Hochdorf returns to profit
With the receipt of a repayment of CHF30m ($32m) from Pharmalys and the proceeds of CHF50.2m from the sale of the Hochdorf site, net debt at the Swiss dairy company fell to CHF32.7m ($34.8m).
Despite the Covid pandemic, sales of CHF303.5m ($323.2m) were generated, 1% below the previous year's figure. Operating activities resulted in a negative operating result due to higher milk prices and lower sales in the baby care division, with a reported EBIT of CHF6.5m ($6.9m). The consolidated profit was CHF2.6m ($2.8m), after a loss of CHF70.3m ($74.9m) the previous year.
Hochdorf said it intends to accelerate the implementation of its strategy, focusing on smart nutrition and the streamlining of its product portfolio, to move into higher value-added areas.
The company said 2021 was a difficult year, with a strained balance sheet situation, market-related factors such as the high milk price or restrictions and cost increases on procurement markets, as well as the impact of the Covid-19 pandemic.
The board of directors and group management said they have reacted with targeted measures, gradually strengthening the company and improving the company’s financial profile in the reporting period.
Hochdorf said the reporting year confirmed the need to transform the company in the coming years and to develop into a Swiss competence brand for technologically ambitious, functional speciality foods in line with the new strategy.
The company said it wants to focus more on smart nutrition products in more value-intensive areas. A consequence of this development will be to reduce the cost dependency on the raw material of milk, which is experiencing increased pressure on volume in Switzerland.
In the last 12 months, Hochdorf has brought several newly-developed finished products and semi-finished products to market in the area of smart nutrition. These include Bimbosan goat milk, the specialist Riso PH infant formula, lactose-free milk powder, a vegan whole milk powder alternative and whey protein concentrate for use in infant formula.
The Covid-19 pandemic and related restrictions undermined project implementation for new and existing baby care customers. Projects were also postponed in the second half of the year due to the tense logistics situation on the global market, leading to supply delays and reduced sales.
Consumer behavior and the changes in demand for milk products during the pandemic led to significant price increases in milk as a raw material, by CHF 0.05/kg on average. From the early summer there were cost increases for other raw materials for infant formula production. Intense competition has meant it has not been possible so far to pass these price increases onto the customer in full, which has had a negative impact on operating profits.
This resulted in net sales in baby care of CHF85m, 15% below the previous year. Despite Covid challenges, Hochdorf said it acquired new partners in Asia for its high value-added Bimbosan and babina own brands. In Switzerland, Bimbosan consolidated and extended its position as market leader, introducing Bimbosan Premium goat milk to the specialist trade at the start of the year.
Overall, Hochdorf achieved net sales revenue of CHF24.9m with its own brands, 2.5% up on the same period last year. A long-term purchase guarantee was agreed with Pharmalys, Hochdorf's largest customer, until 2026. At the same time, cash management and payment flows had to be optimized, especially to the supplied regions in the Middle East and North Africa.
The Swiss chocolate industry recovered from its Covid-19 low in 2020. The volumes sold in the second half of 2021 reached and partially surpassed pre-pandemic levels. This is mainly due to warehouse restocking due to transport bottlenecks and the development of new sales markets. As a result, food solutions achieved sales of CHF219m ($233m), an increase of 6% compared to the previous year. The positive sales for lactose-free milk powder are noteworthy, Hochdorf said, as is the interest from the chocolate industry in the vegan whole-milk powder alternative for "milk chocolate."
Despite the sale of parts of the business in 2020, net sales revenue at group level remained at the previous year's level of CHF303.5m ($323.2m). Gross profit increased in absolute terms to CHF111.2m.
Adjusted for the book profit from the sale of the properties in Hochdorf and Welschenrohr, it was below the previous year's value at CHF70.6m ($75.2m). The operating result of CHF24.7m ($26.3m) was greater than the previous year (2020: CHF13.9m/$14.8m) and EBIT reached CHF6.5m ($6.9m), corresponding to a margin of 1.9%. The sale of the sites in Hochdorf and Welschenrohr resulted in a profit of CHF38.6m ($41.1m), while the production relocation to Sulgen involved one-time provisions of around CHF14m ($14.9m). Adjusted for these effects, the operating EBIT was CHF-16.9m (-$18m), compared to CHF2.3m ($2.5m) the previous year. Consolidated profit was CHF2.5m ($2.7m), after a loss of CHF70.3m in the same period of the previous year.
Due to the negative operating result, cash generated was CHF-3.9m/-$4.2m (previous year: CHF11.1m/$11.8m), while the free cash flow increased to CHF61.2m ($65.2m) thanks to the property sales and the purchase price payment from Pharmalys.
The streamlining of its range and evaluation of the traditional business areas is taking place in the first half year of 2022, so as a result, Hochdorf said this is not the best time to forecast net sales and earnings.
Hochdorf said it has agreed to cooperate in the area of speciality powders with Emmi, for both milk-based and vegan products in March 2022. Hochdorf will produce semi-finished and finished products with special requirements in powder form for Emmi. This operational cooperation is contractually structured as contract manufacturing.