Stockholm / SE. (cab) Swedish Cloetta AB, a leading confectionery company in the Nordic region, the Netherlands and Italy, announced its financial results for the first quarter 2016. Highlights: Net sales for the quarter increased by 3.4 percent to 1’358 million SEK (1’313), including a negative impact from foreign exchange rates of 0.8 percent. Operating profit increased to 108 million SEK (90). Cash flow from operating activities increased to 253 million SEK (223). Net debt/Ebitda ratio was 2.78x (3.60).
President and CEO David Nuutinen comments on the results
Improved operating profit (Ebit), stronger cash flow and lower net debt.
Cloetta’s operating profit (Ebit) for the quarter increased to 108 million SEK (90). Operating profit, adjusted for one-off items, also increased to 126 million SEK (108). Profit after tax amounted to 44 million SEK (33). Both operating margin and adjusted operating margin increased to 8.0 percent (6.9) and 9.3 percent (8.2), respectively. The higher profit and margins show that our focus has paid off.
Sales rose during the quarter, driven by acquisitions. Organic sales were down slightly, facing a strong comparator, at the same time that foreign exchange movements also had a negative impact on sales.
Operating profit was affected by one-off costs, mainly related to remeasurement of the contingent earn-out consideration for acquisitions but also to the planned closure of the factory in Dieren, the Netherlands.
Sustained strong cash flow
Compared to the corresponding quarter of last year, cash flow from operating activities has increased for the ninth consecutive quarter.
Cash flow for the quarter was 253 million SEK (223). Cloetta’s cash-generating ability was thus proven yet again. The 12 months rolling cash flow is now up to 957 million SEK. The ambition is to use future cash flows for repayment of debt and distribution of dividends, while at the same time providing financial flexibility for complementary acquisitions.
Continued decrease in net debt
The debt level has continued to decrease and the net debt/Ebitda ratio at the end of the quarter was 2.78x (3.60). The long-term target is a net debt/Ebitda ratio of 2.5x. Loans of 90 million SEK were repaid during the quarter.
Confectionery market
The confectionery market was predominantly positive in Sweden, the Netherlands, Norway, Denmark and Finland. In Italy, market development was weak during the quarter.
Increased growth through acquisitions
Cloetta’s sales for the quarter rose by 3.4 percent, of which organic growth accounted for -0.7 percent, the acquisition of Lonka for 4.9 percent and exchange rate differences for -0.8 percent.
Sales in the quarter increased or were unchanged in all markets except Italy, Denmark and Norway. The positive trend in both Sweden and Finland was driven by sales of pick-and-mix. In Norway sales declined mainly within pastilles. Sales also fell in Denmark, mainly due to discontinued sales of pastilles by one customer. The market in Italy remained weak and lower sales were noted for pastilles and sugar confectionery.
Integration of Lonka according to plan
After the acquisition of Lonka in July 2015, Lonka’s sales, marketing and purchasing activities are now integrated into Cloetta. The integration of the Roosendaal factory in the Netherlands, into Cloetta’s ERP-system has started.
The planned closure of the factory in Dieren, the Netherlands, is underway and, as previously communicated, production will cease at the end of 2016. Expansion of the factory in Levice, Slovakia, to which the production from Dieren will be transferred, was started during the quarter.
Steps toward the long-term targets
Cloetta’s organic sales declined somewhat in the quarter, facing a strong comparator from same quarter of last year. Sales may vary between quarters, for which reason the focus for organic sales should instead be on the full year. Aside from the sales development, I am pleased to say that Cloetta has had a positive performance in the quarter with a higher operating profit, a higher operating margin and lower net debt together with a sustained strong cash flow. We have thus taken another step forward toward the realization of our long-term targets. The fact that the Annual General Meeting last week also resolved to pay a share dividend is yet further proof that Cloetta stands strong.
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