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Investora 21 September 2016HOCHDORF Holding Ltd
1. HOCHDORF in brief Thomas Eisenring
2. HOCHDORF in numbers Marcel Gavillet
3. Market update Thomas Eisenring
4. Strategy 2016-2020 Thomas Eisenring
5. Outlook Thomas Eisenring
6. Questions
AgendaInvestora, 21 September 2016
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HOCHDORF in brief
History
HOCHDORF is an established Swiss food company.
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1895 Founding of the «Centralschweizerische NaturMilch-Exportgesellschaft» (central Swiss milk export company) by 21 shareholders
1906 Start of roller dried whole milk powder production for the chocolate industry
1908 Start of infant formula production
1953 Launch of HUMANA, the first adapted infant formula
2003 Takeover of the Sulgen plant
2006 Start of the global infant formula business
2013 Full takeover of the Medeikiai plant (Lithuania)
2014 60% shareholding in Uckermärker Milch GmbH in Prenzlau (D)
Takeover of Marbacher Ölmühle GmbH in Marbach (D)
2016 Investments in capacity increase for the Baby Care area in Sulgen (logistics and production)
Image
Companies and participations
HOCHDORF Holding Ltd is organised in three business units and holds several subsidiary companies and investments.
HOCHDORF in brief
HOCHDORF Holding Ltd
HOCHDORF Swiss Nutrition Ltd (100%)
HOCHDORF Baltic Milk Ltd (100%)
Uckermärker Milch GmbH (60%)
Ostmilch Handels GmbH (26%)
HOCHDORF Americas Ltd (60%)
HOCHDORF South Africa Ltd (90%)
Marbacher Ölmühle GmbH (100%)
Baby Care
Dairy Ingredients
Cereals &Ingredients
HOCHDORF in brief
Number of employees
More employees due to new facilities and the insourcing of a part of the logistics in Switzerland.
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Currently 30 apprentice in
six professions.
370 373 371
588 614
0
100
200
300
400
500
600
700
2012 2013 2014 2015 2016
HOCHDORF in brief
Sales development
HOCHDORF products are sold in around 90 countries.
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0
100
200
300
400
500
600
2007 2008 2009 2010 2011 2012 2013 2014 2015 HJ 2016
Turnover Switzerland Export / Turnover foreign countries
In m
io.
CH
F
AgendaInvestora, 21 September 2016
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1. HOCHDORF in brief Thomas Eisenring
2. HOCHDORF in numbers Marcel Gavillet
3. Market update Thomas Eisenring
4. Strategy 2016-2020 Thomas Eisenring
5. Outlook Thomas Eisenring
6. Questions
• Processed liquid quantity: 415.9 Mio. kg (prev. year: 421.4 Mio. kg; -1.3%)
• Quantities sold: 125,604 t (prev. year : 125,767 t; -0.1%)
• EBITDA: CHF 18.4 Mio. (prev. year : CHF 15.5 Mio.; +19.0%)
• EBIT: CHF 13.1 Mio. (prev. year : 10.7 Mio.; +22.7%)
• Net profit: CHF 11.0 Mio. (prev. year : CHF 4.1 Mio.; +168.1%)
• Important decisions
– Investment decision to build the spray tower 9 and the tin line 2
– Signing of the MoU with Pharmalys Laboratories SA for the acquisition of a
majority stake
– Continuation of the strategic projects: Forward integration, product offensive
– Increase production output T8
HOCHDORF in numbers
Good operational first-half results
HOCHDORF performed very well under difficult market conditions, achieving results that exceeded our expectations.
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HOCHDORF in numbers
Key figures income statement
Gross sales revenue in HY 2016 is characterized by the low milk prices.
in CHF 1‘000 HY 2016 2015 HY 2015 2014
Gross sales revenue 278,401 551,208 284,297 428,689
Gross operating profitAs % of production revenue
70,74224.1%
130,14023.9%
63,82822.3%
105,19924.7%
Earnings before interest, tax, depreciation and amortisation (EBITDA)As % of production revenue
18,447
6.3%
30,455
5.6%
15,503
5.4%
27,197
6.4%
Earnings before interest and tax (EBIT)As % of production revenue
13,1094.5%
20,1463.7%
10,6823.7%
20,0164.7%
Corporate profit (Net profit/-loss)As % of production revenue
11,0393.8%
13,0242.4%
4,1171.4%
16,1393.8%
Earned capital (Cashflow)As % of net sales revenue
17,1936.3%
24,8704.6%
8,4533.0%
25,3106.0%
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HOCHDORF in numbers
Key influences
• Gross sales are influenced by lower milk prices.
• High quantity of liquids processed in Switzerland. Plants were running at more or
less full capacity from the beginning of the year.
• Reduced milk intake in Lithuania for strategic reasons on account of the difficult milk
market.
• High restocking due to high milk volumes and assortment decisions.
• Operating expenses mostly in line with the budget.
• New product wins in the area CI.
• Reorganisation of the sales department in Marbacher Ölmühle.
• First sales HOCHDORF South Africa.
• Recreation of the exchange rate EUR – CHF.
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HOCHDORF in numbers
Balance sheet
Balance sheet total increased and the equity ratio fell slightly.
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Assets
in CHF 1,000 30.06.2016 31.12.2015
Current assets 171,738 47.7% 158,054 46.4%
Fixed assets 187,926 52.3% 182,342 53.6%
Total assets 359,664 100.0% 340,396 100.0%
Liabilities
30.06.2016 31.12.2015
Current liabilities 72,727 20.2% 73,965 21.7%
Non-current liabilities 89,013 24.7% 73,642 21.6%
Total liabilities 161,740 45.0% 147,607 47.4%
Shareholders’ equity 197,924 55.0% 192,788 56.6%
Total liabilities and shareholders’ equity
359,664 100.0% 340,396 100.0%
HOCHDORF in numbers
Cash flow statement
Still high investing activities.
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• Investing activities will remain high for the rest of 2016 and also in 2017.
in CHF 1,000 1.1. – 30.6.2015 1.1. – 30.6.2015
Earned capital 17,193 6.3%* 8,453 3.0%*
Change in net current assets -34,240 -20,250
Cash flow from operating activities -17,047 -6.25%* -11,797 -4.19%*
Cash flow from investing activities -10,997 -10,857
Free cash flow -28,044 -10.28%* -22,654 -8.05%*
Cash flow from financing activities 13,284 2,481
Currency translation 25 1,368
Net change in cash and cash equivalents
-14,735 -18,805
Cash and cash equivalents at 1.1. 43,023 46,380
Cash and cash equivalents at 30.6. 28,288 27,575
* % of net sales revenue
HOCHDORF in numbers
Gross sales revenue by area (in mio. CHF)
Growth in the Baby Care area due to plant “tunings” and portfolio optimisation.
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50.160.2
2015 2016
Baby Care
12.7 13.6
2015 2016
Cereals & Ingredients
221.3204.3
2015 2016
Dairy Ingredients
HOCHDORF in numbers
Gross sales revenue by region (in CHF 1,000)
Biggest sales growth in the Middle East/Africa region.
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Switzerland107 Mio.
39%
Europe117 Mio.
42%
Asia12 Mio.
4%
Middle East/Africa
38 Mio.14%
Americas/ Rest
3 Mio.1%
AgendaInvestora, 21 September 2016
15
1. HOCHDORF in brief Thomas Eisenring
2. HOCHDORF in numbers Marcel Gavillet
3. Market update Thomas Eisenring
4. Strategy 2016-2020 Thomas Eisenring
5. Outlook Thomas Eisenring
6. Questions
Qualität
Global dairy markets are recovering
Very low international prices for milk and milk derivatives for more than one year; prices are increasing now.
Market update
Price development of butter, whole milk powder and skimmed milk powder Price development of milk in ct/kg
Quelle: AMI, ife-ev.de, Kieler Rohstoffwert
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Image Qualität
High dynamics in Baby Food
We consider the APAC and MEA regions as the most attractive markets.
Market update
Ø Growth2014-2019 %
Source: TechNavio Insight/own estimation
0 5 10
14
16
1413
16
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Europe
Americas
MEAAPAC
Mrd. USD 2014
Mrd. USD 2019
Accessibility
Image Qualität
New Food Safety Law in ChinaMarket update
Source: South China Morning Post/China Daily
New Food safety law in China: Risks and new chances.
1. HOCHDORF in brief Thomas Eisenring
2. HOCHDORF in numbers Marcel Gavillet
3. Market update Thomas Eisenring
4. Strategy 2016-2020 Thomas Eisenring
5. Outlook Thomas Eisenring
6. Questions
AgendaInvestora, 21 September 2016
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HOCHDORF’s Vision 2020Strategy HGR 2016-2020
«We transform this company into a most profitable niche player
in global premium food markets.»
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HOCHDORF’s vision is based on its future business model, whereas the transformation has already started.
USP of HOCHDORFStrategy HGR 2016-2020
1. We are a Swiss company• We reflect the whole bunch of Swiss values, like “reliability”, “quality”, “precision”
2. We are a mid sized company• We work with leanest possible structures• We are aware that nothing is more difficult to copy than a personal business relationship• Our talents are our main assets
3. We are an independent company • As one of the few dairy companies we are independent from milk producers and are able to
focus on customer and shareholder values independent from our suppliers
4. We are an agile and responsive company• Our customer service is best in class
5. We are a courageous company • We develop markets where competitors hesitate• Our marketplace is this planet• We consider personal business relationships as the most valuable assets
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HOCHDORF acts consequently as a Swiss mid sized company in a global market.
Value Proposition Policy Strategy HGR 2016-2020
1. Focus on premium markets• In every business we are active, we focus on the premium segment
2. Focus on “unsaturated” countries with high growth rates• MENA countries, Africa, Asia and LATAM are still the countries we focus on• China still limited to 25% market share in Baby Care• Exceptions only in special cases
3. Development of higher margin products• Chocolate• Kid’s Food• Base Powders & Instant Products
4. Enhance margins in existing businesses• Forward integration (!!!)• Elimination of intermediaries where possible• Development of Branded Business
5. Professional focus on cost• Cost efficiency is ALWAYS Key
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HOCHDORF’s aim is to increase added value in its products sold significantly.
Market Development PolicyStrategy HGR 2016-2020
1. Secure position in Switzerland• Since the Swiss origin is one of our USP’s, our position in Switzerland must be secured
(especially in Dairy Ingredients)
2. Unsaturated markets with high growth rates• Main focus in this respect are APAC, MEA and LATAM
3. Niche and premium position• Within the markets we strive for the premium segments
4. Accessibility• This includes e.g. number of competitors and their market position, local legislations, defensive
measures of market players etc.
5. Calculable risks• Change of legislations• Political stability (remark: political instability is often also a chance)
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HOCHDORF’s main focus is on “unsaturated” markets with high growth rates.
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Strategy HGR 2016-2020
Specific country strategies
We consistently limit our China business in the Baby Care area at 25%.
NORTH AMERICA:Opportunities underobservation. Concreteproject in planning.
LATIN AMERICA:Extension HOCHDORF Americas with mainfocus Mexico & Brasil.
Check further coope-ration opportunities.
EUROPE:Growth with existingcustomers.
MEA:Growth with existingcustomers.Analysis forwardintegration Baby Care.
Forward integrationDairy Ingredients (HOCHDORF South Africa).
CHINA & VIETNAM:Growth with existingcustomers.
HOCHDORF tomorrow: closer to the customerStrategy HGR 2016-2020
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HOCHDORF’s two dimensions of forward integration.
1. Product driven forward integration• Product driven forward integration means basically to diversify into products of industries
where we supply today• In this case product development, production and marketing is developed out of the
existing HOCHDORF organisation
2. Business model driven forward integration• Business model driven forward integration means to integrate an existing company into
HOCHDORF which already runs a business with our products on the next level(s) of the value chain
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Strategy HGR 2016-2020
Product Offensive
One of the main programs starting in 2016 will be a product offensive which should provide more added value.
Base PowdersAs ingredients for morebasic infant formulas
Weaning FoodsOnly branding/trading
Kid’s FoodsWith fruit, vegetableand wheat
Instant MilkFortified with minerals and vitamins
ChocolateProduced in South Africa«on the continent for thecontinent»
Forward IntegrationLine Extension
Product driven: AfrikoaStrategy HGR 2016-2020
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Development of Afrikoa is promising. Pipeline already exceeds production capacity three times.
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Strategy HGR 2016-2020
Business Model driven Forward IntegrationForward Integration in Baby Care means not just to acquire next level’s business; it means to take over control over the whole value chain.
BTB-Producer
Brand Owner
Distri-buter
Retailer/Pharmacy
Customer(Doctor)
Push MarketingMake the product available
Pull MarketingCreate demand
Pharmalys IStrategy HGR 2016-2020
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Pharmalys is a partner of HOCHDORF since the very beginning and is active in more than 40 countries.
Pharmalys IIStrategy HGR 2016-2020
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Pharmalys is a choice for a forward integration with highest added value at lowest risk.
1. High profitability• Pharmalys runs an excellent business model with outstanding profitability
2. Successful in our targeted markets• MEA and Asia are our target markets. Pharmalys is exactly in these markets very strong (Especially
MEA; China very promising)
3. At the right point of development• Pharmalys grew fast and needs more structure which we can deliver.• Valuation is (even if it is double then HOCHDORF) at a level we can afford the transaction (this will
end very soon)
4. High match in mutual interests• We need the markets and margins; Pharmalys needs to secure supply with Swiss milk
5. Proven track record and long term relationship• Target is very well known, since we work together from the very beginning
6. High reliability of data• Since the big part of the volumes goes over our tables we can exactly validate data/figures
Capacity Increase: T9Strategy HGR 2016-2020
1. Main volume drivers build on Swiss origin• Liptis focus 100% on Swiss origin• Pharmalys has alternative sources, but mainly due to capacity constraints of HGR• Liptis and Pharmalys are HGR’s biggest customers
2. Product Offensive and LATAM• 2016 starting product offensive (Base Powders and Instant Milks) can be produced at UMP
without big investments and very quickly• New and much more attractive alternative for LATAM (JV with Conaprole)
3. Risk minimisation• An investment in a complete new tower and infrastructure for 30.000 MT/year would
completely overwhelm the organisation at UMP
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To invest in new capacity in Switzerland is the right decision; this for many good reasons.
1. HOCHDORF in brief Thomas Eisenring
2. HOCHDORF in numbers Marcel Gavillet
3. Market update Thomas Eisenring
4. Strategy 2016-2020 Thomas Eisenring
5. Outlook Thomas Eisenring
6. Questions
AgendaInvestora, 21 September 2016
32
HOCHDORF is more and more interestingOutlook
Many good reasons for an investment into HOCHDORF Group.
1. Solid Track Record• In the past three years HOCHDORF has proven that we succeed in operating solid even
under difficult conditions and that we are relentless in the execution of our strategy
2. Outstanding USPs• Concerning Food Safety, HOCHDORF as a Swiss company enjoys an excellent reputation • HOCHDORF is the only third-party manufacturer of Swiss infant milk formulas• The only Swiss manufacturer of lactose in IMF quality
3. Respectable margin potential• Forward integration is at the very beginning (further possibilities beside Pharmalys)• Product development for added value products/specialties is at the beginning (some new
Kid’s Food-Products already in 2016)
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• 26 January 2017 Initial information about the 2016 business year
• 13 March 2017 Results for the 2016 business year
• 05 Mai 2017 Annual General Meeting
• 17 August 2017 Half-year results for 2017
Investora, 21 September 2016
Financial Calendar
Upcoming HOCHDORF Group events.
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Thank you for your interest in the HOCHDORF Group