the Scandi Standard is currently positioned with a robust business model of sustainably produced, healthy products. Based on the current market outlook, I see good opportunities for incrementally improving returns to the shareholders in the coming periods.

Leif Bergvall Hansen,
Managing Director and CEO

Please, see the interim report, first quarter 2019: English Swedish