Hochdorf announces interim results

By Jim Cornall

- Last updated on GMT

Bimbosan launched an infant formula based on goat milk in Switzerland that has already been integrated into the export business.
Bimbosan launched an infant formula based on goat milk in Switzerland that has already been integrated into the export business.

Related tags Dairy

Swiss dairy company Hochdorf has announced its interim results for the first half year, and said it is optimistic about its future.

The company was reorganized in line with the strategic foundations created the previous year and Bimbosan AG was integrated into Hochdorf Swiss Nutrition Ltd.

Despite the restrictions caused by the coronavirus pandemic, new customers and markets were acquired and new products were launched in Switzerland and abroad.

However, the company said further measures are necessary to master the Hochdorf Group's tight financial situation and to strengthen the balance sheet. The purchase price repayment from Pharmalys, which enables an immediate partial repayment of liabilities, is positive.

The Hochdorf Group processed 218.9m kg of milk, whey and cream (liquid volume) in Switzerland in the first half of 2021 (PY: 187.9m kg; +16.5%) and sold 32,356 tonnes of products (–30.2% compared to the previous year). This resulted in a net sales revenue of CHF 140.3m/$153.5m (PY: CHF 158.3m/$173.2m). The decrease was a result of the divestments made and liquidations initiated in 2020. On a comparable basis, the result therefore corresponds to organic growth of 8%.

Gross profit fell by around CHF 12m ($13.1m) due to lower volumes, a higher milk price, a deliberate build-up of inventories and a temporary shift in the sales mix (higher share in the Food Solutions division), resulting in an EBIT of CHF –8.6m/-$9.4m (PY CHF 1.2m/$1.3m). The net result at Group level is CHF –9.0m/-$9.85m (PY: CHF –4.0m/-$4.4m).

As a consequence of the net result, equity decreased to CHF 171.4m ($187.5m), but the company said this still corresponds to a stable equity ratio of 51%. The cash flow from working capital was slightly positive at CHF 0.7m ($0.77m). Due to the decline in current assets of CHF –8.6m (-$9.4m), cash flow from operating activities remained negative at CHF –7.9m (-$8.6m). However, this showed an improvement compared to the same period last year (CHF –15.1m/-$16.5m).

Pharmalys Invest AG paid the outstanding purchase amount for the shares in companies of the Pharmalys Group in the amount of CHF 30m ($32.8m) on August 6, 2021. For the Hochdorf Group, Pharmalys Laboratories SA remains the largest customer in its Baby Care segment. The two companies have established their future strategic cooperation by signing a long-term supply agreement. These are important steps for the further financial recovery of the company and for securing the utilization of the production facilities in Sulgen.

The corporate structure introduced at the beginning of the year has further improved performance and efficiency within the company. Hochdorf said it is considerably closer to achieving the goal of an agile, innovative and service-oriented Hochdorf. As part of the structural change, Bimbosan AG relocated from Welschenrohr to Hochdorf, with the subsequent merger of Bimbosan AG into Hochdorf Swiss Nutrition Ltd. Both projects were completed in the first half of the year.

Hochdorf said the new agility is also reflected in its product innovations and new markets, such as the Bimbosan launch of an infant formula based on goat milk in Switzerland. This product has already been integrated into the export business. Preparations are also under way for the launch of Hochdorf own brands Bimbosan and Babina in three new export markets in Asia with the first deliveries expected in the second half of 2021.

The Baby Care segment achieved net sales revenue of CHF 27.9m/$30.5m (PY: CHF 37.6m/$41.1m; –25.8%). The lower sales are largely due to the private label business although Bimbosan also achieved slightly lower sales compared to the same period last year.

In addition to the goat milk launch and new export markets, the private label business also gained three new customers. The products will be delivered and available in the markets in the second half of the year. In the first half of the year, Hochdorf also strengthened its sales teams in targeted areas for further business development and strategy implementation.

The Food Solutions segment achieved net sales revenue of CHF 112.4m ($122.9m) in the first half of 2021 (PY: CHF 120.7m/$132m, –6.9%). However, the previous year's net sales revenue included CHF 25.4m ($27.8m) in sales from Uckermärker Milch GmbH, which was sold at the end of March.

Demand for milk powder from the chocolate industry is slightly increasing again after the Covid-19 slump. The projects related to vegan products and those based on alternatives to cow's milk are on track. The development of functional semi-finished products is also taking shape, particularly in the area of high-protein applications.

The Covid-19 pandemic continues to hamper positive business development with new customers and new products. The effects of Covid-19 were also palpable in the Swiss dairy market in the first half of the year, with a continued shortage of milk due to high domestic demand reflected in increasing milk and raw material prices.

The OPTIMA program to increase efficiency continued to achieve positive results. The six ongoing projects in the areas of facilities, buildings, production processes, logistics, administration and purchasing are pursuing the goal of saving a mid-single-digit million amount this year. In purchasing, however, the market situation has changed significantly and Hochdorf is currently facing Covid-19 related price increases for raw materials and transport services.

Hochdorf said the board of directors and the group management are working on various financial strategy options to stabilize the balance sheet and support sustainable corporate growth and implement the new strategy. The first results have been achieved with the final payment from Pharmalys and the suspension of the review of the syndicated loan covenants.

Ongoing delays and postponements of projects as a result of the Covid-19 impact make it impossible to estimate precise production volumes. Nevertheless, Hochdorf said it expects a stronger second six months, benefiting from higher order intake and better capacity utilization in the Baby Care segment, as well as a seasonal reduction in inventories. Accordingly, EBIT should improve in the second half of the year and result in a balanced EBIT level for the 2021 business year, as previously forecast. The forecast for net sales revenue remains unchanged at CHF 260m to 300m ($284m-$328m).

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