Scandi Standard

Improved margins and strong cashflow

October - December 2023

• Net sales amounted to MSEK 3,011 (3,069). At constant exchange rates net sales decreased by 3 per cent.
• Operating income (EBIT) increased to MSEK 105 (99), corresponding to a margin of 3.5 (3.2) per cent. 
• Income for the period amounted to MSEK 66 (55). Earnings per share amounted to SEK 1.01 (0.86). 
• Operating cash flow was MSEK 109 (-192).

January - December 2023

• Net sales amounted to MSEK 13,014 (12,119). At constant exchange rates net sales increased by 4 per cent.
• Operating income (EBIT) increased to MSEK 457 (290), corresponding to a margin of 3.5 (2.4) per cent.
• Income for the period amounted to MSEK 273 (138). Earnings per share amounted to SEK 4.11 (2.02) 
• Operating cash flow was MSEK 671 (197).
• The Board of Director proposes a dividend for the financial year 2023 of SEK 2.30 (1.15) per share, corresponding to MSEK 150 (75).

Significant events during the quarter

• On the 28^th of December 2023 Scandi Standard's Finnish subsidiary Naapurin Maalaiskana Oy entered into an agreement to acquire Landeli Oy Group's Ready-to-eat activities in Honkajoki. In recent years the Finnish operations Naapurin Maalaiskana have had a good level of growth, primarily driven by the continued positive development of its own brand Naapurin Maalaiskana. Through the acquisition, further capabilities are added and an opportunity to differentiate the business and strengthen the brand.

Key metrics²⁾

1) Adjusted for non-comparable items, see note 5.

2) For definition of alternative KPIs, see page 22.

CEO Comments

The earnings improvement for Scandi Standard continued in the fourth quarter, which is seasonally the weakest quarter due to the holiday season. It is gratifying to note that our operational and financial measures have increased the profitability during 2023 to historical levels. After a long period of having to implement significant price increases to counter cost inflation, market conditions are normalising as key input prices are decreasing. The group operating income for the fourth quarter improved to MSEK 105 (99) with growth in volume. Increased profitability, improved margins, a strong balance sheet and normalising market conditions forms a good basis to continue our growth- and profitability journey in line with our adopted financial targets.

Strong improvement continues in Ready-to-cook

Ready-to-cook (RTC) reported sales growth of 5 per cent to MSEK 2,278 (2,164) in the fourth quarter. The operating income improved to MSEK 77 (31), mainly driven by higher sales, lower prices for input goods and clear improvement in profitability in our Danish operations.

Several of our markets contributed strongly to the profitable growth. The robust demand in a period of reduced purchasing power for our end consumers proves the value offer of our products.

Ready-to-cook in Denmark approached breakeven during 2023 and reported a loss of MSEK -4 (-51) in the fourth quarter. The proportion of slow growing birds had been optimized by the end of the quarter, largely clearing demand in the higher priced segment. The measures to turn RTC Denmark into a net contributor will continue with full force into 2024.

Continue to rebuild Ready-to-eat's orderbook

Ready-to-eat (RTE) reported net sales of MSEK 600 (756) and an operating income of MSEK 22 (53) in the fourth quarter, mainly due to lower capacity utilization at the production facility in Farre, Denmark. As previously communicated, a contract with a major customer outside of our domestic markets was gradually terminated during the second and third quarter of 2023, which means that the capacity utilization was at its lowest in the fourth quarter. We continue the efforts to rebuild the orderbook and expect to gradually replace the lost volume with a more diversified customer base.

During the quarter, Scandi Standard established its Ready-to-eat activities also in Finland through the Honkajoki acquisition. The objective with the transaction is to expand the operations in Finland, expand the product range and enable product refinement and thus higher prices and profitability. Following the deal Scandi Standard has integrated RTE activities in all countries except Ireland.

Other/Ingredients, contributed an operating income of MSEK 10 (25). As for the third quarter, the reduced earnings were driven by more normalizing pricing following a period of exceptionally high pricing. The segment markets about 50% of the weight of live birds processed by Scandi Standard and represents a large commercial potential going forward.

Good progress in structured sustainability approach

Scandi Standard acts to provide the market with sustainable, safe and nutritious products. Efforts to systematically integrate sustainability into both strategy and operations remain a priority focus area.

I am proud of the progress that have been made during the year, including improving the lost time injury frequency rate with 13%, antibiotics use with 25% and our main animal welfare indicator with 19% compared to 2022. During 2024, we will continue refining our roadmap towards 2030, including development of our Climate Transition Plan as well as implementing the EU Corporate Sustainability Reporting Directive (CSRD). The implementation of CSRD will further strengthen the integration of sustainability in our strategy, value chain and operations and facilitate comparability and further transparency.

Reduced net interest-bearing debt and good conditions for the long-term strategy

Net interest-bearing debt continue to decrease. Increased outflows for investments and the acquisition in Finland were countered by improved result and working capital release.

We have defined a long-term strategy and updated financial targets, which was communicated in connection with the capital markets day in November. Our target is to grow the top line by 5-7% p.a. and to growth EBIT per kilo to at least SEK 3 by 2027. This implies an EBIT margin above 6% and a ROCE of more than 15%. Our focus is now on executing the strategy and implementing processes that will increase long-term value creation in the Group. Important areas to reach our financial targets on medium term are continued efforts to rebuild the orderbook within RTE in order to restore the capacity utilization in Farre, increase value creation within RTC Denmark and move up the value ladder for RTC.   

A comprehensive investment programme has been defined to support the growth and margin improvement objectives set for 2027. Under this programme investments of approximately MSEK 500 are expected during 2024 of which the most important is efficiency and expansion within RTC, the roll-out of our new business system and investments linked to our climate transition plan.

I am confident that we have all the prerequisites to reach our new targets and thus create a good return for our shareholders. In the light of strengthened profitability and positive future outlook the Board will propose a dividend of SEK 2.30 per share, which is a doubling compared to the previous year.

Stockholm, 9 February 2024

Jonas Tunestål,

Managing Director and CEO,
Scandi Standard

Conference Call

A conference call for investors. analysts and media will be held on 9 February 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 afterwards.

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 9 February 2024.

 

Financial calendar

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.