I N T E R I M R E P O R T J A N U A R Y - J U N E 2 0 2 1
Improved gross margin in a quarter with challenging comparison figures
April-June 2021 (second quarter)
-
Net sales amounted to SEK 903 million (859), but with challenges in organic growth as a result of the previous year's hoarding
effects and increased household consumption. - EBITDA amounted to SEK 78 million (97) before items affecting comparability, corresponding to a margin of 8.6 percent (11.3).
- Profit for the period was SEK 24 million (40), corresponding to earnings per share of SEK 0.37 (0.62) before and after dilution.
- Free cash flow amounted to SEK -35 million (84).
- Midsona's targets for reduced emissions now agree with the
levels required to meet the goals in the Paris agreement after
approval from the international cooperative body Science Based Target initiative (SBTi).
January-June 2021 (six months)
- Net sales amounted to SEK 1,868 million (1,805).
- EBITDA amounted to SEK 172 million (204) before items affecting comparability, corresponding to a margin of 9.2 percent (11.3).
- Profit for the period was SEK 57 million (87), corresponding to earnings per share of SEK 0.88 (1.34) before dilution and SEK 0.87 (1.33) after dilution.
- Free cash flow amounted to SEK -61 million (86).
Key figures, Group1 | April-June | April-June | Jan-June | Jan-June | Rolling | Full year | |||||||
2021 | 2020 | 2021 | 2020 | 12 months | 2020 | ||||||||
Net sales growth, % | 5.1 | 21.8 | 3.5 | 21.1 | 11.1 | 20.4 | |||||||
Gross margin, before items affecting comparability, % | 28.3 | 27.9 | 28.4 | 28.5 | 28.0 | 28.1 | |||||||
Gross margin, % | 28.5 | 27.9 | 28.5 | 28.5 | 27.9 | 28.0 | |||||||
EBITDA-margin, before items affecting comparability, % | 8.6 | 11.3 | 9.2 | 11.3 | 9.5 | 10.5 | |||||||
EBITDA margin, % | 9.9 | 12.6 | 9.7 | 11.9 | 9.8 | 10.9 | |||||||
Operating margin, before items affecting comparability, % | 4.3 | 7.2 | 5.1 | 7.4 | 5.4 | 6.6 | |||||||
Operating margin,% | 4.7 | 8.5 | 5.1 | 8.0 | 5.5 | 6.9 | |||||||
Profit margin, % | 3.3 | 6.1 | 3.9 | 6.3 | 4.3 | 5.5 | |||||||
Return on capital employed, % | 5.6 | 6.6 | |||||||||||
Net debt, SEK million | 1,716 | 1,310 | 1,716 | 1,310 | 1,716 | 1,584 | |||||||
Net debt / Adjusted EBITDA, multiple | 4.9 | 4.2 | |||||||||||
Equity/assets ratio, % | 45.0 | 47.6 | 45.0 | 47.6 | 45.0 | 45.1 | |||||||
1 Midsona presents certain financial measures in the Interim Report that are not defined under IFRS. | For definitions and checks against IFRS, please refer to pages 17-19 of this interim report and to pages 150-153 in the 2020 Annual Report. | ||||||||||||
Note: | For further information |
This is information such that Midsona AB (publ) is required to publish under the EU Market Abuse Regulation and the Financial Instruments Trading Act. | Peter Åsberg, CEO +46 730 26 16 32 |
This Interim Report was submitted under the auspices of Peter Åsberg and Max Bokander for publication on 22 July 2021 at 8:00 a.m. CET. | Max Bokander, CFO +46 708 65 13 64 |
MIDSONA AB (PUBL) * CORPORATE IDENTITY NUMBER 556241-5322 | INTERIM REPORT JANUARY-JUNE 2021 · 1 |
Peter Åsberg, President and CEO
QUARTER 2
SEK 903 million
Net sales
SEK 78 million
EBITDA, before items affecting comparability
8.6 percent
EBITDA-margin, before items affecting comparability
Comment by the CEO
We are summarising an intensive quarter characterised by tough comparative figures from last year, but also a quarter of new customers and new listings among leading actors, which bodes well for the future.
Pandemic effects resulted in difficult comparative figures and inhibited sales
In the second quarter of 2020, we carried out a successful roll-out of organic products in Europe, which was strengthened by the product hoarding that took place at the beginning of the pandemic. This meant that we continued to face tough comparative figures in the second quarter of this year. Net sales increased
- percent to SEK 903 million, mainly due to the acquired System Frugt at the same time that organic growth declined around 4 percent. Before items affecting comparability, the gross margin increased to
-
percent, which is an important sign of strength, especially since System Frugt has a gross margin in the lower range of 20-30 percent. For our prioritised brands, the sales decrease was 6.5 percent.
The decrease was partly due to last year's hoarding, but also to disruptions in the delivery chain, which led to raw materials and products, mainly from Asia, being delayed or not delivered at all.
Earnings gradually strengthened during the quarter
To address an expected return to a somewhat lower, more normal consumption pattern, we invested a
total of around SEK 12 million extra in consumer marketing and other sales promotion measures during the quarter. EBITDA, before items affecting comparability, in the second quarter, which is seasonally our weakest, was SEK 78 million (97), corresponding to a margin of 8.6 percent. This was significantly lower than last year, which included positive effects from product hoarding and around SEK 8 million from currency translation effects, but higher than the second quarter of 2019, which is a more comparable quarter. We saw a gradual recovery during the quarter with an improved gross margin - EBITDA for June was higher than the same month of the previous year.
Brand focus, integration and success in sustainability
Many of the brands that were negatively impacted by the pandemic, mainly in consumer health and healthfoods, received a positive push during the quarter and sales of own brands increased. Among
other things, the launches of the Mivitotal and Eskio-3 brands were well-received by customers and con- sumers. We also saw a clear recovery in food service and pharmacies. We continued to focus on our organic brands and were successful in the roll-out to the grocery trade in Germany and France. The
increased marketing efforts provided some instantaneous effects during the quarter, but above all we made the investments to strengthen the establishment of our brands in Europe. We are continuing to gain new customers and new listings among leading actors. Several markets recovered in June, mainly Germany, but to some extent France and the Nordic region as well.
The integration of System Frugt continued during the quarter. Since 1 July, System Frugt has been a fully integrated company in the Midsona Group, which means that we can take out synergy gains to a greater extent than before.
During the quarter, we also had our targets for reduced emissions approved by the international
cooperativebody Science Based Target initiative (SBTi), which means that our targets agree with the
levels required to achieve the Paris agreement. This is an important milestone for us and is in line with the long-term goal of zero emissions by 2050.
Several factors indicate a strong third quarter
For the third quarter, we are facing simpler comparative figures since we were completely out of the hoarding phase in the year-earlier period and the roll-out of organic products in Europe - above all Davert - that occurred during the second quarter of 2020 and was followed by a weaker third quarter due to inventory build-up. In addition to this, System Frugt is heading towards its high season.
The situation concerning delivery disruptions continues to be challenging, mainly for raw materials and transports from Asia and our assessment is that they will continue, but slowly decrease as the pandemic winds down. Considering the current market uncertainty, we are continuously working to reduce the cost base. Among other things, we are returning to lower marketing levels.
It's pleasing that the acquisition market is continuing to thaw and we have returned to conducting discussions with potential acquisition companies throughout Europe. Altogether, we see a positive develop ment ahead and I am confidently looking forward to the remainder of 2021.
Peter Åsberg
President and CEO
MIDSONA AB (PUBL) * CORPORATE IDENTITY NUMBER 556241-5322 | INTERIM REPORT JANUARY-JUNE 2021 · 2 |
Financial information - Group
April-June
Net sales
Net sales amounted to SEK 903 million (859), an increase of 5.1 percent .
The organic change in net sales was -4.2 percent while structural changes contributed by 12.1 percent and exchange rate changes by -2.8 percent. For the Group's prioritised brands, the organic sales growth was -6.5 percent. The previous year's strong sales of mainly
organic products, attributable to hoarding and increased household consumption as a result of the outbreak of Covid-19, were challenging to match. The supply chain was also subjected to some disruptions with both delayed and postponed deliveries of raw materials and finished goods as a result of a container shortage and transport delays, which to some extent entailed lower sales volumes. Despite lower sales volumes for prioritised brands, sales for the Group's own brands increased overall. Several brands in the categories of health- foods and consumer health products, which were negatively impacted by the pandemic last year, showed strong sales growth during the period. The sales volumes were lower for licensed brands, as result of concluded sales assignments among other things. As society opened up and pandemic restrictions were lifted, sales improved to food service, partially at the expense of lower sales volumes to grocery trade and healthfood stores.
Gross profit
Gross profit amounted to SEK 257 million (240) and gross profit,
before items affecting comparability, amounted to SEK 256 million (240), corresponding to a margin of 28.3 percent (27.9). The margin trend was mainly driven by a good product and customer mix, selective price increases and a favourable exchange rate trend. Taking into consideration that the acquired business System Frugt, with a gross margin in the lower range of 20-30 percent, was not included in the comparative period, the underlying positive margin development was even better.
Operating profit/loss
EBITDA amounted to SEK 89 million (108) and EBITDA, before items affecting comparability, amounted to SEK 78 million (97), corresponding to a margin of 8.6 percent (11.3). The EBITDA margin essentially decreased as a consequence of lower business volumes combined with increased market investments in prioritised brands, which had not yet had a full impact on sales. The comparative period included large positive operational exchange-rate differences, which was not the case in the current period. The business System Frugt also had an EBITDA margin in the lower range of 0-10 percent, which also contributed to a lower margin overall for the Group. Amortisation and depreciation for the period amounted to SEK 39 million (35), divided between SEK 12 million (12) in amortisation of intangible fixed assets and depreciation of SEK 27 million (23) on tangible fixed assets. Depreciation increased as a consequence of acquired operations. An impairment of intangible assets of SEK 8 million was also applied
as a result of a discontinued product development project. Operating profit amounted to SEK 42 million (73) and operating profit, before items affecting comparability, amounted to SEK 39 million (62), corresponding to a margin of 4.3 percent (7.2).
Items affecting comparability
Operating profit included positive items affecting comparability by a net SEK 3 million (11), comprising a revaluated conditional purchase consideration of SEK 10 million (8), a reversed part of a restructuring reserve of SEK 1 million and an impairment loss on intangible assets of SEK 8 million. The comparative period also included restructuring costs of SEK 5 million and acquisition-related income (negative goodwill) of SEK 8 million as a result of acquisitions of operations at a low price.
Financial items
Net financial items amounted to an expense of SEK 12 million (21). Interest expenses for external loans to credit institutions amounted to SEK 8 million (7) and interest expenses attributable to leases were SEK 1 million (2). Net translation differences on financial receivables and liabilities in foreign currency were a negative SEK 1 million (3). Other financial items amounted to an expense of SEK 2 million (1). The comparative period also included earnings from participations in joint ventures in the amount of negative SEK 8 million, attributable to a revaluation of participations in a joint venture on obtaining a controlling influence. This revaluation resulted in a loss as the previously recognised book value of participations in joint ventures in the consolidated accounts exceeded fair value.
Profit for the period
Profit for the period amounted to SEK 24 million (40), corresponding to earnings per share of SEK 0.37 (0.62) before and after dilution. Tax on the profit for the period amounted to a negative SEK 6 million (12), of which the current tax was negative SEK 3 million (12) and deferred tax was a negative SEK 3 million (0). The effective tax rate was 21.6 percent (21.3).
Cash flow
Cash flow from operating activities amounted to SEK -29 million (89), which is attributable to both a weaker cash flow from operating
activities before changes in working capital and a worse working
capital development primarily due to reduced operating liabilities
and more capital being tied up in operating receivables . The comparative period was strongly impacted by less capital being tied-up in operating receivables as a result of customer payments from the very strong product sales in February to April. Tied-up capital in inventory remained high partly as a result of higher reserve inventory levels for certain critical raw materials and finished products, as a part of improving the level of service to customers in a few markets. Cash flow from investing activities amounted to a negative SEK 20 million (5), consisting of a conditional additional purchase consideration paid of SEK 3 million, investments in tangible and intangible
71 percent1
Percentage of own brands, income
0.2 percent1
Organic growth of own brands
1 For Q2, 2021
EBITDA, before items affecting | Net sales per sales channel | |
Net sales | comparability |
SEK m | SEK m | SEK m | SEK m | ||||||||||||
1200 | 4000 | 120 | 400 | Pharmacies | |||||||||||
900 | 3000 | 90 | 300 | Grocery trade | |||||||||||
Food Service | |||||||||||||||
600 | 2000 | 60 | 200 | Healthfood stores | |||||||||||
300 | 1000 | 30 | 100 | Other specialist | |||||||||||
retail | |||||||||||||||
0 | 0 | 0 | 0 | Others | |||||||||||
0 | 200 | 400 | 600 SEK m | ||||||||||||
Q2 | Q3 | Q4 | Q1 | Q2 | Q2 | Q3 | Q4 | Q1 | Q2 | ||||||
2020 | 2020 | 2020 | 2021 | 2021 | 2020 | 2020 | 2020 | 2021 | 2021 | ||||||
Quarter | Quarter | Q2, 2021 | |||||||||||||
Rolling, 12 months | Rolling, 12 months | Q2, 2020 |
MIDSONA AB (PUBL) * CORPORATE IDENTITY NUMBER 556241-5322 | INTERIM REPORT JANUARY-JUNE 2021 · 3 |
fixed assets of a negative SEK 17 million (8), of which negative SEK
11 million was an on-going expansion investment in South Europe. The comparative period included a change in financial assets of SEK
3 million. Free cash flow amounted to SEK -35 million (84). Cash flow from financing activities was a SEK 11 million (negative 44), consisting
of loans raised of SEK 151 million (1,230), amortisationof loans by SEK 83 million (32), amortisation of lease liabilities by SEK 15 million
- and dividends paid of SEK 42 million. Cash flow for the period amounted to SEK -38 million (40).
January-June
Net sales
Net sales amounted to SEK 1,868 million (1,805), an increase of
3.5 percent. The organic change in net sales was -4.9 percent while structural changes contributed by 11.6 percent and exchange rate changes negatively by 3.2 percent. For the Group's prioritised brands, the organic sales growth was a negative 3.5 percent. The
previous year's strong sales in February to April attributable to both hoarding and increased household consumption as a result of the outbreak of Covid-19 were challenging to match. The supply chain was subjected to some disruptions, especially in the second quarter as a result of a container shortage and delivery delays, which en- tailed both delayed and postponed deliveries of both raw materials and finished products with some loss of sales during the period. However, the sales trend as a whole was relatively good for the Group with a stable demand for products under the majority of the own brands. The sales volumes for licensed brands were lower as result of concluded sales assignments.
Gross profit
Gross profit amounted to SEK 532 million (515) and gross profit,before items affecting comparability, amounted to SEK 531 million (515), corresponding to a margin of 28.4 percent (28.5). The higher gross profit was primarily a consequence of acquired operations. The gross margin was stable, where a good product and customer mix, selective price increases and a favourable exchange rate movement compensated for the negative margin effect caused by acquired operations, with a gross margin in the lower range of 20-30 percent. However, gross profit was encumbered by slightly higher production and inventory-related costs in the North and South Europe divisions.
Operating profit/loss
EBITDA amounted to SEK 181 million (215) and EBITDA, before items affecting comparability, amounted to SEK 172 million (204), corresponding to a margin of 9.2 percent (11.3). The EBITDA margin essentially decreased as a consequence of lower sales volumes at the same time that larger market investments were made in prioritised brands, which had not yet had a full impact on sales. The EBITDA margin for the acquired operation System Frugt was also in the lower range of 0-10 percent, which contributed to a lower margin overall for the Group. Amortisation and depreciation for the period amounted to SEK -77 million (-71), divided between SEK -23 million (-23) in amor- tisation of intangible fixed assets and depreciation of SEK -54 million (-48) on tangible fixed assets. Depreciation increased as a consequence of acquired operations. An impairment of intangible assets of SEK
8 million was also applied as a result of a discontinued product development project. Operating profit amounted to SEK 96 million (144) and operating profit, before items affecting comparability, amounted to SEK 95 million (133), corresponding to a margin of 5.1 percent (7.4).
Items affecting comparability
Operating profit included positive items affecting comparability by a net SEK 1 million (11), comprising a revaluated conditional purchase consideration of SEK 10 million (8), a reversed part of a restructuring reserve of SEK 1 million and an impairment loss on intangible assets of SEK 8 million, as well as acquisition-related costs of SEK 2 million attributable to the acquisition of System Frugt. The comparative period also included restructuring costs of SEK 5 million and acquisition -related income (negative goodwill) of SEK 8 million as a result of acquisitions of operations at a low price.
Financial items
Net financial items amounted to an expense of SEK 23 million (31). Interest expenses for external loans to credit institutions amounted to SEK 16 million (14) and interest expenses attributable to leases were SEK 2 million (3). Net translation differences on financial receivables and liabilities in foreign currency were a negative SEK 2 million (3). Other financial items amounted to a negative SEK 3 million (3).
In the comparative period, earnings from participations in joint ventures also made a negative contribution of SEK 8 million.
Profit for the period
Profit for the period was SEK 57 million (87), corresponding to earnings per share of SEK 0.88 (1.34) before dilution and SEK 0.87 (1.33) after dilution. Tax on the profit for the period amounted to a negative SEK 16 million (26), of which the current tax was negative SEK 11 million
- and deferred tax was negative SEK 5 million (5). The effective tax rate was 22.2 percent (22.8).
Cash flow
Cash flow from operating activities amounted to SEK -48 million (99), as a result of both a weaker development for cash flow from operating activities before changes in working capital and a lower working capital mainly related to significantly reduced operating liabilities. In addition, factoring agreements were discontinued in the first quarter, which had a negative impact of SEK 67 million on operating receivables. Cash flow from investing activities amounted to a negative SEK 35 million (48), consisting of a conditional additional purchase consideration paid of SEK 3 million related to business combinations of earlier years, investments in tangible and intangible fixed assets of a negative SEK 32 million (13), of which negative SEK 19 million was an on-going expansion investment in South Europe. The comparative period also included paid purchase considerations for earlier
years' business acquisitionsof a negative SEK 35 million. Free cash flow amounted to SEK -61 million (86). Cash flow from financing activities was a negative SEK 27 million (72), consisting of loans raised of SEK 151 million (2), amortisation of loans by SEK 106 million (49), amortisation of leasing liabilities by SEK 30 million (24) and dividends paid of SEK 42 million. The comparative period also included issue expenses of SEK 1 million. Cash flow for the period amounted to SEK -110 million (-21).
Liquidity and financial position
Cash and equivalents amounted to SEK 86 million (151) and there were unused credit facilities of SEK 250 million (350) at the end of the period. Net debt amounted to SEK 1,716 million (1,310) and was SEK 1,629 million at the end of the preceding quarter. The ratio between net debt and adjusted EBITDA on a rolling 12-month basis was a multiple of 4.9 (3.5) and, at the end of the preceding quarter, it was a multiple of 4.5. Equity amounted to SEK 2,321 million (2,278) and was SEK 2,410 million at the end of the preceding quarter. The changes consisted of profit for the period of SEK 24 million, translation differences on translating foreign operations of a negative SEK 31 million and dividends paid of SEK 82 million. The equity/assets ratio was 45.0 percent (47.6) at the end of the period.
During the quarter, Davert launched yet another product in its lentil series in Germany.
MIDSONA AB (PUBL) * CORPORATE IDENTITY NUMBER 556241-5322 | INTERIM REPORT JANUARY-JUNE 2021 · 4 |
Division Nordics
Percentage net sales | 67% |
in the Group2 |
Division Nordics1 | April-June | April-June | Jan-June | Jan-June | Rolling | Full year |
2021 | 2020 | 2021 | 2020 | 12-month | 2020 | |
Net sales | 606 | 524 | 1,265 | 1,130 | 2,563 | 2,428 |
Gross profit | 195 | 165 | 405 | 366 | 813 | 774 |
Gross margin, % | 32.2 | 31.6 | 32.0 | 32.4 | 31.7 | 31.9 |
EBITDA | 56 | 64 | 129 | 136 | 282 | 288 |
EBITDA margin, % | 9.3 | 12.3 | 10.2 | 12.0 | 11.0 | 11.9 |
Operating profit/loss | 42 | 55 | 102 | 117 | 231 | 245 |
Operating margin,% | 6.9 | 10.5 | 8.1 | 10.3 | 9.0 | 10.1 |
1 Earnings and margin measurements refer to before items affecting comparability unless otherwise stated.
April-June
Net sales
Net sales increased by 15.7 percent, driven by both acquired sales volumes and organic growth of 2.8 percent for the own brand port- folio. The division's organic change in net sales was a decrease of
2.6 percent, of which external net sales had a decrease of 2.1 percent. The previous year's strong sales in April attributable to both hoarding and increased household consumption were challenging for the
organic product category to match. However, the sales trend overall was relatively good, considering the lower sales of licensed brands as a result of concluded less profitable sales assignments. The sales trend for the brand Friggs, among others, was strong with continued
launch successes on a Nordic basis.
Gross profit
Gross profit improved mainly driven by acquired business. The gross margin improved as a result of a good product and customer mix, selective price increases and a favourable exchange rate trend, which more than compensated for the negative margin effect caused by acquired operations, with a gross margin in the lower range of 20-30 percent.
Operating profit/loss
Even though the gross profit improved and cost synergies from the integration of System Frugt continue to be realised, EBITDA decreased compared with the previous year mainly as a result of large market investments in prioritised brands together with some integration costs being charged to earnings in connection with the completion of the integration work. EBITDA was also impacted in the comparative period by large positive operational exchange-rate differences, which was not the case in the current period.
January-June
Net sales
Net sales increased by 11.9 percent, driven by acquired business
volumes. The division's organic change in net sales was a decrease of
4.4 percent, of which external net sales had a decrease of 4.3 percent. It was a challenge to match last year's strong sales in February to April attributable to both hoarding and increased household con- sumption. However, the sales trend as a whole was relatively good considering lower sales of licensed brands as a result of concluded less profitable sales assignments. Sales of products from the own brand portfolio for comparable units were stable and in line with the comparative period's strong sales.
Gross profit
Gross profit improved, mainly driven by acquired operations, but the margin was lower because the acquired business has a lower gross margin than the division as a whole. However, gross margin improved for comparable units as a result of an improved product mix, cost savings in the supply chain and a favourable exchange rate trend.
Operating profit/loss
EBITDA was lower compared with the preceding year, despite improved gross profit and realised cost synergies from the integration of System Frugt. The negative deviation was mainly attributable to large market investments made in prioritised brands. However, EBITDA was impacted by positive operating currency translation effects compared with negative such effects last year.
72 percent2
Percentage of own brands, income
2.8 percent2
Organic growth of own brands3
- For Q2, 2021
- For external product sales
EBITDA, before items affecting | Net sales per sales channel | |
Net sales | comparability |
SEK m | SEK m | SEK m | SEK m | ||||||||||||
800 | 2500 | 100 | 400 | Pharmacies | |||||||||||
Grocery trade | |||||||||||||||
600 | 1875 | 75 | 300 | Food Service | |||||||||||
400 | 1250 | 50 | 200 | Healthfood stores | |||||||||||
Other specialist retail | |||||||||||||||
200 | 625 | 25 | 100 | Others | |||||||||||
0 | 0 | 0 | 0 | Group-internal sales | |||||||||||
0 | 125 | 250 | 375 | 500 SEK m | |||||||||||
Q2 | Q3 | Q4 | Q1 | Q2 | Q2 | Q3 | Q4 | Q1 | Q2 | ||||||
2020 | 2020 | 2020 | 2021 | 2021 | 2020 | 2020 | 2020 | 2021 | 2021 |
Quarter | Quarter | Q2, | 2021 | ||||||||
Rolling, 12 months | Rolling, 12 months | Q2, | 2020 | ||||||||
MIDSONA AB (PUBL) * CORPORATE IDENTITY NUMBER 556241-5322 | INTERIM REPORT JANUARY-JUNE 2021 · 5 |
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