Strong free cash flow in a period of challenging market conditions
July-September 2020 (third quarter)
● Net sales amounted to SEK 821 million (765).
● EBITDA amounted to SEK 72 million (77) before items affecting comparability, corresponding to a margin of 8.8 percent (10.1).
● Profit for the period was SEK 34 million (35), corresponding to earnings per share of SEK 0.52 (0.77) before dilution and SEK 0.51 (0.77) after dilution.
● Free cash flow amounted to SEK 64 million (19).
● In this somewhat unusual quarter, Midsona was affected more by negative factors attributable to Covid-19 than previously, although the supply chain situation stabilised, resulting in fewer disruptions.
● On 1 September, Midsona took control of the acquired Gainomax brand, a leader in sports nutrition.
● Max Bokander was appointed as Midsona's new CFO. He joins Midsona from the Trelleborg Group and will take up his new post in January 2021. From that time he will be a member of Group Management.
January-September 2020 (nine months)
● Net sales amounted to SEK 2,626 million (2,256).
● EBITDA amounted to SEK 276 million (209) before items affecting comparability, corresponding to a margin of 10.5 percent (9.3).
● Profit for the period was SEK 121 million (62), corresponding to earnings per share of SEK 1.85 (1.35) before dilution and SEK 1.84 (1.35) after dilution.
● Free cash flow amounted to SEK 150 million (52).
● A favourable sales and earnings trend.
Significant events following the end of the report period
● Midsona acquired System Frugt A/S, a leading Nordic player in plant-based foods with its premium Earth Control brand.
Comment by the CEO
A divided quarter
The third quarter brought divided fortunes for Midsona. In connection with the restrictions associated with the pandemic being lifted, sales were weak in the latter half of July and throughout August, probably due to inventories being phased out among customers and consumers alike. We then saw clear improvement towards the end of the quarter. Apart from the exceptionally strong stockpiling month of March, September was our strongest month in terms of sales this year, indicating that the decline in sales during the summer was temporary. For the Group as a whole, sales rose by 7 percent compared with the corresponding period last year although, organically, sales decreased by 1 percent. Overall, I am proud of how the organisation has dealt with the effects of the pandemic. Over the first nine months of the year, we increased our sales by 16 percent while almost doubling our profit for the period compared with the corresponding period last year.
Sales and earnings
The Group's prioritised brands showed growth of slightly more than 2 percent for the quarter. Although inventory phase-outs generally had a negative impact on sales, we saw strong growth for several brands. In the South Europe segment, we continued our launch of Happy Bio among FMCG retailers in France and Spain. The brand grew by 32 percent over the period. The North Europe segment experienced a slight increase in sales over the quarter, although this was lower than expected. This was primarily due to a previously announced launch of the Davert brand to a major FMCG customer being postponed because of the pandemic. The broad roll-out in stores could not commence until late in the quarter, although distribution has built up rapidly since then. The customer placed new orders early in the fourth quarter. In the Nordics segment, the Friggs, Urtekram and Helios brands continued to grow, while Kung Markatta and several brands in the consumer health products category experienced a weaker trend.
Besides a slightly weaker sales trend, profit was impacted negatively by temporary costs associated with production maintenance following the high level of capacity utilisation in the first half of the year. Before items affecting comparability, EBITDA decreased slightly compared with last year, amounting to SEK 72 million (77). The EBITDA margin, before items affecting comparability, amounted to 8.8 percent (10.1).
Acquisitions lay foundation for expansion and further acquisitions
Following the end of the quarter, we announced the acquisition of System Frugt, a leading Nordic player in plant-based foods, strengthening our position in dried fruit and nuts. System Frugt holds a particularly strong position in Denmark with its premium brand Earth Control - the acquisition making this our third-largest brand. We see System Frugt as a platform for continued growth in dry plant-based foods, while we also gain increased production capacity, offering excellent synergies. We expect synergies of SEK 34 million on an annual basis, achieving full effect from late 2022. On 1 September, we also gained control of the Gainomax brand, strengthening our position in sports nutrition. In September, sales got off to a good start under our management.
We have a strong financial position and are continuing to assess possible acquisitions in Europe. The acquisition of System Frugt increases Midsona's strength in health and well-being, increasing our attractiveness as a market partner. With appealing acquisition opportunities having arisen in the wake of the pandemic, we hope, in the near future, to make further complementary acquisitions in one of our three regions, in accordance with our strategy.
Consumers demonstrate clearly that they appreciate healthy products and Midsona has built favourable conditions on which to meet their expectations, so I view the future with confidence. We stand by our humbly optimistic outlook and I look forward to bringing you more information.
President and CEO
This is information of the type that Midsona AB is obligated to make public in accordance with the EU Market Abuse Regulation. The information was submitted for publication through the agency of Lennart Svensson on 22 October 2020 at 8am CET.
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