Orior AG
SIX:ORON
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Orior AG
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[Abrupt Start]
...in overall context of the period, which continues to be influenced by corona, we can look back on a good year 2020.
[Foreign Language] (00:00:14-00:00:21)
It is worth mentioning that the growth is broad-based and supported by various factors. We were able to expand our customer base and grow especially outside our top five customers. We also made good progress in trend channels like discount, e-commerce, online sales, as well as in our own ORIOR factory shops.
The Convenience and International segments achieved very good growth, driven by all competence centers in both segments. Particularly noteworthy is the strong growth in vegan and vegetarian specialties in fresh pasta and in organic juices from Biotta in Switzerland. In the International segment, Culinor Food Group, in particular, but also Gesa, which belongs to Biotta and the distribution platform, Spiess Europe, achieved a pleasing performance.
In contrast, we are not satisfied with the performance of the Refinement segment. Even the corrective measures introduced at an early stage of the year only had a positive effect towards the end of the reporting year, but overall failed to meet expectations. The main reasons
[ph]
there were (00:01:47) unforeseeable difficulties with the IT system change over at Rapelli, mix shifts also in favor of healthy margins and the
[ph]
rainy, summer (00:01:58) with poor sales in traditional gastronomy, especially in the two tourism regions of Ticino and Graubünden.
The challenges around corona has not become easier. In the fourth quarter, for example, we had to accept significantly higher absenteeism rates among our employees due to the higher number of corona cases and the corresponding quarantine regulations. In addition, as mentioned earlier, various food service channels such as traditional gastronomy or canteens and travel gastronomy recovered only
[indiscernible]
(00:02:39).
EBITDA increased by a good 21.4% to CHF 64.1 million, which corresponds to an EBITDA margin of 10.4%. The main sectors of this very positive development are the growth of high margin product categories, the sustainable flexibilization of costs and processes, the new financial framework conditions of Casualfood and the corona related support and default payments of this German state.
In 2022, we were also able to successfully advance several important
[ph]
corporate (00:03:24) initiatives. I would like to briefly mention one or two of them. We've seen
[ph]
already normal interplant (00:03:32) development we've worked on various far reaching projects. The expansion of our plant-based production capacities is the investment in wet extrusion technology at the
[indiscernible]
(00:03:44) site, will ensure our ability to deliver even with continued strong growth in this category.
The closure of two smaller production sites with corresponding integration of production volumes into existing operations is also well on track. These sites development projects will strengthen our profitability and efficiency. And we will also pay into our sustainability goals. For example, thanks to improved processes,
[ph]
several (00:04:20) logistic transports between the sites or lower energy consumption. And this brings me straight to ESG.
ESG, or sustainability is very comprehensive and addresses, so to speak, all of our business areas and everything we do. We approach this topic in a correspondingly integrated
[ph]
menu (00:04:48). I would like to mention a few examples done in 2021. In Switzerland, we have switched to more sustainable hydropower, and thus significantly exceeded our 2025 climate targets already in 2021. Accordingly, we worked intensively on the formulation of a new climate target I will present later.
Also worth mentioning are the significantly increased sales of organic products and sustainably certified products. We were able to achieve our 2018 target of plus 50% more raw material purchases
[ph]
we set certification (00:05:35) already in 2021, meaning our 2018 targets set for 2025 we achieved already last year. This is fantastic achievement and we purchased almost 20% of the organic materials already last year. We also worked on various issues in governance, including the introduction of a long-term incentive plan and minimum shareholdings. And we comprehensively revised our code of conduct and introduced a group-wide complaint management system at the same time.
If we go to page number 5. This revenue curve shows the organic growth of ORIOR Group compared to the year 2020. It is important to note that the previous year's months of January and February 2020 still reflect pre-corona time. By the year 2021 started with a gastronomy lockdown, namely until April in Switzerland and until May in Germany and the Benelux. Our sales developed correspondingly negatively until the end of March and then recovered pretty much in step with the gradual easing of the corona
[indiscernible]
(00:06:59).
In May, the retail business started to normalize while from June onwards, the food service and classic gastronomy business slowly started to recall. December was characterized by bad weather and had a correspondingly negative impact on traditional gastronomy and the barbecue business.
Throughout the year, plant-based specialties, fresh pasta, as well as innovations at Biotta and products in the trend category, organic, sustainable, regional and snacking performed very well. In total, organic growth in 2021 was plus 2% with ORIOR Group's organic growth in the second half of the year at a good 3.1% also thanks to the improved performance of Casualfood.
If we go to page number 6. Our setup is characterized by the decentralized competence and the philosophy, which is supported by autonomous and regionally, deeply rooted companies with the own product and brand
[ph]
goods (00:08:15). This creates proximity to the market and makes the individual competence centers specialized in their product categories fast and agile.
The key strategic initiatives ORIOR New Normal, the ORIOR Champion Model and ORIOR Bridge-building allow us to tap into new revenue potential, work consistently on efficiency improvements, as well as targeted cost optimizations. All three segments and all centers of competence, we see these segments contribute to this resilience and are important to ensure stability across the whole group.
The foreign share, which is currently around 29% will most likely exceed 30% by end of this year. We are convinced of this positioning and the strength that comes from it because it forms the basis for the successful further development of the ORIOR Group in the coming years.
If we go to page number 7. As mentioned at the beginning, we worked intensively on the formulation of a new climate target for ORIOR during the year. For us, the importance of the issue and our common understanding that we must and we want to take our contribution to the climate is indisputable. Furthermore, it was very important for us to formulate the goal in the context of global and national development.
And ultimately, like everything and very important, it is crucial for us that whatever target we set is, can be done affordable and it can be implemented, means it is feasible to achieve. The new climate target has two stages. From 2022, we want climate neutral operations for all ORIOR Switzerland, and from 2025, we want the same for the entire group.
Our long-term ambition is net zero by 2050, which means that our climate neutrality should be extended to the entire value chain. This ambition is in line with the Paris agreement and the Swiss climate target and is also a commitment to our willingness to make our contribution.
I hand now over to Andreas, CFO of the ORIOR Group for the financial report. Please Andreas.
Thank you very much, Daniel. Ladies and gentlemen, I would also like to welcome you to this conference call. I will be happy to guide you through the financial results of the fiscal year 2021. I start the review of the past year with the Convenience segment on page 8. Our four convenience companies, Fredag, Le Patron, Pastinella and Biotta increased their sales by a pleasing 10.4% to CHF 222.8 million last year. The main driver of this good growth was Fredag's plant-based product range, which generated sales growth of over 20% in the reporting period mainly thanks to increasing sales abroad that is in the UK.
In addition to the general increase in demand for vegetarian and vegan products growth is also being driven by increasing awareness of sustainability issues. In order to be able to keep up with this continued strong growth in the plant-based sector in the future, we have decided to invest in production capacities.
We informed last year, at the half year reporting accordingly, two additional wet extrusion lines are under construction, which will increase the current production volume of one line by 200%. The production start of the first line is scheduled for April 2022. Along with the start, we also expect continuous optimizations of productivity as well as sustainability KPIs.
The other convenience competence centers such as Pastinella and Biotta also showed pleasing growth, also thanks to the innovations such as Demeter carrot juice, day fasting concepts
[indiscernible]
(00:13:08) and pasta developed by top chefs. At Le Patron, the development of the pâtés and terrines deserves a special mention. Both product segments stagnated in recent years and experienced a remarkable revival in 2021.
The retail channel did very well last year as it did already in 2020. The food service channel, on the other hand, recovered very differently. System gastronomy including takeaways, for example, Burger King, was even above pre-corona levels. While the classic gastronomy and community gastronomy, the canteens continued to recover only very hesitantly.
I switch to the Refinement segment on page 9. The Refinement segment developed weaker than expected and achieved a 2021 turnover of CHF 246.8 million, which corresponds to a minus of 7.5% compared to the same period of the previous year.
On the one hand, the main driver was the strong comparison basis of the previous year. We had then a growth of 3.3% in 2020. On the other hand, we were also confronted with unforeseen challenges during an IT system change at Rapelli, which temporarily, that is from mid-April to June, led to slowdowns and delays in logistics. The problems were then resolved accordingly.
Another challenge was the shortage of raw materials, especially for organic meat. Pandemic-related weak sales into traditional gastronomy sector and changes in the product range, which in some cases a conscious decision from us to forgo sales in favor of a sustainable margin. The retail channel performed well in line with expectations. Classic gastronomy, on the other hand, also developed negatively in the segment.
On the one hand, because of the situation around corona, but on the other hand, also because of the bad weather in summer, with a lot of rain and correspondingly few excursion tourists in
[indiscernible]
(00:15:43). The various innovations and new launches deserve positive mention, such as the launch of the Pure Nature line on the Albert Spiess branding
[ph]
coop (00:15:53), the myEnergy snack brand and the Aperitivo line also recorded pleasing growth figures. We are also very satisfied with the development of the Albert Spiess online shop.
Sales of organic products, regional specialities and products with sustainability certifications increased again. The raw material situation is tense for beef and chicken. The availability of organic and Swiss origin is limited, and prices remain high. Only for pork has there been a slight easing since the fourth quarter 2021.
Now, I come to the International segment on page 10. Our foreign competence centers, Culinor Food Group and Casualfood, as well as Gesa and Spiess Europe, achieved sales of CHF 167 million. That is a growth of 7.9% compared to 2020. Organic growth was plus 6.8% after a negative minus 8.7% in the previous year. The reason being Casualfood counted organically since September 2020, but of course, with a strong negative corona effect. If we look at the organic growth, excluding Casualfood which was hit particular hard by corona, then a pleasing – after pleasing sales growth in 2020, we also had a renewed sales increase in 2021.
Culinor has grown very well, thanks in particular to the expansion of the customer base and new listings in the fresh menu segment. Gesa and Spiess Europe are also doing well. Their products are both in the organic and regional trend categories which generally performed well. At Spiess Europe, we have also been live with an online shop since autumn 2021. In 2021, Casualfood continued to feel the effects of reduced air traffic and the resulting lack of passengers. A slow recovery has been noticeable since summer.
Overall, the reporting year saw a slight increase in turnover compared to 2020. It should be noted that in 2020, the first three months still contained significant pre-corona sales. The renegotiated range in 2020 and early 2021 have put Casualfood on a new, flexible cost base that will have a lasting impact on profitability.
Specifically, on the one hand, the rents themselves were renegotiated and on the other hand, the composition of the rents, that is the fixed and the turnover related rents
[ph]
shares (00:18:59). With the exception of one outstanding rental agreement, all rental agreements were renegotiated and concluded with optimized conditions for Casualfood and, in some cases, even extended terms.
The new airport Berlin opened at the end of 2020. We are the largest food and beverage provider there with diverse brand worlds such as the deli Berlin or the Italian concept pasta. Together with the planned opening of Terminal 2, the great potential will gradually be realized.
Another highlight last year was the opening of the Smartseller flagship in Ljubljana. Smartseller is an integrative concept introduced in a joint venture with Heinemann, which combines the food and beverage, the convenience and the duty free
[ph]
wills (00:19:54) and was specially designed for small and medium sized airports in Europe. This concept is unique and very attractive for airports, operators and also for passengers.
Now, on page 11, you can see the details of the sales development. The increase in sales of plus 2.3% is made up as follows. Organic growth was 2% driven by good and broad-based growth from the convenience and international segments. All convenience competence centers contributed to the double-digit growth. In the International segment, also all competence centers and also the two companies, Gesa and Spiess Europe contributed to the organic growth, especially in the second half of the year.
Overall, the revenue development of the Refinement segment did not meet our expectations. However, we set the course early on for a stronger year in 2022. The exchange rate effect was slightly positive in the reporting period and amounted to 0.3%.
On page 12, we see the consolidated income statement up to EBIT level. As already mentioned by Daniel, ORIOR Group generated net revenues of CHF 614.1 million that is an increase of 2.3%. Absolute gross profit increased by 5.6% driven by increased sales of innovations and brands and therefore good margins in the Convenience and International segments and product mix changes.
Gross profit was also impacted by higher inventory levels at the end of the year compared to the previous year. The gross margin increased by 141 basis points to 44.8%, mainly due to the good performance of high margin products in the Convenience and International segment.
EBITDA and EBITDA margin increased to CHF 64.1 million, corresponding to a margin of 10.4%. In addition to the good operating performance, the tight cost management within the framework of ORIOR New Normal and the corona-related support payments from the German government had the positive effect here. I will come back to these main drivers later.
Other operating income also includes the corona-related support payments from the German government. In 2021, this was a CHF 9.1 million. As a reminder, the
[ph]
pandemic (00:22:57) insurance payment of CHF 4.4 million was included in this item in 2020.
In the reporting year, the total amount of corona-related benefits received, that is including short time work compensation, and the German economic aid was CHF 11.4 million. For comparison, in 2020, these compensations that is the insurance benefits, short time work compensation and economic aid amounted to CHF 8.7 million. This results in a positive difference of around CHF 2.7 million compared to the previous year.
EBIT, amounts to CHF 35.4 million compared to CHF 25.8 million in the previous year, an increase of 36.9%. This includes impairments of CHF 1.6 million.
[ph]
Board (00:23:54) already announced the closures of two smaller plants enter integration into other production sites.
In particular, it related to the depreciation of machinery and equipment no longer in use. The EBIT margin has increased accordingly from 4.3% to 5.8% in 2021.
I'll now go to page 13. Here, we see the schematic representation of the main corona-related influences on EBITDA. Due to corona, we have to accept in 2020 a decline in margin to 8.8%. The many and large negative drivers in connection with protective measures and in particular, also mix shifts and associated adjustments have temporarily reduced the margin from 10.2% in 2019 to 8.8% in 2020.
We have reported on this in detail last year. In 2021, we were able to increase the EBITDA margin back over 10% and thus, to pre-corona level. The main drivers for these improvements were the growth with high margin assortments and more flexible cost base, retail outperformance and corona-related support payments from the German government.
Negative drivers in 2021 were on the one hand, the situation in the classic gastronomy sector, which recovered only very hesitantly. The IT system changed at Rapelli and a very strange situation in the airline industry, especially in the first half of the year and accordingly also in the travel gastronomy sector. However, the temporarily significantly higher absences due to corona also burdened the EBITDA in the previous year.
I turn to page 14 and thus to the consolidated income statement below EBIT. Financial expenses increased mainly due to the weakening of the euro against the Swiss franc. That is higher exchange rate losses. Group profit before taxes increased by 38.9% to CHF 31.9 million. The increase in income taxes corresponds to the improvement into 2021 annual result. The tax rate was 15%, slightly above the previous year's level of 14.1% and within the long-term expected range of between 15% and 19%.
The minority interest relates to Casualfood that is the share of losses that is not allocated to ORIOR. Due to the aforementioned effects, the consolidated net income of the ORIOR shareholders increased by 25.1% to CHF 27.3 million.
Now on page 15. We see the consolidated balance sheet 2021 according to Swiss GAAP FER. In the reporting year, debt was reduced by CHF 17.7 million Swiss francs, which had a positive effect on the leverage ratio which we will see in a moment. The equity ratio was strengthened as planned and amounted to 21.3% at the end of the year.
The equity ratio according to the shadow calculation that is taken goodwill into account is 38.3%. Otherwise, there were no particular changes in the balance sheet compared to the previous year.
I switch to page 16. Here, we see the development of the debt ratio since 2013. Until 2019, the leverage ratio was always below 2.5 times despite various acquisitions. Due to corona related effects, the leverage ratio was higher in 2020 at 2.87 times. By the end of 2021, we were able to continue our targeted deleveraging due to the good operating performance and significantly reduced the leverage ratio again to 2.09 times. The fourth and final tranche of 11% in Casualfood is scheduled for September 2022. We will continue to pursue a consistent deleveraging policy. The declared goal of our deleverage ratio is to remain below 2.5 times.
I turn to page 17 to cash flow and dividends. The slight decrease is due to the pandemic related reduction in working capital in 2020 and the increased inventories at the end of 2021. In the context of the attractive dividend policy was a steady increase in the absolute dividend, the board of directors proposes to the annual general meeting to pay a dividend of CHF 2.40 per share. We are proud of our shareholder base, which is characterized by long-term oriented and solid investors.
With these words, I hand back to Daniel.
Thank you very much, Andreas. We will now go to page number 18 and the outlook. Ladies and gentlemen, at the beginning of the presentation, I expressed our concern about the war in Ukraine. Allow me to say a few words about this.
We already decided last week to suspend exports to Russia with immediate effect. These are high-end premium products worth around CHF 2 million in sales. Beyond that, it is difficult to make an assessment at the present time. Indirectly, prices for our durum wheat are likely to increase further, especially as Russia and Ukraine are important wheat producers for the world market. In the overall context of ORIOR, however, durum wheat is not very
[ph]
wheaty (00:30:37), especially in purchasing value terms.
In addition, energy prices are likely to rise again, especially for our international competence centers. And now, we look at the outlook for the year 2022. We expect a good year 2022 with a noticeable normalization across the entire business from summer on.
We expect a significant recovery boost in traditional gastronomy from spring and a noticeable recovery in travel gastronomy from summer. In addition, various corona effects is also continue to normalize, such as channel mix shifts, significantly lower corona-related support services from the government and for example, a lower absenteeism rate in our production facilities. On the sales side, we expect growth of 4% to 6.5%. This will be driven by the International and the Refinement segments and by the further development of our plant-based product ranges, including organic vegetable and fruit juice.
In the Convenience segment, we expect Fredag and Biotta to continue to grow. Thanks in part to the expansion of the product ranges and innovations. The Convenience segment sales will be negatively impact by around CHF 8.5 million because of two special effects. First, we will reclassify a trade product, namely herb butter in the amount of CHF 4 million. Second, with the closure of the smaller production facilities, a sales volume of around CHF 4.5 million will shift from the Convenience to the Refinement segment.
[ph]
Pizza (00:32:45), for example, party breads or other meat convenience products such as
[ph]
filling in the dough (00:32:52), which can be optimally integrated into the existing production processes
[ph]
products (00:33:00). In the Refinement segment, we also expect good growth, thanks to product range extensions. Thanks to regional innovations, the recovery of the food service industry at the low year-on-year basis. In the International segment, we plan for continued good growth at Culinor Food Group based on the expansion of our product ranges and innovations with existing and new customers and channels, as well as strong growth in Casualfood, thanks to the substantial recovery in travel gastronomy from summer 2022 on.
We now turn to page number 19. We expect an EBITDA margin of over 10%, despite rising input costs in the areas of raw and packaging materials, transportation and energy and despite significantly lower corona-related support services. We will be able to offset a large part of the negative impulses, thanks to the abundance of positive drivers, but not entirely. We expect therefore to maintain the margin above 10%. This is specifically between 10% and 10.3%.
The main drivers on the margin can be summarized as follows. The sustainable and broad-based growth with good margins in all segments is a very important driver. The new financial basis of Casualfood created from the ORIOR new normal initiative and the more flexible costs in general, the annual productivity increases within the supply chain excellence measures, as well as the project within the plant development strengthened our competitiveness and will also show a sustainable, positive impact on our margins. In addition, the normalization of the corona effect will have an impact on the EBITDA margin. On the one hand, this will be positive due to the elimination of protection and health measures, due to fewer absences and shifts into product and channel mix. On the other hand, it will also have a negative impact due to the discontinuation of the government support services. Input cost will continue to rise even beyond the raw material in process, especially for energy, packaging and transport.
We expect the tax rate to be between the expected medium range of between 15% to 19%. For investments, we expect a CapEx of CHF 29 million to CHF 30 million. This includes mainly strategic investments such as the commissioning of the two new wet extrusion production lines for meat substitutes or the two already mentioned plant development projects with the closure of two locations and the integration of certain product ranges into existing factories. The operating CapEx, however, is roughly at the same level as it used to be in the previous years.
On pages 20 to 22, you will find more details on our segments where we differentiated between the positive drivers and the potential challenges. Due to time reasons, I will not go into details and we go straight to the end of the presentation.
Thank you very much for your attention, and we are now glad to answer any kind of question from your side.
Ladies and gentlemen, we are now ready to take your questions. You can raise your hands or you can write into icon. There are no questions. I see no questions. Are there questions?
Okay. Daniel, I can see there are no questions, so I hand over back to you for the final closing words.
Okay. Thank you much, Milena. So I would like to thank you very much for the time that you have given us to explain a little bit more detail, the year results 2021 and to give you a feeling on the outlook for 2022. Thanks a lot for your time. Stay healthy and take care and see you soon again. Thank you very much. Good afternoon. Bye-bye.
Yeah. Good afternoon. Bye-bye.
Good afternoon. Bye-bye. Thank you.