HALF-YEAR REPORT 2016/17. Leverandørselskabet Danish Crown AmbA. CVR no

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1 HALF-YEAR REPORT 2016/17 Leverandørselskabet Danish Crown AmbA CVR no

2 MANAGEMENT S REVIEW Market development The Danish Crown Group is one of the world s largest food producing companies with primary focus on fresh and processed meat products. In the first half-year of 2016/17, the market for fresh pork has developed very positively. This has created basis for a competitive payment to Danish Crown s cooperative members with an increase of more than 14 pct. The strong demand, especially on the Asian markets, combined with decreasing supply of slaughter animals in Northern Europe have created the basis for the sharp price increase on pork. Through the half-year, pig prices have been stable and relatively high. At the end of the period the pig price is 1.70 DKK/kg above the pig price at the same time last year. In the first half-year, Beef has in a market with stable prices increased the market share of slaughterings in the Danish market on the basis of stable operations and active innovation. The significant increase on pork prices challenges earnings in the group s processing companies. Pork is the raw material in the main part of the companies products and the companies purchase it at market price. Therefore, the total production costs have increased significantly and it takes time to pass on price increases of this level to the retail customers. Consequently, earnings in the processing companies for the first half-year 2016/17 are below earnings for the same period last year. The management in the UK based company Tulip Ltd, slaughtering pigs as well as driving a number of processing facilities, has initiated a comprehensive turn-around plan with the purpose of re-establishing earnings in the group s largest company. A number of projects have been implemented and are starting to show results. During the last part of the half-year, there have been visible improvements week by week, but the financial recovery has been delayed by the higher raw material prices. In October 2016, Danish Crown presented a new strategy named 4WD. Going forward to 2021, the group will develop the business in a number of main markets, and globally focus on some core products. The clear objective of the strategy is to increase the payment per kg to the company s owners; measured relatively against the four other countries in the EU who have significant export of pork. As a part of the strategy plan, Danish Crown has after the end of the half-year taken over the control of the German slaughter company Teterower Fleisch and the integration with the group s other German activities has started. In addition, the group s processing company in the US, Plumrose, has been divested to the Brazilian food company JBS. In the half-year, Danish Crown has also acquired Chark Produkter in Sweden, Leivers Brothers in the UK and Slagter Munch in Denmark. Net profit for the first half year of 2016/17 Increasing prices have raised the group s revenue, which results in the first half-year revenue passing 30 billion DKK for the first time in the history. Sales have also increased, which to a large degree can be ascribed to the acquired companies. Good market conditions and a strong sales performance have ensured good earnings on sales of fresh meat, while earnings in the processing companies have been affected by the sharply increasing raw material prices. On the other hand, DAT-Schaub has succeeded in improving their earnings significantly, in a market where prices on both sheep and hog casings are increasing. The challenges for the group s processing companies with passing on price increases are reflected in a minor decrease in the gross profit. By keeping costs stable, the group has succeeded in realising an EBIT on an acceptable level. The group s net financing costs are lower than last half-year, resulting from the reduction of the net interest-bearing debt of approx. 0.8 billion DKK as well as a lower interest level. Net profit for the half-year 2016/17 amounts to 812 million DKK against 819 million DKK last year, which is considered acceptable under the given market conditions. Balance sheet Since the end of the first half-year 2015/16, the balance sheet total has been reduced by 0.5 billion DKK in spite of increasing prices on the group s products. The reason for this reduction is primarily that investments in a period have been below depreciations. In spite of increasing raw material prices, the group has managed to maintain the capital tie-up in inventories on a low level, while the increased sales prices are reflected in increased trade debtor value. 2 / 10

3 The group s equity at the end of the half-year 2016/17 totals 6.5 billion DKK against 6.4 billion DKK at the end of the halfyear 2015/16. The group s debt gearing at the end of the half-year amounts to 3.3 x EBITDA, being unchanged compared to the end of the first half-year last year. At the end of the first half-year 2016/17, the group s net interest-bearing debt amounts to 11.4 billion DKK compared to 12.2 billion DKK at the end of the first half-year 2015/16. The decrease reflects partly consolidation and partly a low investment level. The group's financing structure is still mainly based on credits with a maturity of more than one year. Consequently, 77 pct. of the interest-bearing debt is long-term debt against 72 pct. at the end of the first half-year 2015/16, being a result of an active portfolio management 3 / 10

4 Statement by the Executive Board Today, the Executive Board has considered and adopted the half-year report for Leverandørselskabet Danish Crown AmbA for the financial period 1 October March The half-year report has not been audited or reviewed by the company s auditors. In our opinion, the half-year report gives a true and fair view of the group and company s assets, liabilities and financial position as at 31 Marchs 2017 and of the results of the group and company s activities and the group s cash flows for the period 1 October March We believe that the management s review contains a fair review of the development in the group s activities and financial affairs, the half-year report and the group s financial position as well as the financial position as a whole for the companies included in the consolidated financial statements Randers, 24 May 2017 Executive Board: Jais Valeur Group CEO Preben Sunke Group CFO 4 / 10

5 Summarised income statement, half-year 2016/ / /16 Revenue 30,715 29,420 Production costs -26,647-25,311 Gross profit 4,068 4,109 Distribution costs -2,115-2,139 Administrative expenses Other operating income 9 22 Other operating expenses Income from equity investments in associates and joint ventures Operating profit before special items (EBIT) 1,026 1,113 Special items 0-9 Operating profit after special items 1,026 1,104 Financial income Financial expenses Profit before tax Tax on profit for the half year Net profit for the half year Summarised statement of comprehensive income, half year 2016/ / /16 Net profit for the half year Items which may subsequently be transferred to the income statement Items which cannot be transferred to the income statement 0 0 Other comprehensive income Comprehensive income / 10

6 Summarised balance sheet 31 March Goodwill 2,291 2,207 2,280 Software Acquired patents, trademarks and similar rights Intangible assets 2,785 2,686 2,781 Land and buildings 5,277 5,348 5,485 Plant and machinery 3,496 3,659 3,746 Other fixtures, fittings, tools and equipment Property, plant and equipment in progress and prepayments Property, plant and equipment 9,637 9,748 10,202 Equity investments in associates and joint ventures Other securities and equity investments Financial assets Biological assets Deferred tax assets Non-current assets 13,167 13,143 13,901 Inventories 4,696 4,181 4,728 Biological assets Trade receivables 6,080 6,240 5,679 Receivables from and prepayments to cooperative members Receivables from associates Other receivables Prepayments Receivables 7,208 7,501 6,826 Other securities and equity investments Cash Current assets 12,307 12,114 12,053 Total assets 25,474 25,257 25,954 6 / 10

7 Summarised balance sheet 31 March Contributed capital 1,564 1,568 1,574 Personal subordinated accounts Other reserves and retained earnings 4,702 5,114 4,745 Equity (including minority interests) 6,481 6,897 6,432 Pension obligations Deferred tax liabilities Other provisions Subordinate loans Mortgage debt 2,858 3,900 3,592 Other debt, issued bonds 2,796 3,495 1,535 Other credit institutions Bank debt 3,149 1,719 3,162 Finance lease commitments Other payables Non-current liabilities 10,430 10,699 9,993 Other provisions Mortgage debt Other debt, issued bonds Bank debt 981 1, Other credit institutions ,963 Finance lease commitments Trade payables 3,698 3,942 3,443 Payables to associates Income tax payable Other payables 2,286 2,097 2,226 Deferred income Current liabilities 8,563 7,661 9,529 Liabilities 18,993 18,360 19,522 Total equity and liabilities 25,474 25,257 25,954 7 / 10

8 Summarised statement of changes in equity 31 March 2017 Contributed capital Personal subor-dinated accounts Reserve for foreign currency translation adjustments Reserve for value adjustments of hedging instruments Retained earnings Total Hereof attributable to minority interests Equity as at , ,294 7, Net profit for the half year Total other comprehensive income Payment of contributed capital, net 2 2 Supplementary payments disbursed -1,425-1,425 Acquisition of or dividend to minority interests Equity as at , ,691 6, Net profit for the half year Total other comprehensive income Payment of contributed capital, net -6-6 Transferred to personal subordinated accounts Acquisition of or dividend to minority interests Equity as at , ,158 6, Net profit for the half year Total other comprehensive income Payment of contributed capital, net -2-2 Supplementary payments disbursed -1,295-1,295 Transferred to personal subordinated accounts Acquisition of or dividend to minority interests Equity as at , ,559 6, / 10

9 Summarised cash flow statement, half-year 2016/ / /16 Operating profit before special items (EBIT) 1,026 1,113 Change in net working capital Other adjustments Cash flows from operating activities 1,024 1,777 Acquisition of businesses Other investments Cash flows from investing activities Cash flows from financing activities Change in cash and cash equivalents Cash and cash equivalents as at 30 September Foreign currency translation adjustments 0 0 Cash and cash equivalents as at 31 March / 10

10 Note 1 Significant accounting policies The half-year report for 2016/17 includes a summary consolidated financial statement for Leverandørselskabet Danish Crown AmbA and its subsidiaries. The half-year report for the fist half-year 2016/17 is presented according to the same accounting principles and with the same significant accounting estimates as the annual report for 2015/16 for Leverandørselskabet Danish Crown AmbA. The consolidated financial statements of Leverandørselskabet Danish Crown AmbA are presented in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for the financial statements of class C enterprises, cf. the Danish Executive Order on IFRS issued in accordance with the Danish Financial Statements Act. Reference is made to the description of accounting policies and significant accounting estimates in note 29 and 1 in the annual report for 2015/16. There are no changes to accounting policies compared to last year due to new and changed standards. Leverandørselskabet Danish Crown AmbA is a limited liability cooperative with domicile in Denmark. The consolidated financial statements are accounted for in Danish kroner (DKK), which is the presentation currency for the group s activities. Note 2 Seasonal fluctuations Due to seasonal fluctuations, the group s inventory values are historically speaking higher at the end of the first half-year than at the end of the second half-year since inventories are built up for sales in the peak season. 10 / 10

It's all about food. Annual release 2015/16

It's all about food. Annual release 2015/16 It's all about food Annual release 2015/16 Contents Financial review 3 GROUP Income statement and statement of comprehensive income 5 Balance sheet 6 Statement of changes in equity 8 Cash flow statement