HOCHDORF Holding Ltd Annual Results 2018
Announcement according to SIX adhoc publication article 53 KR
Hochdorf (pta008/19.03.2019/07:00) - HOCHDORF generated a net sales revenue of CHF 561.0 million in 2018 (-6.6% compared to previous year (PY)). Earnings before interest and taxes (EBIT) amounted to CHF 18.6 million (-56.2% PY) with a net profit of CHF 8.7 million. Although significantly below the record figures of the previous year, the sales and earnings figures are within those forecast by the company in December 2018. The main reasons for the disappointing results are the significantly lower performance of Pharmalys Laboratories SA, the lack of sales in China, delays in the new spray tower line and a worsening of the problems in the Dairy Ingredients division, as well as the one-off effect from the sale of HOCHDORF Baltic Milk UAB.
The HOCHDORF Group processed 661,017 tonnes of milk, cream, whey and milk permeate in 2018 (PY 650,017 tonnes; +1.7%) and sold 154,609 tonnes of product (-18.8% on PY). It achieved a net sales revenue of CHF 561.0 million (PY CHF 600.5 million; -6.6%) and company profits of CHF 8.7 million (PY CHF 40.8 million). The net sales revenue is thus within the range of CHF 540 - 570 million forecast in December 2018. At 3.3%, EBIT as a percentage of production revenue is slightly below the predicted range of 3.5 - 4.0%.
Within the context of the history of the HOCHDORF Group, an EBIT of this size is a reasonably good result, especially considering the additional one-off effect of the sale of HOCHDORF Baltic Milk at CHF 2.9 million. At net profit level, the charge from the sale amounted to a total of around CHF 5.9 million. In addition, operating costs rose sharply to CHF 135.9 million (prev. year CHF 116.4 million; +16.8%).
The main reasons for the disappointing results are the significantly lower performance of Pharmalys Laboratories SA, the lack of sales in China, delays in the new spray tower line and a worsening of the problems in the Dairy Ingredients division.
Last year with high investment total
Earned capital was reduced from CHF 56.0 million to CHF 30.4 million. The considerably lower operating results have a significant impact here. Compared to the previous year, cash flow from operational activities fell from CHF 6.0 million to CHF -81.3 million. The main reason for this is the remaining purchase price payment for Pharmalys. Due to the expansion of business activities, the item "Inventories" in particular increased significantly. Longer payment periods in the MEA region (Middle East Africa) pose a challenge. Nevertheless, the "Receivables" item was reduced overall.
Expenditure of CHF 35.5 million was made in the area of investments for plant, buildings and intangible assets. By omitting the amounts for the expansion of the Sulgen plant, the ordinary investments could be financed from the current cash flow. Work on the new T9/can line 2 was largely completed in 2018. We are planning mainly for replacement investments for 2019.
As expected, free cash flow was negative in 2018 due to the new T9 building and the purchase price payments for Pharmalys and Bimbosan. We expect slightly positive free cash flow for 2019. Net debt increased from CHF 0 million in December 2017 to CHF 141.3 million. The hybrid bond and the mandatory convertible bond are classed as equity and do not affect net debt.
The equity ratio fell to 48.8% compared to the end of 2017 (53.1%). This was due to the higher debt, as outlined above. With the 2018 financial statements, the final purchase price for Pharmalys was again adjusted slightly downwards by offsetting it against equity. Overall, the HOCHDORF Group's financing therefore continues to provide a good basis for the continued growth of the company.
Dairy Ingredients division
The Dairy Ingredients division achieved a net sales revenue of CHF 354.4 million in 2018 (PY CHF 405.1 million; -12.5%) and experienced a challenging year with a still large but declining spread between milk fat and milk protein valuations in the international markets. Activities in Switzerland were mainly shaped by the implementation of the successor to the "Schoggi" law.
In Switzerland, HOCHDORF Swiss Nutrition Ltd processed practically the same amount of liquid (mainly milk and whey) as in the previous year (408,857 tonnes compared to 409,009 tonnes in 2017). In total, however, 26.2% more whey and 8.5% less milk were processed. In terms of products, loss-makers were removed from the portfolio and work was carried out on new and further developments of products with higher added value. Activities also focused on the implementation of the successor to the "Schoggi" law involving a large number of challenging customer and supplier negotiations. With its disproportionately high share of "Schoggi" law milk, HOCHDORF is severely affected by the changes.
Uckermärker Milch GmbH processed a significantly higher liquid volume than in the previous year (193,844 tonnes compared to 234,324 tonnes; + 20.9%). Most noticeably, the processed milk volume increased by almost 30%. On the market side, Uckermärker Milch concentrated on the development and marketing of specialist milk powders with higher margin potential. In this regard, the company achieved an excellent market position for super kosher milk powder in the first year. The year-round low milk protein prices and the additional fall in fat prices in the second half of the year had a strong negative impact on performance. Cost measures were taken to counter these and there were headcount reductions at the end of the year.