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Lotus Bakeries: annual results 2014

Lembeke / BE. (lbbv) In 2014 the consolidated turnover of the Lotus Bakeries Group grew by 4.7 percent to 348 million EUR. This growth comes almost entirely from branded products, where turnover increased by 14 million EUR. Most of this relates to the international growth of original caramelized biscuits and spread, and the growth of Lotus Dinosaurus and waffles.

Turnover

Lotus Dinosaurus made a significant contribution to growth in Belgium and France, with additional efforts made in 2014 to strengthen distribution. In December, the range was extended with a new «Dinosaurus filled» variety: these are the typical Dinosaurus biscuits filled with a layer of real Belgian chocolate. The basic range was also successfully launched onto the Dutch market.

2014 was a very good year for Lotus waffles. During autumn we invested heavily in Belgium in rebranding the waffle category to «Lotus Suzy», with strong media support, presence at events and support at points of sale. In France too, Lotus Bakeries fulfilled its ambition of further developing the total waffle category. Liège waffles were relaunched with new packaging formats. For the first time, Liège waffles were supported by a national TV campaign and in-shop promotions.

The strategy of internationalizing original caramelized biscuits in a sustainable way has been consistently pursued. Several countries presented good growth in original caramelized biscuits and spread, among them the UK, France, the Netherlands and Israel. Appropriate commercial efforts adjusted to the specificities of each market contributed to a huge success and customer appreciation of both original caramelized biscuits and spread. These efforts include an active PR programme in the UK and television campaigns in France and the Netherlands. In Israel, the growth was achieved by close cooperation between our own sales team and a well-chosen distribution partner, relying strongly on television campaigns and social media.

At an international level, we will keep investing, on the one hand in our existing sales offices such as the United States and, on the other hand, in new markets. On 01 August 2014, after careful preparation, Lotus Bakeries started its own sales office in China (Shanghai), and cooperation with the distribution partner was terminated. Lotus Bakeries has been in China for 10 years now, and the development of a sales office in this region marks the next step in its long-term strategy, aimed at further growth and market penetration.

Operating Result

The recurrent operating result (EUR 49.4 million) and recurrent operating cash flow (67 million EUR) increased by respectively 8.1 million EUR (19.5 percent) and 11.4 million EUR (20.5 percent) compared to last year.

Operational efficiencies resulting from the investment programs of recent years are making a significant positive contribution to operating profit. In particular, the restructuring of the gingerbread factories in the Netherlands and the continued focus on efficiency gains in the Belgian, French and Swedish factories, specializing in original caramelized biscuits, pepparkakor biscuits, waffles and cakes, have increased profitability.

Furthermore, the increased turnover of Lotus Dinosaurus, waffles, original caramelized biscuits and spread results in an increase of the operating result. Lotus Bakeries has chosen to further increase its marketing efforts in 2014 in its three largest countries. In France, three television campaigns were launched for original caramelized biscuits, along with a new commercial for waffles; in Belgium, in addition to original caramelized biscuits, frangipane and Lotus Dinosaurus, we invested heavily in a new Lotus Suzy commercial. As for the Netherlands, in autumn we launched a new «Lekker thuis» (home´s best) TV campaign for the Peijnenburg brand, while continuing the Snelle Jelle campaign.

In 2013, a non-recurrent operating loss of 3.7 million EUR was recorded, due mainly to restructuring costs in the gingerbread factories in the Netherlands. With the restructuring in the Netherlands now complete, the non-recurrent operating loss only amounts to 0.3 million EUR.

The financial result in 2014 is slightly positive, partly reflecting the further reduction of financial debt and the low funding costs, but mainly due to positive results on exchange rates.

The tax expense is 12.4 million EUR or 25.2 percent of the result before taxes.
The net result increases by 31.7 percent compared with 2013 to stand at 36.8 million EUR. The low financial and non-recurrent costs explain why the percentage growth in net result is even higher than that of the operating result.

Investments

In 2014 we invested a total of 16.5 million EUR. The largest investments were in Belgium, with the installation of a completely new automated production line for Lotus Dinosaurus and the building of a new headquarters in Lembeke.

Early in 2015, group management, along with the international and certain corporate departments, moved to this new location. In doing so Lotus Bakeries has opted to keep its headquarters anchored in Lembeke, where the company originated in 1932.

Thanks to the strong operating cash flow, the net financial debt over the last twelve months has fallen to 20.2 million EUR and this despite investments of 16.5 million EUR.

Conclusion and prospects

In 2014, Lotus Bakeries was able to produce an attractive turnover growth of over 5.2 percent on its branded products. Profitability grew even stronger, with recurrent operating cash flow up 20.5 percent to 67 million EUR and net result up 31.7 percent to 36.8 million EUR.

The strong profitability reflects the positive effect of the restructuring of the gingerbread factories in the Netherlands, as well as the right investments and continued focus on profitability improvements in the Belgian, French and Swedish plants. The strong internal turnover growth, linked to the consistent application of the Lotus Bakeries commercial and marketing strategy, is also contributing significantly to the increased profitability.

Lotus Bakeries will continue to invest heavily in marketing + sales in order to support and further develop its brands and the associated specialties. The waffle category will continue to be supported in France and Belgium. The gingerbread category in the Netherlands experienced a slight decrease compared to last year. Various initiatives are being taken to support the category of gingerbread and healthy snacks: a new commercial, product innovations in terms of improved packaging and new product varieties.

We are focusing heavily on the further growth of Lotus Dinosaurus. In Belgium and France, where the brand is well established, we are expanding distribution by introducing «Lotus Dinosaurus filled». An additional focus is further internationalization with the introduction of the Lotus Dinosaurus range in a number of European countries like the Netherlands, UK, Sweden, Finland and the Czech Republic. As we shall be giving these introductions maximum support both in-store and through appropriate marketing efforts, their contribution to turnover and profitability in the startup phase will be very limited.

As for China, 2014 was a transition year, in which we laid the foundations for our new sales office, which will enable Lotus Bakeries to continue growing in an interesting market. The combination of local professionals and expats with long-time Lotus Bakeries experience will enable us to focus on the appropriate marketing and sales strategy for China.

Both the Management and the Board of Directors of Lotus Bakeries are convinced that the right strategy and a good basis are in place for continuing, profitable, long-term growth.

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