Significant improvement in operating profit and margins
January-March 2024 (first quarter)
- Net sales amounted to SEK 929 million (974), corresponding to growth of -4.6 percent (0.2). The organic change in net sales was -4.2 percent (-3.4).
- Gross profit amounted to SEK 269 million (256), corresponding to a margin of 29.0 percent (26.3).
- Operating profit/loss was SEK 38 million (16), corresponding to a margin of 4.1 percent (1.6), and operating profit/loss, before items affecting comparability, was SEK 38 million (21), corresponding to a margin of 4.1 percent (2.2).
- Profit/loss for the period was SEK 16 million (-6), corresponding to earnings per share of SEK 0.11 (-0.04) before and after dilution.
- Cash flow from operating activities amounted to SEK 21 million (82).
- The Board of Directors of Midsona AB (publ) revised and adopted both new financial targets and a new strategy for the Group.
- Midsona has received awards for its sustainability work, firstly from the global environmental initiative CDP for its climate strategy and leadership, and secondly as the stock exchange's most sustainable company in the grocery category, taking second place overall, in the Sustainable Companies rankings for 2023.
Comment by the CEO
In the first quarter, we took several steps forward that strengthened our position. As a result of our efforts, all three divisions reported both improved margins and an improved operating profit. An important milestone for us during the period was the launch of our new strategy, which sets our course for the future.
In terms of the external environment, the rise in inflation slowed and there were signs of imminent interest rate cuts. Such an outlook naturally has an effect on people's confidence and consumption patterns, allowing a larger share of households to prioritise healthy, sustainable and high quality food. That being said, significant uncertainties remain, such as the unstable geopolitical situation, the impact of climate change on this year's crops and the weakening of the Swedish krona.
Margins improved by the measures taken
Operating profit for the period amounted to SEK 38 million (21), an 81 percent improvement on the previous year. This is despite the fact that Easter had a negative impact on both sales and profits. Easter is a weak period in terms of sales for the Group, which this year fell during the last week of the first quarter compared with April last year. Easter Week generally changes consumption patterns, as retailers highlight other goods from outside our product categories, and important sales days are lost. Sales for the period amounted to SEK 929 million (974), which was 4.6 percent weaker than last year. However taking into account Easter and terminated contracts, underlying sales were slightly better.
The improvement in the Group's earnings was mainly driven by the higher gross margin. This was a result of well-chosen price increases, and also of the streamlining of our ranges, with a focus on best sellers and the termination of unprofitable contracts. Efficiency improvements in production also began to have an impact.
The gross margin increased to 29.0 percent (26.3), despite continued relatively high raw material prices. The operating result for the period improved significantly, despite the decline in sales.
All divisions improved their profitability
We saw a broad improvement in the first quarter, as all three divisions improved their operating profit compared with last year. The Nordics Division remained the strongest with an EBIT margin before non-recurring items of 9.2 percent (8.0). Friggs continued to sell well throughout the Nordic region and Helios developed well in Norway. There was also positive development in Finland, with increasing sales and improved margins. In Sweden, the trend was slightly negative, as a result of the termination of a distribution agreement and the sale of a brand for which we had sales last year. In Denmark, margins improved despite declining sales. The quarter saw the termination of several contract manufacturing assignments in Denmark with lower margins.
The North Europe Division increased its operating profit to SEK 5 million (-4). Efforts to generate new business continued according to plan and resulted in new listings and agreements for both the Davert brand and contract manufacturing. A new contract with a nationwide grocery store chain in Germany, for deliveries of Davert brand products, will begin in April.
The South Europe Division increased its operating profit to SEK -1 million (-7), which was mainly achieved through improved production efficiency in Spain combined with the implementation of price increases and the termination of unprofitable contracts.
New strategy and new financial targets
During the first quarter, we launched the Group's new strategy, which is largely focused on increasing profitability and strengthening our market position for the future. To achieve this, we will build an even stronger organic platform, develop our strong health food brands and achieve greater efficiency and harmonisation across the organisation. We are confident that our food and health food brands are very well positioned to attract consumers who prioritise their health and want to eat more organic products. As part of the strategy review, we updated our financial targets, which we are now working to achieve:
- Organic growth averaging 3-5 percent annually
- EBIT margin (before items affecting comparability) to exceed 8 percent by 2027
- Net debt/adjusted EBITDA of up to 2.5 x
Recognition of our sustainability efforts
Sustainability is the foundation of our business strategy. This makes it especially pleasing that the non-profit organisation CDP (formerly the Carbon Disclosure Project) ranks Midsona as one of the top 400 reporting companies globally (category A) out of a total of 21,000 businesses assessed. In 2023, Midsona also took a respectable second place in Sweden's Sustainable Companies rankings for 2023 and a first place in the category grocery companies.
Outlook for 2024
We are getting clear indications that we are doing the right things, but we have higher ambitions and have much more to do. We can see that the continued streamlining and coordination of our product range is having a clear impact on earnings and we are continuing to work to create the conditions for organic growth. Recent contracts in Germany prove this. We believe that we are able to continue improving during 2024 with an even stronger offering and more key deals. The focus for 2024 is to continue with the implementation of our strategy, to move us step by step towards our financial targets.
Peter Åsberg
President and CEO
FOR MORE INFORMATION, PLEASE CONTACT:
Peter Åsberg, CEO och President
Phone: +46 (0)730 26 16 32
E-mail: peter.asberg@midsona.com
Max Bokander, CFO
Phone: +46 708 65 13 64
E-mail: max.bokander@midsona.com
ABOUT MIDSONA
Midsona develops and markets strong brands within health and well-being, with products that help people live a healthier and more sustainable life, with an increased understanding of the origin of the raw material and with transparency as to the content. The Midsona share is listed on Nasdaq Stockholm. For more information www.midsona.com/en.
This is information of the type that Midsona AB (publ) is obligated to make public in accordance with the EU Market Abuse Regulation. The information was submitted for publication through the agency of the contact persons above on April 25, 2024, at 8am CEST.
