Hochdorf restructuring leading to better results
In the first six months of 2020 the company has continued to implement the restructuring introduced in the summer of 2019.
In the first half of 2020, Hochdorf Group processed 187.9m kg of milk, whey, cream and butter milk in Switzerland. It also sold 46,357 tonnes of product and achieved a net sales revenue of CHF158m ($174m), compared to CHF243m ($267.5m) the previous first half.
The fall in net revenue is mainly explained by the sale in February of Uckermärker Milch GmbH from the Dairy Ingredients division. An EBITDA of CHF5m (5.5m) means that the company has completed the first half year with positive results, fulfilling bank covenant requirements. The positive EBIT of CHF1.2m ($1.3m), an improvement on the first half of 2019 which saw a negative EBIT of CHF52.4m ($57.7m). The company said this was slightly influenced by capital gains from the sale of Uckermärker Milch, and it has not yet been possible to achieve the required amortizations due to low capacity usage of the production lines for producing infant formula.
Net profit of CHF-4.1m ($4.5m) was due to high interest payments, the company said. The result after minority interests was CHF-3.9m ($4.3m) compared to CHF-43.4m ($47.8m) in the same period last year. Total assets as of June 30, 2020, stood at CHF418.6m ($461m) and the equity ratio was 56.8%. The Hochdorf Group also generated a free cash flow of CHF2.9m ($3.2m).
The management team continued to work on the restructuring program launched in 2019. The sale of Uckermärker Milch was completed at the end of February. The decision was taken to liquidate Zifru Trockenprodukte GmbH, Snapz Foods AG and Snapz Foods USA Inc. due to a lack of potential buyers. The liquidations were completed without affecting results.
Baby Care in transition
In the Baby Care division, Hochdorf achieved net sales revenue of CHF37.6m ($41.4m), an increase of 24.2% on the previous year. The low net sales revenue compared to several previous years is mainly due to the loss of a major customer in 2019 and delays in new customer projects. The coronavirus pandemic also led to setbacks in market registration for China.
To ensure sustained growth, the sales department has been strengthened in key areas and projects have been launched to develop new markets, customers and products. The division aims to bring at least three new products to market by the end of the first quarter of 2021. The company was able to stabilize the business relationship with Pharmalys again after the sale in December 2019.
Bimbosan AG successfully launched its products on the Swiss market based on the new EU formulations – one reason why it was possible to increase its share in the specialist market. It is also working on the development of new product categories for Bimbosan with market launches anticipated by the end of the first quarter 2021. The first delivery to Vietnam represents an important milestone towards internationalisation of the brand.
Dairy Ingredients division
This division achieved net sales revenue of CHF120.7m ($132.9m). This includes CHF25.4m ($28m) in sales from the operating business of Uckermärker Milch.
At the beginning of the coronavirus pandemic, panic buying resulted in an increase in sales and revenue for Bimbosan AG. The effect was, however, rebalanced in the following months. The pandemic also caused slight delays in the company's internationalization process. There was reduced product demand from the chocolate industry from mid-April in the Dairy Ingredients division mainly due to lower chocolate sales in the areas of duty free and tourism.
The coronavirus pandemic also meant Marbacher Ölmühle GmbH endured a significant downturn in sales in the second quarter. However, thanks to various optimization measures, the company still achieved a higher gross margin compared to the previous year.
The senior management team launched its company-wide Optima cost efficiency program. In the first five sub-projects, work is under way to make cost savings in plants and building, production processes, logistics, administration and purchasing. Savings in the region of CHF 2m to 3m ($2.2m-$3.3m) are expected from the program in 2021.
Outlook
Hochdorf said it is not expecting the coronavirus pandemic to have a significant impact on sales and revenue in the second half of the year in the Baby Care division. However, the company had to deal with coronavirus-related delays to new longer-term customer projects in the first half of the year and these may continue to some extent. If travel restrictions persist, a postponement of the market development measures to 2021 cannot be ruled out for the internationalization of the Bimbosan brand.
By comparison, the impact of coronavirus on the Dairy Ingredients division is likely to be felt more acutely. The company said it expects the Swiss chocolate industry, in particular, to see lower product demand if travel restrictions persist; development in this sector will depend very much on the progress of the pandemic.
However, Hochdorf said it still expects to meet the end-of-year projection made in March with net sales revenue of CHF280-320m ($308m-$352m) and positive annual results for EBITDA.
