Scandi Standards AB (publ) interim report January - June 2024

Continued significant volume, and profit growth

April – June 2024

• Chicken processed (grill weight) amounted to 69 (67) thousand tonnes which corresponds to a 3 per cent increase.
• Net sales amounted to MSEK 3,350 (3,411). At constant exchange rates, net sales decreased by 2 per cent.
• Operating income (EBIT) increased to MSEK 127 (121), corresponding to a margin of 3.8 (3.5) per cent.
• Income for the period amounted to MSEK 71 (74). Earnings per share amounted to SEK 1.09 (1.11).
• Operating cash flow was MSEK 169 (272).

January – June 2024

• Chicken processed (grill weight) amounted to 139 (132) thousand tonnes which corresponds to a 5 per cent increase.
• Net sales amounted to MSEK 6,510 (6,695). At constant exchange rates, net sales decreased by 3 per cent.
• Operating income (EBIT) increased to MSEK 248 (213), corresponding to a margin of 3.8 (3.2) per cent.
• Income for the period amounted to MSEK 141 (117). Earnings per share amounted to SEK 2.16 (1.95)
• Operating cash flow was MSEK 99 (330).

Key metrics¹⁾

	Q2 2024	Q2 2023	Δ	H1 2024	H1 2023	Δ	R12M	2023
Net sales	3,350	3,411	-2%	6,510	6,695	-3%	12,829	13,014
EBITDA	231	230	0%	456	426	7%	910	880
Operating income (EBIT)	127	121	5%	248	213	16%	492	457
EBITDA margin %	6.9%	6.7%	0.1ppt	7.0%	6.4%	0.6ppt	7.1%	6.8%
EBIT margin %	3.8%	3.5%	0.2ppt	3.8%	3.2%	0.6ppt	3.8%	3.5%
Non-comparable items2)	-	-	-	-	-	-	8	8
Income after finance net	90	88	2%	178	149	19%	361	333
Income for the period	71	74	-3%	141	117	20%	297	273
Earnings per share, SEK	1.09	1.11	-2%	2.16	1.95	11%	4.33	4.11
Return on capital employed %	10.8%	9.3%	5.3ppt	10.8%	9.3%	5.3ppt	10.8%	11.0%
Return on equity %	11.4%	11.0%	0.4ppt	11.4%	11.0%	0.4ppt	11.4%	11.4%
Operating cash flow	169	272	-38%	99	330	-70%	441	671
Net interest-bearing debt	1,796	1,976	-9%	1,796	1,976	-9%	1,796	1,571
NIBD/Adj. EBITDA	2.0	2.4	-16%	2.0	2.4	-16%	2.0	1.8
Chicken processed (tonne gw)3)	69,209	66,982	3%	139,342	132,085	5%	277,037	269,780
EBIT/kg	1.83	1.80	2%	1.78	1.62	10%	1.78	1.69
Lost time injuries (LTI) per million hours worked	34.0	28.8	18%	29.1	24.5	19%	26.2	23.8
Feed efficiency (kg feed/live weight)	1.48	1.50	-1%	1.49	1.50	-1%	1.49	1.50

1) For details about alternative KPIs, see note 4.
2) Adjusted for non-comparable items, see note 5.
3) Previously reported figures showed live weight, tonne. Historical data converted by a factor of 0.72.

CEO Comments

Scandi Standard reports increased operating income, margin improvements, and volume growth during the second quarter, which is good progress toward our long-term targets. The improvement in earnings was driven by a strong performance in the Ready-to-cook segment while Ready-to-eat posted lower earnings partly due to a positive non-recurring event of MSEK 11 in the same quarter last year. Overall, earnings were strong compared with the preceding year and we continue to realise additional potential. We have driven disciplined volume growth, an improved product mix, and increased efficiency, which increased the Group’s operating income by 5 per cent to MSEK 127 (121). The EBIT margin strengthened to 3.8 per cent (3.5).

Continued growth for our largest segment Ready-to-cook

Ready-to-cook (RTC) increased net sales compared to the corresponding quarter last year by 2 per cent to MSEK 2,546 (2,495), driven by volume increases. Operating income improved to MSEK 98 (48), primarily due to successful efforts to ensure disciplined volume growth, and an improved product mix, and lower costs for input goods, which also benefited our consumers.

Chicken is a versatile and attractive protein, and our local brands continue to demonstrate strength in their respective markets. Our ongoing Ready-to-cook initiatives maintain a clear focus on increased efficiency and gradual earnings improvements. We invested during the quarter in increased processing and improvements both in breast and in thigh deboning. Increased integration between the Ready-to-cook and Ready-to-eat segments will further improve our ability to optimise value based on changes in demand for the different cuts of the bird.

The work within Ready-to-eat is progressing

Ready-to-eat (RTE) posted net sales of MSEK 686 (774) and an operating income of MSEK 38 (59) for the second quarter. The lower earnings compared to the corresponding period last year were driven by lower capacity utilisation at the production plant in Farre in Denmark and the insurance indemnity that positively impacted earnings in the preceding year with MSEK 11.

We noted a significant improvement compared with the first quarter of 2024 driven by our focused efforts on growing and diversifying the customer base. We anticipate continued improvement in the forthcoming quarters in line with previous announcements.

Ingredients part within category Other is a significant strategic area for Scandi Standard. Utilising a greater proportion of each bird and adding value through processing the raw material as far as possible provides us with a healthy contribution to improved profitability. Ingredients accounted for MSEK 118 (142) of revenue for the second quarter, contributing operating income of MSEK 5 (24). The decrease in prices for ingredients is strongly linked to normalised energy prices and was partly offset by several measures to raise the value of these bird cuts.

Leading in sustainability efforts

Scandi Standard sees a clear competitive advantage in being the leading player in animal welfare and sustainability in the global chicken industry and efforts to continuously develop in line with our ambitious sustainability goals are progressing where one of the goals is to halve emissions by 2030. We have been integrating sustainability in all investment decisions since 2023 for example by evaluating the impact of investments on our energy consumption, climate impact, work environment, and cyber security, but also in the area of animal welfare, which is critical for us.

At Group level, our key figures for sustainability developed positively during the quarter even though there was an ammonia leak at our factory in Aars in April. However, I can confirm that there were no serious injuries and that the incident was addressed quickly and in accordance with existing procedures. We have also taken lessons from the rapid and professional handling of the matter to further strengthen the Group’s knowledge in the area. The incident does however negatively impact key figures for the quarter for lost time injuries (LTIs).

Solid financial position

Compared with the previous quarter, net interest-bearing debt increased to MSEK 1,796 (1,709) despite a strong EBITDA. The increase was primarily due to the acquisition of a cutting and packaging facility in Jæren in Norway that we had previously rented, a continued high pace of investment to increase capacity and automation in the facilities as well as distributing a dividend to shareholders. Scandi Standard’s efforts to reduce tied-up working capital by among other things, continuing to improve the coordination between bird purchases and our sales and operational planning continues.

We have a solid financial position that allows for the extensive investment program that has been adopted to support targets for growth and margin improvement by 2027. To achieve continued increased efficiency, expansion, and higher refinement, the investments in 2024 are expected to amount to approximately MSEK 500. We successfully implemented in Sweden a new and more efficient business system during the quarter and other markets will be integrated into the common system successively.

Scandi Standard’s implementation of the strategy and goals adopted for 2027 are continuing with full force. We are set to increase the value of our protein, improve our efficiency and integrate sustainability even more clearly throughout the entire value chain. Our systematic and efficient improvement efforts are enabling us to achieve new interim targets in our journey toward realising our potential across the entire Group.

In summary, during the second quarter, we have continued to develop according to plan with stable, sustainable growth and increased profitability while we, we have completed initiatives that take Scandi Standard further steps forward. We are on the right path and are working together to gradually reach all of our goals.

Stockholm, 17 July 2024

Jonas Tunestål,
Managing Director and CEO,
Scandi Standard

 
Conference Call

A conference call for investors. analysts and media will be held on 17 July 2024 at 8.30 AM CET.

Dial-in numbers:

UK: 020 3936 2999
Sweden: 010 884 80 16
US: +1 646 664 1960
Other countries: +44 20 3936 2999

Slides used in the conference call can be downloaded at www.scandistandard.com under Investor Relations. A recording of the conference call will be available on www.scandistandard.com afterward.
 

Further information

For further information. please contact:

Jonas Tunestål. Managing director and CEO and Fredrik Sylwan. CFO
Tel: +46 10 456 13 00

Henrik Heiberg. Head of M&A. Financing & IR
Tel: +47 917 47 724

This interim report comprises information which Scandi Standard is required to disclose pursuant to EU market abuse regulation and the Securities Markets Act. It was released for publication at 07:30 AM CET on 17 July 2024.
 

Financial calendar

Interim report for Q3 2024	October 25. 2024
Interim report for Q4 2024	February 6. 2025
Interim report for Q1 2025	April 29. 2025

 
About Scandi Standard

Scandi Standard is the leading producer of chicken-based food products in the Nordic region and Ireland. The company produces, markets, and sells ready-to-eat, chilled, and frozen products under the well-known brands Kronfågel, Danpo, Den Stolte Hane, Manor Farm, and Naapurin Maalaiskana. Eggs are also produced and sold in Norway. We are approximately 3.200 employees with annual sales of more than SEK 13 billion.