Swiss cheese slow down hampers Emmi profits

Emmi, the Swiss publicly-traded dairy company, has hailed its 2004 full-year results as "encouraging", despite posting operating profit growth below analysts' expectations, Tom Armitage reports.

Compared to the previous year, the company's 2004 turnover increased by a modest 2.1 per cent to CHF1.9 billion (€1.2 billion), while its operating profit increased by 12.6 per cent to CHF47.3 million (€30.8 million).

Following the results announcement, Zuercher Kantonalbank downgraded Emmi's stock to "market underperform", adding that it was "no longer cheap".

The Lucerne-based company said that trading across its key domestic and German markets had been "difficult" last year, although it noted that it had made significant progress in its international markets.

Emmi said that overall, despite a slow-down in the Swiss fresh dairy market, dairy product sales had increased by 4.9 per cent to CHF971million, while fresh dairy product sales accounted for around half of this figure at CHF474.6 million (an increase of 6.9 per cent).

Functional dairy products, including its Aktifit, Aloe Vera and cholesterol-lowering Evolus brands, managed to offset the comparatively slow growth of fresh dairy, however, with Benecol, Emmi's cholesterol-lowering probiotic brand, more than doubling its previous year's sales.

Conversely, cheese sales, particularly Emmentaler, did not fare quite so well and sales remained constant at CHF889.5 million, although the company noted that it had exported greater volumes to major non-European markets, particularly the US, Canada and Japan.

Emmi added that 2004 sales volumes had been adversely affected by waning domestic consumption and that cheese had been at the centre of a series of price skirmishes involving a number of Swiss multiple retailers.

But the company lauded speciality cheeses Le Gruyère and cave-aged Emmentaler - both of which outperformed the sector - as products which have "considerable potential", along with cholesterol-lowering functional cheese alternative miniCol.

Meanwhile, the company reiterated its ambition to develop its Austrian, German and US markets in 2005 and said that it had earmarked the CHF100 million raised from its public floatation in December last year, for consolidating its presence in the fresh dairy markets across France, Italy, the Netherlands and the United Kingdom.

Since its public floatation, Emmi's stock has risen by around 21 per cent and international sales now account for 23 per cent of its overall annual turnover (CHF445 million).