Scandi Standards AB (publ) interim report January - March 2023
Improved earnings in a challenging environment
January – March 2023
- Net sales amounted to MSEK 3,284 (2,793) in the first quarter 2023, corresponding to an increase of 18 per cent. At constant exchange rates net sales increased by 14 per cent.
- Operating income (EBIT) increased by 149 per cent to MSEK 93 (37), corresponding to a margin of 2.8 (1.3) per cent.
- Income for the period amounted to MSEK 44 (10). Earnings per share amounted to SEK 0.83 (0.10).
- Operating cash flow was MSEK 58 (6).
- The Board proposes a dividend for the financial year 2022 of SEK 1.15 (0.00) per share which corresponds to MSEK 75 (0), to the Annual General Meeting 2023
Key metrics
| MSEK | Q1 2023 | Q1 2022 | Δ | R12M | 2022 |
| Net sales | 3,284 | 2,793 | 18% | 12,611 | 12,119 |
| EBITDA | 196 | 136 | 43% | 781 | 722 |
| Operating income (EBIT) | 93 | 37 | 149% | 346 | 290 |
| EBITDA margin % | 6.0% | 4.9% | 1.1ppt | 6.2% | 6.0% |
| EBIT margin % | 2.8% | 1.3% | 1.5ppt | 2.7% | 2.4% |
| Non-comparable items1) | - | - | - | - | - |
| Adjusted EBITDA1) | 196 | 136 | 43% | 781 | 722 |
| Adjusted operating income (Adj. EBIT)1) | 93 | 37 | 149% | 346 | 290 |
| Adjusted EBITDA margin1) % | 6.0% | 4.9% | 1.1ppt | 6.2% | 6.0% |
| Adjusted EBIT margin1) % | 2.8% | 1.3% | 1.5ppt | 2.7% | 2.4% |
| Income after finance net | 61 | 16 | - | 230 | 186 |
| Income for the period | 44 | 10 | - | 173 | 138 |
| Earnings per share, SEK | 0.83 | 0.10 | - | 2.75 | 2.02 |
| Return on capital employed % | 7.8% | 4.0% | 3.9ppt | 7.8% | 6.7% |
| Return on equity % | 8.2% | 2.8% | 5.4ppt | 8.2% | 6.2% |
| Operating cash flow | 58 | 6 | - | 249 | 197 |
| Net interest-bearing debt (NIBD) | 1,984 | 2,034 | -2% | 1,984 | 1,983 |
| NIBD/Adj. EBITDA | 2.5 | 3.7 | -32% | 2.5 | 2.7 |
| Lost time injuries (LTI) per million hours worked | 18.1 | 28.0 | -35% | 24.9 | 27.4 |
| Feed efficiency (kg feed/live weight) | 1.51 | 1.50 | 1% | 1.50 | 1.50 |
1) Restated non-comparable items. see note 6.
CEO Comments
Scandi Standard delivered significant earnings improvement for the first quarter with an operating income of MSEK 93 (37), and we are taking additional steps in the right direction despite continued challenges in the market. Scandi Standard’s net sales rose 14 per cent at constant exchange rates to MSEK 3,284 (2,793), which demonstrates the strong position Scandi Standard has in most markets.
Performance continues to improve in all segments
Ready-to-cook (RTC) reported sales growth of 16 per cent to MSEK 2,373 (2,046) and improved earnings of MSEK 31 (-2). To address the cost increases we have had for input goods, energy and fuel costs, we continued to adjust volumes and product range during the first quarter. We also implemented price increases and operational improvements. While work remains to return to profitability, I’m proud of the results of the work we’ve completed thus far. This has been possible thanks to our strong market positions in combination with our organisation’s agile approach.
Entering 2023, we faced increased costs for feed and gas. By the end of the quarter, we noted a downward trend for some raw material prices, but this has yet to have any positive effect on our earnings due to lead times in the value chain. We are monitoring ongoing developments carefully and working continuously with cost adjustments in the supplier stage.
During the quarter, losses decreased somewhat for Ready-to-cook in Denmark to MSEK -46 (-51). Starting in the second quarter of 2023, we intend to introduce a comprehensive adaptation of our product range based on current consumer demand. Moreover, we are conducting several savings initiatives and we have a strong focus on culture, governance and leadership as well as on increased efficiency across the value chain and innovation in our product portfolio. As a result, we expect gradual improvement in the Danish operations in the coming quarters.
The trend of more consumers selecting white meat rather than red is distinct and is expected to continue for the long term, but as part of our short-term focus on profitability, we also adjusted volumes in the first quarter. My focus will remain on ensuring profitability in our segments before we focus on higher volumes. When demand increases again, we will be able to quickly transition and adjust volumes.
Ready-to-eat (RTE) continued to improve during the quarter with net sales that increased 19 per cent to MSEK 765 (643) and an operating income that improved to MSEK 45 (35). In 2022, RTE sales grew 40 per cent, mainly in breaded products. Since we are now seeing a change in demand between our various markets and product areas, we are choosing to reprioritise between our investments in favour of markets such as Norway, where we see more immediate effects on profitability, and delaying planned capacity investments in the facility in Farre, Denmark.
Other/Ingredients, our business and product development area aimed at utilising the whole bird and adding value to our products, continued to deliver strong profitability with an operating income of MSEK 24 (10), thanks to improved market prices in combination with our work to improve operational recovery.
From sustainability strategy to sustainability action
Scandi Standard has a clear ambition to be a sustainability leader in the global chicken industry and our size in local markets means that we can make a real difference for people, chickens and our planet. I’m convinced that our systematic efforts to continuously improve are a competitive advantage, and we are continuing investments that encompass the entire value chain. During the first quarter, we integrated Group-wide goals in national operations and implemented local goals and action plans. One example from operations connected to our packaging and plastic goal is the Group-wide packaging strategy we have developed. It includes local initiatives such as testing new materials, reducing plastic in production and new kinds of packaging with less plastic.
Stable financial position
Operating cash flow improved during the quarter, primarily due to stronger earnings and low investment levels alongside increased working capital due to increased turnover and somewhat increased inventory mainly driven by compensation for lower production during easter.
In a changing world, ensuring the right inventory levels is of the utmost importance and we work continuously on striking a balance between production and demand. Net interest-bearing debt amounted to MSEK 1984, in line with the end of 2022.
Our previous announcement about investments of approximately MSEK 400 in 2023 still applies, though there has been a shift in priorities. Investments will be focusing on RTE capacity, the company’s Group-wide business system, and efficiency and maintenance. As mentioned previously, we have reprioritised our investment in Denmark in favour of expanding RTE in Norway and investing in RTC in Finland and Ireland, where we expect to see quicker returns.
Stable foundation creates the conditions for profitable growth
Chicken is a fantastic food and consumption has increased 40 per cent in our markets in the last ten years. In the short term, the current inflationary economy has negatively impacted volume trends, but from a historical perspective we can see that chicken is a reliable product in uncertain times and is fast to recover, at the cost of other protein choices like pork and beef.
In conclusion, I’m pleased to say that we’re on the right path to establishing a stable foundation for profitable, sustainable growth. Scandi Standard combines the inherent strength of a large Group with the advantages of having a clear local presence, which allows for us to act quickly, near our customers. I’m convinced that our collective experience leaves us well equipped to take on future challenges and opportunities. We have all the conditions to succeed and we expect gradual improvement over the coming quarters-
Stockholm, 3 May 2023
Jonas Tunestål, Managing director and CEO
Conference Call
A conference call for investors, analysts and media will be held on 3 May 2023 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 afterwards.
Further information
For further information, please contact:
Jonas Tunestål, Managing director and CEO and Julia Lagerqvist, CFO
Tel: +46 10 456 13 00
Henrik Heiberg, Head of M&A, Financing & IR
Tel: +47 917 47 724
Financial calendar
| Annual General Meeting | May 4, 2023 |
| Interim report for Q2 2023 | August 23, 2023 |
| Interim report for Q3 2023 | October 26, 2023 |
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 3 May 2023
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 12 billion.